The College Campus Game

For over a decade it was quite common to see creditors sitting at tables lined up along any college campus lawn. In fact, most creditors saw young consumers as a great way to build their businesses. As a result, credit card companies would push easy-to-get student credit cards at college students, complete with plenty of free gifts and incentives.

For most college students it was the first time that they were able to receive credit; therefore, it was quite easy for credit card companies to sign up college students. Heck, in any given day you could apply for multiple cards!

College Students and their Mounting Credit Card Debt

The college-student market was a hit among creditors, and for good reason. According to Sallie Mae, 42 percent of college students carry a credit card. As of 2008, college students graduated with an average credit card debt of $4,100; that an increase from $2,900 from just four years earlier.

Sallie Mae also notes that 69 percent of college freshmen had a zero credit card balance in 2004; that number plummeted to just 15 percent in 2008.

Although there were many college students who used credit cards for useful purposes, such as purchasing text books and school supplies, there were just as many that abused credit, thereby resulting in a great deal of credit card debt, even before they graduated from college.

For years, lawmakers complained that the giveaways and other incentives on college campuses were luring college students into credit cards that they could not handle or afford.

As a result, Congress passed strict regulations regarding college students in its CARD Act. Now, creditors can no longer issue credit cards to college students unless they have the income to back it up. Although this may be inconvenient for college students, it may prove to be gift because college students will no longer be starting their professional lives with mountains of debt.

In order to make the most out of your income and live without mountains of credit card debt, it only makes sense that both partners must find a compromise between what is spent and what is paid each month.

If you have a spouse or partner who is unwilling to go the distance to get your credit card debt in check, then it may be time to be a bit more creative when it comes to negotiations.

1. Don’t approach the conversation in attack mode. If your partner feels that he/she is being attacked or accused of accumulating the bulk of the credit card debt, he/she will certainly react by becoming defensive. Instead, approach the conversation using “we.” For example, “We should come up with a game plan for reducing our credit card debt so we can begin saving for a home.”
2. Include your partner in on the discussion. Instead of approaching your partner with all the answers, encourage him or her to become actively involved with finding a solution. You can certainly come with a list of ideas or suggestions; just avoid being the one with all the answers.
3. Sweeten the pot with a little incentive. You may try something like: “we could begin to put money aside for that Caribbean cruise if we just pay off this credit card debt first.” Having something to look forward is often a good incentive for paying off credit card debt.
4. Put it in writing so there are no misunderstandings or miscommunication. Detail clearly what is expected of each of you so that there won’t be any problems down the road. If you are both income earners, detail what portion of each paycheck should go to paying off the debt. You may also want to discuss the ways in which you can begin cutting back on your spending. But, once again, make sure you approach this conservation in a calm, non-confrontational manner so that you can better accomplish your overall goal of living debt-free.

In addition to all of the benefits that millions of consumers will enjoy with the CARD Act, individuals with gift cards will now be covered, too.

Gift cards are an incredibly convenient and practical alternative to cash gifts and are certain to please the recipient. Now, they are protected under the CARD Act, too!

Some of the new changes regarding gift cards include:

• No inactivity charges unless the card hasn’t been used in one year – Many gift card companies would charge steep inactivity fees much, much sooner; now you can enjoy your gift card without worrying that the balance will be affected by inactivity fees.
• No expiration for a period of five years – Many gift cards in recent years would expire in as little as 13 months; now, they cannot expire unless they have not been used for five years. Now you can actually take your time to decide what you want instead of spending before the gift card expires!
• All relevant information must be disclosed on the card – Any pertinent information about the gift card, such as the expiration date, the toll-free number and any fees related to the gift card will need to be written on the gift card. Now there won’t be any second guessing when you find a gift card that you haven’t used for a while!

Other features of the CARD Act that will change the way we use our credit cards include:

• The average late fee or over-the-limit fee will change to $39.
• Credit card companies can no longer charge an inactivity fee or an annual fee. For all those credit card consumers concerned with paying fees if they don’t use their credit regularly, this part of the CARD Act will prove to be incredibly useful.
• Credit card issuers will need to evaluate rate increases every six months on anything imposed after January 2009.

There are a number of ways to meet your financial obligations and still manage your credit cards successfully; you must, however, be committed to a number of obligations if you expect to enjoy the many benefits of credit cards.

1. Always make a point to establish an emergency savings fund so that you won’t have to rely on credit cards if an unexpected expense creeps up. Putting a large purchase on your credit card may make it incredibly difficult to pay off, thereby setting you up for long-term debt.
2. Always take a moment to question your purchase so that you can decide if you are living within your means. A spur-of-the-moment trip to the beach many sound like fun, especially if you have a large credit limit, but you must think hard about whether this type of credit card purchase can be realistically paid off in a reasonable amount of time. The problem with credit cards is often that individuals get the false sense of having money because they have their credit cards in their back pocket.
3. If you are unable to pay off your credit card balance, in full, make a commitment to stop spending until the balance is paid off.  Making this small commitment to yourself will likely mean the difference between living within your means and living with credit card debt.
4. If you are saddled with too much credit card debt, take the time to set up a realistic repayment schedule and stick to it. Instead of simply paying the minimum payment, treat your credit card bill like any other bill and stick to the monthly payment you set up. You may even want to set up an automatic bill payment so that you won’t be tempted to pay less each month. You can often find calculators online that will provide you with a monthly payment amount that will allow you to reach your credit card payoff goals.

Here is our list of the top four steps you can do to protect your credit score:

1. If you don’t want nor need a credit card account any longer your first instinct may be to close that account. However, doing so could mean a lower credit score. It may seem more logical that having too much open credit on your credit score could lower your credit, but actually the opposite is true. Closing a credit card account lowers your available credit, thereby raising your debt-to-income ratio, something that the credit reporting agencies use when determining your credit score.
2. If you have any credit cards that are at or near their limit, you could be lowering your credit score. In other words, your credit limit is not an invitation to spend it all. The best rule of thumb when speaking of credit card spending is to limit your spending to no more than 30 percent of your credit limit. Any more than 30 percent could have a negative effect on your FICO score.
3. If you fail to make just one or two payments over the course of a year you may not think your credit score would suffer all that much. However, nothing could be further from the truth. In fact, one 30-day delinquent payment could mean as much as a 100 point drop in your credit score. Remember: in order to enjoy a great FICO score you must make all payments on time, without exception.
4. Falling into the retail credit card trap could cost you big. If you are inclined to take advantage of those “open an account today and save on your purchase” offers you could be setting yourself  up for trouble, as opening a number of credit card accounts at any given time can prove to be detrimental to your credit score. In addition, the high interest typically charged on retail credit cards could put you in over your head quickly in debt.

So, the question is: can you settle your credit card debt for less than you owe? Can you settle with your credit card company for a fraction of your balance and make more realistic payments?

Here’s what you need to know when considering a credit card debt settlement company:

• Not everyone can negotiate a lower payoff amount for their debt. In other words, your overspending may not qualify you for debt settlement. Instead, reputable debt settlement agencies work specifically with people who are in hardship situations, like a loss of a job, divorce or medical situations. In other words, if you are still making money the credit card company will expect you to pay back your debt – so don’t expect a “get out of jail free” card if you simply overspent beyond your means.
• You may be better off trying to negotiate a deal with your credit card company. Because so many people are turning to debt settlement companies many credit card companies simply won’t deal with them. Simply, if you are experiencing financial hardships and are having a difficult time paying your credit card debt, the best course of action may be to simply contact the credit card company yourself and forgo the debt settlement company.
• Don’t approach the debt settlement business the same way. Simply put, not all debt settlement companies are the same. There are unscrupulous, even dangerous, companies that are out to take your money and there are non-profit organizations that may prove to be quite helpful. In other words, do your homework before choosing a debt settlement agency.
• Understand that using a debt settlement company will adversely affect your credit score. There is no way to avoid this, as any time a credit card company is willing to settle for less than you owe them your credit score will take a hard hit.

However, Visa and Mastercard may soon be antiquated, leaving them feeling more than a bit threatened with this emerging technology.

Atlanta and three other big cities not yet named will be the location of the upcoming tests of the mobile payment system. Although the particulars of the system have not been fully disclosed, we do know that it will work by holding your smartphone in front of an electronic reader at your favorite retailers.

All transactions using this method will be processed through Discover Financial Services, the fourth-biggest payment network in the country. The London-based Barclays will help manage the accounts processed through Discover.

An End to Visa and Mastercard Fees?

Many retailers, who have for years had to put up with the transaction fees charged by Visa and Mastercard may be inclined to steer towards this method of payment. Most retailers have argued for years that there is no real competition in the credit card business; this mobile payment system may be just what this industry needs to create a healthy competition. Many retailers feel that any new payment system that would reduce their fees would be quite welcomed.

Visa and Mastercard payments currently make up more than half of all U.S. consumer purchases, compared to just 36 percent in 2003, according to the Nilson Report. Visa and Mastercard accounted for a whopping $2.45 trillion, or 79 percent, of all purchases last year. This number represents both credit cards and debit cards.

Merchants will have to pay about $200 per electronic reader and phone costs are expected to increase between $10 and $15, but many people see this change as well worth the money, especially because of the sheer convenience that it will afford both retailers and consumers.

According to Mercatus, a consulting firm in Boston, more than half of all U.S. consumers will use mobile financial services within the next five years. Eighty percent of those consumers will be between the ages of 18 and 34.

These unique circumstances may provide you with the opportunity to snag that really great credit card for which you’ve been looking. However, with multiple credit card offers being delivered into your mailbox every week, how do you begin examining and comparing the offers?

Although each credit card offer will come with its own benefits and advantages, there are five things that you should take a moment and review when comparing credit card offers:

1. Review the APR – The APR on the credit card will likely allow you to eliminate certain cards right off the bat. So, it only makes sense to take a look at the card’s APR immediately upon opening the credit card offer.
2. Review the terms of the APR – A credit card’s APR is only as good as the terms and conditions that are attached to it. Don’t be fooled by a low, promotional APR; instead, find a card with a great low, fixed interest rate so you won’t have to play the game of transferring to another credit card the moment the card’s promotional APR expires.
3. Review the balance transfer options – If you have outstanding debt on other credit cards, you may consider transferring those balances to your new credit card. Luckily, many credit card offers come with balance transfer options; just be sure to check the terms and conditions, including the APR, associated with the balance transfer offer, as they will usually differ from the card’s general terms and conditions.
4. Review the card’s rewards – If rewards are what you’re after, then examining the rewards is likely high on your priority list. Don’t skim through this material, though, as credit card rewards often come with their share of terms and conditions. Instead, take the time to read this information carefully.
5. Review all other terms and conditions – It can’t be said enough: take the time to read the small print! Your job as an informed consumer should be to make sure you completely understand all aspects of your credit card, and this happens when you read all of the card’s fine print.

There are a number of debt consolidation programs available, so finding a reputable company that will help you negotiate lower payments and terms on your credit cards may be a tricky maneuver.

It is therefore extremely important to find a non-profit, debt consolidation company that will help you consolidate your credit card debts into one, manageable payment. Here are a few tips to help get you started:

• Gather all your credit card debts together and consider whether they have become too much too handle. Entering into a debt consolidation program will lower your credit score, so make sure you are not jumping into a debt consolidation without first exhausting all of your other options. You may try consolidating your debts on your own or negotiating lower payment terms with your creditors, for example.
• Don’t be afraid to ask plenty of questions when researching a debt consolidation company. Verify their credibility through your local BBB and ask for a list of referrals, if desired.
• Keep up to date with your creditors through the debt consolidation process. In other words, make sure that the bills are getting paid on time and in full, according to your debt consolidation program.
• Expect to see the program through to completion. If you decide to abandon your debt consolidation program, expect all of your creditors to once again start asking for their money. A debt consolidation program will only work if you see it through to completion.
• Consider taking a credit counseling course. Credit counseling courses are ideal for individuals who are afraid that they will find themselves back in a financial bind after their credit card debt consolidation program ends and they begin spending like they once used to again. Take a cue from your past mistakes and make a point to learn from them and move forward towards a more positive financial future.

Many consumers, particularly over the past year and a half when creditors tightened their belts and denied credit to millions of consumers, have become jaded towards the credit card industry. Combine that with the new credit card legislation and the ways in which many credit card companies have found a way to skirt the current legislation, and it’s no wonder why so many consumers are now heading toward a “cash only” philosophy.

Although this can certainly eliminate much of the hassle and grief associated with credit cards, it does make establishing a good credit score very difficult to achieve.

The bottom line is that, in order to obtain a loan for anything from a car and home to a student loan, you must have a credit score. Often times, no credit is as often as detrimental as bad credit.

With that said, there are ways in which you can enjoy a relatively credit card-free lifestyle without jeopardizing your credit score in the process:

• Find one, great credit card with a low, fixed interest rate – Avoid dealing with low, promotional rates that will expire. Instead, do your research and find a card that has a low, fixed interest rate.
• Make regular purchases and pay them off each month – You must make purchases on your credit card in order to establish a strong credit history. You can simply make one or two purchases each month and then pay those purchases off when the bill arrives to begin building your credit score.
• Consider rewards to make your credit card purchases work for you –Credit cards can end up saving you big, provided you understand how reward credit cards work. Making purchases – and paying them off each month – may allow you to earn anything from cash back to airline points, so consider the advantages of credit cards instead of just the disadvantages.