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Personal Checks or Credit Cards: Which is Best?

Choosing Credit Card

Personal checks used to be the way to go. Whether you were buying groceries or a sweater from your favorite department store, you often used a personal check or cash. Although personal checks still serve a purpose in today’s society, there may be a smarter route to take when it comes time to pay for your purchases: a credit card.

Credit cards simply offer better safety and security over personal checks, for a number of reasons:

• Checks can be stolen – If you use checks to pay bills, you may be surprised to find that check thieves will steal checks from the mail, “wash” them of their information, and use them to withdraw large sums of money from your checking account. In addition, carrying around your checkbook in your purse could also spell trouble if your purse is stolen. Although most banks have fraud protection in place to protect your money, the hassle of having your bank account drained is trouble in itself.
• Checks can trick you – Writing checks can often be tricky, as they don’t always appear right away. As a result, if you don’t keep super-accurate records of your check writing, you could be fooled into thinking you have more money in your account than you actually do. As a result, you could end up overdrawing your account, which may result in bounced check fees or overdraft fees.
• Checks are not always easily accepted – Unlike credit cards, which are now accepted at millions of places worldwide, cashing a check or using a check to pay for purchases is not always easy. Some retailers do not accept checks; others demand other forms of identification to cash a check. In other words, writing a check is often simply not worth the hassle.
• Checks cost money – Ordering checks costs money. Sure, it may be only $20 or $30 each year, but if you don’t need to pay this, why bother? Paying with a credit card, on the other hand, costs no money.
• Checks can’t be used online – Even if you enjoy using checks, if you purchase goods or services off the Internet, you will likely need to use a credit card to complete the transaction, as most online retailers do not accept checks.

The Top Three Purchases to Always put on your Credit Card

Introduction

Unbeknownst to many of us, our credit cards do more than just provide us with shopping convenience. In fact, credit cards are quite useful when making certain types of purchases. It always pays to carefully read the terms and conditions of your credit card so you can be sure you are taking full advantage of all the perks being offered by your credit card company.

For example, there are a number of purchases that are actually protected when you charge them:

1. Expensive items, such as computers, appliances and electronics – Any big-ticket item should be charged because, chances are, your credit card company offers extended warranties for these purchases. In short, many credit card companies offer better warranties that the original warranty offered by the manufacturer. In addition, many credit card companies offer price protection, meaning that if you find the same item, either through the same retailer or a different retailer, within 60 days of your purchase, your credit card company will match that price and provide you with a credit for the difference in price.
2. Services – Any type of service you receive – from landscaping to plumbing – should be charged. Any company that takes credit card purchases must adhere to the terms set by the credit card company, meaning that if you have a dispute with the service offered, the burden of proof is actually on the service company to prove that the work was done to your satisfaction.
3. Travel expenses – If you are taking a holiday, it pays to charge your expenses. What many people don’t realize is that most credit cards offer such protections as travel accident insurance, car rental insurance and even lost luggage insurance. So, before you take off on your next trip, contact your credit card company and ask what travel perks are afforded to you. Most credit card companies will provide protection for everything from lost luggage to the theft of your belongings from a hotel room, so don’t leave home without your credit card and without a good understanding of the protections afforded by the credit card company.

When to Choose a Credit Card over a Debit Card

Choosing Credit Card

Debit cards are ideal, as they allow individuals to stay within their budget and spend only what they have. However, there are time when using a debit card is not a good option. Credit cards boast a number of advantages over debit cards, although they can be used in generally the same way. In other words, don’t let the debit cards fool you: they simply can’t offer the protections afforded by credit cards.

Here are times when it is best to choose a credit card over a debit card:

• Shopping online – Because debit cards are linked directly to your bank account, you may leave your finances vulnerable should an identity thief steal your card’s numbers. Although there are some protections afforded to debit card customers in the case of identity theft, the protections afforded to credit card customers are more comprehensive. In addition, although you may be protected from fraudulent use of your debit card, having your bank account drained may cause additional problems, like bouncing checks or not having enough money to cover living expenses.
• Expensive purchases – Any expensive purchase is best bought using a credit card, as it will likely offer you dispute rights if something goes awry with the product or service. Also, many credit cards feature extended warranties, thereby eliminating the need to purchase them from the retailer.
• Deposits – If you must use a credit card to hold anything from a hotel stay to a car, the company will likely take a security deposit against your debit card. In other words, if you reserve a hotel they may charge you a $200 security deposit that is returned after your stay; however, if you use a debit card to reserve the hotel room, you won’t have access to that $200 until your stay had ended.
• Restaurants – Using a debit card at a restaurant may set you up for loss. Anytime someone needs to walk away from you, out of your sight, to make a charge purchase, there is a chance of theft. With this in mind, it is best to use a credit card when you dine out, thereby better protecting yourself from the ill effects of identity theft.

Will your Smartphone soon Replace your Credit Card?

News

If you have both a smartphone and a credit card in your wallet, you could soon see your plastic disappear. This is because smartphone manufacturers – namely, AT&T, Verizon Wireless and T-Mobile – are working to develop a mobile payment system that will allow individuals to pay for their purchases using just their smartphone.

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.

Merchant Charge Card or A Credit Card?

Choosing Credit Card

It is a common misconception that a charge card is the same things as a credit card. Charge cards are typically issued specifically by stores and merchants for exclusive use in their stores or by some groups who offer a card that allows you to “charge it” at a limited number of participating merchants. Typically, you have to pay off the balance every month, although some do allow you to pay your balance over a period of time. Charge cards do not equate to an extension of credit, though you do usually have to have a pretty good credit score to get one. Credit is similar to a cash loan, you have to pay it back with interest and fees, however, it can be used almost anywhere. Charge cards do not offer the ability to  use them wherever you wish or to obtain cash advances and other company products, and while they sometimes come with the rewards and perks, they are not the same as those offered by many of today’s credit cards.

Charge Cards

While there are some charge cards that fit into a category that is neither store specific, nor really a credit card, for this particular discussion, the focus is on those cards issued through merchants themselves. The merchants issuing the cards typically have their own financial department or have partnered with a financial institution to issue the cards. The approval procedure is much like that of a credit card. Your credit will be checked and based on their terms and conditions, they will decide whether or not to issue a charge card to you.

A store charge card limits you to purchases at a particular store and its branch merchants, including  being limited to their merchandise offerings and prices. However, if you shop frequently or exclusively at one or two stores, a store charge card might be right for you.

Credit Cards

Credit cards offer many customer perks and benefits and greater flexibility than a store card. You can use it at a variety of places, earn rewards, points, cash back, etc. You are privileged to other products within your credit company’s line and can obtain cash advances from ATMs and cash back at point-of-sale. The APR and fees are typically lower than that of merchant charge cards as well. Credit cards allow you to shop  online and to pay your bills, where as a store card will only let you shop from their website, if they have one, and certainly will not help to pay your living expenses.

Ultimately, it is up to you to decide what suits you best. However, for those searching for greater flexibility in their spending, a credit card might be the better choice.

Understanding the Difference between a Credit Card and a Charge Card

Introduction

The terms “credit card” and “charge card” have often been used to describe the same thing but, in reality, they are two very different things.

A credit card is a standard card in which you can charge purchases and then pay them back over a period of time. A charge card, however, is card on which you can make purchases, but they must be paid off when your bill arrives.

Charge cards have been primarily issued by American Express, while other companies, such as MasterCard, Discover and Visa, have offered their customers credit cards.

The Benefits of a Charge Card

The premise behind an American Express card has always been liberal spending limits and no accrued interest rates, mainly because the card balance is paid in full each month. Most American Express credit cards have no set credit limit, but in order to qualify for an American Express credit card your credit history must be near flawless.

Annual Fee Amounts

There are also annual fees charged by American Express for its charge cards; they typically range between $25 to $500 a year, depending on the spending limit and benefits the card provides. The annual membership fee for owning an American Express charge card also comes with its share of perks, including a rewards program.

Should you fail to pay your balance on time, American Express charges either a flat fee or a percentage of the balance, depending on the card you are carrying. Most of the time, however, American Express affords its customers a liberal window in which to pay their balance; typically 40 to 50 days (compare that to 25 to 30 days for a standard credit card).

Flexible Payment Options

American Express also offers flexible payment options for its customers who use their cards to travel. American Express typically allows customers to carry a revolving balance of travel purchases, provided they exceed $200.

Credit Limits

American Express commonly keeps track of its customers buying habits and credit reports, and adjusts their credit limits to reflect this. Although American Express will not put a cap on your credit limit, they can refuse purchases if your balance becomes excessive. American Express, however, does not charge over-the-limit fees to its customers.

Is it Time to Break up with your Credit Card?

Choosing Credit Card

The credit card news, as of late, has been anything but positive. The government is tightening the reigns the credit card industry who, in turn, is scrambling to switch up the rules of their credit cards before the new credit card bill takes place. And who is left in the middle of this mess? That’s right: you, the consumer.

All of this mess can make any consumer think twice about even having credit cards anymore. But is the solution to simply cut up your credit cards and live without them?

Although it would make sense that credit cards sometimes hurt credit, most of the time they help credit. In other words, cutting up your credit cards and ending your relationship may not be the best idea, in terms of your credit score.

A Cash-Only Life?

If you plan on living on cash alone for the rest of your life then perhaps ending your relationship with credit cards can work. However, if you plan on financing a vehicle, purchasing a home or refinancing your current mortgage, your credit card relationship is crucial.

This is because credit cards help you establish a strong credit history which, in turn, helps to boost your credit score. Without credit cards, your credit history can be brief, thereby hurting your credit score and your chances of securing any type of financing.

And, given, the state of the current economy and credit sector, a strong credit score is king. Without it, you can all but forget about securing a home loan, vehicle loan or personal loan.

With that said, there are a few things you can do to make your relationship with your credit card company run a bit more smoothly, even in these uncertain economical times:

• If you received notice from your credit card company that your interest rate has been raised, immediately contact your credit card company and request that they cancel the card. They will undoubtedly ask why, thereby giving you a chance to ask if they can lower your interest rate.
• If your creditor refuses to lower your interest rate, you may want to look for another card with a lower interest rate onto which you can transfer your balance. Beware, though, of the balance transfer fees and promotional interest rates, both of which can end up costing you in the long run.
• If you don’t have the option of transferring your balance, the new credit card law allows you to “opt out” of your higher interest rate credit card. If you cancel the card, the creditor must allow you pay off the balance at your current interest rate.

College Students: Easy Ways to Begin Building your Credit Now!

Credit Score

The college years are filled with excitement and optimism, yet they can also be riddled with uncertainty about life after college. It is therefore of the utmost importance to start thinking about life beyond college, even if you’re still a freshman!

In particular, it is vital that you begin working to establish a strong credit history so that you can begin your life after college with a good FICO score in your back pocket. After all, your ability to obtain a car loan, a home loan or even a good job relies on a strong credit score.

How to Start Working toward a Great Credit Score while you’re still in College:

a)      Jump onto your parent’s credit card. If your parents are good with their credit, and if you are ready to take on the responsibility of a credit card, you may want consider asking your parents if they can add you to their credit card account as an authorized user. This is often a great way to begin establishing your credit history, and is a solution to the tight restrictions due to be placed on student credit cards as a result of the new credit card legislation.

b)      Ask your local bank or credit union if they provide student credit cards. Although these types of cards typically come with a low limit and a higher APR, they are still the ideal way to begin building your credit history. This is not the time, however, to get yourself into credit card debt. Make a point to purchase only needed items, and to also pay off your balance in full, every month, without exception.

c)       Consider a secured credit card if options A and B aren’t possible. Secured credit cards require a cash deposit equal to your credit limit, so that the bank will be protected in case of your failure to pay. However, they are also a practical way to build your credit history. Then, once you have established a strong credit history you can move to a standard credit card.