Credit Card Quick

How a Creditor Determines your Credit Limit

Credit Score

Have you ever wondered why you have the credit limit that you do?

Whether you were approved for less – or more – than you thought, you should know that there is actually a formula that credit card companies use to determine your credit limit.

• The first thing a credit card company will do when you apply for a credit card is look at your credit score. Your credit score (often referred to as a FICO score) is a clear indication of how you have managed your debts in the past. The scoring used in a credit score also predicts your ability to repay loans in the future.
• Credit card companies, after they look at your credit score, will then look at your debt levels and your income. Your debt levels, also commonly referred to as a debt-to-income ratio, is a common reason why many people, although they may have a gleaming credit score, will have lower credit limits. It is the credit card company’s way of protecting credit card customers from more debt than they can financially handle.
• In addition to looking at all of the above factors, a credit card company will also examine your current outstanding credit, or the amount of credit on other loans and credit cards that you have open and available. For example, if a credit card company notices that you have another credit card, but that it is maxed out, this may raise a red flag that you are taking on more debt than you can handle; as a result, your credit limit may be significantly lower than your previous credit card.

Many times, your credit card company will automatically raise your credit limit if you have established a good track record of punctual payments. However, it is also important to point out that creditors are also able to lower your credit limit if you show a steady of history of late payments.

The best thing you can do maintain a good credit score and ensure that you are eligible for higher credit limits is to make your payments on time, each and every month, and to keep your spending in check and not top out your credit limit.

Credit Cards and Traveling: What you need to Know

Introduction

Many Americans turn to their credit cards when traveling, as they can provide a truly convenient and practical means of paying for everything from airline travel and hotels to restaurant meals and entertainment.

Best of all, credit cards, unlike cash, can be easily and quickly replaced if lost or stolen. It is no wonder, then, that so many credit card customers bring their credit cards along for the ride when they take a vacation. Credit cards, in fact, have all but replaced cash and travelers’ checks for traveling; their convenience simply can’t be beat!

Before you embark upon your next holiday, there are a few things you should take care of regarding your credit card:

• Contact your credit card company to check on your credit limit. If necessary, ask for a credit limit increase to handle all of the expenses associated with your travel plans. With the new credit card legislation credit card companies cannot charge you for over-the-limit fees, but they can decline your card if you exceed your credit limit. It is therefore important to make sure you have enough spending room on your credit card to handle all of your travel and vacation expenses.
• Bring along the contact information for your credit card and store it separately from your credit card in case your wallet or purse is lost or stolen. It is important to contact your credit card company immediately upon learning that your card is missing, so keep the phone number handy at all times so you can take care of business and get a new card issued and sent your way sooner than later.
• Consider bringing along a second card in case there are problems with your primary credit card. A second credit card is a bit like an insurance policy. If there are issues with your main credit card, you will still need a way to make purchases and cover expenses while away, so it is always best to have a backup credit card in your wallet, just in case.

The Four Terms to Pay Close Attention to when Applying for a Credit Card

Introduction

Applying for a credit card involves more than looking for the best interest rate. In fact, it is often the other terms and conditions on the credit card that make the most difference when it comes to managing your credit.

Your credit card can be incredibly valuable, or it can be incredibly detrimental; in other words, your credit card is only as useful as the behavior that accompanies it. And that means starting with a good understanding of your credit card and the important terms to study when applying for a credit card.

1. Annual percentage rate – The annual percentage rate on a credit card, otherwise known at the APR, is usually the best place to start when comparing credit cards. Pay close attention to the APR, as well as the APR should you become delinquent on a payment. New credit card legislation states that a creditor can raise your APR if you are more than 60 days delinquent on a credit card payment, so make it a top priority to get your credit card payment in on time, or else you could be faced with an astronomical APR.
2. Grace period – The grace period on the card is the time frame during which you must pay your credit card’s minimum balance. Although the new credit card legislation has forced creditors to allow customers adequate time to pay their credit card bills, you should still pay very close attention to the due date on the card, as well as a the grace period, and allow yourself plenty of time to get your payment in on time, each and every month.
3. Credit limit – Your credit limit should never, under any circumstances, be disregarded. In addition to incurring hefty over-the-limit fees, your credit score will inevitably become damaged, as your debt-to-income ratio will soar. In other words, make a great effort to keep your balance paid down and to not come close to maxing out your credit card.
4. Introductory rate – Many cards offer introductory rates to court customers. As they say, all good things must come to and end and this goes for introductory rates, as well. Pay close attention to the length of your introductory rate, as well as the APR once the introductory rate has ended.

There’s an App for that: Managing your Credit Card from your iPhone

Introduction

Managing our credit card accounts has never been more convenient and practical, and it looks like it just got a little bit easier.

Citibank has teamed up with the iPhone to allow individuals to effortlessly complete their mobile banking services. Called the Citi Mobile Suite, this iPhone application allows cardholders to access and manage their credit card accounts from their mobile phone, from any location and during any time of the day or night. Could it get any easier?

Advantages of Mobile Banking

Mobile banking; in particular, banking from your mobile phone, has never been easier, and the benefits are clear:

• Mobile banking allows credit card customers to keep an eye on their account, at any given time, thereby giving customers more control over their spending habits. Haven’t we all opened our credit card statements and stood there in awe at the balance because we didn’t realize we charged so much the month before? Mobile banking applications for mobile phones eliminates this monthly surprise by allowing customers to check their balance and their recent purchases, whenever and wherever.
• Mobile phone banking allows customers to keep a close eye on their credit limit so they don’t exceed it and incur costly over-the-limit fees. It allows customers to stay within their budget and not overspend without thinking.
• Mobile phone banking, like the one offered through Citi, allows customers to text requests regarding their credit card account, including balances and transaction history. This feature takes the concept of mobile banking one step further, as it allows customers to receive important information about their account on demand.
• Mobile phone banking allows credit card customers to track spending on their credit card as to prevent identity thieves from obtaining their credit card numbers and charging up their credit cards. The ability to view credit card purchases at any given time is a huge blow to identity thefts who before could potentially make unauthorized purchases for weeks before getting caught. The more connected we become to our credit card accounts the less likely that identity thieves will be able to get away with fraudulent spending.

How to tell if your Credit Card isn’t Working for you Anymore

Choosing Credit Card

Your beloved credit card, which you have toted around with you since college, may just not be working for you anymore.

Many creditors are in the process of changing their terms and conditions because of the newly introduced credit card legislation. It is therefore extremely important to keep abreast of all changes that may be taking place with your creditor and your credit card.

Don’t cast aside the information included in with your monthly statement; instead, make sure to read it carefully, as it could change the way you use your card. It may also prompt you to ditch your current credit card in favor of another one with more competitive features and benefits.

How to tell if it’s time to move on:

• Customer service is lacking – Excellent customer service is usually on the top of many cardholders’ wish lists when it comes to deciding on a credit card company. You may want to ask yourself if you have been satisfied with the customer service the last time you called. For example: Did the customer service rep handle your problem/question in a professional manner? Was the problem remedied in a reasonable amount of time? Was the customer service rep polite and friendly? If you answered “no” to any of these questions, then it may be time to find a creditor that takes pride in excellent customer service.
• Your interest rate goes sky high – Many creditors, in response to the new credit card legislation, are now raising interest rates to make up for decreased profits. If you have been a loyal customer and have always paid your bills on time, then you should not have to put up with a hike in your interest rate.
• Your credit limit is cut – Just like increased APRs many creditors have begun cutting credit limits on current customers. Once again, if your credit limit has been cut but you have proven to be a loyal and responsible customer then you shouldn’t have to deal with a decrease in your credit limit.
• Your rewards are not what they cracked up to be – If you chose a rewards credit card, but the rewards are riddled with exceptions and restrictions, then you may want to look for a new rewards card with less restrictions and more ,well, rewards!

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.

Learn about your Credit Card’s Features and Save

Credit Card Rewards

Often times we find ourselves so concerned about our credit card’s terms and conditions that we fail to recognize that our cards carry some great features that can help us save money, manage our money and protect our purchases.

Although it certainly is important to thoroughly read our credit card’s terms and conditions so that we understand such things as our APR, our monthly due dates, cash advance fees, credit limit and the like, we should also take the time to read all of the features that so many creditors offer with their cards.

So many consumers fail to read and understand their credit card’s features, which means that many of us are losing out on some great perks and features. In other words, take a second look at your cardholder agreement to learn about your credit card’s benefits:

• Proof of purchase – Perhaps one of the best features of your credit card is your monthly statement. Sounds weird, doesn’t it? But it’s true! Your monthly statement is a clear proof of purchase for any expenditure, so if you need a run-down of expenses for your business, for your taxes or simply for your own records, your credit card statement does the trick. Plus, it can also serve as a receipt for a purchase if you misplaced your original store receipt. The bottom line is: hang on to your monthly credit card statement – you never know when it will come in handy!
• Purchase protection coverage – Many cards now offer purchase protection coverage, which essentially protects you from damaged or defective goods when purchased on your credit card. Your creditor can actually go after the retailer in question to get you a refund on a defective or faulty purchase.
• Car insurance rental coverage – Did you know that if you pay for a rental car with your credit card that you may automatically have rental insurance coverage? Many creditors offer their cardholders insurance coverage for rental insurance companies; which means that you won’t have to purchase the costly insurance through the car rental company.

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.

The Perks of Using your Credit Card to Make a Large Purchase

Credit Card Rewards

If your credit is great and you’ve earned a high credit limit and a low interest rate then you may consider using your credit card to make a large purchase. From a used car to a flat-screen television or backyard deck, your credit card may be your ideal source of credit for large purchases and home improvements.

Have you considered using your credit card to make home improvements; to take a family vacation; to purchase household appliances or furniture; or to purchase a computer? All of these types of purchases can be made using your low-interest credit card!

There are plenty of perks for using your credit card to make large purchases, including:

• No loan application – If you are looking to make a large purchase on credit you will need to deal with the hassle of a loan application; either for a car loan, a personal loan or another credit card. However, if you have an existing credit card with a high credit limit and a low interest rate, you can make your purchase and avoid the frustration of filling out a loan application.
• More competitive interest rates – Many personal loans, auto loans and retail credit cards charge shockingly high interest rates; whereas, your credit card will likely have a more competitive interest rate. Compare the interest rates for a personal loan, as well as your credit card, and you may be very surprised to see that your credit card may offer a much lower interest rate.
• Convenience checks – There is no better way to make a large purchase than to simply write out a check. Many credit card companies send convenience checks to their outstanding customers, along with special offers and promotions. For example, it is not uncommon to receive a special convenience check promotion with a low, fixed interest rate until the loan is paid off.
• Easy repayment terms – Your credit card will likely boast easy repayment terms which allow you to prepay without a penalty. Most credit cards have simple, straightforward terms and conditions, as well.