Credit Card Quick

How Many Credit Cards do you Need?

Introduction

You may have heard the question: How many credit cards should I have?

Well, the short answer to this question is: It all depends.

Now that we’ve thoroughly confused you, here’s a little better explanation.

The fact of the matter is that what’s good for one person in terms of credit cards may not be best for another person. Typically, however, having more than one credit card in your back pocket may help you in a number of ways:

• You have another card in case one of your cards is rejected – Perhaps you forgot to pay your credit card bill on time, or you hit your credit card limit and you really need the security of another credit card. A second credit card can really come in handy in case of these scenarios. Sure, in a perfect world you would never reach your credit card limit or forget to pay your bill, but having another credit card for the “what ifs” is never a bad idea.
• Your main credit card is lost or stolen – If you have trouble with your main credit card and you are unable to use it because it has been lost or stolen (and your credit card account has been compromised), it is always a good thing to have another credit card to use.
• You need access to a large credit line – Often times, an extra credit card is kept by many consumers who want access to another line of credit in case of a financial emergency.
• You want to increase your available credit for credit score purposes – Part of your credit score is determined by something called your “debt to income ratio.” What this basically means is that about a third of your credit score is based on how much available credit you have at any given time. If you have a couple credit cards, chances are your available credit will increase, along with your credit score.
• You want to have spending options – You may have a couple credit cards that you use for different reasons. You may keep one and use it strictly for business expenses and keep another because you can rack up rewards on certain types of purchases. Because there are so many credit card hybrids out there now, you may have more than one card to take advantage of the many features and rewards being offered.

Diversifying your Credit to Build your Credit Score

Credit Score

Many consumers wonder what they need to do to build a solid FICO score. We all know that paying our bills on time and keeping our debts to a minimum is always a good idea if we want a strong credit score, but there are other things we can do bump up our credit score so we can qualify for the lowest interest rates on everything from home loans to credit cards.

Here’s how:

The three credit reporting agencies (TransUnion, Equifax and Experian) assess your credit worthiness by looking at a number of factors, including credit history, payment history and your debt-to-income ratio. However, they also look at how you manage different types of credit. If you are missing certain types of credit, your credit score will likely be lower.

Examining Different Types of Credit

In short, there are a number of different types of credit accounts that the credit reporting agencies take into consideration when examining your credit: credit cards, retail accounts, installment loans, home loans and consumer finance accounts. If you lack a home loan or installment loan, for example, the credit reporting agency does not have information to draw from and will therefore reduce your credit score slightly to account for this lack of information.

In other words, simply paying your credit card bill on time each month will not make a huge difference to your credit score over the long run. Installment loans are a great tool for raising your credit score, as they are steady, monthly bills that must be paid. In other words, if you pay on a car loan for an extended period of time, the credit reporting agency then has adequate information that details you are a good credit risk for installment loans and will therefore raise your credit score to reflect this.

Consider Adding a Small Installment Loan

Now this certainly doesn’t mean that you should seek other types of credit simply to raise your credit score. All it means is that it may take time to build your credit score enough to obtain the best interest rates on a variety of loans. However, now may be a good time to take a small installment loan on a kitchen appliance, for example, and make the steady payments instead of paying cash for it. The history of your payments will most certainly have a positive effect on your credit score.

Credit Cards: A History Lesson

Introduction

Credit cards are a way of life these days. Many of us could not imagine a world without them. Credit cards bring us lots of spending flexibility and personal perks; things unimagined 200 years ago. Where did the credit card come from and how has it evolved?

Clever Prediction

As has been the case a few times throughout recorded history, brilliant writers and thinkers, great imaginations, have predicted ideas and events in their literature that have actually come to pass. It 1887, Edward Bellamy, in his novel Looking Backward mentioned the use of little cards to make purchases. He talked about using the cards and paying at a later date. How brilliant and right on was this? Credit cards made an appearance a short time later.

The Early Years

Around 1914, gas cards came into the world. Many Americans were purchasing automobiles and this meant an need for fuel. Oil companies saw an innovative way to draw in the customers. They provided  credit cards for gas purchases, allowing customers to pay off their tab at a later date. They even went as far as to accept their competitors cards!

Next, came the store cards. It was really a gimmick for marketing and bringing in the customers. However, the customers seemed to like the buy now, pay late concept and it stuck. It helped to improve the customer base of many companies and also improved the buying power of the customers. These store cards set the standard for payment due dates and limits and helped customers to build a good reputation: the earliest version of credit ratings.

Then, in the 1930’s or 40’s, came the concept of revolving credit, which eventually did away with repayment limits, allowing customers to make purchases and pay on their balances over a longer period of time. Customers could enjoy more convenience and the idea of fees and interest to generate revenue was born.

The Modern Era of Credit Cards

Around 1950, the idea of the all-purpose credit card was brought to the market by one Ralph Sneider. The idea was that customers could do away with holding multiple accounts at various merchants and just carry one card that covered every purpose and purchase. Hello Visa and MasterCard! The idea slowly took off, rising to popularity in the last three decades of the 20th century.

Today, credit cards are a major part of everyday life for many people. This means big business. Credit card companies want customers, and definitely want to make their money too. This is both good and bad. Credit cards can help the consumer to take care of their wants an needs faster than ever before, building up their credit rating if they pay the bill and use the card responsibly. However, this eagerness to get credit cards into the hands of the customers is also a practice loaded with risk, as it leaves room for company losses and financial disaster for those who use the credit cards but can not or do not pay.

Credit cards have come a long way in history, thus far. Only time will tell what the next era will bring to this form of big business.

Is a Credit Card Right for You?: Things to Consider Before You Apply

Introduction

In today’s world, credit cards are often considered both a need and a want. Consumers want them for the convenience and perks they offer, and they need them to help build credit, add capital to a small business, rent a car, reserve a hotel and any number of things you just can’t seem to do anymore without having plastic in hand. While credit cards can be a great asset to have, they are not for everyone. There are several questions you need to ask yourself before you fill out that credit card application. Some of these questions can determine if it is wroth your time to even bother filling out the form and others can help you to decide if you can afford a credit card. If a mainstream bank issued credit card is not for you, look into other options, such as secured or pre-paid cards.

Income

What does your income currently look like? Can you afford to take care of yourself? Pay your bills and expenses, supply your needs? Beyond that, is there extra money aside from the basics? If you can say yes, then a credit card may be right for you. If you are struggling just to get by and barely making ends meet, you might want to hold off on that credit card until your financial situation gets better. Obtaining a credit card while you’re already struggling could lead to more debt and more financial woes than it is worth.

Your Credit Score

If your credit score is not all that great, you might not want to fill out the credit card application. You could very well find yourself denied credit or given a card with an extremely low limit and high interest. While a card like this could help to build up your credit, it might be worth holding off until you can improve your credit score in other ways. If you already have debt and a low score, you probably are in no position to take on more debt in the form of a credit card. Focus on improving your score and later on, when you can afford it, you might be able to get a credit card with a higher limit, better rates and additional perks.

Responsibility

Are you good at paying your bills on time, every month? Do you resist spending frivolously? Are you careful to keep a budget? While it’s acceptable to buy yourself something special every now and then, you want to seriously consider what kind of spender you are before you go getting a credit card. If your spending leaves you scrambling to gather up the money to pay your bills, you might want to get some credit counseling or budgeting education you even consider getting a credit card. If spending is a bad habit you already have, you might find yourself maxed out and drowning in debt very quickly.

Before you fill out any credit card application, ask yourself these questions and carefully consider your current position in life. if you can afford it and do not think the consequences of owning and uses a credit card will hurt you, then go for it. If a credit card will only lead you into further financial distress, consider alternatives or wait until your circumstances change.

Consumer Satisfaction Plummets as Creditors Raise Interest Rates, Cut Credit Limits

News

As if 2009 didn’t bring enough bad news: recent polls released by J.D. Power and Associates reveal that consumer satisfaction with credit cards fell sharply in 2009.

It’s no surprise, really, that consumers are frustrated with their credit cards, as many have been socked with outrageous fees and equally outrageous interest rates as creditors scramble to recoup some of their losses.

Highlights of the J.D. Power and Associates Poll (which was conducted in May and June by 9,000 credit card customers):

• Twenty percent of credit card holders saw an increase in their interest rates between 2008 and 2009.
• Eighteen percent of credit card holders were dissatisfied with fees on their credit cards, which was a 10 percent jump from just a year earlier.
• The customer satisfaction index fell to 703 (on a 1,000-point scale), which is the lowest since J.D. Power and McGraw-Hill began the customer index satisfaction survey in 2007.
• Credit card customer satisfaction comes in dead last among all financial services industries, including banking, insurance and investment services.
• One out of five customers experienced a rise in their interest rate over the past year.

It is clear from this recent survey that most consumers are simply fed up with the over-the-top rates and fees being charged by many credit card companies as of late. As the government put the squeeze on credit card companies, and as the recession took its hold, credit card companies started responding by slashing rewards for customers and raising rates.

And this doesn’t sit very well with customers, as to be expected.

American Express, which is the largest credit card company based on sales, was ranked first in the poll for customer satisfaction, followed by Discover Financial Services and JPMorgan Chase. Those ranked below the industry’s average included Citigroup, Bank of America and Capital One.

It is important to note that American Express, Bank of America, JPMorgan, Citigroup, Capital One and Discover make up about 80 percent of the industry in the United States.

The J.D. Power and Associates poll reviewed customer satisfaction based on many factors, including rewards, benefits, services, problem resolution, interaction, fees, rates, billing and payment processing.

How Many Credit Cards do you Really Need?

Choosing Credit Card

We hear conflicting opinions all the time regarding the number of credit cards we should have, must have, and never exceed. But what is the magic number?

Well, for starters, there is no magic number, and what works for you in terms of the number of credit cards may very well not work for another individual. There are, however, a few points to remember when considering your perfect number of credit cards:

• Pay close attention to your debt-to-income ratio. If you have a card with a balance that exceeds 50 percent of your credit limit, then you may be entering into dangerous territory because many creditors may perceive you to be a credit risk. However, if you exceed 50 percent of the credit limit on one of your cards, it may not be such a big deal, credit-wise, if you have another card or two with low balances, as this will decrease your debt-to-income ratio.
• Consider holding at least two credit cards if you feel comfortable that you can effectively and responsible manage the two cards. However, if you tend to spend on your credit cards then a second credit card may not be the right decision for you. Again, this is where “one sizes fits all” does not apply.
• Don’t hold so many credit cards that you have difficulty managing them. In other words, if you have 10 cards, all with low balances, then you are ahead of the game. However, if these 10 cards create confusion when it comes time to paying them, then they certainly are not worth the hassle, even if you have a fantastic income-to-debt ratio as a result. If you are unable to effectively manage your cards then chances are you will miss due dates and payments, thereby negatively affecting your credit score.
• Be careful about closing credit card accounts, as this may negatively affect your credit score; specifically, your income-to-debt ratio.
• Consider choosing major credit cards (Visa, Master Card, Discover and American Express) over department store credit cards, as major credit cards typically have higher credit limits (which have a positive effect on your income-to-debt ratio) and lower interest rates.