Credit Card Quick

Your Rights under the CARD Act if you Carry a Balance

Introduction

Many of us carry a balance on our credit cards from month to month; in fact, statistics show that about 46 percent of all American families roll their balances over each month. If you’re one of those individuals, consider yourself lucky to be protected under the CARD act currently in place by Congress.

In fact, some of the provisions of these new credit card laws could very well be speaking directly to you, particularly if you find yourself carrying over your balances from month to month.

Here’s how the new CARD act may affect you and your credit card balances:

• Rate Freeze on New Accounts – The new legislation states that creditors must not change a cardholder’s interest rate during the first year of opening the account. That’s great news for the many cardholders who found credit card companies raising the interest rates on their credit card mere months into their new account. However, there are some exceptions to this rule: expiration of a promotional rate; variable APRs; or payments that fall 60 days past due. The creditors, in these three circumstances, have the legal right to change your credit card’s interest rate.
• Reward for Responsible Behavior – If you find yourself on the receiving end of a rate increase because you fell at least 60 days behind on your credit card payment, you may still be in luck. Although the credit card company has the legal right to raise your interest rate due to nonpayment, they must reinstate your original credit card interest rate if you make all required payments during a six-month period.
• Protection on Existing Balances – Although credit card companies are permitted to increase your card’s interest rate after a year of opening a new account, they are not permitted to apply the new, higher interest rate to your current balance. Only those purchases made after the rate hike can fall under the new interest rate.
• Payments to Higher Interest Rate Balances First – If you have a credit card that has different interest rate for different purchases, the credit card company must apply all of your payment (beyond the minimum payment) to your balance with the highest interest rate first, thereby enabling you to save big on finance charges.

A Useful Website for Cardholders

Credit Card Types

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.

Smart Holiday Spending

Credit Card Debt

You don’t have to spend the better part of the new year stressing over bulging credit card balances and high interest rates!

Called “holiday hangover,” it is the time of the year that many consumers cringe when they open their credit card bills. Too much debt and not enough cash means that credit card balances go nowhere while interest rates and fees continue to mount.

This is the year that you can change this, though. Instead of digging yourself into debt this holiday season, change your attitude toward holiday spending and instead spend smart to save yourself from a “holiday hangover” in 2010.

How to Keep your Credit Card Spending in Check this Year:

• Understand retailers’ tricks and be prepared to reject them. It is not uncommon to be inundated with credit card offers every time you walk into your favorite retailer. Although these enticements can be tempting, keep in mind that most retailers charge much, much more in interest charges than major credit cards. The bottom line: you will likely end up spending more in interest charges with retail credit cards, regardless of whether you take advantage of a promotional rate.
• Take your credit card out of your wallet unless you make a planned purchase. Impulse spending is the weak spot of many consumers. You’re out and about when you notice something that you didn’t think you need, but now you can’t live without. Sound familiar? For most consumers, this type of spending is dangerous and all too common. Your best bet is to simply leave the credit card at home until you are ready to make a purchase.
• Make a budget and stick to it. If you do your homework and set a strict budget for all the people on your list you are far less likely to go overboard with purchases, and far less likely to charge up your credit cards.
• Determine your ability to pay off your debt before you make a purchase. If you want to make a credit card purchase, but you know you don’t have the money to pay it off in full next month, sit down and calculate the interest you will be paying. Often times, this bit of reality is enough to make you think twice about hefty purchases.
• Choose the best credit card and put away the rest. You don’t need to use all of your credit cards, and you really shouldn’t. Instead, take the time to compare the rates and terms on your credit cards and use only the card with the best terms and conditions.

Why Cutting up your Credit Cards may not be the Right Move

Credit Repair

Many consumers, worried about an overabundance of credit card debt and rising interest rates, have chosen to take matters into their own hands and cut up their credit cards, once and for all.

But is this really the best decision, both for yourself and your credit score?

The first thing you need to know is that your ability to borrow virtually any kind of money is dependent upon a strong credit score, especially in today’s economy. It is because of this that cutting up your credit cards, although a seemingly smart idea, may really be detrimental to your credit score.

For example, cutting up your credit cards and canceling your accounts immediately affects your FICO score, as your available credit is now much lower. Because part of your FICO score is related to your available credit, canceling your accounts may do much more harm than good.

Consider All of your Options

Instead of cutting up your credit cards and closing your accounts, consider paying down the balances. This is simply the easiest way to protect your credit score and keep your debt manageable.

Your timely payments will allow you to establish a good credit history which will, in turn, improve your credit score. In addition, your low credit card balances will keep your available credit open, which will therefore produce a stronger credit score.

The Basics of a Good Credit Score

A good rule of thumb is to seek consumer credit counseling services if you are drowning in debt; otherwise, it is best to manage your debt by making timely payments and by keeping your credit card balances to a minimum.

It is also a good idea to regularly check your credit score. Order a copy of your credit report from all three credit reporting agencies at least on a yearly basis to make sure that your report is accurate and free of any errors or discrepancies.

Why it Pays to Consider all of your Options when Shopping for a New Credit Card

Introduction

We all remember those days when credit flowed freely. Our mailboxes were crammed full of credit card offers and we essentially had our pick of credit cards.

Shopping for a credit card in today’s economy, however, is decidedly different. We are no longer inundated with credit card offers, and we may not even be eligible for some of the credit cards that, just a few years ago, we could have easily obtained.

Order your Credit Report

Before you begin the process of shopping for a new credit card you must understand where you stand as a customer. To do this, you should order a copy of your credit report from the three, major credit reporting agencies.

If you want further information about your credit score, you can go to myfico.com to get your FICO score. This website also gives you access to financial tools which allow you to see how some of your financial decisions can affect your FICO score, either for the better or the worse.

It is important to understand that most banks will consider you a good credit risk if your credit score is 750 and above, so understanding where you stand is a great, first step when shopping for a credit card.

Consider your Future Plans

Before you apply for a new credit card, consider whether you will make any large purchases in the upcoming months, as a new credit card can reduce your FICO score, which may make it harder to snag a home loan or a car loan (or get a better rate).

You may want to pay off and cut up your old credit card once you have received a new credit card, but reconsider closing the account, especially if you plan to make any large purchases in the upcoming months, as closed accounts lower your available credit, which in turn lowers your FICO score.

Decide on a Card that’s Right for you

If you carry a balance, your first priority should be to find a credit card with a low interest rate. If you travel often, consider a travel rewards credit card, and so on. Make sure your credit card meets your needs and that the terms and conditions of the card make sense for the type of spender you are.

Three Ways to Beat the Credit Card Game

Introduction

Credit cards can be your best friend, and your worst enemy. For those who have mastered the credit card game, credit cards are merely a convenience, and one that they certainly never rely on. Mindful, responsible spending and a serious commitment to paying off your credit card debt in a reasonable amount of time will save you from credit card problems, thereby helping you to become financially independent and not bogged down in credit card debt.

How to Beat the Creditors at their own Game:

• Did you ever hear the saying that the best way to achieve a zero percent interest rate on your credit card is to simply not have a balance? Listen, credit cards more than serve their purpose, for a multitude of reasons; however, when you find yourself purchasing things that you know darn well you will not be able to pay off in the near future then it is time to rethink your attitude towards credit card debt.

For starters, make a budget and stick to it. That will allow you to estimate what you can afford to charge each month and pay off each month. Next, before you whip out your credit card to make a purchase, simply take a moment or two and ask yourself if you really need this item, or if it an impulse purchase.

• Consolidate your debts onto one, manageable credit card and then cut up all of the other ones. One of the biggest mistakes consumers make is to consolidate their credit cards and then simply charge them back up again. You must make a conscience decision once you have consolidated your debt to no longer use those cards that got you into trouble in the first place.
• Negotiate the terms of your credit cards. It is not uncommon to see interest rates skyrocketing and credit limits being slashed, as the new credit card legislation has prompted many creditors to stick it to their customers in hopes of recouping some of their losses. However, if you notice you APR on the rise or your credit limit being cut, immediately contact your creditor to remind them that you have been a loyal, responsible customer and that you expect the changes to be reversed. If they are unwilling to negotiate with you regarding the terms of your credit card then it may be time to move on.

What you need to Know about Traveling and your Credit Card

Card Security

Traveling with a credit card provides us with many conveniences and advantages. It eliminates the need to carry a large amount of cash; it protects us against fraudulent spending; and it even provides us with purchase protection insurance. Best of all, most major credits are accepted at destinations all over the world.

It is therefore important to always plan accordingly so that your travel plans won’t be interrupted by credit card problems.

• Call the company ahead of time – It always a good idea to call the creditor before you depart on your vacation to let them know that you will be traveling and perhaps charging more than you typically would. Many creditors, when they see a great deal of credit card activity, especially in a different location, will flag a credit card for fraud. It is therefore important to inform them, ahead of time, so that you won’t have to deal with a frozen credit card account while you are on holiday.
• Check your balance – There could be nothing more impractical than not having enough credit on your credit card while away on vacation. Therefore, it is best to check your balance before you leave and, if necessary, contact your creditor and request a credit line increase to accommodate your travel expenditures.
• Beware of using your credit card at suspicious locations – Use your credit card only at trusted locations while traveling, if possible; especially while traveling abroad.
• Always carry a backup credit card – If you experience problems with your credit card, it is always a good idea to carry another, major credit card as a back-up.
• Keep the credit card phone number in a safe location – Write down your credit card’s phone number and store it in a safe location while on vacation in case you need to contact the creditor. You may choose to keep it in a separate piece of luggage, or you may ask your travel companion to carry the number. Of course, you don’t want to carry the number in your wallet or purse, as it won’t do you much good if it is stolen, too, along with your credit card.

Thinking Ahead: Adding an Authorized User to your Credit Card

Introduction

As many of us know, it is possible to add an authorized user to our credit card accounts. Often, this may be a spouse, a teenage child or a family member that may otherwise not be able to obtain credit. Although this may be ideal in certain situations, it is definitely a decision about which you may want to think twice.

Any debt that is incurred on your credit card – regardless if it was charged by another individual – is your debt, and you, and only you, are responsible for it in the eyes of the credit card company.

There have been countless situations, for example, when an irate spouse, on the verge of a divorce, charges up credit cards on which he/she is only an authorized user. Or college-age children going off to school and irresponsibly and recklessly spending on their parents’ credit cards.

The bottom line is that adding an authorized credit card user to your credit card comes with its own set of risks. It is therefore of the utmost importance that you put a great deal of thought into this decision because, in the end, it is your credit and your finances on the line.

For example, I had a friend that agreed to add her brother as an authorized user to her credit card account because he had poor credit and was not able to get a card on his own. Although she made it very clear to him that he must pay the balance every month, the card’s balance quickly got out of hand and he was no longer able to afford the payments. Who was stuck with this debt? Yep, you guessed right: my friend.

After all, if she chose to not pay the credit card under the assumption that it was his debt, her credit score would certainly have taken a nose dive and the good credit she had worked for all of her life would have landed in the gutter.

It is important to understand that perhaps the very first mistake my friend made was allowing her brother to act as an authorized user. His bad credit should have been a red flag! After all, if was not able to maintain good credit on his own, what made her think that he would act any differently when it came to her good credit?

In the end, like anything else, the decision to place another individual on your credit card account is a very personal one, as each situation is truly unique. However, if you decide to put a loved one on as an authorized user, continue to closely monitor the account. If you notice any signs of abuse or if your loved one fails to pay the bill – even once – you can swiftly remove them as an authorized user.

Avoiding Newlywed Nightmares

Credit Card Debt

The excitement and stress of planning a wedding often leaves very little time for anything else. However, in between wedding and honeymoon planning, it is important to arrange a meeting with your soon-to-be spouse regarding your finances – including your credit card debt.

Although finances and credit card debt are not exactly the most romantic or pleasant topic to discuss before the wedding, it is nevertheless important. If you and your fiancé don’t develop a game plan for handling finances and credit card debt then you may find yourselves in the middle of a newlywed financial nightmare.

Start your marriage out on the right foot by asking each other the following questions:

• How many credit cards do you have and what are their balances? If you both have three credit cards, then you may want to consider paring them down so that you both have one or two joint accounts.  Another issue to discuss is the balances on your credit cards. It is best to lay it all out on the table and so that you and your fiancé can move forward and develop a game plan to pay down the debt.
• Do you want to have joint credit card accounts, or would you prefer to have a separate account? Your soon-to-be-spouse may desire a joint account with you, as well as a separate account, particularly if he/she uses credit cards for business purposes.
• What do you use your credit cards for? Does your fiancé use his/her credit card for emergency purposes only, or does he/she use them on a daily basis to collect reward points? You will both need to come to an agreement regarding what is acceptable once you are married so that arguments do not erupt over credit card debt.
• Who will handle the finances, including the credit card bills? Many couples appoint one person to handle the finances as to prevent confusion and hassle. Talk frankly and openly about this issue and decide which person would be best suited to handle the position of “account manager.”

The Five Best Tips for Managing your Credit Card Balance

Credit Card Debt

In an ideal world, we would all have a zero balance on our credit cards. Although this is certainly something most consumers would like to aim for, the reality is that most individuals carry a credit card balance. In fact, recent statistics show that the average credit card balance for an American household is $8,000.

Instead of simply listening to financial advisers tell you that you should pay off your credit card balance, it may be best to start with strategies for managing the balance you currently have. The truth is that most of us would prefer not to have a credit card balance, but because this may simply not be reasonable for some individuals at this time, arming them with the tools necessary to handle their credit card balances may be a more logical step in the credit card process.

1. Check the due date – every time.

It is important to remember that the credit card company can change the due date at any time. The credit card company may also shorten the length of time in which you have to pay your credit card bill, so always check this due date every time you receive your monthly credit card statement.

2. Pay far enough in advance to account for processing and mail delivery.

Don’t get caught with late payment charges because your payment didn’t make it in time. Instead, always allow at least a week for your payment to arrive to your credit card company when sending it through the US Postal Service. Add a day or two if a holiday is approaching, as well.

3. Consider online bill payment services.

If sending your credit card payment through the postal service makes you nervous, then consider online bill payment services. Many credit card companies have this service on their website and you may also pay your bill through your bank’s online bill payment service.

4. Always pay at least the minimum.

Regardless of your budget or financial position, it is imperative that you always, at the very least, pay the minimum balance on the credit card. It is simply not worth a damaged credit score and credit card fees.

5. Pay more than the minimum, when possible.

First, the bad news: you will get nowhere fast paying just the minimum balance every month. Now the good news: if you pay just a small amount more towards your credit card bill each month, you could enjoy saving hundreds, if not thousands, of dollars in interest payments over the years.