Credit Card Blog

Many card holders are getting a nasty surprise these days: their credit limits aren’t what they used to be. Cards that were once considered a financial safety net might not be all that cushy anymore. The worst part is that these credit limit reductions can take card holders by surprise.

How can you keep from getting hit with the credit reduction whammy? First, always make timely payments - on everything. Credit card companies might penalize you with a reduced limit if you make even one late payment that causes a dip in your credit score. Also, keep a good debt-to-credit ratio on your existing accounts. If you go over your credit limit, you just might find that it gets smaller as your bills get larger.

Some people face falling credit limits through no fault of their own. Companies balk at extending high credit limits to customers who work in troubled industries, such as real estate or mortgage loan processing. And with upcoming legislation that will regulate the way credit card lenders can make changes to credit limits, some companies are hurrying to make changes now.

Protect yourself by being a good customer, making timely payments, watching your credit limit, and always reading the fine print when you sign up for any credit card.

MoneySupermarket.com ran a survey and found that more than 4 million households had used a credit card (or a personal loan) to pay for their mortgage in the last year. 

More than 4 million households have turned to a short term, higher interest product, like a credit card, in order to make a payment on a lower interest, long term mortgage!

If you were one of the 4 million who did this to keep your head above water, you should definitely take careful stock in how you are spending your money.  You would probably be shocked at how much money you have available to you, if you cut back in certain, non-necessity areas.  Go through your check register and credit card statements to see exactly where your money is going, and anything you’ve spent that wasn’t an absolute “MUST” should be considered carefully.  You may be able to pay off credit cards and keep up with your mortgage if you  make some slight changes in how you spend your money.

The FICO credit scores are calculated using information about what kind of credit you have, how much of your available credit you use, and how you pay the debt you have.  Oddly enough, it doesn’t care much about your income or where you work - just what you do with the money you borrow and how much of your available funds you p

Most people hurt their credit scores by utilizing too much of their available funds.  For example, if all of your credit cards combined have an available spending limit of $8,000 and you usually have about $6,500 in credit card debt each month, you’re using a large percentage of your available money and therefore your credit score is negatively affected by that.

One way to start raising your credit score using your existing credit cards, is to ask your credit card companies to raise your credit limit (without checking your credit report).  If you’ve been making your payments on time, chances are the credit card company will do this for you.  As you increase the amount of money you have available, and continue to pay down the amount of money you owe, you’ll see your credit score go up.  Just be sure not to start charging more because you have more room on your card(s) to charge!

Like millions of us, you’ve probably filled out a credit card application. And when you did, you were probably asked to provide proof of income. Once all the necessary information was in hand, the credit card company probably ran a check to see what shape your credit was in. If everything looked good, you soon received your very own charge card. This is the standard procedure. Right?

Not necessarily. Some shocking statistics from the UK suggest that 82% of all successful credit card applicants in 2007 were never asked to verify the information on their applications. 14% said that they never even answered questions about their income or outgoing bills.

As a result, some applicants overstated their income by as much as 70% in order to qualify for the cards. Many used the cards unwisely, and had to take out additional loans to make their monthly credit card payments. Others simply defaulted; lenders in the UK had to write off £17.3billion of credit card debt last year.

Some responsibility lies with the lenders, of course, but card holders should know their limits and be realistic about their spending habits. Don’t let this happen to you!

Times are rough, with Americans facing increasing costs of living while their incomes stay the same. In the past, families turned to their home equity when they needed a low-interest loan to make ends meet. But the mortgage crisis has taken that option away from many. How are consumers coping now? By turning to their credit cards.

Credit cards have become a necessity for daily purchases and bills. Interest rates aren’t typically as low as home equity rates, but the cards are widely available and convenient to use. Anyone in any credit situation can obtain a credit card, but the very best terms and rates will go to those with high credit scores. Nobody likes being in debt, but low-interest or 0% APR credit cards can be life-savers in tough financial times. Reward cards can also benefit consumers who charge purchases every day.

The economic stimulus packages, designed to help Americans contribute more money to the economy through spending, are mostly being put toward credit card debt. Credit cards are a safety buffer for consumers who want available funds in case of emergencies. They are paying down their debt so that they’ll have more available credit when they need it the most - the immediate future.

The thought of sky-high credit limits often provokes a strong response in people. Some fear these limits and their potential. Others long for them. So when is a really high credit limit actually a good thing?

High credit limits can make or break a credit score. The effect depends on how those credit limits are used. For example, a card holder who has an untapped combined credit limit of $100,000 will look great to lenders. They will assume that the person has been financially responsible to have earned so much credit, and even more responsible to have left most or all of it unused. This will open many doors for the card holder.

Now, if that same card holder suddenly racked up a debt of $50,000, lenders would start turning up their noses at such a potential risk.

A person’s utilization rate is the key to their success. A high credit limit with little or no debt is the ideal situation. Some consumers find that their utilization rate is much more important than their stellar payment history when it comes to hiking up a credit score.

The bottom line? If you’re been declined for credit, pay down your debt. Ask for credit limit increases on your available credit cards, or open new ones that offer more favorable terms. With great power comes great responsibility, though; when your limits skyrocket, it will be tempting to take that dream vacation you’ve been putting off. Just keep your cool and keep your eye on the prize: an excellent credit score.

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.

It’s a tough time for lots of Americans right now. The credit crisis might be on its way out, but it has left plenty of victims in its wake. People who lost their jobs and their homes often turned to credit cards to make ends meet. Now they find themselves with a pile of debt. What is the best way to reduce credit card debt in such circumstances?

First, they should stop using their credit cards except in emergency situations. The goal is to pay off the cards, or at least pay them down. Charging unnecessary expenses won’t help. Instead, put as much money as possible toward paying off the card’s balance. Avoid minimum payments - they won’t get you anywhere. Instead, cut back on other expenses so that you can put as much money as possible toward paying off those card balances.

Next, card holders should focus on paying off their cards with the highest interest rates. This might require some sacrifices for a while, but it’s worth it. You don’t want 20-30% interest rates to drain your income. Pay off the balance on high-interest cards, and then cancel them. If you want to open a new account, shop around for cards that offer a good deal and reasonable interest rates.

Finally, if paying off isn’t an option, card holders can consider transferring their balance from a high-interest card to a low or no-interest credit card. The 0% interest phase on the cards can last from three months to a year. If you can pay off your balance in that time period, a no-interest card is a great way to put all your cash toward the principal of your debt rather than the interest.

It is getting increasingly difficult for consumers to get approved for credit cards (and other forms of credit, as well.) 

I’ll bet you didn’t think about it much when you were a few days late paying your cell phone bill- until it became the reason why you couldn’t get approved for a credit card! 

Lenders are now using more personal data and payment records than ever before when they are deciding whether or not to approve a credit request.  Things that had little or no effect on a credit rating as recent as last year are now becoming the sole reason for a denial notice.

Banks and credit card companies can access your cell phone payment records, mail-order paymetn records, bank overdrafts and other forms of credit. There are some companies that can find out whether you have been paying your rent on time.

All of this information is now being used when a lender decides whether or not you’re worthy of credit.