Financial Tips | Debt Management

Cashspeak! Financial Tips | Debt Management
Custom Search


Tips and Techniques for Applying for Credit Cards

The biggest factors you need to consider when applying for a credit card are (1) interest rate; (2) fees; and (3) terms. In addition to these important considerations, you need to gauge whether you need more credit or whether your current credit score will allow you to obtain a particular credit card. If you have never had a credit card before, you may not be able to get the best credit card available. The same is true if you have bad credit and/or a low credit score. However, this does not mean that you have to settle for a bad credit card.

If you currently own a credit card and want another card so that you can increase your purchasing power, increase your credit to debt ratio, and/or get a new card with better terms, a better interest rate, and/or a better fee schedule, you possess the power to find a great card with great terms, interest rates, and fees.

The first thing you need to look at is the interest rate of your prospective credit card. A low, fixed rate should be your priority. However, you may not be able to find a fixed rate credit card. If such is the case, look for a low, adjustable rate but make sure that the interest rate on the credit card, although adjustable, cannot exceed 9.99%. If the adjustable rate that you are looking at can possibly go over 9.99%, do not get the card. The lower the interest rate on your prospective credit card, the better. However, do not pay an annual fee or other fees in order to get that lower interest rate.

An annual fee is the worst thing you can have on your credit card. The fee simply does not make sense. Basically, you are paying a credit card company solely because you own the credit card regardless of whether or not you actually use the card. You should never pay for something unless you use it. As such, why should you pay for carrying a piece of plastic in your wallet or purse? The point is, avoid annual fees. It is important to remember, however, that some fees (such as late fees, over the limit fees, etc.) are unavoidable because every credit card on earth will have such fees. However, this does not mean that all of the fees are the same. As such, obtain a credit card with no annual fee and the lowest "unavoidable" fees.

You credit card terms are also very important. Credit card terms include the grace period between payments, rewards programs, and customer service. The longer the grace period between payments, the better. Some credit cards have 20 day grace periods while others have 30. Obviously, having an additional 10 days to pay your credit card bill can help. Rewards programs can also be good because you can accumulate points from purchases for travel or products, get cash back on the total amount of your charges, and/or get tickets to concerts and events.

Search for a low, fixed rate credit card. If, however, you cannot find a fixed rate credit card, look for an adjustable rate card that cannot go over 9.99%. Never get a card with an annual fee and try to get the lowest "unavoidable" fees that you can find. Last, look for good terms such as long grace periods and a good rewards program. Following these tips will help you get a great credit card


Who is Better, Visa vs Mastercard?

The four major credit card companies (Visa, MasterCard, American Express, and Discover) are all constantly trying to set themselves apart from the others. Whether by credit card services offered, credit cards offered, credit card terms offered, or rewards programs offered, to name a few, each company is constantly trying to convince the public that their company is the best when it comes to credit cards. However, with all of the conflicting advertising and consumer reports that you may have heard, read, or seen, how do you discover which card offers the best service?

With respect to Visa and MasterCard, the question of service can be broken down into two parts (1) acceptance around the world; and (2) customer service. The category "acceptance around the world" refers to the number of places that each card is accepted. Because of the vast amount of marketing and money that both of these companies have, the difference between the amount of locations in which each card is accepted is minimal. As such, it is very hard to distinguish between Visa and MasterCard on this subject. Because of this fact, neither credit card company gains an advantage over the other in regard to credit card service.

In regard to customer service, my personal experiences have led me to favor MasterCard over Visa. As far as telephone customer service, I found both services to be friendly and willing to help. However, as far as actual help is concerned, MasterCard actually delivers on its promises. My opinion on this situation is derived from the following experience.

My father and I have the same name. However, because I am named after my father, my name has the suffix "II" following my name. Despite this fact, from time to time I find my father's credit card activity being reported on my credit report. On one such occasion, both a MasterCard and a Visa belonging to my father were being reported on my credit report. After contacting both of the credit granting institutions and receiving instructions on how to remove my father's credit information from my credit report, the MasterCard account has since correctly been removed from my credit report while the Visa account belonging to my father still remains on my credit report.

Based upon this experience, I feel that MasterCard better protects its cardholders by correcting problems when they arise. On the other hand, it feels that Visa is more interested in protecting its own interests. Granted, your own experiences will dictate your opinion of each company. However, based upon my experiences, MasterCard has better credit card service.


Comparing Credit Card Rewards Programs

Credit card rewards programs are great in that they reward you for credit card use. However, there are two important things you should know: (1) you should never pay for a card (via annual fees or a higher interest rate) simply because the credit card offers a rewards program; and (2) you should not charge more purchases or spend more money than you normally would simply because the credit card has a rewards program. If you can avoid these two common mistakes, your rewards card should by a nice addition to your credit card repertoire.

There are many different rewards cards from which to choose. Some rewards cards offer airline miles that you can redeem for airline travel, some rewards cards offer points that can be redeemed for anything from the latest electronic gadget to a ski resort vacation, and still other rewards credit cards offer cash back bonuses. Your individual tastes and needs should be the determining factors when deciding which rewards credit card you should obtain. However, before you make your decision, there are some things you should know.

If you want a travel rewards card, make sure that there are no blackout dates for travel and that the miles never expire. Additionally, make sure that the miles that you accumulate can be used for an airline that you actually use. It does not help your situation if your miles can be redeemed only on some unknown airline company.

In regards to rewards cards that offer strictly points that can be redeemed for a whole catalog of things, you have to again make sure that you would actually use your accumulated points on their merchandise. It does not make for a good rewards card if all you can redeem your rewards points for is an outdated clock radio. Also, as with the travel rewards card, make sure that your points never expire.

Of all the rewards programs available, many people choose the cash back rewards cards. I understand the appeal of getting cash back from your normal credit card use, but usually the cash back percentage is so small (usually one percent (1%) of your total purchases) that you have to spend a very large sum of money to actually receive something other than a nominal amount back. As such, I am not a big fan of cash back rewards programs. However, if you are a "big spender," a cash back program may be the right option for you.

The point is, use this information to decide which rewards program credit card you would like to pursue and do so by finding the best credit card that offers the rewards program that you want.


How Much Credit is Too Much?

Credit is an important financial tool to possess. Having good credit can help you get loans and can save you money by way of lower interest payments. Therefore, should you need to obtain a loan for investment purposes, having good credit will help you get that loan. Additionally, the investment that you pursue could help you make money and thus, the loan that you took effectively made you money. However, all of this is possible only if you have a good credit. Therefore, it is in your best interest to obtain and maintain good credit.

There are certain things that factor into your credit score. One such factor is your credit to debt ratio. The higher your credit to debt ratio, the better that it is for your credit score. In other words, if you have a lot of available credit and a little bit of debt, lenders look at this favorably. Ideally, you should have no more than 30% of each credit card's credit limit in use. Additionally, your total debt should be at most 30% of your overall credit. For example, if your total available credit is $50,000, you should have no more than $15,000 in total debt.

Having a lot of credit is good as long as you make sure that you follow certain guidelines in obtaining such credit. Such guidelines include not acquiring the credit too quickly and not to use it as soon as you get it.

Acquiring credit too quickly is looked upon with disfavor in the credit reporting bureaus. This is a fact because the bureaus believe that when a person acquires a lot of credit quickly, they are set to incur a lot of debt. As such, your ability to repay such debt, if acquired, may be impaired. Obviously, is you cannot pay your debt, this will negatively affect your credit score.

In accord with the above paragraph, should you incur a substantial amount of debt immediately after you obtain your credit, your credit score will be decreased. This is bad because the whole point of obtaining more credit is to increase your credit score.

It is important to know that even though having a high credit to debt ratio can increase your credit score, you should not have too much credit because you may be tempted to use it. Having a high credit limit can be abused should you start to utilize it wastefully. Therefore, if you are tempted by credit cards, you probably should not have too high of a credit limit.

Maintain a high credit to debt ratio, never have more than 30% of your total credit in use, and do not acquire debt too quickly or else your credit score will suffer.