Credit Card Blog

As we await the decision of the $700 billion bailout of the troubled mortgage industry, the discussion of A Credit Cardholders’ Bill of Rights has still got Banks and consumers talking.  The Bill of Rights protects consumers from things that have become a bit too common in the credit card industry – questionable late fees and interest rate hikes without prior notification, and requiring clear disclosure of terms and conditions.

Within minutes of the approval of such measures, several banks expressed their disappointment and opposition, including America’s Banking Association.  They claim such a move will actually increase the cost of credit for both consumers and small businesses, as indicated in their press release.

Your teens are growing up, and you want to make sure that they’re able to handle their finances once they’ve left the nest. Is it a good idea to give them a credit card at this stage of life?

No, according to James Roberts, a marketing professor at Baylor University. He found that card-toting teens are “less price-sensitive, spend more, and overestimate their available wealth compared to those who write checks and pay cash.” While that can be said of any age group, you don’t want your teen’s credit score to crash before they’ve even graduated high school.

Roberts suggests setting up a bank account for your teen and giving them a debit card to manage. If they prove to be responsible spenders, a pre-paid credit card is another option. Teens with pre-paid cards have a set amount of money they can spend, so there’s a limit to the amount of damage they can do. Just beware of high fees associated with such cards.

Perhaps the best thing you can do to prepare your teen for a lifetime of good credit is to set a strong example with your own spending. If you treat credit cards like easy money and find yourself struggling to make your monthly payments, chances are good that your teens will face the same challenges. Talk to them about interest rates, penalties, limits, and the temptation to spend beyond their means.

Americans aren’t the only credit card holders plagued by identity theft. Our cousins down under are facing problems of their own. It’s estimated that Australians lose $4 billion every year to identity thieves. That sobering figure heralds the beginning of National ID Fraud Awareness Week, from October 13th – 17th.

How are thieves making off with so much money? A study conducted by the Australian Bureau of Statistics found that 75% of Australians threw out personal details that could be used to swipe their identities. Tax file numbers, dates of birth, and other vital statistics fill trash bins everywhere, according to a spokesman for waste audit company Waste Min.

To protect yourself from identity theft, keep an eye on your bank and credit card statements as well as your credit report. If you see unauthorized charges, report them immediately. Subscribe to a credit monitoring service to be alerted whenever there are changes to your credit report. Even better, try an identity theft fraud protection service.

Most importantly, watch what you throw away. Identity thieves are certainly watching. Don’t make their job any easier by giving them intact documents to sift through.

It’s no secret that financial companies are feeling the squeeze. With banks and card companies (and, soon, taxpayers) shouldering an enormous burden of bad debt, many lenders are lowering the credit limits on customers’ cards. It makes sense from a business perspective, but that doesn’t make it any easier to swallow.

If you’re worried about your own credit limits, follow these tips from the Wall Street Journal:

1.    Reduce your debt. If your cards are running at near capacity, you should pay down that debt as soon as possible. Card holders with the most debt face the highest risk of having their limits lowered. Banks simply don’t want to risk large amounts of default.
2.    Check your mail. You will be notified in writing when your card company changes your credit limit, so pay attention to any letters you receive. Also, ask your credit card company if they offer online alerts to inform customers of changes taking place.
3.    Watch your credit report. It’s more important now than ever before to make sure your report is accurate. Report any errors immediately to get them removed.
4.    Play the field. If your limits do get lowered, shop around for cards that offer you a better deal.

Remember: if you’ve been a good customer with a track record of timely payments, you might even manage to negotiate a higher limit with your current card company. It never hurts to try.

50 years ago this month, nearly every home in Fresno, CA, received a small plastic card from Bank of America. For better or for worse, this “BankAmericard” introduced Americans to the concept of buying with credit. Unlike it predecessors, the Bank Americard did not require payment in full every month. A year after the Fresno Drop, that city’s residents had spent almost $60 million in purchases. Later, this credit card would evolve into Visa.

What have we learned since the introduction of revolving credit? If personal debt hasn’t taught us a most valuable lesson, we need only look to our government for proof that spending beyond one’s means is a disastrous choice.

When used responsibly, credit cards can be beneficial. They get us out of emergency situations, they offer unparalleled purchase protection, and they pave the way for a good credit score. But anyone who views credit cards as free money (much like the 60,000 Fresno citizens who got those shiny new cards a half century ago) is in for a rude awakening when they open their first statement.

Today, there are more than 3.6 billion credit cards in use around the world. Credit has become a cornerstone of our culture, a perpetual love-hate relationship between lenders and cardholders. Let our current economic crisis serve as an example to future generations: limit your spending or face the consequences.

If you’re carrying credit cards around that you never use, don’t be surprised if you try using it after awhile and it doesn’t work!  Many card companies are closing inactive credit card accounts.  How long a card has to be inactive before it’s closed depends on the particular issuer of your card, but if you want to keep your credit cards from being cancelled, you may want to use them every few months to keep them “active”.  (Hint: any purchase will cause your card to be active, so if you’re avoiding credit card debt, buy a pack of gum or candy).

Read your credit card policy and see if there is a clause about inactivity.  It may or may not be there – closing inactive accounts falls under the “we can cancel your card for any reason” clause; or “we reserve the right to decide who we do business with and who we don’t” clause. 

On Tuesday, lawmakers approved a  new credit card legislation in a 312 to 112 vote.  This bill bans retroactive interest rate increases on existing balances.  Credit card companies are only able to change interest rates on new balances now – and ONLY after giving advance notice of the interest rate hike to cardholders.

Other rules and laws for changes to the credit card industry (that benefit consumers!) are under review but it’s unlikely that anything will be finalized within the year.

The Kiva card supports the Kiva charity – you know the one that funds business loans in the developing world?  It’s issued through Advanta, who generously matches your charitable contributions (created through using the credit card as you normally would) up to $200 per MONTH.

Your own credit card statement will earn you 5% back on all the grants you make to Kiva using the card, as well as 5% back on certain purchases. 

Using this credit card will actually help people start businesses and support their families in the developing world, so it’s a card you can feel good about using.  Especially since it also offers exceptional interest rates and a 0% balance transfer offer for the first 15 months.  And no annual fee…

If you’re going to use a credit card, and like to do “good deeds”… the Kiva card from Advanta is a tough one to beat.

If you’re tired of credit card companies making money off you (interest, finance fees, annual fees… etc), why not use your credit cards to make you some money instead?  Sound impossible?  Here’s what you can do:

• Find a credit card offering 0% interest on cash advances for 12 months OR;
• Find a credit card with 0% interest on new purchases for 12 months, and then use your Paypal account to process a credit card payment like a purchase (essentially, you are charging the credit card and the money ends up being placed in your Paypal account as cash, but without a cash advance fee)

With this 0% interest money, make a deposit into a high interest savings account or a 6 to 12 month CD (FDIC insured) , like one of the following:

• ING Direct
• Capital One Direct Banking
• E*Trade

Deposit as much as you can take from your 0% interest credit card and let it earn interest for the full 12 months in the high interest savings or Certificate of Deposit.  During the year, make the minimum payment required on your credit card (you aren’t paying interest, so this is ok!) and before your 12 month promotional interest free offer ends, withdraw money from where you deposited it to pay back the remaining balance.  The money that remains is what you’ve earned from the credit card.

Deposit $10,000 in a 5% interest account for 12 months, and you’ll make about $500 off the interest.  Re-invest the $500 into a new Certificate of Deposit, or keep it the high interest savings account to grow more; and you can look for a new 0% interest offer and start all over – only this time you’ll have the extra money you earned from the last time to include with your deposit!

Consumer Reports recently picked twelve of the best credit cards available. While they were at it, they also spilled the beans on the three worst credit card deals they found. What qualifies a credit card to end up at the top of Consumer Reports’ “worst of” list? Fees, mostly. Lots and lots of fees.

And the winners (losers?) are…

The New Millennium Visa or MasterCard; HSBC’s American DreamCard; and the First Premier Gold MasterCard.

The lattermost credit card was so abysmal that it received a special mention all its own. Card holders who sign up for a First Premier Gold MasterCard will be welcomed into the fold with a $29 account setup fee. But this card keeps on giving – if, by giving, you mean “charging exorbitant fees”. Next comes a hefty $95 program fee, followed by a monthly $7 service charge. As if that weren’t bad enough, card holders pay between $48 and $68 for the “privilege” of carrying this card in their wallets.

America, you can do better than this. When you see one of these credit cards coming, run far and run fast. Apply for something – anything – else. It’s almost guaranteed to be a better choice than these three.