Rule #1: Pay your account on time, every time.
You may think that because your statement just arrived, you have a few days before you need to deal with it. Until the new regulations go into effect, that’s not necessarily true.
After July of 2010, credit card issuers will be required to send your bill 3 weeks ahead of the due date, giving you plenty of time to get your payment in before the deadline. But right now, that bill could be due just a few days from the time it lands in your mailbox.
So open the bill the day it arrives, and if it looks like there’s not time to get postal delivery by the due date, pay on line. This can also be tricky, because if you read the fine print, some card issuers require your on line payment to be made by a specific time of day. For instance, your bill may be due on July 3, so you assume you have until midnight – but the fine print clearly states that the payment must be made by 3 p.m. Eastern Standard Time. If you pay at 3:15 – you’re late!
Most card issuers do give you the option to schedule your payment ahead of time, so if you’re apt to forget on the due date, enter your payment ahead of time and schedule it for the due date. Be sure to write the deduction in your checkbook on the date you entered the payment. Don’t wait for the due date, or you may “forget” and spend the money that’s already spoken for!
Rule #2 – Never, ever, go over limit.
You’ve read that to preserve the highest possible FICO scores you must never exceed 30% of your available credit. Some experts say not to exceed 10% – but sometimes life happens. If the transmission goes out of your car, you go ahead and exceed the 30% because without the car you wouldn’t get to work – and wouldn’t have money to pay any bills.
This is the second reason to read your mail – carefully.
Panicked credit card issuers are lowering credit limits on cards and raising interest rates – even for some of their best customers. That means, unless you read everything you receive from your card issuer, you might think your credit limit is $5,000 when it has actually been reduced to $2,000.
So every time you receive a credit card statement, open it that day and look at the due date, the credit limit, the available credit, and your interest rate.
Going over limit not only costs you money in fees, it almost guarantees a large hike in your interest rate, and harms your FICO scores - so take the extra minute to read that statement.
I don’t own credit cards” is a statement we’ve all heard uttered with pride, but it really isn’t a very smart move on the part of the speakers.
For one thing, at some time in life everyone could be in a position to need credit. Few people can pay cash for a house, or even a car, and in today’s world, a high FICO score is necessary to get funding for those items.
Consumers who have always paid cash for everything do have a reason to feel proud of themselves, but lenders look at them as high risk, simply because they have no track record that shows how they pay their bills.
In the past, mortgage brokers were able to use items such as utility accounts and rental history, but that practice could disappear. Mortgage lenders are tightening up restrictions, and while the attitude once was “let’s make this work” the new attitude is much the opposite. They don’t want to lend to anyone who doesn’t look like a rock solid, low-risk borrower. They want to see high FICO scores.
Owning a credit card and using it responsibly – never exceeding 10% of your available credit and always paying on time – helps raise your FICO scores considerably.
The second reason is, of course, convenience and a “fall back” in case of emergencies. Even though you don’t use it regularly, a credit card can be a comfort if, for instance, your furnace blows up on a Friday night.
It’s also a handy tool to use to reserve a hotel room or a rental car, not to mention the most inexpensive means of paying for goods in a foreign country. When you pay with a credit card you get the most favorable exchange rate – which is far more favorable to you than exchanging your traveler’s checks at a currency exchange desk.
Credit cards are also considered a good form of identification when you want to write a check and the business insists upon 2 forms of ID.
If you choose a rewards card and use it wisely, you can also put cash in your pocket. By paying your balance in full each month, you pay no interest charges – yet your rewards dollars still grow. For some consumers, the year-end rewards can become a several hundred dollar “gift” at year’s end.
Lastly, by owning a credit card you are able to make purchases on line – often at a considerable savings. A variety of merchants offer the same goods on line and in their stores – but at a savings of up to 33% on line. The assumption is that they’re saving on the cost of a storefront and passing it on to their customers.
BestRateforCreditCards.com your resource for credit cards, business credit cards, student credit cards, secured credit cards, and prepaid credit cards. We also provide a weatlth of information about the importance of having credit cards and how they will benefit you.
You need a good
credit score – that is a given in today’s financial climate.
Your FICO score no longer affects just your ability to buy a home, a car, or a house full of furniture. Now it affects your ability to purchase a cell phone, obtain satellite TV service, and even to buy car insurance at a reasonable rate. In addition, prospective employers and landlords are checking credit scores as a way of screening individuals.
Your credit card can help you build that high score – but only if you use it wisely.
If you’re just starting out you may qualify only for a very low line of credit. That’s OK, because you’re not going to use this credit card for any purpose except to build your credit scores and establish a solid financial reputation.
That means you’ll use it sparingly, and pay the entire balance each time a statement arrives. Preferably, on the day it arrives, so you don’t risk slow mail and a late arrival. Paying on line can also alleviate that problem – and if your paycheck won’t arrive for a day or two, most cards will allow you to schedule your payment for a later date. (Just remember to deduct the payment!)
While the rule of thumb has been to use no more than 30% of your available credit line, credit expert Emily Peters says that 10% is the way to the best score. So, if you begin your credit card use with a card limit of $500 – you should charge $50 or less each month. Or rather – in each statement period.
Remember that your cut-off date may or may not coincide with the calendar. Don’t charge again until you’ve paid the previous balance.
As you begin to shop for your new credit card, look over the offers carefully. Apply only for those that offer cards to individuals who hold scores similar to yours, because credit inquiries and rejections from “good credit – credit cards” will harm your scores.
If your scores are too low to qualify, then consider a secured credit card. Yes, this is in effect using your own money, but as long as you follow the guidelines set forth here, your credit will slowly build – enabling you to qualify for better and better cards as time passes.
Your new credit card should be a tool – as such, use it wisely and soon you’ll see credit scores that enable you to buy that home at the best possible rates.
BestRateforCreditCards.com your resource for credit cards, business credit cards, student credit cards, secured credit cards, and prepaid credit cards. We also provide a weatlth of information about the importance of having credit cards and how they will benefit you.
Persistence is the key to a lower
credit card interest, says Pamela Yip, writing in the Dallas Morning News.
With interest rates rising, consumers facing layoffs or reduced work hours can have a hard time making monthly minimum payments, let alone paying down their debt to any significant degree. When interest suddenly escalates from the 9% range up to nearly 20 or 30 percent, the effect on monthly minimums can be drastic.
The answer is to get that interest rate lowered – something many consumers believe is an impossibility.
Not so, says Ms.Yip. Most consumers make one call, hear the word “no” and give up. But that’s a mistake.
Here’s what to do instead:
Make your first call about 3 days before the end of the month. That’s when customer service representatives are under pressure to meet monthly goals. If the first representative says no, wait a while and call back. You’ll probably reach a different representative.
If the second representative says no, respectfully request to be put through to a supervisor. Then be prepared to wait. The wait could be a long one because:
1. They’re hoping you’ll get tired and hang up
2. The supervisor is probably talking to another customer, and may have more ahead of you on hold.
Traditionally, the odds are 3 in 4 that talking to a supervisor will result in a lowering of your interest rate. But, if he or she won’t readily agree, suggest a 6-month period of lower interest to allow you to catch up.
They don’t want to hear the word “bankruptcy” so should be willing to work with you if you tell them the situation is serious. Explain that you’ve been a good customer and ask them to review your record to verify that you’ve always paid on time.
Tell them you like the company and would like to remain with them, but that their failure to reduce your rate will result in you transferring their balance to a different company. They should “get it” that in that case they’ll earn NO further interest. If your credit score is still good, it won’t hurt to mention that fact, along with your history with their company.
Be sure to call before your account has gone into arrears – and do educate yourself on the going rate for credit cards before you ask for a reduction. Studying the offers on this site should give
you a good idea of a fair number to request.
Credit cards and
debit cards appear to have replaced cash and checks for many consumers, but this change comes with risk.
Some financial experts say that use of credit cards leads consumers to spend more, because it’s so easy. They say if you must use plastic, use a debit card so you’ll spend only what’s in your account. The danger there is in going over limit, just as it is with writing a check for more money than you have in the account.
How to use your debit card:
At the checkstand, you always have an option of using your debit card as a credit or a debit. When you use it as a credit card, it’s called an “offline” or “signature-based” transaction and like a check, it will take a little longer to post to your account. Using your PIN number and calling it a debit is an “online” transaction and it is withdrawn from your available balance immediately.
While this time difference is so slight that most consumers would hardly notice, it makes a difference to the retailer. When you use the credit button instead of the debit, the merchant pays a higher fee to accept the card. On the other hand, some card issuers reward you for such use by crediting you with a small rebate. Additionally, some card issuers charge you a fee every time you use your PIN and make an “online” transaction.
The dangers of using a debit card:
Credit cards have more protection under the law. While you can dispute a credit card transaction and get your money back, when you use a debit card it becomes more difficult. Merchant mistakes, double billings, or fraudulent billings are sometimes impossible to resolve. The merchant already has your money and you’ll have to convince him to give it back, whereas with a credit card, you can have the charge reversed and “charged back” to the merchant.
Theft is a different matter. Under the Electronic Funds Transfer Act you’ll be responsible only for the first $50 if your debit card is lost or stolen – as long as you report it within 2 business days. This is also true with credit cards, except the 2 day time limit does not apply.
Using a debit card for car rentals can harm your credit scores! Some companies will check your credit each time you use a debit card to rent a car – putting a potentially score-damaging inquiry on your credit report.
Businesses that require a credit card to hold a reservation present another danger… Car rental agencies and hotels can cause the worst damage, because the dollar amounts can be large. Each puts a “hold” on your bank account for the amount they expect you to eventually owe – tying up money you might have planned to use for other purposes, such as a trip to the grocery store. You could innocently write checks that will bounce, not realizing that you have essentially
already paid for a vacation you’ll take next month!