Credit Card Blog

It’s that season again: the leaves are falling, the holidays are coming, and the Salvation Army’s red kettles will soon be out in force. If you’ve got the holiday spirit but don’t like to carry cash, consider donating with your credit or debit card. You can swipe your card right in person at certain locations, or you can make a donation online at the Salvation Army web site.

Salvation Army members say that this convenient new payment arrangement was put in place to help young adults give more. The organization is also branching out online by incorporating social networks such as Facebook.

The nation’s high unemployment rate has caused many families to turn to the charity for aid. The Salvation Army helps feed and clothe 4.5 million people during the holiday season, and they accept donations of money and goods all year long.

The Red Kettle campaign will kick off on Friday, November 13th. To find out more, visit the Salvation Army’s web site today.

Recently, over 45% of American credit card consumers experienced either a rise in their interest rates, having their credit limit lowered, an increased minimum monthly payment, or reduced user rewards.

Congress is considering upping the compliance date on the CARD Act from February, 2010 to December 1, 2009. This may have a significant impact on retailers and holiday shopping of consumers. Many retailers may have to provide extra incentive for their customers in order to make up for the lag in credit card purchases. Already, consumers are using cash more and credit cards much less. Even with the CARD Act effective before Christmas, consumers dealing with a lowered credit limit and higher interest rates implemented before hand are not likely to charge their holiday purchases.

One recent shows reveals the following statistics:

• 113% rise in consumers facing possible lower credit limits.
• 42% rise in those having their minimum monthly payment increased.
• 33% are seeing their rewards program decline.
• 36% are experiencing increases on various fees.

Understandably, it’s these consumers and countless others who agree this bill should be enacted in December not February. Some representatives are angered and acknowledge the fact the numerous credit card companies are abusing this delay by raising interest rates, charging hidden fees, lowering credit limits, or all of the above. This acknowledgement is a start but needs to be followed by swift action.

With the number of consumers resorting to cash over credit increasing every day, credit card companies are searching for ways to keep and please their cardholders. Some are offering zero percent interest rate for six months or increased cash-back rewards for certain credit purchase amounts. As the holidays quickly approach, with the looming possibility of the CARD Act becoming effective, consumers may see credit card offers that are either completely out of the ordinary or absolutely astronomical.

On June 10th, one million Advanta card holders were be out of luck. That’s when the company, which focuses on small business credit cards, stopped issuing credit for good. This announcement caused Advanta card holders to hurry and redeem their reward points at the last minute. Now many of them are looking for financing alternatives for their businesses.

Advanta’s small business niche has been hit hard by the recession, and the card issuer’s numbers reflect that. Advanta watched its stock shares lose 90% of their value over the past year. With a default rate of 16% - roughly half that of American Express - Advanta posted a first-quarter loss of $76 million. That’s much less than some of the larger firms, but enough to make Advanta pull out of the race.

The credit card industry as a whole has been plagued with record levels of delinquency and default. Advanta is just another casualty of the recession, and probably won’t be the last. Small business owners who loved their Advanta cards must now try to find a replacement. Experts recommend small business credit cards and personal loans, both of which may be easier to obtain through local credit unions during the Recession.

Though credit lines dried up on June 10th, Advanta will continue to accept payments on existing accounts.

In the past, American Express gift cards were subject to $2 monthly maintenance fees beginning one year after the card was purchased. Thanks to a push from customers who told AmEx the fees diminished the value of the gift cards, American Express has decided to change its ways.

Effective immediately, there will no longer be a monthly fee on AmEx gift cards. This is also true for cards which have already been purchased. So if you’ve been holding on to an AmEx gift card for a while, you can rest assured that your balance won’t slowly seep away.

There is still an upfront fee associated with gift card purchases, but monthly fees are a thing of the past. In fact, American Express has elected to do away with all fees after purchase.

Thanks to new legislation, other gift card issuers will have to rethink their own fee structures. In August of 2010, it will no longer be legal to charge dormancy fees on gift cards unless those cards have been inactive for one year.

Beginning in February 2010, it will become more difficult to get credit cards for those who are under the age of 21. That is because under the Credit Card Accountability, Responsibility and Disclosure Act of 2009, that restriction will be imposed on those who try.

The only exceptions for this are if a parent, guardian our spouse is willing to co-sign the application which makes them liable for the charges on the account as well. Or, there must be proof of sufficient income to meet the financial obligations of the card.

The fear is that before this law goes into effect in February, there will be a run to apply for and obtain credit cards since once one is issued, it will fall outside of the law’s provisions.

In 2004, over 75 percent of undergraduates had at least one credit card. And now, that number is over 84 percent. Most do not pay off their balances every month and the median debt amount held by this group is $1,645 as opposed to around $950 in 2004.

Students in this age category show a clear need for guidance when it comes to using credit cards and paying their balances. Yet, one of the overriding protests to this law is that since they are able to vote, drive and enlist in the armed forces, they should be able to get credit cards, too.

The better course of direction with regards to credit cards and their used would be to educate about the merits of using them responsibly. But, ultimately, it is up to the students and their parents to make sure that their use of credit cards is based on sound logic and with forethought to the consequences.

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.

The credit industry is in the midst of a financial storm and while battening down the hatches might keep the elements at bay for now, another impeding storm is on the horizon. Barack Obama’s new credit laws have already sent shockwaves through the credit industry and with further laws about to be unleashed it seems that the once serene landscape for the credit companies is about to become a lot more cloudy.

The new laws restrict the credit companies from making profits in the same way as before, which why they are now trying their best to cut as much waste away as possible.In the past lenders have lured potential customers with low interest rates and no annual fees that’s about to change, however, and companies are now scrambling to find ways to cut their credit lines.

Many companies are now embarking on a mass detox program, purging all inactive accounts in an effort to reduce their liabilities.Experts predict that in the coming months 20% or $1.2 trillion worth of credit will be cut and by the end of 2010 that figure is set to rise to $2.7 trillion or 50%.

It’s not just inactive accounts that are going to be cut; borrowers who are deemed “subprime” could see their credit lines disappear, as could those weak credit and switch lenders.This recent information highlights the precarious nature of the industry and the vulnerability of the credit card companies. For those who potentially face having their credit limits revoked, these are worrying times and another sign that money lenders are adopting a much more ruthless stance towards both current borrowers and prospective clients. Making sure you don’t fall into the red zone and that you maintain a good credit history is now more crucial than ever because one too many mistakes and you could find your credit line cut.

Most of us have heard grumbling about the long delay before the new credit card rules go into place. Most of the changes won’t occur until mid-2010, but there are some important rules that will go into effect sooner. They are:

#1: 45 Days Written Notice of Change to Terms

Any significant changes to the terms of the account must be detailed in writing 45 days before the changes take place. This also goes for interest rate hikes. This gives card holders a reasonable amount of time to opt out of changes they don’t like. Prior to this change, creditors were only required to give 15 days notice.

#2: Written Notice of the Right to Cancel

Along with the written notice of changes to interest rates and terms, card issuers must provide cardholders with written notice of their right to close their account instead of agreeing to the new terms.

#3: Fair Due Dates (in February)

Credit card bills will be due on the same day every month to make it easier for cardholders to pay their bills on time. If the due date falls on a weekend or holiday, the payment cannot be marked as late if it’s received the next business day.

For the full set of rules that will go into effect by 2010, visit www.consumer-action.org and search for “new credit card provisions”.

Some consumers are cleaver in their efforts to work the system to get what they want.  This is true in almost any part of life and has its practitioners in the credit card category as well.

The Trick-   There are those who still have good credit and are using credit cards and rewards programs just to feed their desire for the “good life.”  Recently a story was told of a couple who had very meager living quarters in their hometown, but kept up a high life of travel and living by using second-hand time share offers and obtaining credit cards with travel rewards to book flights between these most desirable locations.

Living Large -  Since their living expenses in their hometown were so little, they could afford to pay for the time shares and resorts.  Working the credit card rewards programs means that they often have multiple cards from the same creditor.  Then, they would negotiate the annual fee down or work out additional travel points to their advantage.

Dangerous Consequences  - Working a program like this is very dangerous because if you are not good at controlling your spending, you can get in over your head very quickly.  Which brings us to the main issue in working with credit cards: controlling your habit of using the cards.

While some have put forth great efforts to use the system in order to get what they want, most other card holders are struggling just to make payments.  The key thing to remember is to keep from putting yourself in a vulnerable position which you might regret later.

Recent reports by Fair Isaac Co. (the company that invented the FICO credit rating) indicate that over 30 million credit card customers had their limits inexplicably cut in recent months.

In cases where negative activity has occurred on the account then reduction, or indeed cancellations, of credit limits is necessary but according to Craig Watts of Fair Isaac, “the vast majority of consumers who lost borrowing power appear to have done nothing to provoke the cut.” Many customers have seen a 14% reduction in their borrowing power during recent spate of credit culls and naturally one of the biggest fears for consumers is the affect on their credit scores.

Credit utilization is the determining factor in your overall FICO credit score and is calculated by comparing the amount of debt you have against the amount of credit available to you. A sudden reduction in your borrowing limit will inevitably cause an increase in your utilization score. The higher your score the more likely you are to be perceived as a risk which means this sudden rise in credit cuts could have serious long-term implications for borrowers.

If you want to become a better borrower and reduce the risk of having your credit limits slashed here are some quick tips to keep your FICO image clean:

Pay Bills on Time – It’s an obvious one but every late payment will have a negative ripple effect on your FICO score.

Keep Balances on Credit Cards Low - Owing high amounts on your card will cause your score to rocket. Make sure any revolving debt is kept to the smallest amount possible. Even better try to pay off any debts instead of transferring them.

Keep a Tally on Your Score – Checking your credit score through an authorized agency won’t affect your credit rating and it is the most affective way to improve. By seeing exactly what the credit companies see you’ll be able to better adjust your financial situation to enhance your image.