Credit Card Quick

Bank of America to Hit Customers with Annual Fees

News

It is clear that credit card companies are still reeling from the ill effects of the CARD Act legislation. From raising interest rates to becoming much more selective regarding whom they will offer credit, the effects of the CARD Act continue to reverberate throughout the credit card industry.

Bank of America, though, appears to be taking things one step further, as they recently announced that they will begin charging annual fees to millions of its customers. Although it is still not clear how many people will be affected by these new annual fees, even consumers with a good history and a good credit score may not be in the clear regarding annual fees.

Fees to Start Soon

Bank of America is expected to begin sending letters to its current credit card customers as early as this spring. The letter will state that the company will begin charging many of its customers a $59 annual fee. The letter also states three reasons why credit card customers may be charge this annual fee, but it falls short on spelling out who exactly will be targeted.

The letter goes on to state that the company is making the changes due to “derogatory public record or collection filed” and that they will review their banking relationship with each customer.

Who is being Targeted?

It appears that the company is targeting customers with outstanding balances and why they are doing this is quite simple. If the company charges a customer with a large balance the $59 annual fee, they can either accept the fee or close the account. However, before they can close the account they must pay off the balance — and this is simply not possible for some customers. In short, the company can get away with charging the $59 fee to customers with higher balances because, unless they pay off their balance, they must keep the card open and pay off the fee.

Bank of America, although it doesn’t state this, of course, says that every account undergoes a periodical review, and that every customer will either have the choice to accept the fee or close the account. Bank of America also states that the “majority” of customers will receive the annual fee.

The Last of the CARD Changes go into Effect

News

Although many of the regulations and changes of the CARD Act have already been in place since May, the very last of them are now in effect.

The most recent changes to current credit card legislation under the CARD Act include:

• The first late payment fee on your credit card cannot be more than $25; however, subsequent late payments in a six-month time frame can result in higher late payment fees of $35 for each offense.
• Your late payment fee cannot exceed your minimum payment. For example, if your minimum payment is $20 your credit card company cannot charge you a $25 late fee. The maximum late payment fee in this case could not exceed $20.
• You cannot be charged multiple fees for the same offense. For example, you cannot be charged a bounced check fee and a late payment fee if your check bounces.
• You can no longer be charged an inactivity fee for not using your credit card. Other fees, such as annual fees, can still be charged.
• Any increase of your APR must be explained to you. In other words, an increase in your credit card’s interest rate must accompany a reason behind the change.

Other changes that went into effect earlier this year include:

• Your credit card company cannot increase your card’s APR during the first year unless your rate is an introductory, or “teaser,” rate or if your APR is variable and it tied to an outside index. Your creditor may also raise your interest rate if you are 60 days delinquent on a payment or if you don’t comply with the terms of the credit card.
• Your creditor must provide you with a 45-day notice before making any significant changes to your credit card account. In addition, during this time you have a right to cancel the card before these changes take place and pay off your balance under your card’s original terms and rate.
• Your creditor must give you at least 21 days to make your credit card payment.

The Link between your Credit Score and Closing a Credit Card Account

Credit Score

Have you heard the rumor about your credit card score being lowered if you close your credit card account? Are you now nervous about closing any type of account?

If so, then you must take into account several factors.

Annual Fees

First of all, many credit card companies are now imposing very steep annual fees on their credit cards. For example, Citi is now starting to impose a $60 annual fee on some of their credit cards. The fact of the matter is that most credit cards will not impose an annual fee, so in my opinion it only makes sense to close an account that is going to charge you an unnecessary fee. Will it lower your credit score a few points? Sure. Will saving the $60 every year be worth it? You bet.

Inactive Account Fees

In addition, many credit card companies are now charging fees for inactive accounts. In other words, if you have an open credit card account that you no longer use, you could very well be charged an “inactivity” fee by your credit card company. Again, in this instance, I would say that it is best to save yourself the aggravation and the unnecessary fee and close the account.

If you are unsure about closing your credit card accounts, but you want to avoid the fees, there are steps you can take. For example, simply charging one or two purchases a year on a credit card will stop the inactivity fee. You can also call your credit card company and dispute the annual fee; many credit card companies will comply if you are a good customer.

In the end, closing your credit card account will probably not lower your credit score substantially. Many times, a closed credit account lowers your FICO score because it shortens your length of credit history. Although this is usually true, the fact of the matter is that if you have a good credit score closing one account won’t affect your FICO score for very long.

You may, however, want to avoid closing an account before making any large purchases, such as a home or a car, as you will want your credit score to be as high as possible as to secure the best interest rate.

Teaching Your Kids About Credit Cards: The Basics Part One

Introduction

You want to teach your kids everything they need to know to get started on their own, right? Of course, you can’t literally teach them everything. There are those things that can only be learned through the school of hard knocks. However, you can prepare you kids for the real world by giving them great financial tips, including lessons in credit and credit card usage.

Credit Scores

Sadly, many young adults venture into the world of reality with nary a clue as to what a credit score means, let alone what one is. Parents can give valuable financial lessons by teaching these young ones all about credit scores. Sit them down and explain all about the three credit bureaus, how scores work and how they can be somewhat different from agency to agency, depending on the reporting practices of the creditors themselves. Explain to them what those numbers mean, what affects those numbers, the importance of maintaining a good score and what affects it could have in the future as far as their ability to obtain credit, loans, get a home or even a job.

Credit Cards

Credit cards have their benefits and downfalls. In this day and age, though, it is definitely a valuable tool to have, even for the young adult. Parents can prepare their kids by teaching them how to use credit cards responsibly. In part 2 of this series, we will discuss ways to start teaching credit card use early on. For now, we will address the basics that your kids need to know before they ever think of even obtaining a credit card.

First, be sure to explain to them that some cards do have annual fees, and that the balance due is not simply their purchase amounts, but also includes fees, finance charges and interest rates. Explaining interest rates is a smart idea as well. Teach them about responsible use of a card and paying the balance, including the pros and cons of minimum balances. Some of the other things to tell them? Make sure they can afford to pay back what they charge plus fees and interest. caution them against impulse purchases and cash advances, as well as purchasing a few dollar item on credit.

Teaching your kids to be disciplined with a credit card can set them up for a reasonably financially responsible future, so long as they adhere to these lessons. Adding in lessons about budgeting, investing, and saving wouldn’t hurt either.

Is Gold Card Status a Worthy Ambition?

Introduction

Many strive to one day possess the Gold Card status.  However, is this a worthy ambition? Does this mean something special or is it just a prettier card for your wallet?

Having a gold card (or silver or platinum or titanium for that matter) represents a certain status as a credit card holder. Your credit score is probably excellent. Maybe your time with your credit card company has proven you a valued and worthy customer. Your gold card is the reward. Essentially, it says you pay your bills. Still, is a gold credit card better than other credit cards?

Almost every credit card company offers credit cards tagged as gold or one of the other metallic words that make them sound extra special. The truth is, other than a happy store who will think your tops because you have a gold card (they see it as a status symbol), these kinds of credit cards are no better than the many other credit cards on the planet. You can find plenty of cards offering the same perks to you as a customer without the added label of “gold.”

The Benefits and Considerations of Gold Credit Cards

The one benefit of a gold card may be a higher credit limit on the card. After all, it is said to signify that you are more than creditworthy. However, this has not always been the case. Some people do find themselves paying less in annual fees and interest with these cards, but again, that’s not always going to be the case.

Some gold cards may come with lower interest rates or the same average rates of any other card. While some cards may carry lower interest, odds are, they have a whopping annual fee that will offset the loss in interest fees.

Gold or Not?

Are we saying that Gold cards should not be obtained? No, that is not specifically true. Some gold cards do have their perks, like the ones mentioned above, and they may even offer some outstanding rewards programs. Gold cards are not a ad thing to have. They do have the appearance of a higher credit status after all. The important thing is that you find a card that offers you the credit limit, benefits and terms that suit you, whether the label is gold or not.

Credit Card Shopping: What to Consider when Choosing a Credit Card

Choosing Credit Card

Choosing a credit card is a bit of an art. One credit card doesn’t fit all, and your spending habits, your wants and your needs all play a part when determining which type of credit card is right for you.

Your credit card can be an extremely useful financial tool, so it is up to you to decide which type of credit card will best fit your lifestyle, your financial needs and your budget.

What to Consider when Choosing a Credit Card:

• Decide which type of spender you are – Are you the type of spender who pays your bill in full each month, or do you anticipate carrying a balance? Will you use your credit card for personal use, or is it primarily for business purposes? Will you use your card for daily expenditures, or will you only use it for emergency purposes? All of these questions are necessary, as there are a number of cards that cater to different spenders. For example, an individual who pays off his/her balance every month will likely need not worry about APRs, but instead focus on details such as annual fees and rewards programs.
• Find the best APR – Do your research and find the cards with the most competitive interest rates. Decide whether a fixed or variable interest rate is best for you, and then determine whether the quoted interest rate is a promotional one, as this will likely change within a year’s time to a higher APR.
• Consider whether you need a balance transfer option – Many individuals who find a new credit card with a more competitive interest rate often transfer their old balances onto their new card. Although this is generally a good idea, it is important to fully understand all of the terms and conditions that accompany the balance transfer offer. Some things to consider: the APR on balance transfers; the length of time the promotional rate will stay in effect for the balance transfer; and the balance transfer fees associated with the balance transfer.
• Read the fine print – Commonly referred to as the credit card’s terms and conditions, the fine print on your card is chocked full of very important information about your account that you must fully understand. Don’t accept a credit card offer if you don’t fully understand the card’s terms and conditions, and ask questions if something doesn’t sound right.

Are your Credit Card Rewards Working for you? Tips for Getting the Most out of your Rewards

Credit Card Rewards

Credit cards with rewards features are arguably the most popular types of credit cards these days. Consumers want to see a return on their spending, and there is no better way than through rewards credit cards.

In exchange for making purchases with their credit cards, credit card companies are offering pretty lucrative rewards in return. However, in order to get the most out of your rewards credit cards you must be educated about your rewards program and what it can – and cannot – do for you.

Before selecting your next rewards credit card, take a moment or two to really scrutinize the rewards program. Pay close attention to the card’s terms and conditions, and don’t just go with a rewards credit card that sounds good. Make it your mission to find the best rewards credit card for your particular situation so you can be one of those consumers who truly benefit from rewards credit cards!

Some points to consider:

• Unless you plan on paying your card in full each month, don’t use a rewards credit card. It doesn’t make much sense to work towards rewards when you’re paying interest charges each month. In other words, weigh the benefits offered by your rewards credit cards with the interest charges you pay each month if you carry a balance and you’ll soon see that the negatives often outweigh the positives.
• Pay close attention to the level of spending you must achieve before you begin earning the maximum on your rewards credit card. For example, many credit cards offer “up to” a certain percentage in rewards, but many times the customer must meet a minimum amount of spending to actually achieve the maximum rewards percentage.
• If you choose a rewards credit card that offers frequent flier miles, really pay close attention to the level of spending you must achieve to earn a free flight. If you typically charge a lot on your credit card over the course of the year then a frequent flyer credit card is probably a good choice; however, if you tend to charge small purchases here and there you probably won’t earn enough points to qualify for a free flight for quite some time.
• Consider annual fees when choosing your rewards credit card. Some credit card companies charge a yearly fee, and others do not; but don’t dismiss the cards that do charge an annual fee, as their rewards program may far exceed their competitors that don’t charge an annual fee. In other words, weigh all of the card’s terms and conditions before you make a decision.

Should you put up with Credit Card Annual Fees?

Choosing Credit Card

Many credit card companies are getting quite creative when it comes to socking customers with fees. Case point: there are a few credit card companies that are now kicking around the idea of reinstating annual fees. During the height of the credit boom, most creditors threw annual fees out of the window. Now, however, they seem to be singing quite a different tune.

The question is: should you pay an annual fee for your credit card?

If you have good credit and you’ve proven yourself to be a good credit card customer, then absolutely not. As consumers, there are certain things that we will inevitability have to put up with, given the state of the economy and the pitiful state of the credit card industry. However, annual fees shouldn’t be one of them.

Who wants to pay their creditor for the privilege of spending their own money? I certainly don’t, and neither do most consumers.

Testing out Annual Fees

There are many reports that credit card companies are now in the process of “testing out” annual fees for their credit cards, which means that if enough consumers complain about this unnecessary fee then most companies will ditch their annual fees and leave them in the trash, where they need to remain.

Bank of America, for example, recently announced that it would start to “test” annual fees for its customers, and charge a select group of customers an annual fee of anywhere from $29 to $99, although it isn’t clear how they will decide which customers pay the lower fee and which customers will be charged the higher fee, and if there are any fees in between.

When you may not Have an Option

There is, perhaps, one occasion that you should simply pay the annual fee and quietly go on your way. If you have poor credit or have been unable to pay your credit card bills in a timely fashion then you probably don’t have a whole lot of options when it comes to annual fees. In other words, if you dispute your annual fee, your creditor may very well tell you that you must pay the fee or risk losing the card.

Your best bet, as a credit card customer, is to simply contact the creditor and request that the annual fee be removed from your account. Some companies will comply, particularly if you have proven yourself to be a good customer, while others will stick to their guns.