Credit Card Blog

There are signs that consumers are bringing credit card debt under control and are beginning to make strides to pay it off along with other debts like automobile loans.

Moody’s Investor’s Service reports that the charge-off rate by banks for bad consumer debts decreased from 10.76 percent in June 2009 to 10.52 percent in July.

Also, delinquencies that had been on a steady increase have also begun to decline. The Federal Reserve has issued statements that show that there is a positive move by consumers to paying down their debts as well.

Retailers are hoping that this bodes well for the holiday shopping season. It appears that more families have discovered ways to manage their debt and make strides to pay it down. Other studies are validating this trend. Consumers are also increasing their savings rates at levels not seen in years.

With unemployment and underemployment still major issues, the positive effects will probably not be wide-reaching, but it is better than the opposite.

The best way to view this information is to realize that families are in a better position to make a comeback when things do improve.

This is not good news, however, for credit card companies who are beginning to feel the pinch of fewer and fewer people using their credit cards for purchases and instead paying with cash via debit cards or using tactics like layaways at retailers to fund their purchases.

The door to economic recovery is opened but just slightly for the moment. The recovery is fragile and might still be a ways away before it grows stronger.

It is obvious to state that if you are laid off from your job, you immediately go into conservation mode. Most workers are not afforded the advantage of having advance notice of a job layoff, but economic indicators tell us that we all are vulnerable.

Consider that Whirlpool Corporation just announced that they will close their plant in Evansville, Indiana, Idling more than 1100 workers. The closing will come in the summer of 2010. Far more serious than a layoff, these people will have no jobs in less than 12 months. So the best thing to do is to plan now for the worst that is to come.

Pay off Credit Cards- If you have money with which you can pay off cards then by all means, do so. Use the method that makes sense for you by paying off the balances that are costing you the most in interest and other fees, or by paying off the small ones first and rolling your payments towards the larger balance cards.

Save Money- Begin to save money into a liquid account as soon as you can (if you are not already). A savings account will work ok, but if you know you have a long period of time in which to do this, you might consider a higher interest yielding account for this purpose.

Stay Away from 401k- Avoid raiding your 401k or other retirement money to use for paying bills. The only possible exception to this is if you are under 30 years of age, and you can use what you have built up to completely pay off your unsecured and possibly auto loans. Even at that it is not recommended.

Begin looking for another position with another company right away. Do not wait until the layoff or job loss hits. Polish your resume and hit the streets.

Looking for new and innovative ways to stay out of credit card trouble? Most of the good ideas have been presented, but here is one that might help. This one involves your behavior and attitudes towards credit cards.

Continue in Crisis Mode

Even though things might be improving and you can see the credit market beginning to open back up, continue to operate as thought there is a crisis. That means, continue to pay down your balances and aggressively clean up your credit. Be vigilant about credit card accounts that you have – do not open any more.

Keep extra income flowing as long as you can. If you have taken on a part-time job or jobs that are bringing in some much needed additional money, keep working them. Use that extra money to reduce debt and build up savings.

Retain the expense savings efforts that you began months ago. In reality, these might be things that you will want to embrace as positive lifestyle changes. These include shopping with coupons as well as more price consciously, shopping at thrift stores and yard sales.

Doing this along with other energy savings ideas can help you keep more of your money and when it comes time to pay bills, you will actually have some cash that is left over.

Using a mindset of intensity towards reducing your credit card and other debt will go a long way to helping you become more financially stable, even when times get better. Think of how much better off you will be then.

The practice of lowering credit limits on card holders across the board has affected many customers with good credit. Since then, they have learned to be more aware of their credit limit. Making these tasks a common activity every week before you shop and use your card will help.

Check Your Limit – Make it a point to check your credit limit regularly. Once per week is not too much. If you have Internet access, you can view it when it is convenient. Tie it into another online activity that you already perform on a regular basis, such as checking your email. Or, most card issuers allow you to check your balance and other items via a phone call to their toll free customer service number. Put the number on speed dial and use it often.

Pay Down Your Balance – Work hard to pay down your balance and keep it as low as possible. While this will not keep the creditor from lowering your limit, it will help if they do by making sure that you have enough of a ceiling to absorb such a decrease.

Protect What You Have – Learn to use your credit card wisely and pay more than the monthly minimum which will help protect what you do have and make it easier to manage your balances.

Smart card holders adjust their activities to make sure they are not caught in the tow of card issuers across the board adjustments to accounts. The days of running your credit card accounts on auto-pilot are over.

It started with retail stores that went out of business, leaving cardholders to wonder if they still had to make credit card payments to a now-defunct chain. (They did.) Next came the closure of Advanta small business credit card accounts. Now, GM cardholders are in limbo. Will they still have a working credit card? Do they still need to make monthly credit card payments to the bankrupt auto giant? Will they still be able to earn points through the GM earnings program, which allows cardholders to accumulate points to put toward the purchase of vehicles?

Sadly, a lot of this information is still undecided. As of now, the GM credit cards can still be used. The earnings program is another matter; GM has asked the bankruptcy court to keep the program going, but it is uncertain whether or not the court will agree. If you’re a GM cardholder, keep making your monthly payments as usual. Keep using your card as usual. But don’t put too much faith in the earnings program. It might stay intact, or it might have its plug pulled by the court. We’ll just have to wait and see.

When it comes to living beyond one’s means, Americans are legendary. But that doesn’t mean we’re alone. In fact, the Financial Times has recently reported that Europeans are going through pretty much the same debt fallout that Americans are experiencing, due to many of the same factors – namely, overspending and easy credit.

Now European lenders are preparing for a tsunami of debt default similar to the one that hit American banks last Fall. Some estimates expect that 7% of Europe’s consumer debt will go bad. With total consumer debt topping $2.5 trillion, that’s a lot of default waiting to happen.

The same article reveals that households in the UK have a higher percentage of debt to disposable income than US consumers. Still, debt default in the UK is expected to be about half that of America.

If you have a heavy debt load and think you might be in danger of defaulting on your credit cards, call your company’s card services division and let them know what’s going on. They might set you up with a payment plan that will help keep your payments at a manageable level.

It’s no secret that credit card companies are using data profiling to decide which cardholders are risky and which ones aren’t. What do your spending habits say about you? Let’s scrutinize an imaginary credit card bill through the eyes of a credit card company.

Alcohol: If you’re spending a lot of time partying, credit card companies might take your alcohol consumption as a sign of stress – due to a job loss, too much debt, or a failing marriage. (Those are all considered qualities of high-risk cardholders, and your credit limit could be slashed because of them.)

Bills & Taxes: Paying other bills and even your income tax with your credit card is a troubling sign that you can’t come up with the money any other way.

Adult Services: Gambling and other 21+ activities don’t look good to credit card companies. These charges might be a sign that you’re trying to escape from your money woes. Surprisingly, spa services can also work against you for the same reason.

Therapy: In a trend that’s ruffled plenty of feathers, card companies are clamping down on the credit limits of people in therapy. Why? Most therapy revolves around money and marriage problems. Either of those could cause you stop paying your bills.

So what does your credit card bill say about you? It will paint a brighter picture if you can avoid putting controversial charges on your credit card.

We’ve all been warned not to carry a balance from month to month on our credit cards, and especially to avoid making minimum monthly payments. That’s because minimum payments, especially on large balances, can take half a lifetime to pay off, at which point you’ve probably paid more in interest than in capital.

The new credit card laws will compel credit card issuers to spell out just how long it will take to pay off your balance by making minimum monthly payments. While this will surely be an eye-opener for many people, there’s one group that won’t benefit from the new rules: the responsible cardholders who paid off their balances on time and in full every month.

Rather than being rewarded for their good behavior, these cardholders will suffer as interest rates and fees continue to skyrocket, and credit limits and reward programs are scaled down.

If you’re a responsible cardholder, continue to pay off your balance at the end of every month. Even if the card companies aren’t recognizing your self-control, you will maintain a good credit score – and that will come in handy in the coming days when credit isn’t as readily available as it once was.

Have you ever been standing behind someone in a check out line who opens their wallet to get out their credit card to pay… and noticed a rolodex-style wallet containing what looks like a hundred different credit cards?

Are you that person?

How many credit cards is reasonable?  I guess it really depends on each individual, but the general recommendation is to carry somewhere between two and six different credit cards at the most, and they should be the top issuers- Visa, MasterCard, Discover or American Express.

You should also have a goal to pay off your credit card statements in full each month, so keep that in mind when deciding how many cards you should have in your wallet.  If you know you have a tendency to carry a balance from one month to the next, look for cards with no or low interest rates, and you should be receiving some sort of rewards from using your credit card, whether it’s in the form of cash back or airline miles or something else- with all of the various rewards programs, there is no reason not to have one you can benefit from.

The more credit cards you have, the harder it is to remember when each of the payments come due.  it’s better to select two or three cards with great rates and a solid rewards program than to try and spread your purchases out among fifteen different cards and attempt to remember when each are due!

Anyone with credit card debt can tell you how easy it is for it to spiral out of control and become unmanageable. Here are some tips for keeping yourself within your means:

Don’t use credit cards to create a new lifestyle – sure it can be fun to spend more money than you can afford on entertainment and lavish purchases. It can be fun to go shopping with friends just for the hobby of shopping rather than to pick up necessities – but it’s not fun when your credit card bills start rolling in and the payments are more than you can afford. A credit card is not permission to spend more money.

Don’t use credit cards to make ends meet – if you run into financial difficulty, one of the worst things you can do is rely on credit cards to make ends meet. In other words, don’t use them to get groceries or pay your utility bills or other expenses. You’re just creating additional bills that will need to be paid, on top of the bills you didn’t have the money to pay in the first place!

Don’t send just the minimum payment – even though you technically only need to send a minimum payment to a credit card to keep it up to date and avoid a penalty or late fee – don’t do it. Send more than the minimum at all times to limit the amount of interest you are paying. Whenever possible, try to pay off your credit card the same month you use it. If you only budget for the minimum credit card payments, you might be in big trouble if that minimum payment suddenly increases from $50 to $100 a month.

Don’t be tempted by the promotional rate – just because those purchases are billed at 0% interest for six months or a year, don’t go crazy and buy everything in site. If you aren’t able to pay it off before the promotion ends, those purchases are going to start being billed at a very high interest rate.