Everything About Credit Cards

Credit card stocks rose recently as a result of reports that the number of charge-offs had slowed, but analysts are warning that this is merely a seasonal lull. The lull is likely the result of consumers receiving their income tax refunds and using that money to try to catch up with overdue accounts. Social Security recipients also received “stimulus checks” of $250 each – and those may have slowed the rate of delinquencies.

Accounts 180 days overdue generally turn into charge-offs, which are then handed to credit collection agencies. July reports showed that delinquencies 180 days overdue had dropped, but delinquencies overdue 30 to 59 days have increased. To many analysts, this is a forecast of charge-offs to come.

Depending upon the analysts, predictions are that charge-offs will rise from a current rate of about 10% to as much as 18 or 20%. Some, who are more optimistic, predict a peak of about 11% by early 2010. Charge-offs at some banks already reached 13.8% in June.

Charge-off rates have tripled since January 2007 – keeping pace with the unemployment rates. Unemployment, which was reported at 9.3% in June, is now the highest since 1983, causing many consumers to make tough decisions about paying bills. Unsecured debt is, of course, the last to be paid when income doesn’t cover all monthly expenses.

These numbers include credit card accounts which were included in consumer bankruptcy proceedings, along with those accounts which consumers have simply stopped paying. They do not include accounts subject to “workout” plans created individually by consumers with their credit card issuers, or with debt management plans administered by credit counseling agencies.

If your credit card account is overdue, or nearing the charge-off stage, consider a debt management plan.

Debt management plans call for some voluntary concessions from the lender, but allows for complete repayment of the loan. Thus, debt management plans allow consumers to regain control of finances without destroying their credit ratings.

Consumers should be aware that the legitimate Debt Counseling agencies do not charge for their basic services. Signing up with a company that offers to wipe out your debt for a fee is simply another scam, designed to part consumers with whatever funds they do have.

Rather than respond to an ad that arrives in your mailbox or you e-mail in-box, contact the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling to find a counselor near you.

If you have a small business, yes – you need a business credit card.

Business cards often carry lower interest rates and higher credit lines than personal cards, but that’s not the only reason. In order to qualify, you’ll have to be set up as a business, with a business name and possibly an Employer Identification Number.

You’ll need a business address and phone number – but these can be at your home if you are running a legitimate business from your residence. Many people such as building contractors, excavators, landscape artists, and freelancers do have offices in their homes.

You’ve probably read enough about taxation to know that the interest on your personal credit cards is not tax deductible. But interest on business expenses is deductible, so if you carry a business credit card and use it for nothing except business expenses, the interest you pay will be a deduction. And when it comes to tax time, every deduction counts.

If you slip and use that business card to buy the kids’ new shoes, you’ll be out of luck. So if you may need to carry a balance, be careful not to use that credit card for any kind of personal expense. If there’s an expense that could be viewed as personal – such as concert tickets or a restaurant meal – be sure to document the event in your day planner. Note the names of the clients or customers you were entertaining, along information about the business discussion that took place.

Secondly, business credit cards often give benefits such as year-end accounting. You can see at a glance how much you spent on gasoline, office supplies, entertainment, etc. If you give credit cards to your employees for business use, the reports will also tell you how much each employee has spent, and for what.

Your monthly statements are also broken out to show how much each person spent, and where they spent it. This is an excellent way to monitor employee activity and rest assured that your credit is not being used inappropriately.

Then there are the rewards. When business cards offer a rewards program, you get benefits for making those purchases that are essential to your business. Who doesn’t want a little cash back on necessary expenses?
Major credit cards aren’t the only ones to offer benefits to cardholders. Retailers like Staples™ will send you a rebate check at the end of each month based on the previous month’s charges – and will often offer extra cash back for buying their brand. They also mail out “free” coupons to entice cardholders to try new products.

P.T. Barnum said there was a customer born every minute, but considering the threats to consumers, sometimes it seems like there’s a scammer/thief/crook born every minute. Unfortunately, credit cards are one of their prime targets.

One of the latest scams is “credit card shaving.” In this scam, the thief randomly tries 16-digit card numbers until one of them shows as valid. Then, he “shaves” the numbers from a pre-paid card and replaces them with the guessed number.

This sounds like a lot of work, but with the right equipment, putting new numbers on an old card can be done in a manner that most store clerks won’t notice. To prevent the clerk from simply “swiping” the card, the thief disables the magnetic strip on the back, forcing the clerk to key in the numbers.

Someone can be using your card without it ever leaving your wallet.

This is one reason why you must check your credit card statements as soon as they arrive each month, and must notify your card issuer immediately when you spot a bogus charge. Then file a police report, because most credit card companies won’t remove the charges without one.

Another new scam involves stealing your cards from your mailbox. You know that the sticker on new cards tells you to activate the card from your home phone. This was a safety feature to prevent a mail thief from using stolen cards.

Now a new website offers the means to place a call from any phone and make it appear to be coming from any other phone. All the thief has to do after stealing your card is look up your phone number in the local directory.

If the thief plans on long-term use of your account, he or she can contact your credit card company and fill out a change of address so you get neither the card nor the statement showing an ever-enlarging balance due.

If you’re expecting a new card in the mail – either on a new account or a date extension on an existing account – make sure to watch for its arrival. If it doesn’t show up in a reasonable amount of time, call your credit card issuer to see if it has been sent. If so, have them check to see if it has been activated and if there are any charges.

Along with notifying your card issuers and law enforcement, you should notify the credit bureaus immediately when a credit card has been compromised.

De-activate the affected credit card numbers and get new cards, but ask your card issuer to do so in a way that shows you are merely changing account numbers.

Americans cite many reasons why they need only one card. One of the major reasons is that they’re afraid of the temptation presented by multiple lines of credit. If they have more credit, they might use it.

This is a valid concern, and those who cannot resist spending probably shouldn’t have any credit cards. But life is certainly safer and more convenient when you do.

Some experts recommend keeping one credit card with a zero balance – and keeping it in a safe deposit box for emergency use only – such as after a robbery or house fire. This was probably good advice before the banks began closing unused accounts. Now you do need to take the card out and use it at least quarterly or you’re apt to find it has disappeared.

Keeping one credit card exclusively for on line purchases is a safety feature as well. Should your account be compromised, you’ll know which card numbers were stolen and can take action quickly. It’s also easy to spot a bogus charge on a statement with few entries.

Rewards are another good reason for multiple accounts, because different cards offer different rewards. A consumer who plans ahead and keeps track of offers can reap good rewards by using the correct credit card for each purchase.

Along with the rewards, keeping like purchases together on one card helps with record-keeping. It also makes it instantly clear to you if you’re spending more than normal on some part of your budget and need to cut back. Seeing 8 separate charges at the local CD outlet, movie theater, or restaurant might tell you that you’re indulging yourself a little too much!

Multiple cards also boost your credit scores - as long as you keep use under control. Don’t let your charges on any one card rise above 30% of the credit limit in any one month. If you slip and go above the 30%, go on line and make a payment before your next statement date. Of course, having multiple credit cards and credit lines makes it easier to keep a low balance on each of them.

For many, having multiple cards with different due dates makes budgeting and bill-paying easier.

Lastly, if you have multiple cards and one card issuer suddenly decides to cut your credit line or raise your interest, you’ll have somewhere else to turn. You can even transfer balances if another credit card has friendlier terms.

The first thing to watch for is an annual fee. If you have to pay to carry the card you might have to spend quite a bit just to break even. So unless that annual fee offers some other benefit, such as an extremely low interest rate, you probably want to keep looking.

Next is the kind of cash-back. Is it actual cash, or is it points? If it’s points, how many do you have to accumulate before you can turn them into cash?

Some cards offer cash-back but with a combination of expiration dates and payment thresholds that mean you have to spend a lot in order to ever see the cash back. If the threshold is say, $100 and you’re earning 2%, you’d have to spend $5,000 before you get your rebate. And if your rewards expire at the end of each twelve month period, you could have spent $4,900 without seeing a dime returned to you.

You want rewards that roll over from one year to the next, or that automatically pay out at the end of the period, no matter if you’ve only “earned” $20.

Check to see how you go about getting your cash back – will they automatically send a check or credit your account? Will you have a choice of how to receive it? Or will you need to fill out rebate forms in order to get your money?

If you use your card for business and thus charge and pay off large amounts each month, it makes sense to use a card that rewards you. But be careful, some credit card issuers put a cap on how much you can earn. Some cap your earnings at $300 per year.

Look for restrictions. If the card rewards grocery, gasoline, or restaurant purchases, don’t assume that just because you bought groceries, gas, or a meal that the purchase will qualify. Many of the credit card issuers have significant and surprising limitations with regard to which stores, gasoline outlets, or restaurants qualify.

The bottom line is that if you want to get a card that fits your lifestyle, and will truly give the promised cash back, you have to read all the fine print. It isn’t easy – those agreements are filled with legaleze and the print is minute, but reading it all is the only way to know if you really are going to get what you expect.

High credit scores will assist the student’s entry into the working world in many ways.

First, they will help them land that first job, because many employers do look at credit scores before hiring. Next, they’ll help them find a home or apartment to rent – because landlords check credit scores, too. After that, they’ll help with the ability to get a cell phone, sign up for cable TV, and of course, buy a car or a home.

Used as a tool, credit cards will help build those credit scores.

Start with one, use it carefully, and then in about 6 months, make application for another. Owning 2 or 3 cards that are reporting good things about you will help you enter the work world with high scores.

What is careful use? Use the card sparingly and charge no more than 30% of the card’s credit limit in any one month. Then pay it off each month when the statement arrives. Always pay on time, and if you absolutely can’t pay the entire balance, pay all you can – at least the minimum.

If you’ve had to go above the 30% for an emergency, go on line and pay the card back down to that level before your statement is issued. The amount that shows as owed on your credit report is the amount listed on the statement, so you can avoid going over that limit by paying early.

If you can’t get a card of your own, ask a parent or other financially responsible person to allow you to “piggyback” on his or her account. You’ll be added to the account and that person’s good financial activity will be reported to your account. You don’t need to have or use the card yourself unless they never do. The account does need to show some activity at least quarterly.

If you choose this route, be sure to choose wisely. Someone who charges more than the recommended 30% or who pays late will do you harm rather than good.

If you must, obtain a secured card with a credit card issuer who reports to the credit bureaus. Yes, you’ll be using your own money, but yes, you’ll be building your credit scores, and that’s what this is all about.

“Fee-harvester” cards, for instance, stand to lose as much as 46% of the revenue they’ve been generating from these subprime credit cards. These cards, which are typically issued to people who do not qualify for standard credit cards or student credit cards, carry fees which can right now run as high as 71% of the card’s initial limit.

Fees can include: Application fees, program fees, account set-up fees, annual fees, and monthly participation fees. In one example, a card with a $250 credit limit carried $178 in immediate debt – before the cardholder even had a chance to access the $72 left in his credit line.

Under the new law, credit card issuers will be restricted to charging 25% of the card’s credit limit in such fees. However, there will still be no limit on the interest rate charged.

Over limit fees will also become a thing of the past for some consumers. Right now, you will likely be allowed to charge over your limit – saving you the embarrassment of a “turn down” at a retailer’s check-out counter. But that privilege carries a heavy fee – often $39 or more for each overlimit charge.

Under the new law you can opt out of the privilege to go over your credit limit, which may cause embarrassment, but will prevent overlimit fees. In addition, the credit card issuer will be limited to charging one overlimit fee per billing cycle, rather than a separate fee for each transaction.

Consumers will now have the option to pay either on line or over the phone – with no fee. Presently many credit card issuers offer free on-line payments, but charge as much as $15 for accepting a payment over the phone. Card issuers will still be allowed to collect a fee for expedited payments, so you should still pay a day or two ahead of time or at least early in the day on the due date.

For mail-in payments, card issuers will be prevented from charging late fees for payments received on the due date, or on the next day if the due date falls on a Sunday or holiday when mail is not delivered. When payments are made at a local bank, they must be credited the same day.

Owning a secured credit card can be one of the most effective ways to raise your credit

In order to obtain a secured credit card you simply deposit a sum of money into a savings account which is held as security against charges you’ll make on the card.

Some question the reason why anyone would want such a card – when they have to put up the money ahead of time to get it. One reason is convenience.

As long as you aren’t over-limit, a secured credit card will be accepted in places where a check is not. So if you don’t have the cash in your pocket, you can still make a purchase. And of course, when you want to save money by shopping on line, a credit card is a must. It’s true that you can use services such as Pay Pal by accessing your checking account – but since merchants have to wait several days for payment, not all will accept that form of payment.

The second reason is that using that secured credit card will help you build a good credit score.

By keeping your purchases under 30% of your credit limit and paying every statement as soon as it arrives, your credit scores will begin to climb. The savings account itself is a boost to your credit rating too.

When you have consistently “paid as agreed” for a period of time, you can contact the credit card issuer and ask to have your secured credit card upgraded to an unsecured credit card. At that time, you’ll get back the savings account money, with interest. But since having a savings account as well as a checking account does increase your credit scores, you should continue keeping that money in a savings account. Adding to it regularly is also a good move.

Once you have established your ability and willingness to pay your accounts on time, you’ll be able to ask for a higher credit limit, which will also increase your credit scores.

Remember to limit your use of the secured credit card – and later the unsecured credit card – to 30% or less of your credit limit. Even if you pay the balance in full each month, the balance at the time the statement is issued is what goes on your credit report. You don’t want your credit report to show that you have “maxed out” on any credit card.

The new laws, most of which will go into effect in February 2009, will reduce credit card issuers’ revenues significantly. That means they’ll be looking for new and different ways to boost their profits. Phasing out rewards credit cards may be one way.

Why will the changes harm the banks’ profits? Because several provisions of the new laws will limit their ability to increase interest rates at will.

Right now a card issuer might mail a promotion promising a low “non-promotional” rate that convinces consumers to transfer balances - or simply to spend more than they should. They begin to carry a large balance, but don’t worry because the interest rate is so low – until they open a statement one day and find that their old 5.99% is now 25.99%.

What happened? The credit card issuer exercised its right to raise rates at “any time for any reason.” One common reason right now is a late payment – even if that payment was mere minutes late – or a default or late payment on some other account.

Experts predict that this prohibition alone will cost the credit card issuers an estimated $10 billion in lost revenue.

Banks will still be able to raise your rate on existing balances – but only if your payment is 60 days or more late. And then… if you make the next 6 payments on time, they’ll be required to drop the rate again.

The ban on rate hikes doesn’t apply to introductory rates, which you accepted with the clear understanding that the rate would raise on a set date. That date, by the way, must be at least 6 months from the date the card is issued or the convenience check written.

Since these changes don’t go into effect until February or later, credit card issuers will be spending the next few months raising rates, adding fees that weren’t covered in the law, and cutting costs.

Since Rewards cards are often used by those who pay their bills in full each month, they may be seen as an additional drain on profits, and be phased out. If you have a rewards card, you should collect on those rewards now, and do so often. If the programs disappear you may not be able to collect on unused rewards credits.

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.

Credit card issuers set up tables on college campuses to entice passers-by to sign up for student credit cards in exchange for stuffed animals, pizza coupons, CD’s, and other gifts. The urgency to “fill this out right now” discourages these students from reading the fine print, so they sometimes have an annual fee charge on their account before the card even arrives.

With high interest rates and high credit lines, many students find themselves deep in debt to credit card companies long before they enter the job market.

Some of that is about to change.

Under the Credit Cardholder’s Bill of rights Act of 2009, credit card issuers will have a few rules to follow regarding student credit cards.

First, they will, in most cases, be prohibited from extending credit to any person under the age of 18. (If a parent or guardian is the primary account holder, they can still carry a card in their own names.)

Creditors will be prohibited from opening a student credit card account for any student who doesn’t have a verifiable income – or if they already have a credit card account with that company or any of its affiliates.

If the student does have a verifiable annual income, the maximum credit extended cannot exceed 20% of annual gross income, or $500. The maximum for all credit card accounts may not exceed 30% of gross income. This rule can be waived if the student has an approved co-signer.

Since the interest rates and annual fees for student credit cards varies from one issuer to the next, parents and students should do the research and choose the correct card. Responding to a solicitation in the mail or filling out an application in order to get a free gift can lead to a credit card with undesirable fees and interest rates.

But there’s good news on that score too. Should your child sign up for a student credit card only to find that owning it is not in their best interests, they can cancel the card within 45 days. The card issuer will be required to report cancellation to the credit bureaus – freeing up the student to obtain a better card.