Credit Card Blog

Interest rates on credit cards have been steadily increasing, causing individuals with credit card balances to pay even more for their debts.  The rebates being issued by the US Government are meant to be spent to stimulate the economy, but it’s a sure bet that many people plan to use that money to get rid of some of their existing debt.

Using the “free money” to pay off your existing high interest debt can give you a way out, as long as you avoid the most commonly  made mistakes people have after paying off debt:

• Finding the available credit so tempting that you go out and charge some new purchases to replace the money you’ve just paid off!
• Feeling as if you have more money available each month due to paying off a bill or two; and overspending your salary to the point that you’re late making payments on other bills.
• Opening a new account with a higher credit limit after paying off an older account

If you do decide to use the rebate to pay off some of your debt, you will definitely save money on interest payments.  Even if you are unable to pay off all of your credit card debt, applying such a significant payment all at once will help lower what is owed and cause you to pay less interest over time.

Somewhere, hidden in the small print of the credit card disclosure agreement, may be the words “universal default”.  These are words you want to avoid in any credit card you apply for.  Universal Default is the phrase used to describe the practice of raising all interest rates on all of your accounts if you happen to make one of your card payments late. 

You might be late with your MasterCard, and discover that the interest rate on all of your other credit cards (and sometimes even your loans) have increased.  On top of the $29-$39 late fee you’ve paid, now your balances will all receive higher interest rates for the life of the balance!

The perfect solution is to always pay all of your bills on time.  Sometimes this isn’t possible, though.  If you find you are going to be short, sometimes you can avoid late fees and interest rate hikes by contacting the credit card company before the payment is due to explain your situation.

The thought of a teenager with a thousand dollar credit limit and easy access to a shopping mall is enough to give most parents the willies. But it’s more common than you’d think. According to recent studies, approximately 8% of all American teens now have their own credit cards in their own names. Is this a good thing? That depends on how well-educated the teens are about credit card use - and debt.

Having a credit card at a young age can nurture a good credit score early. Misuse of the card can also lead to poor credit early in life. If you’re a parent of a card-holding teen, make sure they know that credit cards are intended for emergencies. Or set a spending limit of your own, and encourage them to pay off their balance each month to avoid revolving debt and interest.

If you’re worried about your teen’s spending habits, but want to teach them to be responsible card holders, think about getting them a prepaid credit card. That way, you can decide how much they can spend. You can also co-sign for a card and set up online account access so that you can monitor all charges.

Credit cards are definitely a part of today’s society, so teaching kids to use them right is a good thing. Set an example by using your own cards wisely and encouraging your teens to do the same.

The Internal Revenue Service has a reputation for doggedly pursuing those who don’t pay their taxes. Now they’ve told PayPal, the popular online credit card processor and payment service, to cough up data on offshore credit card use.

Why PayPal? The payment giant forayed into the world of online gambling between the years of 2000 and 2001. Some sources claim that the IRS is looking to crack down on improper use of offshore credit card accounts for online gambling during that period. Others aren’t so sure. Some skeptics believe that the IRS will use the data it gains as an excuse to sniff out all kinds of financial indiscretions, including unreported income. Tax professionals have even referred to this summons as a ‘fishing expedition for illegal activity’.

Will the PayPal summons herald the start of a witch hunt in the Age of Technology? Only time will tell. In the meantime, play nice and pay your taxes.

Credit card companies offer a variety of insurance options - the four main insurance coverages you can purchase from your credit card include disability, credit life insurance, property, and unemployment insurance.  The question remains- is it worth it to you to pay an extra few dollars each month to add these insurance policies to your credit cards?  Here is what each of the various insurance options cover:

Credit Life - If you die, your credit card balance will be paid off.  You purchase this insurance from the credit card company, and you also designate the beneficiary of the policy to be the credit card company.  If you should die, your policy kicks in and the money is no longer owed.

Disability - If you have credit disability insurance and you become medically disabled, the policy will make your minimum monthly payments for you.  Personally, I’m hesitant on the value of this insurance coverage because there are many concerns over what will be classified as a medical disability, the length of time your payments will be covered, and whether or not you can use the card if you’ve put in a claim for the disability insurance.  I would just be sure to look into all the details before deciding whether this coverage is worth it to you.  If you’re self employed, by the way, you probably won’t qualify at all.

Property- Credit property insurance is supposed to cancel the debt owed on items you bought using the credit card, if the items are later destroyed by specified events or situations listed in the policy coverage details.  There is no deductible when making a claim under credit property insurance, but I think the concern here is what types of events or situations qualify you to cash in on this policy.  Check into it carefully.

Unemployment- Involuntary unemployment insurance offered through credit cards which will make your monthly minimum credit card payment if you are laid off involuntarily.  Again- if you are self employed, you can’t put in a claim so don’t purchase this coverage!  Also, if you make purchases after you’ve been laid off, those items will not be covered under the policy.

People are becoming more charitable, and they are looking for easy and creative ways to support their favorite causes. Affinity credit cards, which donate a percentage of purchases to a given charity, are quite popular right now. The cards often sport logos or pictures that make clear the causes close to a card holder’s heart. By charging your daily purchases, you can help save the whales, make a dying child’s wishes come true, or give a little support to any one of hundreds of great charities. But what price do banks tack onto these affinity cards? Are the cards actually worth the cost?

The bank that issues an affinity card is the party responsible for making the charitable contributions. Some card holders are critical of the banks because they seem to overcompensate for their donations by charging high finance fees and interest rates. In addition, the amounts they actually donate are pennies on the dollar. Regular use of an affinity card might add up to an annual donation of $25 to support your favorite cause – very little when compared to how much you could help an organization by writing them a check.

As with any credit card, card holders who maintain a monthly balance on their affinity cards will be more affected by high fees and interest than those who routinely pay off their balance from month to month. And while contributions can be on the stingy side, some insist that it’s better to give a little than not at all. For the truly philanthropic among us, affinity cards might best serve as a way to help in addition to – not instead of – more traditional donations.

If you were offered a credit card with a $100 credit limit, but knew that you would have to pay a $100 activation fee in addition to monthly payments and high interest rates, you’d likely turn up your nose and take your business elsewhere.

Sadly, millions of sub-prime card holders are agreeing to these atrocious terms. They fear that their lack of credit, or bad credit, will prevent them from obtaining a more traditional credit card. College students are prime targets for fee-harvesting card marketing. Their biggest mistake is failing to read the terms and conditions of the credit card before signing a contract. Some of these cards offer credit limits as low as fifty dollars. If students and other potential card holders were to read the terms carefully, they’d do the smart thing and walk away.

It’s true that poor or no credit will have an impact on your interest rate when you sign up for a credit card. But even people with the lowest credit scores can do better than a fee-harvester. If you’re in need of a credit card while you build or repair your credit, talk to your bank. If you’ve done business with them for a while, they will likely work with you and extend you credit. There are plenty of ways to get a credit card if you have bad credit. Do your homework, and don’t fall for cards that sound too easy to be true. Chances are, they’re not a very good deal.

It’s prime time for penny-pinching, but skimping can cost you big in the long run. Just ask Hannaford Supermarket. Customers who used their credit or debit cards at a Hannaford store between December of 2007 and March of 2008 might have had their information stolen. Many people blame sub-par security measures for this breach; Trojan software was found on computers in all 300 store locations. How could this happen?

Retailers have a target on their backs, and identity thieves are taking aim. This is the third major retailer security breach in recent months. Thieves use “Trojan horses” – malicious programs that masquerade as something else in order to infiltrate a network – to gain access to private information. Just clicking an e-mail attachment can set off a Trojan. And since these programs are sneaky and constantly evolving, anti-virus software and firewalls might not be enough to stop them.

Retailers need to educate every employee with access to the Internet about the threat of malware. They should also invest more time and money into beefing up their security. In all of the major breaches, store-level network security failed to detect the problem. Maybe some expert advice is called for?

Card holders should also take a lesson from Hannaford’s unfortunate incident: check your credit card statements often. If you see charges you don’t recognize, get in touch with your card company. Remember that today’s thieves don’t necessarily make huge, obvious purchases. These days, they might be nickel and diming your credit limit to the max. It’s impossible to predict which retailer will fall prey next time, so keep track of your spending. You could also invest in a one of the new security-conscious credit cards that generates a new number with each transaction, invalidating the old number after you make a purchase.

It probably comes as no surprise to hear that phishing – an assortment of scams that trick card holders into giving out their private information - is alive and well. Another form, called ‘vishing’, involves scammers calling up card holders on the telephone and persuading them to part with their card numbers, security codes, and expiration dates. The calls always sound official, so it’s no wonder so many people fall for them. In a recent twist, scammers are pretending to be bank officials and contacting account holders to inform them that their account has been suspended. Victims call 800 numbers provided by the thieves and are greeted by authentic-sounding voice recordings and menus. They enter their card information to reactivate their “suspended” account, and the damage is done. Sadly, even a single mistake can have disastrous effects on one’s credit score after the thieves go on a shopping spree with their ill-gotten cards.

To protect yourself from these scammers, never open any unsolicited e-mail you receive. Just opening some of these e-mails can infect your computer with harmful software programs. If you do accidentally open an e-mail (because, let’s face it, some of them look really official), never click on any link contained therein. Even e-mails that claim to be from Paypal, E-bay, or even your own bank can be fakes, and the links they contain will lead you to official-looking web sites that ask you to enter your credit card information or other numbers that identity thieves want to get their hands on. You can report such e-mails to your e-mail provider and the institution that the imposters claim to represent. Also, run a spyware and virus scanner after dealing with these e-mails, just to be safe.

High tech crime is an unfortunate part of the Age of Technology. Stay smart and don’t fall for phone or Internet scams that put your credit at risk.

It’s a common practice for gas stations to put up to a $50 hold on your credit card or debit card when you pay at the pump for your gasoline.  It’s also extremely common for a hotel to put a “hold” on funds for staying in their hotel.  They take your credit card or debit card during check in, so that they have it on file to cover any “incidentals”, like internet use, phone calls, movie rentals, or in-room bar use.  What you may not realize is they can put a hold on $50 to $200 a night or more.

People using credit cards are less likely to be effected by the hold - but if you are nearing your credit card limit and you attempt to use the card at a restaurant later, you could be denied.  If you try to avoid credit cards and rely on your debit card (linked to your checking account), you are of course limited to the amount of money you have in your account.  Most people would experience some financial difficulty if $200 was held/frozen from their checking account for several days.

When traveling, try to use a credit card to book the room and for the “incidentals” that you won’t be using for the rest of the trip.  If you don’t count on that card, you won’t have to worry about the “hold” the hotel puts on your money.  If you like to pay for gas at the pump with your debit card, just be prepared to deduct at least $50 from the account, regardless of what you actually put into your tank for a few days until the transaction clears and the appropriate amount is deducted from the account.