Credit Card Blog

Have most of us forgotten what the holidays are really about?  It’s not about running out to Wal-Mart and the mall to buy as much as your credit card limits will allow you to purchase for everyone on your gift list, is it?

Sure, everyone – especially kids – love to wake up to a Christmas tree that’s positively hidden behind the piles of presents, but there are other (possibly even BETTER) ways of celebrating the holiday season.

Instead of racking up even more credit card debt that the majority of Americans are struggling to pay already, why not spend less on each gift you buy (and if possible, pay with cash), and have a get together with family and friends instead?  Bake and share cookies and pies, have a party in someone’s home where everyone enjoys time with one another instead of exchanging expensive gifts.

If you’re a Citi cardholder, you might be in for some big rewards. Citigroup made an announcement Wednesday that it was partnering with Amazon.Com to bring its loyal customers what executives have termed “the largest-ever rewards program”, and “rewards on steroids”. How good is this rewards program, and who can participate?

13 million Citi cardholders will be able to shop online at Amazon to accumulate reward points. The program also gives customers points for booking their travel plans on Expedia.Com. Customers can also accumulate points by making purchases with their Smith Barney debit cards. 

At a time when consumers are using less plastic, and when lending criteria have grown tighter across the board, Citi’s reward program is a way to reward its good customers and give them an incentive to keep paying with credit. After all, if consumers stop charging their purchases, Citi’s profits would go down. The financial company has produced a win-win situation, giving its best customers the freedom of choice when it comes to earning their reward points.

Eager shoppers take note: to redeem your rewards, you need to go to Citi’s Thank You Network reward web site, not Amazon.Com.

The holiday shopping season is here, and it brings with it the temptation to spend, spend, spend. 0% interest credit cards can seem like a good way to finance your purchases without the hassle of interest. But before you fill out an application, get familiar with the common traps that these cards can spring on you.

Time Limits

You definitely don’t want to go crazy on the holiday spending, only to realize that your interest skyrocketed when you didn’t pay off your balance within six months to a year. 0% interest credit cards don’t stay 0% forever. The interest-free phase typically lasts for 12 months, though some last as few as three. Make sure you can pay off the full balance before your time is up.

Penalty Interest

As with other types of credit cards, the interest on your 0% interest card will go sky-high if you’re late on a payment. Your balance could jump from 0% interest to 30% interest overnight. To avoid this nasty shock, call your card issuer if you ever suspect that you’ll be late on a payment. They might work with you.

Balance Transfers

Does your credit card charge a different amount of interest for balance transfers and purchases? Some cards offer interest-free balance transfers from other credit cards, but apply a rather high rate of interest to regular purchases. Always read the fine print and know your credit card’s terms before you use it.

As credit card companies fear an increase in consumers who are unable to pay back their credit cards, many have begun reducing credit card limits for cardholders they consider “risky”.  In many cases, this doesn’t mean that the cardholder has made their payments late – it is often the result of other factors.  Card issuers report reducing credit card limits for cardholders who are carrying high balances on several cards, because they are seen riskier than someone who has small balances on their credit cards.

 A reduced credit limit can be a shock, because you often don’t get notified of the reduction until after it’s been changed on your card.  With holiday shoppers using their cards for their gift purchases, you could find yourself embarassed by a declined card that you thought had room on the balance for more purchases.

If you want to find out before the bored cashier tells you your card is declined in the check out line, call your credit card customer service and ask what your available balance is.  Also verify that they have no plans of lowering it as you intend to use the card – at least that way you will know where you stand.

Even in difficult economic times, it’s not impossible to stay out of debt this holiday season. Use a few simple tips to keep yourself ahead of the game:

• Even though times are tough, remember to pay yourself first. This is always a good idea and in today’s economy, it is critical.It isn’t easy, but put money in savings and pay all your bills before you set aside money for holiday gifts.

• Next, develop a budget based on what you have not what you want. Buy only what you can actually afford. You may have a wish list- and certainly your children will- but this year, everyone may need to settle for a few less packages under the tree

• Don’t purchase the first thing you find- shop around. Sales will likely be big this year to encourage retail spending. Comparison-shop, save your receipts and try to find the best deal possible.

• Remember to keep your checkbook balanced. It’s very easy to just run and shop, but this year it is even more important than ever to keep very careful records. Don’t fall behind when it comes to balancing that checkbook. If you do, the next thing you know, you’re going to be looking at red ink. No one wants to increase their expenses with nasty overdraft fees that multiply like snowflakes in a blizzard.

• Finally, don’t open a brand-new credit card just to get the 10% discount. It may sound wonderful right now, but sooner or later, that extra credit card could cost you a lot more than you think. Do you really want to spend the New Year paying off yet another credit card? Do yourself a favor and pass up that offer- it most definitely will come again.

Congress is hard at work trying to find a way to restructure the way credit cards operate. They may have good intentions, but keep your eyes open, because they may actually cause more harm than good.

We all know the government is bailing out big-time banks and now, perhaps, the auto makers. Jumping on the bandwagon, some representatives from the retail industry came up with a great idea. Why not lower the disease that retailers pay to credit card companies when people buy merchandise on credit? The theory as this savings would be passed on to the consumer. Think again.

The fee for using a credit card is usually less than 2%. It provides for the electronic network that allows major credit cards to be accepted. Retailers get their share of the pie right off the bat, while the credit card company takes the risk if the customer doesn’t pay the bill. However, small merchants are struggling and some members of Congress feel that reducing the fees will help the average consumer.

Keep an eye on the Conyers-Cannon bill (HR 5546). This bill would waive antitrust regulations for as many as 15 million retail companies and allow them to force banks and credit card companies to provide basically free credit. The Justice Department doesn’t like the idea, because they believe antitrust laws make sure that markets are fair and competitive and protect consumers. That won’t stop Congress, however, because some members are espousing a theory that by reducing expenses for retailers, it will ultimately lower prices for consumers.

It won’t work. Why? The authors of the bill did not include amendments that that would make sure the savings are passed on to consumers. Instead, it would only increase the earnings of the huge corporations, while all the little guys would once again be left out in the cold.

If Conyers Cannon becomes law, credit card companies will lose profit, in turn, they will as restrict credit even more smaller providers might even drop out of the market altogether. And it will leave merchants in struggling communities unable to offer credit cards to their customers. Once again, only the big guys will win credit card companies will most likely recoup their losses simply by raising interest rates on cardholders even higher than they already have

The last thing anyone can afford is Congress to continue to try and solve the economic crisis by bailing out the rich and ignoring the poor.

This year’s tight economy could make the holiday season more difficult for many shoppers. Typically at Christmas time you see credit cards come flying out of wallets at every possible opportunity. People, don’t worry about tomorrow, they just spend, spend, spend, in order to have a fabulous Christmas for friends and family

This year, however, we may see things a little differently. Many consumers are deciding to shop only with cash this year. To make it even more difficult banks are limiting credit card offers, approving fewer applications and reducing credit lines for current customers.

Typically, retailers make a fortune at Christmastime. However, with jobs declining all across the country the stock market bouncing around, but typically falling and global fears about this economic crisis, many people are friend afraid to use their credit cards this year.

There may be an answer to your holiday shopping needs this year, without resorting to your credit cards. Layaway, the process of setting aside your purchases with a small down payment and then making regular payments over a period of several weeks before you take your purchases home is making a comeback. Many big retailers such as Sears, Kmart, T.J. Maxx and Burlington Coat Factory still offer layaway and, in fact, Kmart company spokeswoman, Caroline Goldberg, says Kmart’s layaway request has increased this year.

If you do use your credit cards this holiday season, be careful, especially with store brand credit cards. They can carry a pretty hefty interest-rate and there may not be many new credit card accounts issued. This year, many store owners are counting on current cardholders to make it a Merry Christmas for them

Think the mortgage crisis doesn’t affect you if you don’t have current problems with your home loan? Think again.

This year, you can expect the fallout from the mortgage crisis to affect your Christmas shopping if you typically use credit cards to handle those expenses.

Although credit card companies are closing accounts left and right, cutting credit lines and raising interest rates, it may not be enough. Even though credit card debt is only a fraction of the mortgage problem, major card issuers like J.P. Morgan, Chase & Co., Citigroup and others cannot afford more losses. With the unemployment rate heading towards 8%, lenders are fearful that they will not be repaid when extending credit.

According to the US Federal Reserve reports, 60% of American banks have tightened up their credit card standards since July. Even those continual credit card offers sent in the mail are falling to the lowest point in over three years. The Wall Street Journal reports that many credit card holders will see an interest increase by an average of three percentage points and the increase will affect millions of customers.

Lenders are also being extremely careful in opening new accounts to avoid the subprime crisis from beginning all over again. Thanks to tightening standards, especially in areas like California and Florida who were hardest hit by the housing crisis, residents in these states may feel the biggest fallout.

We’ve all been there: exiting a department store, juggling gifts as we brave the cold, preparing to step out into a crowded parking lot, only to be greeted by a Salvation Army volunteer. Bell ringing, kettle gleaming, the volunteer smiles warmly. We think about donating a few dollars, but soon realize that we’ve got no cash on hand. It’s a common dilemma in our increasingly cashless society.

Now the Salvation Army has come up with their own solution. Expanding on an idea that’s already in play in Charlotte, NC, and Phoenix, AZ, the charity will be experimenting with cashless kettles in 12 new locations throughout North Texas. The organization says that by adding card-swiping technology to its storefront kettles, it took away the frequent excuse of not having cash on hand. Another benefit of this system is the paper trail it creates. People who make credit card donations get a printed receipt proving that they contributed to the charity. These receipts can be collected and used for tax deduction purposes. 

Of course, anyone from any state can use their credit card to donate to the Salvation Army by giving through the organization’s official web site. You can also set up your own online red kettle to raise money for those in need.

“Citigroup is reneging on a promise it made to tens of millions of credit card customers in good times.” If that lead-in to this New York Times article sounds a bit harsh, that’s because it is.

Citigroup once vowed before Congress that it wouldn’t raise rates until an account expired. That was in the early part of 2007. Now it’s late in 2008, and the credit crisis has caused Citigroup to go back on its promise, earning them a harsh tongue-lashing from critics.

If you’re a Citi cardholder who hasn’t had a rate hike in the past two years, you can bet that one’s coming. Customers will see their interest rates jump 3%, putting some of them over the 20% interest mark. It might be a good time to shop around for a new credit card.

On the other hand, the economic climate is making many companies do things they deem necessary to retain profitability. American Express has hiked rates and laid off thousands of employees, and some financial institutions have folded altogether. Still, Citi is finding very little sympathy.

Representative Carolyn Maloney of New York says that she understands why Citi is doing this, but she doesn’t like it. Says Maloney, “Apparently a deal is only a deal when it doesn’t cost the financial institution too much money.” Ouch.