 |
|
Drawbacks Of Not Having A Credit Card
There are very few things that are as ubiquitous as the credit card. This little rectangle of plastic can give us so much convenience, but to the unwary can also bring so much misery. Credit cards may be the easiest way to get a standby line of revolving credit, always available when you need it, but it can also be the fastest way to get mired in credit card debt. People may complain about credit card debt but everyone agrees that despite the risks, there are too many drawbacks to not having a credit card.
Credit cards as we know them today are relatively new and are continuously evolving. The major laws protecting consumers' rights involving credit were passed in the mid-seventies. It may be timely that Congress is currently considering added measures to enhance consumer protection. Yet, for a long time, people were using credit cards as a convenience product rather than as loans. Many people paid their entire balance each month. Credit cards were not as essential then as they are now.
Banks do not make money if people did not carry balances since a grace period for purchases, where no interest is charged for one month, is usually standard. As far as banks are concerned, the best credit card customer is one who....(to view the entire article click here)
|
|
|
Facts & Tips
•It is safer to place a credit card transaction on a secure website than by phone, or even than handing the card to a waitress.
•The Diners Club was the first credit card ever issued. It went out to 200 customers and was accepted at 27 restaurants in New York City.
•Paying your credit cards on time is the single most important thing you can do to maintain and improve your credit score.
•Credit cards make it easy to buy things we want now rather than waiting. If you can’t payoff charges with one or 2 billing cycles think about how much you really want and will use the item. If you hesitate it is probably better to pass on the purchase.
•Impulse buying is the single largest problem with credit card abuse and people getting in debt over their heads. Plan your purchases and you will avoid the credit trap.
•Check your credit profile regularly. You can receive a free credit report (no trials or strings attached) by visiting www.annualcreditreport.com. By law you are entitled to receive a credit report from each of the 3 big credit bureaus every 12 months.
•The average credit score in the US is 678.
•Read the fine print of your credit card contracts. Many will raise your rate over 30% for a single late payment - even on a different card.
•Cards with no annual fees and low interest rates are the best choice. Compare points and rebate cards to the cash benefit compared to interest rates and fees.
|
|
|
|
Preventing Credit Card Fraud
•Never give your credit card number over the phone unless you initiated the call. A reputable company will not call you for this information unless you requested them to do so.
•Keep your eyes on your card when you give it to a sales clerk or waiter. Know where it is at all times.
•Never respond to an email that asks you to go to a site link to verify your information. No bank or reputable company will ever ask you for this information in an email or over the phone. They have the information already. 999,999,999 times out of a million these are sites trying to steal your information.
•Don’t write a pin number on your debit or credit card. If you must write it down, keep it somewhere else and write in code. Better not to carry extra cards with you unless you plan to use the card now. Even then, memorize your pin.
•Shred all credit card applications you receive. Store all receipts and statements in a secure file. Never leave info laying around in the open.
•Shield your credit card number when placing a transaction over the phone where anyone can see, even with binoculars. Better yet, what are you doing placing a credit card transaction in public.
•Keep a list of all credit card numbers, pins, expiration dates and bank contact info in a secure place so if lost or stolen you can contact the bank.
•Open bills and statements immediately. If you have online services keep track at least weekly and definitely every time you use the card.
•Never sign a blank credit card receipt. Draw a line through blank lines where additional charges could be added.
•At restaurants and other places that often receive tips write the total in the blank space. If you left a cash tip write ‘0’ in the tip line and rewrite the total.
•If your receipt has a carbon imprint (rare these days) destroy the carbon and take it with you.
•Once you report a credit card lost or stolen you have no more liability for fraudulent charges and your maximum loss is limited to $50.
|
|
|
Facts & Tips
•Banks make billions of dollars each year on credit card fees such as annual fees, late payment fees and over limit fees.
•Banks prefer that you do not pay your balance in full each month. They make billions of dollars each year on the interest and are in fierce competition for your business. This is true even in today’s credit market, although they tend to be a little more cautious with sub-prime customers.
•Secured credit cards are a means to obtain a credit card if you have no or poor credit. You provide the bank a secured savings account deposit as guarantee for any charges to the card. Your credit limit is the balance of your deposit.
•Banks charge a high annual fee and high interest rate, even though it is your money backing the card. They also limit the amount of cash advances and charge excessive fees for cash advances and late fees.
•Prepaid cards are available and work basically the way regular credit cards work. You will not be charges transaction fees. However, you will not receive any benefit to your credit rating and you generally pay fees for purchasing the card, making deposits to the card, ATM withdrawals and checking the card balance.
•If your credit score is lower, insurance companies will often try to charge you higher rates, especially for car insurance.
•Your payment history accounts for 35% of your credit score, account balances for 30%, length of credit history for 15%, amount of newer credit and types of credit for 10% each.
•The amount you make, length and type of employment and sources of income have no effect on your credit score.
•It used to be your employment stability, sources of income and your relationship with the bank that affected your ability to get a loan the most. Now most banks rely solely on a credit score. Credit unions still take a look at the entire package.
•Negative information remains on your credit report for 7 years, with bankruptcy lasting 10 years. Yet positive information only remains on your report for 3 years.
•You may obtain a free copy of your credit report any time you are denied credit based on your credit score or information in your report. This does not count as your free annual report.
•Inaccuracies in your report should be reported in writing. The bureau and the firm providing the information have 30 days from the receipt of your dispute to investigate the inaccuracy and correct them. You have a right to then request that correction notices be sent to everyone who received your report in the last 6 months (2 years if for employment purposes).
•It is estimated that over ½ of all credit reports have inaccuracies.
•Public records filings such as liens and income or property tax delinquencies can have a serious affect on your credit score.
•Some lenders rate your credit scores by A, B, C, D or NR, others by excellent, good, fair or poor and still many others as prime or sub-prime.
•Business credit is totally different than personal credit, scores are calculated on different criteria and different credit bureaus track business credit.
•Build your 401(k) balance while paying off credit card debt. Money you place in your 401(k) is tax deferred. If you have $250 a month paid into your retirement account, you are not taxed on that $250 – it is deferred. Take the tax savings you would have paid and use the money to pay down your credit cards – highest interest rate first. The net benefit to you is the same, but you will pay off your credit card faster. If your employer does a matching contribution you will save faster. For even better savings, transfer your 401(k) to a self directed account and control your own investments.
Paying 26 bi-weekly mortgage payments will pay off your mortgage faster than using a service to pay an extra payment per year. They keep the money until you have a full payment – 1 year later. They pocket the interest. If your mortgage company won’t let you split the payments, open a separate savings account and deposit your payment bi-weekly. Every 3 months you will have ¼ extra that can be used to pay down principal, dropping the balance by 1 full payment annually, plus a significant savings on interest owed. If you are making the monthly scheduled payment, they cannot refuse an additional principal payment. You will pay off the loan years ahead of schedule.
•Credit card grandfathering, in which the good credit rating of a credit cardholder allowing another person as an authorized user are fast disappearing. It used to be an easy way to raise the score of a family member with a lower credit score. Because of abuses in which good credit was extended to strangers for a fee, this practice is being discontinued for credit scoring. Instead, get a credit card issued to you and your teenager with a small credit limit. The student can learn to build and manage good credit. By keeping the limit low you reduce your risk if the student defaults.
Credit Unions offer greater benefits than many banks, with higher interest rates on savings and CD’s. Unlike the banks that have not passed on bailout savings and cheap fees for federal monies, credit unions pass on the savings to depositors. Interest rates for loans, credit cards and auto financing are also some of the best in the industry. Credit Unions are member owned and are not out to make huge fees like banks. Many offer free advice, counseling and classes, especially for kids.
•Once a creditor agrees to correct an error on your credit report, request a copy of the universal data form which lenders send to credit bureaus. If the chage isn’t made you have proof.
Rather than paying a monthly fee to monitor your credit reports, often at $20 per month or more, consider having the credit bureaus freeze your credit. When you need credit again you reverse the process. The fees are much less and no one can use your information improperly, unlike monitoring. Plus you will be sure you actually want new credit before unfreezing your accounts.
•To regularly monitor your credit score you don’t need to pay huge fees. Instead, use CreditKarma.com for a close estimation of your score for free. Then when you need to know your score for a credit application, sign up for myFICO for a free 30 day trial for a more accuracy.
•Be careful of credit card fees and rates. Many providers have been silently changing their terms.
•78% of credit card holders get a lower rate when they ask for it
•
•
|
|
|
|
|
|
Credit Card Clauses
•Annual fees - cards with annual fees are designed for rewards cards and people with poor or ‘sub prime’ credit scores. If your rewards card charges an annual fee determine whether it is worth the fee. If you can only get a sub prime card now, try to upgrade to a new card without an annual fee before the year is up. Your credit score will have improved with on time payments for more than the minimum amount due.
Payment Fees - some finance providers are charging fees to pay your bill by phone or even by internet, thus encouraging late fees by requiring you to send your payment by mail. The law allows them to record the payment when they receive it and not by the postmark. There have already been charges and hefty fines against some institutions that make a point of not processing payments as of actual date of receipt. They often charge $15 for making your payment by phone or internet.
Grace Periods - most cards have a 20 to 30 day grace period for paying off charges before you are charged interest. If you do not have a grace period your charges start accruing as soon as they are made.
Introductory Rates - many cards or credit offers have a zero interest promotional rate. If you do not pay off the purchase in full by the end of the introductory period you will have to pay interest starting the date of the purchase. That can amount to a charge of hundreds of dollars. If you are late on even one payment the clause may include accelerated payoff.
Penalty Rates - this clause allows the lender to drastically increase your interest rate if you are late on one payment.
Universal Default - gives the lender the ability to increase your interest rate if you are late on any credit payment - even if your account with them is always paid on time.
|
|
|
|
x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x
|
|
|
|
|
|
Creditors rate credit scores in various levels
Prime - If your credit score is above 680, you are considered a "prime borrower" and will have no problem getting a good interest rate on your home loan, car loan, or credit card.
Sub-Prime - If your credit score is below 680, you are "sub prime", and will likely pay a much higher interest rate on your loan.
Shafted - credit score below 560.
|
|
