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Why Creditors are now Turning to Parents for Student Credit Cards

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Getting a student credit card used to be as simple as turning the corner of any college campus. Creditors used to camp out and lure students in with special offers and free gifts.

However, given the recent changes to certain credit card laws through the CARD Act, students can no longer just snag a credit card the day they turn 18. In fact, creditors are only granting credit cards to college students if they can prove they have a source of income sufficient enough to pay their bills.

Unless, of course, students get a co-signer; in particular, their parents need to co-sign for the credit card.

A New Approach

As always, creditors have found ways to get around challenges, and student credit cards are no exception. Creditors are now targeting parents of college students for student creditors. In fact, you can be certain that student credit cards will start coming your way if you have a college student under the age of 21.

Parents are now being targeted by creditors because creditors know that parents will be the ones to determine whether their children will receive a student credit card. In particular, many creditors are targeting parents who already have credit cards through a particular credit card company and asking them to take on an additional account in the name of their student.

This direct mail approach may be a highly successful endeavor for credit card companies, as they can avoid marketing to students but nevertheless get to them through their parents.

Should you help your Child get a Student Credit Card?

If you are a parent of a college student, you will want to strongly consider whether it is time for your child to possess a student credit card, as ultimately the student credit card will affect your credit score if payments are not made.

There is no time like the present to teach your child responsible credit card habits, regardless of whether they are college students or not. Take the time to talk to your child about the importance of building a strong credit history, as a student credit card will be able to allow your child to begin building his or her credit history, so that he or she can have a strong credit score by the time college graduation rolls around.

A Useful Website for Cardholders

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The Federal government has a great website that could provide you with plenty of useful information regarding credit cards.

This new site (found at www.federalreserve.gov/creditcard), which is maintained by the Federal Reserve Board, has been launched to provide consumers with a basic guide to understanding the credit card industry.

Some of the useful features on this new website include:

• An Interactive Tools and Features section, which includes an area about learning more about a credit card offer you may have received. Located in an easy-to-open PDF file, this handy link allows you to better understand the terms and features of any credit card offer. Also located in this section is a guide to understanding your statement.

We think this section is particularly useful, as it breaks down all of the legal credit card terms into easily understandable language so that you can better navigate your monthly credit card statement.

Finally, the last section of this Interactive Tools and Features section is a Pay it Off calculator, which allows you get an estimate of how long it will take to pay off your credit card balance, given your interest rates and monthly payments.

• The Federal Reserve also has a great section on their website that allows credit card customers to watch their PSA; this video essentially teaches consumers how to navigate the credit card process and get the most out of their credit cards.
• The What you Need to Know: Credit Card Rules section is designed to educate and inform consumers on the new credit card legislation and how it can change the way your credit card company handles your credit card account.
• A small section called 5 Tips for… on the Federal Reserve website provides easy-to-follow steps for doing a number of things, such as “Improving your Credit Score” and “Getting the Most from your Credit Card.”
• The Federal Reserve credit card website also features additional sections that allow you to learn more about: options, interest rates, fees, lost or stolen credit card, billing errors, general complaints and managing your credit.

Why it may Pay to Stick with your Current Credit

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For many of us, the great credit card balance transfer offers over the years have tempted us to transfer our credit card balances from card to card. However, given the dramatic shift in the credit card industry, what once was commonplace now becomes a liability.

This holds true for many aspects of the credit card industry, including the length of time in which we keep our credit cards. Maintaining and developing a relationship with a trusted creditor is often worth much more than the short-terms savings you may experience from balance transfer offers or introductory offers.

Here are some of the reasons why it may pay to hold onto your current creditor:

• Best rates – It’s simply a fact that long-term customers get the best rates. Most credit card companies offer great interest rates to their valued customers because they have a credit history on which to draw from. In other words, if you have proven yourself to be a trustworthy customer, your credit card company will likely reward you with a competitive interest rate. You will likely also have more room to negotiate if you feel that you creditor could offer you a lower interest rate.
• Positive impact on credit score – Your FICO score, although determined using many factors, may be influenced by your history with the same creditor. In other words, you may have an excellent payment history, but another individual with the same history that has not switched credit cards every year or so will probably enjoy a higher FICO score in this area.
• Higher credit limit – Along with a better interest rate, you will likely enjoy a higher credit limit as a loyal customer. Many times, your creditor will gradually increase your credit limit as you prove your credit worthiness to them.
• Late payment forgiveness – Good customers who almost always pay their credit card bills on time will likely enjoy leniency from their credit card company if they slipped one month and paid their credit card bill after the due date. In fact, many credit card companies will remove late payment fees for loyal customers who failed to pay their credit card bill on time just once or twice.

Beware of Small Business Credit Cards with Personal Liability Clauses

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Small business credit cards offer many small business owners loads of convenient and practical features that allow them to run their businesses more efficiently; which is why so many small business owners have flocked to small business credit cards over the last, few years.

You may think it is in your best interest to take out a small business credit card for your business, and that generally holds true, but there is an exception to this rule.

As more and more credit card companies put the brakes on consumer credit, there are a number of changes that have also taken place; in particular, there are many credit card companies that include personal liability clauses with their small business credit cards.

Personal Liability Clauses Increasing

A small business credit card that features a personal liability clause is something that you might want to steer clear of, mainly because it means that if you are unable to pay your credit card because your business didn’t succeed, you may be personally responsible for paying back that credit card debt.

In other words, the credit card company can come after you, the cardholder, to pay your business credit card. Most small business owners run their business so that the business’s assets and liabilities remain separate from their own, personal accounts. However, credit card companies, in an effort to recoup some of their losses due to the lousy credit market and equally lousy economy, have started attaching small business debt to the cardholders who own the businesses.

Your Small Business Card may be Linked to your Personal Assets

That essentially means that a creditor may now be able to come after your personal assets if you are unable to pay your small business debt.

Unfortunately, the new credit card legislation does not cover small businesses, leaving many small businesses on their own when it comes to fighting creditors.

It therefore pays to take the time to read the small print of your small business credit card. Ask questions if you don’t understand the card’s terms and conditions and, if the creditor has a personal liability clause in their card’s terms and conditions, consider looking for another small business credit card.

Where has my Credit Limit Gone? The Reason why Credit Lines are Disappearing

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The credit industry is in a bit of a tight situation. The new credit card legislation has changed the practices of the industry, which has left many creditors struggling to make a profit.

As with most everything else, there are positive angles and not-so-positive angles with change. Although the new credit card legislation was designed to help consumers and reign in on the questionable practices of the credit card industry, it has also created turmoil as creditors seek to find other ways to either make a profit or simply keep their losses to a minimum.

Creditors begin to make Changes

A perfect example of this is that many creditors are cutting back credit lines to less-than-stellar customers in an attempt to cut waste; and the easiest way to do that is to cut their credit lines, either by hacking their credit limits or by simply cutting them off for good.

In the past, creditors sought out nearly any type of customer, and did so with low interest rates, promotional rates, and even gifts and rebates. Times have certainly changed, though, and now creditors are scrambling to find these consumers and cut their chances of incurring debt and not paying it back. In other words, creditors must act because their hands are tied and their profits are dwindling.

What we can begin to Expect

Some of the actions from the credit card industry that we can expect to see include: cutting off all inactive accounts; cutting off subprime consumers; and reducing the credit lines for countless others.

Many industry experts believe that creditors may cut nearly $1.2 trillion worth of credit to consumers this year alone, and that by 2010 the number is expected to rise to $2.7 trillion.

For many of us, our credit cards serve as an everyday convenience, as well as a lifeline in case of emergency situations. It is therefore in our best interest to do what we can to keep the credit we already have, as to protect ourselves and our credit score.

The Perks of Owning a Small Business Credit Card

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If you own a small business, then you may have considered a small business credit card. You may need a small business credit card, regardless of the size of your business. In other words, if you have decided against a small business credit card simply because you don’t think your business is big enough then think again. A small business credit card can offer you and your business many advantages that personal credit cards simply can’t.

But what is a small business credit card and how can it serve you as a small business owner?

• Online Tools – Small business credit cards often comes with a wealth of money management tools. These tools, often available online, help you, the small business owner, to track and organize expenses in an effort to maintain accurate records. The online tools offered by many credit card companies for their small business credit cards also enable you to monitor the spending of your employees should they need to make business-related purchases.
• Larger credit limit – Small business credit cards often come armed with a much higher credit limit than standard, personal credit cards. If you are starting your business and need assistance from time to time, then a larger credit limit is ideal for you. In addition, if your business requires that you make large purchases, then a higher credit limit will certainly come in handy.
• Separate from your personal accounts – A small business credit card is a practical alternative to using your personal credit card to make business purchases. In order to ensure accurate bookkeeping, it is important to keep your personal accounts separate from your business accounts; therefore a small business credit card may become very useful.

When searching for a small business credit card, remember that interest rates, credit limits and reward programs differ widely from one card to the next, as do the services they offer to small business owners. It is therefore important to take your time and compare small business credit cards to be sure that you have chosen the one that is best for you and your business.

Should I Take Advantage of a 0% Interest Rate Balance Transfer?

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We’ve all received those tempting offers from credit card companies offering a 0% interest rate on balance transfers. Sounds enticing, doesn’t it?

Well, credit card companies are betting on it. Don’t get me wrong – 0% balance transfer offers are a potentially excellent credit choice; but they may also come with terms and conditions that could turn around and bite you if you don’t stay on top of things.

How do they Make Money?

It only makes sense that a credit card company can’t make anything off of customers who take advantage of 0% interest rate offers, right? Wrong! The credit card company is betting on the fact that the majority of credit card holders will be unable to pay off their credit card balance during the 0% promotional rate. In other words, the credit card company may not make anything off of the credit card holder at first, but it is only a matter of time before they start making money.

How Long does the Promotional Rate Last?

Which brings me to the next point: 0% credit card balance transfer rates are rarely for the life of the loan! Upon further inspection, you will find that most credit card balance transfer offers are only good during a short, promotional period, which is typically between six and 12 months. At that point, the credit card’s interest rate will likely significantly jump.

In fact, some credit card companies may raise interest rates upwards of 18 percent once the promotional rate has expired. And this is where reading the terms of the credit card balance transfer offer becomes so important.

There are many credit card holders that accept 0% balance transfer offers, only to ignore the length of the promotion. And then, before they know it, they have been paying a 15 percent interest rate on their large balance!

What about Balance Transfer Fees?

Many of us are so excited to receive a 0% balance transfer offer that we automatically accept the offer without looking further into it. The two things that you should take special notice of include the interest rate once the promotional rate has expired, as well as the balance transfer fee.

Huh? A balance transfer fee? Yep, this is another way credit card companies make their money. Many companies charge a fee to transfer a balance, and this fee often ranges between one and three percent of the balance of the transfer.  Most credit card holders find that this fee is reasonable, considering the money they will save on interest rates, but it is definitely something to look further into when accepting a 0% balance transfer offer.

The bottom line with 0% balance transfer offers is that they can certainly prove beneficial to credit card holders who carry a balance on their cards. However, it is still important to work hard and pay off the debt as to avoid future finance charges. Check the balance transfer’s terms, including the promotional rate and the balance transfer fee, so that you can make the most informed decisions regarding your credit.

Have you Considered a Small Business Credit Card?

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We all know that credit cards play an important role in our day-to-day living. It should therefore come as no shock that small businesses rely heavily on credit from time to time.

Bridge the Income Gap

Many small businesses use small business credit cards to bridge the gap between income and expenses. A revolving line of credit is important for many small businesses or start-up businesses, as this enables the company to continue operating the business, even when cash flow is an issue.

Search for a Low, Fixed Interest Rate

Small business cards are similar to traditional credit cards, as the credit card balances are subject to interest charges; therefore, it is extremely important for small business owners to shop around and find a small business credit card with a low, fixed interest rate.

Take Advantage of Online Tools

Small business credit cards may also prove useful to small business owners who want to track their weekly, monthly and yearly spending. Most small business credit cards offer a myriad of online tools to help small business owners track expenses. In addition, year-end account summaries are also very useful, as they enable small business owners to see the overall picture regarding their yearly expenditures.

Protect yourself Against Credit Card Theft

Like traditional credit cards, small business credit cards feature protection against fraud or credit card theft, as well. For many small business owners, the ability to check the account online is important, as they can monitor the account on a weekly – or even daily – basis to ensure that there are no unapproved charges on the card.

Include Additional, Authorized Users to the Account

Small business owners can also add certain employees to the account, thereby enabling them to purchase supplies when needed. And, because all expenses are tracked and accounted for, the small business owner does not need to worry about frivolous expenditures. For many small business owners that rely on employees to make purchases and order supplies, this account feature may prove extremely beneficial.

Keep Business and Personal Expenses Separate

For many small business owners, it may prove useful to separate business expenses from personal expenses, so it may be a good idea for small business owners to obtain a small business credit card and use it solely for business expenditures, thereby eliminating the problem of confusing bookkeeping.

Facts about Secured Credit Cards

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Credit cards are a convenience that many Americans have come to appreciate. However, given the financial crisis and the looming recession, many once credit-worthy Americans are now struggling to re-build their credit after difficult financial times sidelined their credit score and their ability to obtain credit.

For those of us who are struggling with our credit worthiness, secured credit cards may be the answer. It is important, however, to educate ourselves on both the advantages and disadvantages of secured credit cards before applying for one.

How Secured Credit Cards Work

A secured credit card is essentially a credit card with a security deposit. The credit card works in a similar manner to a traditional credit card; however, the credit card holder must first deposit money into a special account that is equal to 50 to 150 percent of the card’s credit limit.

The credit card holder then uses the credit card as he or she would any standard credit card, and pays the bill in a similar fashion. The only difference is that the creditor has a cash reserve to pay the credit card should the cardholder default.

As the cardholder continues to pay the card every month and make responsible purchases, the creditor may raise his or her credit limit. For cardholders seeking a higher credit limit, the creditor simply requests a larger security deposit.

Establish and Spruce up your Credit Rating

For those consumers with little or no credit, or for those with a poor credit history, a secured credit card may be the ideal solution for rebuilding credit. A secured credit card provides consumers with the opportunity to show creditors that they are working towards a more financially sound future.

A secured credit card enables anyone of legal age to establish a credit history; therefore, they are ideal for young adults who have no credit history. Others who may find secured credit cards to be useful are those in bankruptcy or those who have had their bankruptcy recently discharged.

Establishing a credit history with a secured credit card may very well be a responsible step towards a better financial position.

Disadvantages to Secured Credit Cards

While there are few disadvantages, it is important to remember that secured credit cards typically carry a high interest rate, although for many consumers with poor or no credit, this is often an accepted trade-off.