Credit Card Quick

Welcome in the New Year with a New Attitude on Spending

Credit Card Debt

We all begin talking about “trimming the fat” when the New Year rolls around, but perhaps you can begin thinking about “trimming the fat” in terms of your finances. Make this the year you establish a healthy relationship with your finances and begin to really understand the benefits and satisfaction that come along with handling your money and your budget well. Here’s how to make 2011 the year you finally break yourself if all those poor financial habits and decisions:

• Make a realistic budget – We all make budgets, but how realistic are they, really? Instead of making a budget that you know in your heart and your head just isn’t going to translate well into real life, take everything into consideration so that you have a better chance of pulling it off. For example, if your budget leaves no room for discretionary spending, and you have nothing left over at the end of the month for a birthday present or a new outfit, then you’re bound for disaster. Instead, pad the budget for living and take it from there!
• Examine your needs versus your wants – One of the ways we get muddled in terms of finances is because many of us have blurred the liens between wants and needs. Let’s get one thing straight: your morning latte is not a need! Does that mean you should deny your latte cravings? Perhaps not; but it may mean that your once-a-day latte run can be cut down to a three-day-a-week run.
• Consider repayment terms and consider consolidating – Take a look at your current credit card bills and installment loans and pay close attention to the repayment terms. You may be better off consolidating all of those bills onto a fixed, low-interest-rate credit card as to simplify your monthly bill payments. Putting all those bills onto one card may facilitate the process of paying bills and may make it easier to look at the “big picture” when it comes to paying down your bills.
• Reexamine your current credit cards – Don’t forget about your credit cards and make sure they are still working for you in terms of interest rate, rewards and other terms and conditions.

Creditors now Targeting Less-than-Perfect Credit Card Customers

Choosing Credit Card

Does your poor credit score disqualify you from credit card offers? Maybe not.

Most consumers, over the past couple years have become quite accustomed to only receiving credit card offers when their credit is stellar. However, the tide is beginning to turn when it comes to credit and to whom the creditors will extend credit.

Recent statistics indicate that credit card companies, on average, are now sending out twice as many credit card offers since last year. What makes this surge in credit card offers so significant, however, is that consumers with even poor credit card now being included in the creditors’ mailing lists.

Bad Credit Doesn’t Have to Mean no Credit

Creditors, unlike a few years ago, however, are actually putting a bit more thought into those individuals with bad credit. In other words, some types of bad credit card better than others.

Take for instance, the concept of “strategic defaulters.” Creditors deem these types of consumers better than those who are credit “abusers” or “sloppy payers.” Didn’t think creditors separated some bad credit from others, did you?

Strategic Defaulters as a Result of the Recession

Strategic defaulters, as described in a recent article in the NY Times, are individuals whose credit scores took a free fall because they walked away from a home because the mortgage was larger than the home’s value. Creditors look at these consumers as good bets because they may have paid all their bills on time up to this point. And they are also likely consumers who make a good living. Remember: income still matters in terms of risks for the lender.

Strategic defaulters are different from sloppy payers or abusers, who often neglect to pay bills or only pay some bills on time. Another category considered by creditors is the “distressed borrower,” an individual who does not have the means to pay his or her bills on time.

Yet another category considered by creditors is the “first-time defaulter,” a consumer who always paid bills on time before the recession took hold. Many creditors deem these types of consumers worthy of a second chance.

So, the next time you get a credit card offer, consider it an opportunity to make a second chance and begin redeeming your credit score.

Does your poor credit score disqualify you from credit card offers? Maybe not.

Most consumers, over the past couple years have become quite accustomed to only receiving credit card offers when their credit is stellar. However, the tide is beginning to turn when it comes to credit and to whom the creditors will extend credit.

Recent statistics indicate that credit card companies, on average, are now sending out twice as many credit card offers since last year. What makes this surge in credit card offers so significant, however, is that consumers with even poor credit card now being included in the creditors’ mailing lists.

Bad Credit Doesn’t Have to Mean no Credit

Creditors, unlike a few years ago, however, are actually putting a bit more thought into those individuals with bad credit. In other words, some types of bad credit card better than others.

Take for instance, the concept of “strategic defaulters.” Creditors deem these types of consumers better than those who are credit “abusers” or “sloppy payers.” Didn’t think creditors separated some bad credit from others, did you?

Strategic Defaulters as a Result of the Recession

Strategic defaulters, as described in a recent article in the NY Times, are individuals whose credit scores took a free fall because they walked away from a home because the mortgage was larger than the home’s value. Creditors look at these consumers as good bets because they may have paid all their bills on time up to this point. And they are also likely consumers who make a good living. Remember: income still matters in terms of risks for the lender.

Strategic defaulters are different from sloppy payers or abusers, who often neglect to pay bills or only pay some bills on time. Another category considered by creditors is the “distressed borrower,” an individual who does not have the means to pay his or her bills on time.

Yet another category considered by creditors is the “first-time defaulter,” a consumer who always paid bills on time before the recession took hold. Many creditors deem these types of consumers worthy of a second chance.

So, the next time you get a credit card offer, consider it an opportunity to make a second chance and begin redeeming your credit score.

Balance Transfer Fees: What you may not Know

Credit Card Types

You may have considered transferring your credit card balances onto one credit card with a low, promotional rate. In fact, now may be a great time to look into balance transfers, as the credit industry seems to be rebounding by leaps and bounds.

You may be receiving more credit card offers than ever, and many of those offers may come with a balance transfer offer. Although most of these balance transfer offers are quite advantageous, there may be a few things to consider before accepting a credit card offer with one of these balance transfer offers. In particular, pay close attention to balance transfer fees, as they can be tricky and often difficult to understand. Here’s what you need to watch for:

• High balance transfer rates – Balance transfer rates can vary widely from one card to the next, and some creditors charge as much as three to five percent in the form of balance transfer fees. The amount you will pay will depend on the amount you are transferring, as the balance transfer fee is a percentage of the transferred balance. It is important to remember that, most of the time, these fees are not negotiable. Sometimes individuals with excellent credit that threaten to use another card to transfer balances may have luck when it comes to negotiating the balance transfer fee rate.
• Keep in mind that there are generally no limits on balance transfer fees, so if your balances are high, expect your balance transfer fee to be high, too, which may cancel out any advantage you may get from transferring your balances to another credit card with a lower interest rate. It may be in your best interest to do the math and determine if the balance transfer fee or the higher interest rate on the other card makes more financial sense.
• Don’t expect balance transfer rates to hang around very long. In fact, many creditors have cut these introductory periods quite dramatically, from 12 months just a year ago to little more than six to nine months these days. Pay close attention to the card’s default rate once the promotional period has ended, as it could be just as high – or higher – than the interest rates on your current credit cards, thereby leaving you in a worse position than when you started.

When Should you Consider Alternate Payment Options?

Credit Card Debt

Credit cards are a luxury that many of us enjoy. They help get us out of financial binds and emergencies; they provide us with an easy method of paying for everything from groceries to vacations; and they allow us to earn cash back and rewards on everyday purchases.

However, you may want to think twice about using your credit card in the following circumstances:

• If you’re close to your credit limit – One of the factors that credit reporting agencies consider when determining your credit score is the amount of available credit. Therefore, if you charge to the limit on your credit cards your available credit is diminished, which therefore lowers your credit score. It is always best to avoid carrying a balance of more than 30 percent of your credit limit to keep your credit score intact.
• When you receive notice that the interest rate on your credit card will increase – The new CARD Act requires creditors to give customers a 45-day notice on rate increases; however, your rate may actually increase just 14 days after you receive the notice. Instead of spending on your card, take this time to negotiate a lower rate with your credit card company or find another card with a more competitive rate.
• If you know you can’t realistically pay off the balance in a reasonable amount of time – The best case scenario, of course, is being able to pay your credit card balance in full when the statement arrives. However, if you have a game plan in place to pay off the credit card balance over the course of a few months then it is probably okay to use your credit card. The trouble comes when you begin making purchases without having a plan in place to pay them off. Think twice before making a purchase and ask yourself if you can realistically pay off the purchases in a reasonable time frame.
• When you are purchasing something from an unknown website – To play it safe, it is always best to stick to purchasing online items from trusted websites. It just doesn’t pay to risk your identity and credit card information paying for a purchase from a website of which are you unsure.

Your Guide to Making the CARD Act Work for You

News

The CARD Act, the new credit card legislation enacted earlier this year, was designed to help credit card consumers manage their credit and keep creditors in line by eliminating outrageous fees and difficult-to-read (if not nearly impossible) terms and conditions.

However, it is important to point out that, in response to the CARD Act, many creditors took steps to protect themselves and, as such, some credit card consumers may benefit from the legislation while others may not. Here’s what you’ll need to do to ensure that the CARD Act is working for you:

• Keep a close eye on your credit card paperwork – You may be receiving more correspondence from your credit card company, and some of it may be just small notifications that appear to be junk mail. Because the CARD Act requires creditors to give you adequate notification of changes in your card’s terms and conditions, it is important to keep a close eye on any correspondence you receive from your creditor. In other words, you must read those annoying little pamphlets if you expect to be kept in the loop of any changes to your credit card!
• Take advantage of the charts now provided on your statement. Creditors are now required to provide consumers with payoff information regarding their account. A typical chart on your credit card statement will likely show how long it will take to pay off your account paying just the minimum balance (and the total interest you will pay!) and how long it will take you to pay off your balance paying a higher payment each month. This information can be very useful when budgeting yourself and working towards paying off your credit card debt.
• If you don’t use your card, expect it to be canceled. If you have a credit card that you use just for emergencies, the creditor may very well cancel that card. To avoid this, make it a point to use your card at least a couple times a year and pay the balance off when the bill arrives.
• Expect to pay a higher interest rate on your credit card. Creditors, in response to the strict regulations set forth by the CARD Act, raised their interest rates to recoup some of their losses. However, these higher interest rates can still be negotiated, and you have the right to cancel the card and pay off the remaining balance under your old interest rate if your credit card company raises your interest rate and doesn’t want to negotiate with you for a lower rate.

The Young Adult’s Guide to Money Management

Introduction

It’s never too early to learn the ins and outs of money management. After all, the decisions we make as young adults can affect our finances and credit score for years to come. Starting on the right path as a young adult will better ensure a successful financial future.

Here’s how to get started:

• Aim for the 30 percent mark when it comes to saving. If you start saving early, you will be ahead of the game when it comes to purchasing our first home, building an emergency fund to prevent a financial catastrophe and saving for retirement. Aim for 30 percent now so it will become second nature to put 30 percent aside in an interest-bearing account.
• Spend money for your future, not your whims. Instead of spending on whims such as vacations and clothing, think in terms of your future income. There are a few debts that are almost always worth taking on, and student debt is one of them. Spend the money to get educated doing what you want to do and it will most certainly pay off in the form of future earnings.
• Don’t wait to begin saving. Although we can all think of other things to spend our 30 percent on, the truth is that it is always best to start saving early. The beauty of compound interest is best played out when you start saving early in your adulthood.
• Get a credit card when your income allows and start building your credit history. A credit card can be dangerous in the hands of someone not skilled in the importance of credit, but it can also be a very powerful tool for building a strong credit score and therefore being prepared to take out larger loans, such as car loans and mortgages.
• Make the process of paying bills a priority in your life. Before nights out, new cars and last-minute vacations, make it a priority to always take care of your financial obligations, even seemingly insignificant ones. Remember: Electric bills, cell phone bills and credit card bills are just as important to your credit as your rent payment each month!

Does your Credit Card Help or Hinder your Credit Score?

Credit Score

We all assume that our credit cards, when used correctly, will help our credit score ranking. After all, establishing a history of charging and paying will prove our credit worthiness and bump up our credit score, right?

Well, that’s right most of the time. However, like most financial cases, this does not always hold true.

In particular, take note if you have a Visa Signature, World MasterCard or American Express credit card. These credit cards are generally reserved for those with high incomes and excellent credit and therefore come with the NPSL feature, which stands for No Preset Spending Limit.

You may think that if your credit card comes with the NPSL that you are free to charge as pleased, with no implications. However, your spending may very well be limited – unbeknownst to you.

What are NPSL Credit Cards?

NPSL credit cards generally come in two varieties: NPSL credit cards, which allow you to spend a certain, undisclosed amount, but require you to pay off your balance each month; and NPSL credit-hybrid cards that feature a revolving line of credit that allow you to exceed your limit, provided you pay any amount over your credit limit in full each month.

What many individuals fail to realize that many of these NPSL cards do come with a spending cap and, if your reach that amount (which may be unknown to you), your card will be declined. So, instead of enjoying the benefits of having no preset spending limit, you may be fooled into thinking your card will never be declined – only, of course, to have it declined, which can be incredibly inconvenient and embarrassing.

Detrimental to your Credit Score?

In addition, the way NPSL cards are reported to the three credit reporting agencies may be downright detrimental to your credit score. This is because one of the factors considered when determining your debt-to-income ratio is your credit utilization. If the credit limit is unknown by everyone except for the credit card company, including the credit reporting agencies, your credit utilization cannot be accurately calculated, thereby possibly lowering your credit score.

In short, it may be best to stick to a competitive, low-interest-rate credit card and avoid NPSL credit cards if you are concerned about your credit score.

Are you Putting your Credit at Risk without even Knowing It?

Credit Score

Most of us are pretty good at keeping a budget, paying our bills and spending wisely on our credit cards. However, there is more to managing our finances and protecting our credit than you may think.

The good thing, however, is that, with the proper knowledge, it is actually quite simple to protect your credit and manage your finances just by following a few, simple steps:

• Switch your monthly budget into an annual budget. Most of us think in terms weeks instead of looking at the year as a whole. There have been a few studies that have shown that college students underestimate their spending by as much as 40 percent when looking at it from a monthly perspective, yet overestimate their annual spending by just three percent.
• Start now and begin saving. There is only one way to protect your finances and credit and prevent a financial catastrophe from occurring: by saving! Many experts recommend saving at least $1 out of every $3 you earn. It is always best to pay yourself and then work your budget around your remaining income. If you can’t swing 30 percent, don’t give up spending altogether. Instead, save what you can and work toward paying off your debt so you can bump up your saving for the future.
• Beware of rewards credit cards, as they could cause you to accelerate your spending. Called “purchase acceleration,” this happens when you spend more freely, or purchase things you otherwise wouldn’t have with cash, because you think you’re being rewarded. However, in reality, the interest you are paying on your unpaid balances will exceed any rewards you may have earned.
• Reevaluate your gift giving. Many individuals overdo it when it comes to spending on gifts. Often times, a less-expensive gift will be just as much appreciated, and will put you in a much better financial situation. Purchasing a gift within your budget will still allow you to make your recipient happy, but will not put you in credit card debt that you can’t afford to pay off.

The Top Three Reasons Why it Still Pays to Use Credit Cards

Introduction

We’ve all heard the shift in credit card use in America, as more and more consumers are putting their cards away in favor of cash. Although using cash may be a great idea for a number of things, it is still important to point out that credit cards still have a very important use in society, and are still tops when it comes to certain purchases.

Before you think of taking the scissors to your credit cards, read on and see why it may make your life a bit harder to navigate without a credit card in your back pocket:

• Credit cards build your credit so you can get purchase larger things, like homes and cars – In a perfect world we would all use cash to pay for everything, from our education to our home improvement projects. However, very few of us will ever be able to accomplish this, so taking out loans is typically an inevitable part of life. With that said, paying cash for everything may make you feel better in terms of your finances, but it will not help you down the path to making large purchases, such as a home or a car. The bottom line is that most of us will need the help of credit cards to establish and build a strong credit score.
• Credit cards help you rent a car, hotel or airline ticket – Many types of purchases require the use of a credit card. Hotel rooms, for instance, almost always require a credit card deposit or hold. Even if you use cash to ultimately pay for the hotel room, for instance, you will still need a credit card to place a reservation with the hotel. The same usually goes for renting a car and booking air travel.
• Credit cards protect your purchases – Cash and debit cards can’t protect you the way credit cards can. Most credit cards come with a great feature, commonly called consumer purchase protection. What this means is that your purchases are protected through your credit card in case of a dispute with the retailer, theft or damage.

Store Warranties: Should you or Shouldn’t You?

Introduction

Tis the season to head to the store and make those large purchases; namely, electronics purchases, so now is the time retailers begin asking you to purchase those costly, extended warranties. The last thing you want to do when purchasing an expensive electronics item is to purchase an expensive extended warranty. What should you do?

Luckily, if you use a credit card, you may not have to take out one of these extended warranties— and not feel bad for not doing so. Many experts agree that the chances of you actually using one of these warranties is pretty low. That’s because, statistically, if the electronics item breaks, it will either be during the first few weeks, which is covered under a return policy, or long after an extended warranty would be valid. In addition, experts find that the number of people who actually cash in on their extended warranty is in the single digits.

With that said, you may still feel a bit nervous about walking out of the store without some kind of guarantee. First of all, ask the store about their return policy. Many stores, such as Costco, offer a generous 90-day return on electronics (and a lifetime return policy on nearly everything else!).

Second, don’t leave home without a good credit card that features buyer protection. Many of today’s major credit cards offer extended warranties on things such as electronics through their consumer protection packages. It is important to remember that all credit cards do not offer this protection, so check with the credit card company before making any large purchases.

The major credit card companies have the following consumer protection plans:

• Visa Signature – If you are a Visa signature card holder, you will likely be entitled to a year extension beyond the manufacturer’s warranty.
• American Express – We love American Express cards for many reasons, and their generous consumer protection plan is just one of the reasons. If you purchase anything on an American Express card (all of the cards in their line come with the same protection) you will automatically receive a year extension beyond the manufacturer’s warranty.
• MasterCard – We weren’t overly thrilled with MasterCard’s consumer protection policy, as they will only offer an extension of one year if the manufacturer doesn’t offer a warranty.
• Discover – Discover cards do not offer these consumer protection plans regarding defective products, but they do partner with Square Trade to offer inexpensive warranty extensions.