Credit Card Blog

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!

Using your credit cards sometimes offers good deals, even if you aren’t counting on the credit card rewards program.  Here are two promotions your travels might let you take advantage of:

Receive $25 off a round trip flight through Southwest when you purchase a Southwest gift card with a value of at least $100.  Purchase the giftcard online with your Visa card before June 30th to qualify (only United States issued Visa cards will qualify).  The $25 discount must be applied on Southwest tickets purchased between July 1 and Aug 30th, and you must purchase your tickets with at least seven days advanced notice of the date of travel.
Go to www.southwest.com/rapidrewards/giftcardvisa.html for more info. 

Get a $25 Visa gift card when you pay for your Marriott Hotel and Resort reservation with your Visa credit card.  Staying on a Friday or Saturday is required, and you must give code “V12″ when booking your hotel stay.  There are some restrictions.  Visit www.marriott.com for more info.

I heard about these deals through Tom Parsons of The Dallas Morning News.

Kids do the darnedest things.

For example, six-year-old Bennett Christiansen of Aurora, Illinois, managed to get his own credit card from Bank of America.

Amy Christiansen, the child’s mother, said that all of her family members had been receiving offers of credit in the mail - including Bennett. For a bit of fun, she allowed Bennett to fill out and send in one of the applications addressed to him.

In a totally unexpected development, Bennett soon received a credit card with his name on it, even though he’d listed his birth date as 2002 and his income as $0. The child’s card carried a $600 credit limit.

Bank of America insists that they do not target or give credit to minors, but Mrs. Christiansen was understandably concerned about the ease with which her child obtained his first credit card. She’d better stay on her toes; Bennett’s 3-year-old sibling has also received offers of credit.

Many marketing campaigns for prepaid credit cards are targeted to the under 18 crowd.  In fact, anyone over 16 can deposit money on a prepaid credit card and then use it like a credit card when shopping or online.  Kids as young as 12 or 13 can often get a prepaid card as well, as long as Mom or Dad sign up for it.

Some advocates claim giving teenagers a prepaid credit card gives the opportunity to teach them responsible money management skills, while critics argue that we’re just showing them how tempting a real credit card can be and setting them up for disaster.

As far as the financial companies are concerned, it’s difficult to make much money on a prepaid credit card since they can’t charge interest on unpaid balances.  They typically charge a sign up fee and then fees whenever a deposit is made to the account- but the amount they earn is minimal compared to a traditional credit card.

Prepaid credit cards are beginning to make their mark in the corporate world, however.  Companies are branding the cards with their logos, and using them as employee incentives since they’re cheaper than checks or merchandise incentives, and sometimes a prepaid card is used in lieu of a paycheck.  The employee’s pay is loaded directly onto a prepaid card each pay period, and the employee can then use the money as they normally would.  (Prepaid credit cards work in ATM’s for cash withdrawals, too).

When a father of a Texas 13-year-old forgot to get his son a birthday present, the boy took matters into his own hands and order an additional card from his dad’s credit card company.  Apparently, if you know the answers to the security questions, anyone can get an additional card sent out in their name.

The teenager took a few buddies out on the town and charged $30,000 on his dad’s credit card account.  They capped off the evening in a motel room, where they ordered two female escorts, at just $1,000 a night (each).  The girls thought their clients appeared “young”, and so instead of their typical job duties, they played “Halo” on the Xbox with the boys. 

The call girls were released without charge, and the boy was sentenced to three years community service and convicted of fraud.  According to an article on Money.co.uk, when asked what the boy aspires to be when he grows up?  A politician, of course.

There have been a number of reports of individuals paying less on their credit card bills (or skipping the payment altogether) - and giving the reason that they need the money to keep gas in their tanks.

The higher gas prices are not only affecting American’s ability to drive to and from their place of employment, but it’s trickling down and affecting just about everything else in our lives, too.  If you are finding yourself skipping a credit card payment to put gas in your car - there’s a real problem!  Not only will you have a late fee on the card, but often the interest rate will be increased due to the missed payment.

Other people are using credit cards to help keep fuel in their vehicles.  Since we’re paying around $4 a gallon for gas, it’s costing us a small fortune to fill up.  When you put that amount on a credit card, week after week, your $4 a gallon ends up costing you even MORE, due to interest and finance fees on the credit card.

As always, using credit cards with rewards programs offers a way to earn something back, but they’re only beneficial if you can pay your balance in full each month.  Now is an important time to cut back on your excessive spending, particularly spending on high interest credit cards you don’t intend to pay in full at the end of the month, because the prices of our necessities are increasing.

If you drive a large vehicle, you may have noticed yet another consequence of high gas prices: you can’t even fill up your tank when you pay at the pump with your credit card, because you’re not permitted to charge more than $75 in gas purchases.

Wait, what? Yes, it’s true. Many gas stations have instituted a $75 transaction limit for customers who pay at the pump with their credit cards. To pump more than $75 worth of gas, customers have to do a separate transaction or have their card swiped inside the store by a cashier.

Needless to say, many customers are angry about the transaction limits. But who’s really to blame? Card issuers insist that the merchants are the ones who choose to put such limits in place. Merchants point out that card issuers won’t reimburse them for more than $75 if a customer disputes a charge or uses a stolen card to pay for their gas purchase.

Regardless of where the guilt lies, it’s safe to blame the $4/gallon gas prices that have brought about situations like this one.

Have you been the target of multiple direct mail credit offers in the past? Pre-screened offers of credit clutter mailboxes from coast to coast. A good offer is a good offer, but sometimes all those envelopes feel like overkill.

Well, if there’s one good thing to be said about the state of the economy, it’s this: credit card direct mailings have decreased.

Financial services have reduced their direct mailings by about 13% during the first quarter of this year. Mintel senior analyst Chris Zagorski said, “One of the main drivers definitely has to do with the economy. With credit lines tapped and people struggling to make ends meet, both consumer spending and savings are down.” In other words, if people aren’t spending money, it’s probably not economical to spend so much money marketing to them.

The reduction in direct mail offers still leaves consumers with a lot of mail. Financial service corporations sent out about 4 and a half billion pieces of mail during the first quarter of 2008. Yikes! If you’re still overwhelmed by the number of pre-screened credit offers you receive, you can do your own mail reduction by calling 1-888-5-OPTOUT (1-888-567-8688) or visiting www.optoutprescreen.com.

Many small business owners use zero-percent interest offers to get their businesses off the ground.  While it can be a reasonable solution to starting a business for individuals who don’t have access to the necessary capital available; you definitely want to be careful that you don’t get in over your head.  Credit cards make it easy to spend more than you can afford if you are not disciplined.  Here are some tips for using a credit card to start a business:

• Avoid spending more than you can reasonably afford to pay each month based on your current income level - just in case your business doesn’t turn a profit or generate cash flow as quickly as you plan.
• Look for zero-percent credit card offers that offer no interest for at least twelve months, followed by a low, fixed-interest rate.
• If using a credit card to fund your business start-up; be sure to use one that also offers a rewards program that you can benefit from (travel rewards, cash back programs, or discounted merchandise, etc).

A home equity line of credit is a ‘revolving credit’, similar to a credit card in that you have a maximum limit that you are able to use, but that money can be used again as soon as it’s been paid off.  The major difference between a home equity line of credit and a credit card, however, is that home equity lines of credit are secured against your home.  If you fall too far behind on your payments, the lender can take possession of your home in order to recover the debt.

Previously, home equity lines of credit were made available with special checks that allow consumers to access the money when needed.  A check could be written and deposited into your checking account, or used to pay a vendor or when shopping at your favorite retailer.  More recently, many lenders have started providing the home equity line of credit on a credit card.

While having a card in your wallet that accesses your home equity line of credit is convenient - it can also be extremely tempting for many people.  If you take a HELOC to make improvements on your home, for example, and have more money than you need for the repairs, you may find yourself shopping for a new wardrobe with your HELOC credit card.  Think twice about doing this - is it really worth putting your home on the line for unnecessary purchases?