Credit Card Blog

Consumers who held a credit card account with now-defunct Circuit City should know that their credit card account is in danger of going inactive if they don’t use it – and that can mean a bruise on their credit score.

Circuit City cardholders were recently informed that they would receive Best Buy branded credit cards in May. Until then, consumers can use their old Circuit City cards to make purchases at Best Buy.

The problem is that many cardholders, when polled, didn’t realize that their Circuit City accounts were still open. Having open credit accounts which are not used can leave cardholders vulnerable to identity theft and denial of credit. Closing the account can also bruise your credit score.

If you’re a Circuit City cardholder, your best option is to treat the new card like your old one. It will even have the same account number and terms of use. By using the card regularly for small purchases, you will eliminate the risk of your account going dormant. If you’d really rather not keep the card, you’ll need to call Best Buy to cancel the account.

Before our current economic recession, college students could barely walk across their campus without being (almost) harassed into applying for a new credit card.  Credit card companies would give away t shirts, free pizza and little gadgets (even frisbees!) to encourage students to sign on the dotted line for their student credit card offers.

Today though, it’s becoming increasingly difficult for students to find credit cards.  There are far fewer tables set up across campuses and even credit card websites are making it harder to find the student credit card offers.   For example, American Express has removed their Blue for Students card from their website listing (unless you physically type in “student” in the website search bar).

It hasn’t become impossible for students to obtain credit cards, but instead of them being pushed onto students, those who want the credit cards will have to do a little searching.  If you can’t find an adequate student credit card for your needs, consider becoming an authorized user on a parent’s account.  If the parent has good credit, your own credit score will get a boost from the association (and the opposite is true as well, so choose carefully!)

Scammers are always looking for a fast new way to make a buck. Now they’ve started targeting pre-paid “Green Dot” cards, widely available at grocery and discount stores.

The scam works like this: Thieves find these cards while rifling through victims’ purses and wallets. Once they have the cards in hand, they alter the card’s activation code. Then they take the card to a checkout and talk the cashier into manually entering the new, fraudulent code. This allows the thief to make purchases which are then charged to a different party.

Authorities are advising a two-pronged scam prevention strategy. First, cashiers should be told never to enter a card’s activation code manually. If they suspect that they’ve been handed a stolen card, they should call local law enforcement immediately.

Consumers can also take steps to prevent card theft. Routinely locking car doors and keeping your purse or wallet secure can make all the difference. Also, leave your credit cards at home – including pre-paid debit cards – unless you plan to use them. Report any suspected theft as quickly as possible. You can also contact your local police department to request information about identity theft in your area.

If you aren’t among the lucky people receiving an income tax refund this year, you should know you have the option of paying for your taxes with your credit or debit card.  There are a number of benefits and disadvantages to paying with credit, but for some people they don’t have much choice.

If you are paying your taxes with a credit card, at least try to choose a rewards card that will help you get a little more from your payment.  The IRS provides a list of online resources for where and how to pay for your taxes on credit or debit card:  http://www.irs.gov/efile/article/0,,id=101316,00.html

Most people will be required to pay a 2 to 2.5% convenience fee for paying their taxes on credit or debit card.  It may be possible to deduct the fee if you itemize your return and the amount of miscellaneous items add up to more than 2% of your adjusted gross income.  If so, you can deduct the portion that exceeds more than 2% of your adjusted gross income on Schedule A.

With an increasing number of people reporting that their credit card limits are being lowered, it becomes even more important to try to pay off credit card balances as soon as the statement arrives rather than carrying a balance from month to month.  It’s no longer just a matter of whether the interest rate is low enough to make it reasonable to carry a balance and make just a minimum payment – now you need to be concerned of a credit card company lowering your credit limit and hurting your credit score and causing you over-the-limit-fees.

It used to be you had to make your payments late to get a credit limit decrease.  Now, with credit card companies attempting to lower their risks of lending money in a tough economy, the major credit card lenders are reducing limits on everyone – regardless of how they make payments or not.

A lower credit limit will increase your debt utilization ratio – meaning that even without spending more money on credit you’re suddenly using more of your available credit (since less is available to you) and therefore become a higher risk in the eyes of creditors should you go looking for new credit.  You also might notice your credit score drop due to lowered credit limits.

In some cases, credit card companies are reducing the credit limits of customers to below the amount that the cardholder has already spent.  For example, if you’ve had a $2,000 credit limit and used $1500 of it, you could be hit with an over-the-limit fee when the credit card company lowers your available credit to $1490.

Pay off credit card balances as quickly as possible to avoid these problems and unnecessary fees.

The most recent consumer credit report has been released and shows that revolving credit (typically credit card debt) has dropped 9.7%.  The question is – does this mean people are becoming financially smarter and paying off their credit card debts while avoiding taking on new debt…. or is it just due to the fact that it’s much harder to obtain credit now than it used to be?

The drop in credit card debt is not overly surprising, although it’s difficult to know for sure whether it is a result of people getting more careful with their finances or if it’s a result of them not being able to get more credit.  Even though you might expect that people who are struggling financially might rely more on credit cards more in an effort to make ends meet -in general, most people tighten up their purse strings whenever the economy has a downturn.  Most unnecessary spending is curbed, and people make a sincere effort to pay down their debts – preparing for the worst.