Credit Card Quick

Why the New Credit Card Legislation may not be all it’s Cracked up to be

News

February 22^nd is the magic date when all of the credit card legislation that was passed through the Credit Card Accountability Responsibility and Disclosure Act (CARD) must go into effect. That means that all of the credit card companies must comply with the new terms set forth in the CARD Act.

Although these changes are designed to help consumers better manage their debt and to discourage credit card companies from operating under false pretenses, it doesn’t mean that you can forget about fees and hiked interest rates.

The bottom line is that you still must be a responsible consumer; it does not give you a free pass to spend as you like without consequences.

In addition, don’t assume that just because the government has reigned in the credit card companies on certain points doesn’t mean that they can’t then conjure up new traps in which to catch consumers.

The Fine Print

Most of us are conditioned to simply discard the legal mailings we receive from our credit card company about our credit card’s terms and conditions. However, we must begin to change our way of thinking because the credit card legislation doesn’t deny the right of the credit card company to raise interest rates or impose fees; it simply states that they must warn credit card customers ahead of time.

For example, your credit card company can raise your interest rate on future purchases at any time, but they must also give you a 45 day warning. If you fail to read this fine print in your contract, your credit card company could potentially raise your credit card’s interest rate and you will be none the wiser; that is, until your receive your first credit card statement with a large finance charge.

Fixed-Rate vs. Variable Rate

Another trick that credit card companies have up their sleeves is to turn fixed-rate credit card accounts into variable-rate accounts. This is because the credit card legislation only covers fixed-rate credit cards. In other words, the creditor is free to increase your credit card’s interest rate at any given time if it is a variable-rate account.

The bottom line is that we all have to become better advocates for ourselves and to make it a point to understand all of the terms and conditions associated with our credit cards.

The Three Most Common Myths about Credit Cards

Introduction

There are some credit card myths that, regardless of how many times they are debunked, still manage to enter the minds of many credit card customers.

The best line of defense when managing our credit card accounts is to become informed and educated consumers. In other words, don’t let misunderstanding and ignorance ruin your credit and cost you big in terms of higher interest rates and declined loans.

Here are the three most common myths about credit cards:

Myth 1: As long as I pay my card’s minimum balance my credit will be great – Many consumers think that as long as they continue to pay their minimum balance on their credit card that they will enjoy a great credit score. This may have been true just a couple years ago, but many consumers have learned the hard way that it just isn’t a good payment history that determines your FICO score. Another factor that contributes greatly to your FICO score is your debt-to-income ratio.  And if you have many cards that are either maxed or close to being maxed then your debt-to-income ratio becomes skewed, thereby making you a larger credit risk and lowering your FICO score.

Myth 2: The best way to get the lowest interest rate is to transfer my balances every time I get a balance transfer offer – Many of us have played the balance transfer game over the last few years. You know the drill: you accept a balance transfer offer with a low interest rate and transfer all of your higher interest rate balances to that card. Then, once the introductory period has ended and your interest rate has increased, you find another card to do the same thing. Doing this in today’s market may not be such a good idea, though, as your FICO score is directly related to how many credit card accounts you open during a given time and how many credit card accounts you have open during any given time period. In addition, if you close an account every time you open a new one, you don’t have the opportunity to log a payment history, which therefore also negatively affects your credit score.

Myth 3: The new credit card legislation will protect me from all sneaky credit card practices – Sure, the new credit card legislation has eliminated some of the sneaky practices commonly used by credit card companies in the past. However, don’t expect the legislation to protect you from every underhanded practice. The bottom line is that there are still creditors out there who will find a way to make money; and it is up to you remain aware of any changes to your credit card account.

Changes to your Credit Card in 2010

News

The Credit Card Accountability, Responsibility and Disclosure Act, which is set to go into effect as of February 10, has changed many of the ways in which consumers use credit cards and credit card companies handle consumers’ credit card accounts.

This new credit card legislation comes with its share of changes, most of which will take place as early as next month. The changes to the credit card industry are designed to protect consumers and hold credit card companies accountable for responsible behavior, but they may also result in more responsible behavior from credit card consumers. In other words, consumers are sure to benefit from the upcoming changes, which include:

• You credit card’s interest rate cannot be raised if you are just a few days late on your payment.  This is welcomed news to many credit card consumers who, in the past, saw their credit card interest rates soar when they missed their monthly payment by a day or two.
• The creditor can raise your card’s interest rate if you are more than 60 days late making your payment. However, if you make your payments on time for the next six months following your late payment, your creditor must lower your rate to its original APR.
• Any amount paid on your credit card bill, above the minimum payment, will be automatically applied to your highest interest rate balance. In other words, if some of your balance carries a 9.99% interest rate and another portion of your balance carries a 14.99% interest rate, your credit card company must apply your excess payment to the 14.99% balance, thereby helping you pay off your debt quicker and pay less interest on your debt.
• Your credit card company must give you at least 25 days from the closing date of your statement to make your credit card payment. Before the legislation took place, many creditors were decreasing the amount of time the cardholder had to get his or her bill paid, thereby resulting in many delinquent payments (and plenty of related fees and penalties).

Check your credit card statement and carefully read all of the enclosed terms and conditions so you can be aware of the changes to your credit card and how they will affect you.

The Differences between Secured and Unsecured Credit Cards

Choosing Credit Card

Most consumers find that credit cards are not only a practical financial tool, but a necessary one. Even individuals who don’t use credit cards on a regular basis are all too aware that credit cards are important for doing everything from renting a car to reserving a hotel room.

For many individuals, the question of secured and unsecured credit cards is often raised. In particular, many individuals are confused about the differences between a secured and unsecured credit card, and which one is right for them.

With today’s changes in credit card terms and conditions, and with the recent credit card legislation currently enacted by Congress, many individuals are downright confused when it comes to credit cards. We all want the advantages of credit cards, but many of us don’t want the hassles associated with them. There is a way to make credit cards work for you; you just must educate yourself on both the advantages and disadvantages of each so that you can make the right financial decision.

There are benefits to both secured and unsecured credit cards, and there are also challenges associated with each of them.

Secured Credit Cards

Advantages

• Easy to Obtain
• Typically Requires no Credit Check – Ideal for Individuals with Poor Credit, No Credit or those who have Filed for Bankruptcy
• Ideal for Individuals who may have difficulty Managing their Debt
• Keeps Spending in Check
• Ideal for Individuals who are Looking to Build or Rebuild their Credit

Disadvantages

• Requires a Cash Security
• Typically has a Low Credit Limit
• Often comes with High interest Rates
• Often comes with High Fees and Strict Terms and Conditions

Unsecured Credit Cards

Advantages

• Gives the spender great buying power
• Often comes with Low Interest Rates and other Advantageous Reward Programs
• May be an Ideal way to Borrow Large Sums of Money
• May act as a Personal Loan
• May be Ideal for Consolidating Higher Interest Debt

Disadvantages

• Can Lower One’s Credit Score if it isn’t Handled Responsibly
• May come with High Interest Rates and Costly Terms and Conditions
• May be Dangerous for Individuals with Poor Spending Habits

Credit Card Legislation Introduces an Era of Responsible Credit Card Usage

News

This upcoming year may bring more than new credit card legislation; it may just bring about more responsible credit card usage among consumers.

Looking Back on 2009

We have learned a lot from the past year. From the housing market crash to the debacle that resulted from the near-collapse of the credit industry, 2009 was a year of shocking change. For those of us accustomed to spending wildly on everything from cars and houses to vacations and clothes, 2009 brought about a huge change.

No longer could we take out credit at will; in fact, many creditors pulled in the reigns and not only began denying credit to consumers, but also limiting their access to the credit that they already had.

Case in point: many consumers saw the interest rates on their credit cards soar and their credit limits cut in half. It was a desperate attempt at credit card companies to limit their losses amidst delinquent loans and abandoned credit card debt.

Many individuals were also shocked to see their credit card company change the terms, fees and conditions on their cards. Even those with the best credit scores saw changes to their credit cards. In fact, 2009 left everyone feeling much more financially vulnerable than they did just a year earlier.

Positive Changes for 2010

However, 2010 may be the year that responsible credit card usage and accountability take center stage. No longer will credit card consumers be able to blame credit card companies for unfair practices and sneaky tactics. In fact, credit card companies will be forced to lay all cards out on the table, thereby leaving no surprises for credit card consumers.

In other words, credit card companies must be more responsible, and credit card customers must also do their part and act more responsibly.

One of the biggest changes for 2010 is that only the most responsible credit card consumers will be offered credit. Everyone else must prove themselves by acting responsibly with their other types of credit if they expect to snag a credit card.

Make a Promise for a More Financially Secure Future

Make 2010 your year for more responsible credit card usage. Read and re-read your credit card’s terms and conditions and make it a point to understand all aspects of your credit card. You owe it yourself and you owe it to your credit score to act responsibly in 2010.

Have you Read your Credit Card Notice Lately?

News

If you’ve recently received a notice from your credit card company and you haven’t read it, you may want to think about digging it out of the trash and taking a look at it.

Many credit card companies are beginning to send out notices to customers regarding changes in their accounts. Mainly due to the changes taking place because of the new credit card regulations, credit card companies have started sending out notices detailing changes in interest rates, fees and other terms and conditions.

For many credit card customers, these notices are little more than an inconvenience, filled with difficult-to-understand language that really doesn’t affect how they spend on their credit cards. But in reality, these notices can contain very important information that many greatly affect how credit card customers handle their credit card spending.

The federal Credit Card Accountability, Responsibility and Disclosure Act of 2009, which is set to take effect on February 22, 2010, includes sweeping restrictions on everything from interest rates to over-the-limit fees.

Changes to look out for:

• Annual Percentage Rate (APR)- Your card issuer can raise your interest rate, but can only do so if they give you at least 45 days notice of your rate increase. Many times, individuals do not take time to read their credit card notice, thereby catching them off guard when they notice that their rate has increased. It is therefore in your best interest to check your statement each and every month so you can be aware of any changes in your card’s APR.
• Minimum Payments – If you have different APR on different balances on the same card, your creditor is now required to apply any payments over the minimum payment to the highest rate APR. Now is the time to add more money to your credit card balance each month.
• Over-the-Limit Fees – Over-the-limit credit card fees are now being highly restricted by the new credit card legislation, which is good news for consumers. However, as a result, many creditors are therefore declining transactions that exceed your credit limit, so remain aware of your credit card balance at all times.

How to Obtain a more Competitive Rate with your Current Creditor

Introduction

Everyone is struggling to survive this incredibly difficult economic time, and credit card companies are no exception.

Desperate to recover some of the losses experienced over the last year or two because of the meltdown of the credit sector and the subsequent fall of the housing market, many creditors began to employ less-than-upfront tactics to saddle consumers with more debt. As a result, the government enacted the new credit card legislation, which simply led to more underhanded credit card tactics before the law could be enacted.

You may have very well found yourself in the crosshairs of this credit card mess. If you received a statement or letter from your credit card company with news of an increasing interest rate, decreased credit limit or other changes to your card’s terms and conditions, you may be wondering what your options are, if any.

In particular, many credit card customers with great credit histories and strong credit scores have had their credit limits slashed or their interest rates increased. The question is: is there anything you can do to combat these new credit card tactics?

If you have consistently paid your bills on time and stayed within your credit limit then it is possible to convince your creditor to revert the changes to your account.

How to Achieve Success with your Credit Card Company Following a Hike in Interest Charges and Fees:

1. Contact your credit card company upon receiving news of your credit card’s terms and conditions and let them know that you are a valuable customer and that you want your card’s terms and conditions reverted back to their original status.
2. If the credit card company is not receptive to this request, let them know that you may be forced to cancel the card and instead accept a better offer from another credit card company.
3. If you don’t have any luck with a customer service representative, ask to speak to a supervisor.
4. If you don’t get anywhere with a supervisor, cancel the credit card. The creditor must then allow you to pay off the balance of the card at the original interest rate. However, it is best to secure another card before canceling your current one.

Prepaid Cards: Are they really a Better Alternative to Credit Cards?

Choosing Credit Card

You may have heard quite a bit about prepaid cards as of late, as many consumers and financial experts are touting their convenience and practicality. In fact, because of the poor credit sector and the inability of many consumers to obtain credit, prepaid cards have surged in popularity.

Prepaid Cards: How they Work

The concept behind prepaid cards is quite simple: a consumer purchases the card from a retailer and loads it with money. The prepaid card, which may be partnered with Visa, MasterCard, Discover and American Express, can then be used as a consumer would use a debit or credit card; to purchase items through retailers or to pay bills online.

Prepaid credit cards require no credit check, and are quite simple to get and load with money. It is no wonder then, that in 2008 alone, consumers loaded nearly $8.7 billion on prepaid cards; that’s up about $4 billion from the year before.

Prepaid Cards Popular Among College Students, those with Poor Credit

For individuals who may not be able to secure a regular checking account, a prepaid card may be a practical alternative. Often times, parents use them as a cash source for their teenage or college-age children, while others with little to no credit use them as they would any other credit card.

Given the fact that the new credit card legislation, when it goes into effect in February, will further restrict the ability of college students to obtain credit, it only makes sense that prepaid cards will see a further increase in popularity.

Prepaid Card Fees to Watch for

It is important, amidst all of the advantages, to know that prepaid cards do come with activation fees, and most of them charge for ATM withdrawals. However, when considering the hefty fees charged by banks and creditors, many consumers are more than happy to pay these fees.

For consumers looking for a simple, practical way to pay bills and avoid credit card charges and bank overdraft fees, prepaid cards may be just what they’ve been searching for.

Credit Card Changes we can Expect in 2010

News

This year’s been a rough one for credit cards. From credit card restrictions, credit card legislation and more credit card changes to make our heads spin, the credit card industry has been a difficult one.

Many individuals have lost their ability to obtain credit, while others who never had a difficult time securing credit found themselves unable to obtain credit, as well. Credit card companies put the brakes on gimmicks and high credit limits and credit card consumers found themselves drowning in credit card debt because of outrageous fees and skyrocketing interest rates.

However, as we look to 2010, we can expect things to calm down significantly. In particular, after the remaining credit card laws have been enacted in December, the uncertainty felt on both sides of the equation – the credit card companies and the consumers – should begin to settle and, in general, the credit card industry will adjust to its rules and regulations.

Some of the changes we can expect to see next year include:

Fewer Gimmicks – All of those credit card gimmicks that we have gotten used to receiving over the years will likely not be there anymore. Credit card companies, under the new laws, are simply not allowed to offer hard-to-understand gimmicks, and they really cannot afford to anyway. Because of the tighter restrictions on credit card companies, creditors will target only those with good credit, thereby eliminating the need to offer gimmicks.

Looser credit restrictions – Individuals with poor credit will have been weeded out by this time, thereby leaving only those with good credit. Because of this, creditors may soon be offering more competitive deals to those with great credit. Looser credit restrictions may mean credit will begin flowing a bit more freely next year, including personal loans and credit card offers.

More responsible credit card users – As we said before, the individuals with poor credit will simply not be able to secure credit, which leaves more responsible credit card users. Because of this, credit card companies may be offering better credit card offers to those responsible credit card users.

How to Effectively Resolve a Conflict with your Creditor

Introduction

The relationship between consumers and creditors has been strained this past year. Between the poor economy, the new credit card legislation and what seems like forever-changing rules to the credit card game, tensions have run high and many credit card consumers are more than a bit confused about their credit card bill and the new changes that seem to be popping up out of nowhere.

If you have a concern with your credit card company, it is best to avoid contacting them in hopes of a screaming match. Yelling and complaining will get you nowhere fast, so it is important to prepare yourself and ask the right questions to your credit card dilemma.

The following steps will help you resolve a conflict with your creditor:

• Your first point of contact will no doubt be a customer service representative. Explain your issue and speak slowly, clearly and remain courteous. Keep all of the necessary information close at hand so that you can refer to a particular bill or transaction.
• Keep a pen and a piece of paper nearby, as well, so you can jot down appropriate notes. Remember to write down the time and date of your call; remember to also ask for the name of the representative.
• If you feel as if the customer service representative cannot handle your problem or if you feel as if you are simply getting nowhere with a resolution then you have the right to ask to speak to a supervisor. However, remain courteous during the entire phone call.
• If you get nowhere by calling the credit card company, make your case in writing. Include all of the information from your phone call(s) and send the letter certified mail so that you have proof that the credit card company received your letter. If you don’t receive a response from the creditor within a few weeks, you can follow up with a phone call or be prepared to take other actions.
• File a complaint with the Better Business Bureau, the National Credit Union Administration, the Federal Reserve or the Federal Deposit Insurance Corporation.
• Make sure you follow the above chain of command when attempting to resolve a conflict, as you may need this information if you need to take the issue further.