Student Credit Cards

Kiss those sign-up tables with enticing free perks goodbye! Apparently, free pizza just isn’t worth all that easy-to-acquire debt. Students under 21 will now have to prove that they have a source of income or have a parent willing to co-sign financial responsibility on the card. The future of student credit cards looks to be more along the lines of debit cards and prepaid cards as well as cards with higher interest rates and lower credit limits, teaching some lessons in financial responsibility and budgeting to a younger generation.

Rewards Programs

Credit card companies have already begun tightening the reigns when it comes to rewards programs, however, things are about to change even more. The days of generic spend a buck get a buck or a point look to be falling to the wayside. New programs will be specifically geared toward certain lifestyles and audiences, such as music downloads, sports fans, etc.

Low-Interest Rate Cards

Comparably, these cards will still carry a lower rate, however, the interest is about to go up by several points, so be prepared to pay more. People hoping to get a low interest rate card might find it even more difficult now, as the credit card companies don’t exactly find these to be their best products, at least from their viewpoint, as they just can’t charge much to make their own profits. Credit card companies will tighten the requirements even more, so these cards will be harder to come by.

Prepaid Cards/Gift Cards

As of August 2010, all fees will have to be disclosed before purchase, and you no longer have to worry about losing your money because a gift card expired so quickly. Expiration dates will now be fives years from the date of purchase.

Business Credit Cards

There are no changes in the credit card act that will have any effect on business cards. Consumer credit cards are the only ones included in the provision.

Gas Cards

As for the cards that are co-branded with an oil company logo, they will be offering more rewards and perks, however, you’ll make a few cents less per purchase and overall, the card is going to cost you more.

Debit Cards

Interesting changes are coming to debit cards. Banks will no longer be allowed to charge hefty overdraft fees. We might even begin to see more debit cards offering rewards and perks to the user. However, it may cost up to $30 to have a debit card if banks start charging an annual fee.

Balance Transfer Cards

The enticing offers will still be there, but expect to pay more as interest rates rise. While some companies might still offer incredible introductory terms, for the most part, you can expect to see shorter terms and fewer 0% introductory rates. Still, the rates will be decent. 7 to 9% is not bad in the overall scheme of interest rates.

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.

If so, then it may be time to consider contacting your credit card company and asking them for payment assistance with your credit cards. Often times, a creditor will respond positively to a customer who recognizes a problem and chooses to deal with it before it gets out of hand. In other words, dealing with your debt problems head on instead of ignoring your mounting debt is not only better for you, but also better for your creditors.

But will your creditor bite?

Maybe and maybe not. There are some credit card companies who simply will not negotiate different payment terms for your credit card bill, while others will work with you to find a plan that will suit both parties. The only way you can find out how your creditor will respond to your request is to simply ask them. After all, you really don’t have anything to lose except a lot of worry over your debt load.

How to Negotiate Changes for your Credit Card Debt:

• Don’t wait until you fail to pay your credit card bills to ask for assistance; instead, make every effort to cover your card’s minimum payment so that you can show good faith on your part. Your creditor will be more willing to negotiate with a customer that has a strong payment history.
• Document all contact you have with your credit card company, including dates and times of phone calls and names of representatives you talked to. Then, ask for a written agreement from your credit card company that details the terms of your new agreement.
• If your credit card company is unwilling or unable to assist you with coming up with more reasonable repayment terms regarding your credit cards, you should seek help through a nonprofit consumer debt agency, who can help you find ways to manage your debt.

• Personal Loan – A personal loan is still a popular form of debt consolidation. Personal loans require no collateral, and are therefore a bit more difficult to get than other types of loans. Because personal loans are considered unsecured debt, they may also come with higher interest rates. However, if your credit score is still strong and you’ve always paid all of your debts on time, then you will likely still qualify for a personal loan. Personal loans are often offered through credit card companies, banks and other lenders.
• Credit Cards – If you have debt from a variety of lenders, many of which have high interest rates, then consolidating your debt using a low-interest credit card may be right for you. Many credit cards offer great deals on balance transfers, thereby allowing you to consolidate all your debt onto one, easy-to-manage credit card. Be careful about balance transfer fees, however, as well as introductory rates, to be sure that you’re getting the best deal on your balance transfer credit card offer.
• Home Equity Loans/Lines of Credit – For many homeowners with equity in their homes, a home equity loan or line of credit may be an option when consolidating debt. These types of home loans generally offer low interest rates and a longer repayment period, thereby making them a popular loan for homeowners. However, it is important to remember that these types of loans use your home as collateral; in other words, if you are unable to repay your loan, your home may be used by the lender to repay that debt.

Whichever type of loan you use to repay your debts, it is important to always consider all of your options. And, as always, develop a game plan, right from the start, regarding the repayment of your loan so that you can plan your budget accordingly.

Learning from Past Mistakes

In past years, credit was flowing freely and creditors were more than anxious to lure consumers in with promises of teaser rates, gimmicks and reward programs. Many of us took the bait and began charging to our heart’s content.

Fast forward to 2009 and things don’t look quite so rosy anymore. Many of us now find ourselves in quite a precarious position; the economy is in a recession and our credit card debt is piling high as creditors dramatically raise our interest rates and add over-the-top fees. Not only are many of us unable to pay down our credit cards, but some of us are simply unable to keep up with the payments and fees.

New Changes Underway

The new credit card bill, which is due to go into effect July 1, 2010, is designed to come to the rescue of the millions of Americans bogged down in credit card debt and unable to get out from under it. But will this new law affect the way creditors lend out money?

Perhaps. We may see fewer promotional rates, fewer rewards programs, higher interest rates and tougher credit criteria, particularly for those with a short credit history. But in the end, credit card companies are still a business, and for those of who have worked hard to maintain our credit, credit will still be available. In fact, competition among creditors will still exist, thereby providing consumers with excellent credit plenty of options regarding credit cards.

In addition, the new law requires that credit card companies must provide cardholders with notice of a rate or fee increase at least 45 days ahead of time, thereby enabling consumers to make a change, if desired.

The bottom line is that the new credit card laws will put the responsible credit card consumer back into the driver’s seat, and will prohibit credit card companies from imposing certain practices that will only leave credit card customers in a no-win situation.