CASHSPEAK

Tips and Techniques for Applying for Credit Cards

2009-02-19T12:51:00.000-08:00

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?

2009-02-09T20:45:00.000-08:00

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

2009-02-05T13:44:00.000-08:00

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?

2009-02-03T21:41:00.000-08:00

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.

Tips for Travel Rewards Credit Cards

2009-01-30T00:51:00.000-08:00

Credit cards have become an integral part in the financial lives of many people. If used properly, a credit card can be a great financial asset that assists you (assist by way of a good credit score not by way of purchasing power) in making big purchases and enabling you to get important loans. However, if abused, credit cards can make your financial life a living nightmare. As such, always practice sound credit card and debt management. That being said, it is important to note that not all credit cards are created equally.

Companies are doing everything these days to entice people into obtaining a credit card. For example, many companies will offer no interest on cash advances, balance transfer, or purchases for the first year that you own the credit card. Some companies offer a great introductory interest rate and follow that up with a low, fixed interest rate. Still other credit card companies offer rewards in the form of points or airline miles that can be redeemed once the credit card owner obtains enough points. Of all of these rewards, airline miles can be the most beneficial.

If you are the kind of person that uses a credit card for one particular task (e.g., getting gas for your car/truck), a rewards card may be a great option for you. A rewards card is a great option because your credit card use is going to continue regardless. As such, why not get rewarded in more than one way for consistent and proper use?

With the price of fuel increasing and airlines going out of business, it seems that the average airline ticket has greatly increased in price. Additionally, things that used to be complimentary (e.g., an in-flight beverage, checking more than two pieces of luggage, and an in-flight snack, to name a few) now cost money. As such, using points to get discounts on or even free airline tickets, hotel rooms, and/or rental cars (especially if you travel a lot) can save you a lot of money. Therefore, a travel rewards card may be in your best interest.

Basically, a travel rewards card works the same as a "points" rewards card. Each dollar spent equals a certain amount of travel points. Once you have accumulated a predetermined amount of travel points, you can redeem them for flights, hotel rooms, and/or rental cars. However, if you get a travel rewards card, you still have to make sure it is a good credit card. For example, you should not pay an annual fee simply because it is a rewards card. Additionally, the rewards card interest rate should not be higher than your other credit cards merely because it is a rewards card.

Do not fall into the trap of paying too much for a rewards card merely because it offers rewards. Make sure that there is no annual fee, a low interest rate, and that the points can be redeemed for any flight at any time (i.e., no blackout dates). If your rewards card has these attributes, you will have added a great credit card to your financial arsenal.

How to Get Help with Credit Repair Services

2009-01-29T19:07:00.000-08:00

Many people have a problem controlling their credit card spending habits. As such, many people have a lot of credit card debt and thus, have financial problems because of it. Because of this constantly increasing debt, many people are late making payments, have charge-offs, and/or fail to pay a bill altogether. These practices lead to the destruction of a person's credit report and ultimately negatively affect a person's credit score. Most negative credit report information takes anywhere between seven (7) to ten (10) years to be removed from your credit report. However, a credit repair service can help you overcome these problems and put you on the fast track to credit report recovery.

Speaking from personal experience, credit repair companies can help you restore your credit report. When I was in college, I made the mistake of obtaining credit cards regardless of the terms attached to the same. As such, I ended up with numerous credits with ridiculous annual fees and very high interest rates. Additionally, because I lacked the knowledge on how to correctly use credit cards, I used my credit cards like a second bank account. Needless to say, my debts caught up with me, and I was soon in financial trouble.

The good news was that I was young enough to learn a lesson from my experience. However, the bad news was that my credit report was left in shambles. I did not want to wait the seven (7) to ten (10) years it normally takes for negative information to be removed. As such, I asked around and received a referral from a friend for a credit repair company.

Credit repair companies dispute the negative information in your credit report by using the law of the Fair Credit Reporting Act. Basically, if negative information in your credit report cannot be "verified" it must, by law, be removed from your credit file. Credit repair agencies use this federal law to basically exploit the fact that credit card companies usually do not keep exact records. As such, many times the negative information in your credit report cannot be verified and thus, it must be removed.

Credit repair companies can help, but you have to be aware of certain things. First, there will be a fee for their services. However, you should not pay too much money (no more than a couple of hundred dollars, depending on how much negative information is in your credit report). Also, you have to be patient. Depending on how much negative information is in your credit report, the entire process could take a year or more. This is so because by law, the credit reporting bureaus (TransUnion, Equifax, and Experian) have up to thirty (30) days to respond to your dispute. Additionally, you may have to dispute some information more than once. As such, the timeline gets longer.

If you have negative information in your credit report, credit repair services is an option that you should consider. However, do not pay too much, be patient, and keep your credit repair company aware of any correspondences you get from any credit card company or any of the credit reporting bureaus.

Tips for Obtaining Credit Cards With Bad Credit

2009-01-29T12:05:00.000-08:00

If you have bad credit, you probably should not be obtaining a credit card. As is evident by your credit score, you have gotten in trouble with debt in the past and may not have acquired the education necessary to avoid this trap again in the future. That being said, if you are adamant about obtaining a credit card for whatever your reason, there are some things you should know.

First and foremost, because you have bead credit, you are in a weaker bargaining position. As such, you may have to accept some terms on your credit card that you should not ordinarily accept. One such term is a high interest rate. However, this does not mean that you should pay the highest interest rate possible. If the credit card you are looking at has an interest rate at twenty percent (20%) of higher, walk away from the credit card offer. Regardless of the level of your need for a credit card, obtaining a card at twenty percent (20%) interest or more, even with bad credit, is pure lunacy. If you were to make a purchase with such a card, absent you paying off the outstanding balance once the bill arrived, you would be throwing money away.

Another concession you may have to make, and not a bad one at that, is that you may have to settle for a card with a lower credit line. Based upon the severity of the negative information in your credit report and your credit score, you may be approved for something as small as a three hundred dollar ($300) credit line. This is a very small credit line that probably will not do much for your situation, but the good news is that such a small credit line will also help protect against you accumulating too much debt.

Regardless of how low your credit score is and how much negative information is in your credit report, you should always avoid secured credit cards. Secured credit cards are basically credit-debit cards. With secured credit cards, you have to deposit a certain sum of money with the bank (for example, $500) that issued the credit card. This deposit becomes your credit line and you charge purchases based upon your deposit. However, instead of paying off the purchase from your deposit, the bank sends you a bill. Your deposit money simply sits there, not collecting interest and not helping your situation. Additionally, secured credit cards usually have ridiculous fees (such as account set-up fees, annual fees, program fees, and account maintenance fees, to name a few), which do nothing but cost you money, and extremely high interest rates. The bottom lines is that even though secured credit cards may help to rebuild your credit, because of the enormous amount of fees and the extremely high interest rates, it may be better for you to wait the seven (7) to ten (10) years it takes for negative information to be removed from your credit report instead of getting the secured credit card.

If you have bad credit, know that you may have to pay a higher interest rate and may have a lower credit line. However, you should stay clear of secured credit cards because the small benefit your credit report receives from using such a card does not make up for the enormous amount of money that these cards cost.

How to Find "No Fee" Credit Cards

2009-01-29T10:18:00.000-08:00

One of the biggest mistakes you can make when obtaining a credit card is to obtain one with unnecessary fees. The most common "unnecessary fee" that people pay is an annual fee. An annual fee is a fee that a credit card company charges cardholders once per year merely because they own the card. Regardless of whether you actually use the credit card, you are charged this yearly fee.

The biggest problem that I have with annual fees is that they are nonsense fees. Paying the fee does not get you a better interest rate. It does not help you get better service or discounts on merchandise. As such, you pay this fee for no other reason but for the fact that you own the card. That is like paying an extra $50 per year on your cellular phone bill merely because you own a cellular phone. With so many other credit card options available, paying unnecessary fees (like an annual fee) is not a smart proposition. As such, where can you find no fee credit cards?

The best place to start is at your local bank. Banks usually have great credit cards with no annual fee. To further refine your search for the best "no fee" credit card, start at banks with which you already have an established relationship (i.e., already have a checking account, savings account, etc.) because you may find better deals and credit card offers that are not advertised to the general public.

Another great place to find a "no fee" credit card is on the Internet. However, you have to be cautious where you look. Randomly searching Internet websites is not only dangerous (because you will have to divulge private, financial information in order to apply for the credit card), it is also inefficient. The best place to start searching on the Internet is on the major credit card websites (e.g., Visa.com, MasterCard.com, DiscoverCard.com, AmericanExpress.com, etc.) because they offer many different products that can be easily compared. Additionally, these major credit card websites have many security precautions and thus, you can rest assured that should you apply for one of their cards, your information will be safe.

When applying for a "no fee" card, make sure that the card is truly "no fee." One thing that some banks like to do is state that their credit card has no annual fee when in fact it does have such a fee. For example, during your search you may come across a credit card offer that states that there is no annual fee "as long as you make at least one purchase per year using that card." And, in the event you do not make a purchase, there is a fee of X amount of dollars. This kind of "no fee" card does in fact contain a fee. Forcing you to make a purchase is the same as charging an annual fee. Do not fall into this trap and avoid these cards.

Remember, you have several options. Therefore, do not take the first credit card offer you receive. Look around, do some comparative shopping, and find the best no fee, low interest credit card for your needs.

How to Get a Credit Card in a Tight Credit Market

2009-01-28T10:15:00.000-08:00

Getting a credit card in a good economy is a very easy task. In a good economy, companies will extend you credit even if you have a poor credit score. The credit these companies extend will not be good (i.e., the credit card will have numerous fees and an extremely high interest rate), but these companies will still be willing to hand out credit cards. However, in a down economy, credit cards are not as easy to come by.

Companies are less likely to overlook credit score mishaps when evaluating whether to approve you for a credit card. Due to this fact, how do you get a credit card in a tight credit market?

The simplest and most obvious answer to this question is to repair your credit if you have bad credit. Repairing your credit will not only enable you to have a better chance of obtaining credit in a tight credit market, it will also help you in the long run to obtain a loan for a big purchase (e.g., a home, car, etc.) and/or a big event (e.g., a wedding, college education, etc.). As such, cleaning up your credit is one of the best things you can do for your financial future. Coincidentally, repairing your credit will also help you get a credit card in a down economy.

Another way to obtain a credit card in a tight credit market is to shop around at various banks, banking institutions, and financial institutions. Even if the general consensus is that the credit market as a whole is "tight," this does not mean that every credit granting institution is cutting back or otherwise curtailing their credit card business. You may have to look to uncommon banks or financial institutions, but you should be able to find a company that is willing to give you a credit card.

Talking to banks with which you already have a relationship can also help you get a credit card in a tight credit market. In a down economy, banks are more willing to extend credit to customers that have an established track record with that bank. However, this does not mean that new customers have no options. Banks will often offer new customers a deal (such as offering a credit card when that person opens a checking account) to entice such customers into becoming long term clients.

There are many things you can do to get a credit card in a tight credit market. It is important, however, to note that you should not settle for a bad credit card merely because the credit market is "tight." If you are in the market for a credit card and it does not seem that any good credit terms exist on any credit card offers you have investigated, you should reevaluate your need for a credit card at that particular moment. If your credit issues are more of a "want" than a "need," wait until things get better before getting a credit card. If, however, the opposite is true, make sure you pick the better of the two evils.

How to Create a Debt Elimination Plan

2009-01-21T11:08:00.000-08:00

Getting out of debt is the quickest way to becoming financially secure. It is important to note that not all debt is bad. There is such a thing as good debt. Good debt is debt that makes you money. For example, a real estate development loan from which you can collect rents as a result of a commercial development is good debt. Therefore, your debt elimination plan should focus on your bad debt. Bad debt is debt that costs you money. An example of bad debt is credit card debt. Another common bad debt is a car loan. Cars depreciate in value and thus, taking out a loan to buy a car will cost you money.

Eliminating your bad debt is important should you want to achieve financial security. The most important thing that you have to realize is that, absent you winning the lottery or inheriting a large sum of money, your bad debt is not going to disappear overnight. Therefore, getting out of debt is a process. The point is, however, should you stick to an economically feasible plan, you will start to notice a drastic decrease in your overall debt. Therefore, you will pay less in interest payments and thus, will save money on your debt.

A very common mistake that people make when enacting a debt elimination plan is that they continue to accumulate debt while trying to pay off the same. The debt payments that you make and the debt reduction techniques that you enact will be for not if you continue to offset these advances by accumulating more debt. You cannot reduce your debt and create more at the same time. Therefore, if your debt elimination plan does not include a plan to prevent the accumulation of debt, your debt elimination plan will be useless.

In order to have an effective debt elimination plan, you have to pay off the highest interest debt first. Your highest interest debt will most likely be your credit cards. Therefore, you need to pay off your credit cards first in order to get out of debt more quickly and to decrease the amount of money that you waste on interest payments. This is not to say that you should refrain from paying your other debts during this time. Put simply, you have to contribute more of your payment dollars to the higher interest items. Therefore, for example, should you have $100 per month to pay of your debts and one debt has a 22% interest rate and another debt has a 7% interest rate, you should pay a certain percent to each debt, the higher one to the 22% interest rate (for example, you might want to pay 80% to the 22% interest rate (which would be $80) and 20% to the 7% interest rate (which would be $20) so that you can pay off the higher interest debt sooner).

Focus on your bad debt, be patient, refrain from accumulating debt while paying off your existing debt, and pay the higher interest rate debt first. Doing this will insure that your debt elimination plan is a success.

The Truth About Rewards Credit Cards

2009-01-16T18:32:00.000-08:00

Rewards programs are supplements to credit cards and should not be the primary reason as to why you get the card. The best reason to get a credit card is a low interest rate (and of course no annual fee, because there is absolutely no reason to have a credit card with an annual fee). Additionally, the credit card that you obtain should have a high credit limit.

Before you choose a rewards card, you should look carefully at rewards card advertising. Many advertisements state that you can get cash back from using your credit card. The problem with these advertisements is that they are a little misleading. Do not get me wrong, you absolutely will get cash back from one of these cards. However, the amount that you have to charge and pay off is vastly disproportionate to the amount of cash that you get back. For example, most cash back rewards cards offer you 1% cash back. This means that you will have to charge and pay off $10,000 in order to get only $100 back. That is not a typo, $10,000 to get $100. Is it really worth it to apply for a card that offers 1% cash back? Additionally, these cards usually have a higher interest rate than the non-rewards cards. Therefore, as you are paying higher interest, you are barley getting any money back.

Also, make sure that the rewards card you want actually offers rewards that you want. Almost all of the credit card companies that have a rewards program offer some kind of "shopping mall" in which you can redeem your rewards points. However, many times there are products and trips that you will not want. Therefore, even if you have all of these rewards points, you will not be interested in anything and thus, will never use the rewards points. Therefore, the reason that you obtained the card is no longer useful. Thus, you may have just obtained a card that you will never use. In the end, you will end up with a bunch of reward points that you will never use or, if you redeem your points, you will end up with a piece of merchandise that you do not want.

The point is, do not be awe struck by a credit card solely because it offers rewards. Get a credit card that has no annual fee, has a low, fixed interest rate, and has a high credit limit. If you find a couple of credit cards that meet these criteria, then you can choose based on rewards. However, you have to make sure that the rewards program is simply a collateral matter and not the primary reason that you choose a card.

How to Consolidate Your Debt

2009-01-15T22:28:00.000-08:00

A consolidation loans is a loan, generally taken out by college students upon graduation, which is used to pay off various student loans that you have accumulated during your years as a college student. However, a consolidation loan is not restricted only to student loans. In other words, you can take out a consolidation loan for your regular debts (such as credit card debt).

The effect of a consolidation loan is that upon consolidation you have to pay back only one loan (the consolidated loan) instead of the numerous loans that the graduate took out during college or the various debts that you have as a result of credit cards. Make no mistake, the amount of the debt that you owe does not decrease. The only change that occurs is that you now have to make only one payment instead of several. Additionally, because after you consolidate you have to deal with only one company, your loan payments and interest rate are both lower.

Debt consolidation can offer many great benefits, such as a lower monthly student loan and credit card payments, as the case may be, reduced interest rates, the prevention of being assessed late and over-the-limit fees, and faster debt reduction, to name a few. However, there are also some disadvantages that accompany debt consolidation. In regard to consolidation loans for credit cards, you may have a freeze of your credit using privileges, closed credit accounts, and consolidation fees. Knowing how to weigh the positives against the negatives and becoming completely informed (or as well informed as possible) about consolidation are two important factors you need to consider before making a decision as to whether or not you should consolidate your student loans or your credit card debt.

The easiest way to consolidate your loans, whether they are student loans or credit card debts, is by contacting a debt consolidation company. Keep in mind that there are companies that deal exclusively with student loans and there are companies that deal exclusively with credit card debt. Therefore, make sure that you have contacted the correct company for the product that you need.

Once you have chosen a company, you will have to give the company all of your loan information for the loans that you want to consolidate. Basically, the company will either pay off all of your loans and then you pay back that company at a particular interest rate, or the company will talk to all of your creditors and work out a lower monthly payment that is combined with all of your other monthly payments so that a total lump sum payment is calculated that you pay each month.

That is the gist of what you have to do. Keep in mind that the entire process is relatively simple, but it can be tedious. Therefore, be patient and you will be rewarded.

How to Get a Debit Card

2009-01-14T23:42:00.000-08:00

A debit card looks exactly like a credit card. It will have the same shape, color, and magnetic strip that a credit card has. A debit card is used almost exactly the same way as a credit card. In fact, there are times when a debit card is used exactly the same way as a credit card. For example, if you are at the grocery store and you want to pay with a debit card, you swipe your card through the machine and type in your PIN (PIN means personal identification number). If the bill clears, your debit is approved and on you go. However, if you are in a restaurant, you card is swiped like a credit card and instead of having to type in a PIN, you have to sign a receipt.

Debit cards are cards that draw against your checking account. Basically, when you make a purchase with your debit card, the purchase price is deducted from a pool of money that you already have on deposit with your bank. If you spend more than you have on deposit, you are likely to pay overdraft fees and whatever other fees your bank is allowed to charge based upon your debit card agreement.

Some of you may have used your debit card as a credit card at the gas station and/or grocery store. In other words, you may have pushed the "credit" button on the payment machines available at these locations. You did not have to enter your pin and you had to sign a receipt or enter your zip code. Even though the transaction was executed and approved like a typical credit transaction, your debit card purchase is not reflected on your credit report and the purchase price is debited from your checking account within a business day or two. Therefore, although transacted like a credit transaction, it is not in fact a credit transaction when you use your debit card. You do not get any credit report benefits and such transactions and subsequent debiting on your checking account does not affect your credit score.

Obtaining a debit card is very easy. Because a debit card is linked to a checking account, the first thing you need is a checking account. The easiest way to get a debit card is to obtain one from the one bank in which you opened your checking account. Nowadays, banks automatically give you a debit card when you open a checking account. If, however, you do not have a debit card but you have a checking account, go to the bank in which you have a checking account and request a debit card. You may have to fill out a paper, but because the card is linked to your checking account, there is no approval process.

Getting a debit card is that easy. Therefore, if you do not have one, obtain one today.

Are Credit Cards Attractive?

2009-01-14T17:48:00.000-08:00

One of the biggest financial problems is people using credit irresponsibly. Many people think of credit as a second bank account. Basically, they spend until the card is "maxed out." These people do not realize what they did until the credit card bills start coming in. The minimum payments do not seem like much, but after six months of payments have barely reduced their overall debt, the realization of the debt problem occurs. They realize the mistake that they have made but only after it is too late.

This situation occurs because credit cards are very appealing. People get a feeling of power and success when they use their credit card. They seem to forget that every dollar that they charge must be repaid with interest. As such, the problems discussed above come to fruition. The interesting part about the appeal of credit cards is that many people do not learn their lesson after discovering that they have a debt problem. Instead, these people obtain more credit cards and "max out" those cards too. Eventually, the debt becomes so overwhelming that the only viable option is to file for bankruptcy.

In order to make credit cards more attractive, credit card companies have started making credit cards out of other materials instead of plastic. Additionally, credit card companies have added "cool" colors and personalization options to credit cards. Most recently, one credit card company allows its customers to put any picture that they want on their credit card. The theory is, if a credit card company offers an option to personalize the card, more people will apply for and obtain the card. Additionally, because it is personalized, the card will be used more often. Funny enough, this theory most likely has more basis in fact than in theory.

The worst thing you can do is fall for clever advertising or obtain a card merely because it looks good or is "pretty." You should obtain a credit card with no annual fee, with a low, fixed interest rate, and with a high credit limit. If your credit card does not have these basic things, it does not matter how good it looks because it is not a good credit card.

The point is, even though credit cards can be attractive, you have to avoid being seduced. If you become seduced by credit cards, you may fall victim to reckless spending and card misuse. This can lead to same very unsavory financial situations.

Financial Planning in Your Twenties

2009-01-14T17:29:00.000-08:00

If you are in your twenties, the good news is that you have a lot of time before retirement and thus, you can build a very large retirement account and/or savings "nest egg." The bad news about being in your twenties is that you may not have yet reached an extremely high paying position in your career and thus, you may not have a lot of capital with which to invest. Therefore, your financial plan may have to be progressive to compensate for your current financial condition. When I say "progressive," I mean that as you get older or as you earn more money, you should invest more dollars because more may become available.

Being in your twenties also creates the dilemma of split priorities. Basically, you have to strike the delicate balance of saving enough money for the future but not saving too much such that it interferes with your ability to address present financial concerns. If you are in your twenties, chances are that you have just graduated from college (if you went to college), may be thinking of graduate school, may be in the market to buy a home, may be in the market to buy a car, may be getting married, or may be starting a family, to name a few. As such, all of these things require a lot of money. Therefore, you should be concerned about these expenses.

As stated above, because you are in your twenties, you have a long time before you retire (under the traditional model) and thus, because you have a lot of time to profit from investments, your investment strategy for retirement should be pretty aggressive. The theory behind such a strategy is that being aggressive now will give you the opportunity to make a large profit. However, should you lose money, because you are so young, you will have more than enough time to recover any losses. Additionally, as you age, you should move your investments into less aggressive stocks because as you age, your focus should be to maintain you current profit levels and to receive consistent returns.

If you are not sure how to start or what to do, talk to a professional. There are many competent financial planners out there that can help you obtain and maintain a winning strategy for short and long term growth based upon your goals. Therefore, find one today to help you take the steps toward financial security.

Credit Card Wisdom

2009-01-14T15:56:00.000-08:00

Spending on credit cards can become a very large problem if you do not keep track of what you are doing. If a you have one credit card, it is easy enough for you to keep track of your spending. Additionally, if a credit card has a low credit limit, that limit will be a ceiling for your spending habits. Keep in mind that I am not suggesting that you use your credit card until you "max it out." I am merely suggesting that the credit limit, if low, will prevent you from getting too deeply into debt. However, a low credit limit is like a double edged sword because even though it will prevent you from charging too much, a low credit limit is looked upon with disfavor by lenders because it means that you either are new to credit or are not a responsible user of credit.

As I stated, if you only have one credit card, it is relatively simple to keep track of your spending. However, what if you have more than one credit card? Two credit cards should still be easy to track, but what about three, four, or even five cards? At what number does credit management become difficult? This is the problem that many credit users face.

Many people become seduced by credit cards. They get a feeling of power and start to abuse their credit card privileges. Abuse of credit cards is always a problem, but this problem magnifies when you have more than one card. Could you imagine the financial burdens that would arise if you had five credits and all had been abused? The point is, wise credit card use goes beyond the traditional good advice of paying your bills on time, paying more than your minimum payment, and keeping your debt low. Wise credit card use includes knowing when you are abusing your credit and knowing how to stop before the problem becomes insurmountable.

The best way to prevent credit card abuse is to keep track of your spending. If you do not keep track of your spending, you will soon discover that your credit card bills will start to spiral out of control. This is sad because credit cards should never be a cause for financial concern. Credit cards should only benefit your situation. Therefore, wise credit card use denotes that if your credit cards are not improving your financial situation, you are abusing your credit cards.

Use your credit cards wisely and you will reap great financial rewards.

Best Places for Hiding Money at Home

2009-01-13T12:35:00.000-08:00

First of all, I have to admit that you should not hide money in your house. Should your house get broken into or should something happen to your house (such as a fire, flood, earthquake, hurricane, or tornado) the money that is lost in such a disaster will be lost forever. However, should you have your money in a bank and that bank is FDIC (federal deposit insurance company) insured, your deposits are protected up to $100,000 in the event that the bank goes under. Therefore, if the money is in your house, it is unprotected and unsecured, but if the money is in your bank, it is protected and insured. Of course, if you have some kind of security system, your money will be protected to a point, but should a natural disaster hit, a security system will do little to protect your money. Thus, you should always keep your money in some kind of bank (whether the money is in an account of some kind or in a safety deposit book) so that it remains protected and is insured against loss.

However, should you feel the need or choose that you want to hide money in your house, the best place to hide money is in a safe. By putting your money in a safe it will be secure and safe. However, you have to remember that your money is only as protected as your safe is. Therefore, if your safe is not bolted to the floor, a thief could easily steal the entire safe and open it later. Thus, should you decide to utilize a safe in order to hide money in your house, make sure that it is bolted to the floor and that it is both fireproof and waterproof.

You should avoid hiding your money in places like your kitchen. Thieves commonly look in your kitchen for hidden money because the kitchen is refuted to be the most used room in a house. Therefore, a thief will look in your kitchen drawers, in your cookie jars, and every other common place that you have thought of for hiding money. Additionally, because this room is the most commonly used, there are not many places that you could hide your money that would keep it secret. Therefore, avoid the kitchen at all costs.

As stated above, you should not hide your money in your house. However, should you decide to do so, never hide your money in a your kitchen, use a safe to hide your money, and make sure that the safe is bolted to the floor so that your safe is not stolen or ruined.

Tips for Buying New or Used Automobiles

2009-01-12T21:56:00.000-08:00

Buying a car, whether it is new or used, is a game. The buyer is trying to purchase the car for the lowest price possible. The seller, on the other hand, is trying to sell his/her car for the highest price possible. Therefore, because the buyer's goals are completely at odds with the seller's, there will be some haggling and negotiations involved in the transaction.

There are many factors that are involved in a car sale that could create leverage for either the seller or the buyer. Should you be purchasing a car from a car dealership and require financing, your credit score could be a bargaining chip for you if your score is good or could be a bargaining chip for the dealership if your score is low. Additionally, depending on the age of the car and the popularity of the car in which you are interested, these factors could be bargaining chips for you or the dealership. Therefore, if you want a really good deal on a car, make sure that you have enough leverage so that you can purchase the car for the price that you want.

When you want to buy a car, you have to be realistic with your offer. Obviously, you are trying to get the car you want for the lowest price possible. However, you have to present an offer that is credible. For example, if the car is worth $40,000 and you offer $15,000, there is probably no chance that you will be able to purchase the car (absent some extremely big financial problem of the owner of the car) for such a low price. Therefore, when you are negotiating, start with an offer that is low but credible.

One of the biggest problems with buying a used car or a car from a private seller is that you will receive no warranties. Thus, unless you are a mechanic or have some education about cars, you will need to have a used car inspected before you purchase the same. The last thing that you want to do is buy a car that has no warranties and that breaks on you in a couple of weeks.

When purchasing a car, utilize the leverage that you have in order to get the best price. Make your opening offer low, but credible. And, if you are buying a used car and it has no warranties, make sure that you have the car inspected before you purchase it.

Credit Card 101: Facts About Credit Cards

2009-01-12T21:38:00.000-08:00

There are many things that you should know about credit cards before applying for one. For example, not all credit cards are the same. Some credit cards are secured and some are not secured. In addition to this difference, there are usually "hidden" provisions in a credit card agreement that most people neglect to read. Such provisions include the differences between the interest rate for a purchase and a cash advance, and whether or not the credit card company from which you obtained a credit card engages in the practice of universal default.

A secured credit card is a credit card that is that is tied to a monetary fund of some kind (whether it is a deposit, bank account, or some other account). The monetary fund can be accessed and used by the credit card company in the event that the credit card holder defaults on a payment. These kinds of credit cards usually have an obscenely high interest rate and an inordinate amount of fees. Basically, they are terrible credit cards that target people with bad credit.

As an alternative to getting a secured credit card, you should look at non-major credit cards. These types of credit cards include credit cards from various retail stores, department stores, and even gasoline cards. These cards usually have a high interest rate, however, the usually have no fees attached to them as secured credit cards do. Additionally, these "non-major" credit cards are unsecured, therefore, you do not have to put up a big deposit or tie the credit card to a bank account. It is easy to qualify for non-major credit cards, and thus, they provide an attractive alternative to secured credit cards should your credit be bad.

In regard to the different interest rates for purchase and cash advances, if you look at your credit card statement, you will see a section that shows you your interest rate. There are usually two interest rates shown: (1) your purchases interest rate; and (2) your cash advance interest rate. I can almost guarantee that the cash advance interest rate will be several points higher than your purchases interest rate. For example, you regular purchases interest rate may be 12.95% while you cash advance interest rate may be 19.95%. Why the big difference? This difference exists because your monthly payments will not count towards your cash advance balance until you fully pay off your regular purchases balance. Therefore, the credit card company will be able to charge you a higher interest rate while you are paying off your primary debt.

Universal default is a credit practice where you will be in default on one card because you are in default on another unrelated credit account. For example, let us pretend you have two completely unrelated credit cards; Credit Card A and Credit Card B. Further, let us pretend that Credit Card B has a universal default provision in the credit card agreement. Now, pretend that you are late or default on a payment to Credit Card A. The credit card company that gave you Credit Card B can now put Credit Card B into default even if you have never missed nor been late on a payment to Credit Card B.

The effect of this is that it is possible for you to be charged a credit default fee for Credit Card B (even though you have never missed nor been late on a payment to Credit Card B) and that another negative impact will occur on your credit report.

These are just a couple of credit card facts of which you need to be aware before you obtain a credit card.

How Does a Credit Card Work?

2009-01-12T18:20:00.000-08:00

Credit can be a very powerful financial tool. Having good credit can help you get loans, can lower the interest rate that you pay for such loans, and get help you get favorable loan terms. Therefore, having good credit will help you get loans and will help you save money. On the other hand, should you have bad credit the exact opposite will happen. You will most likely be denied for loans. Additionally, should you get a loan, the interest rate will be very high and the loan terms will not be favorable to you. As such, you should strive to obtain and maintain a good credit score. However, in order to obtain a good credit score you have to known how credit works.

You should always think of credit as a loan. If you think of credit as a loan, it will put you in the proper mindset when you use your credit cards. In other words, you will not forget that using the credit card means that you have to pay back the amount that you charge. If you think of a credit card as a second bank account, you are going to get into a lot of financial trouble. Basically, you will not keep track of your charges, and you will not be responsible with your credit card use.

How credit works is very simple. When you obtain a credit card you are given a particular credit limit. This credit limit is the total amount of money that you can borrow on your credit card. You can utilize your entire credit limit at once or you can use your credit card for a bunch of purchases until the total amount of the purchases equal the credit limit.

Basically, when your credit card is swiped by the store, restaurant, or other location from which you purchased something, the credit card company pays the store, restaurant, or other business the amount that you owe. In exchange for this service, you are able to defer your payment of such a bill until a later date. In addition, credit card companies allow you to pay over time instead of in one single lump. In exchange for allowing you to pay this debt over time, the credit card company charges you an interest rate. Your credit card agreement will dictate how often the interest rate is charged on your outstanding balance.

In a nutshell, a credit card purchase is a loan from your credit card company. The most amount of money you can borrow is dictated by your credit limit. You have to pay back this loan either at one time or over time in the form of monthly payments. Should you choose to pay over time, the credit card company will charge you an interest rate on your outstanding balance. This is how credit cards work.

What fees are charged when you use credit cards?

2009-01-11T23:38:00.000-08:00

Yes, credit cards can have costs. There are two main costs associated with credit cards: (1) interest rates; and (2) annual fees. Interest charges result only from the use of a credit card. Annual fees, on the other hand, are charged regardless of whether or not you actually use your credit card.

You should never have to pay to use credit cards. However, this is the exact effect of an annual fee. An annual fee is a payment by you to the credit card company for the privilege of using that credit card. There are far too many good credit cards out there that do not have an annual fee for you to obtain one with an annual fee. In essence, do not get a card with an annual fee, it is that simple.

In addition to annual fees, credit card companies charge other fees of which you may not be aware. If you are ever late on a payment, there is usually a fee. If you go over your credit limit, there is usually a fee. Know what these fees are and factor them into your decision as to whether to obtain that particular card. It is important to note that almost every credit card will have these fees. Therefore, do not refrain from obtaining a good credit card simply because these fees exist. Should you do so, you will not find a credit card.

Interest rates are another fee charged by credit card companies. First, you should notice that the interest rate is different for credit purchases and cash advances. Cash advances always carry a higher interest rate. Additionally, your monthly payment will not count towards your cash advance balance until your credit purchases balance is paid off. This is because cash advances carry a higher interest rate. Therefore, the longer that your balance remains unpaid, the more money the credit card company makes.

Also, make sure that the interest rate that is advertised is not an "introductory" rate or a "variable" rate. Introductory rates only last a couple of months (at most, one year). After that introductory period, your interest rate resets to the default rate. The default rate is usually a lot higher than the introductory rate. Therefore, be aware of what you are getting yourself into because you do not want to see your interest rate jump over twenty points at the end of your "introductory" period.

Variable rates change with economic conditions. Therefore, you could have a great rate one month and a terrible rate another month. Granted, the rate changes are not dramatic. Therefore, you will not go to bed one night with a 9% interest rate and wake up the next morning with a 20% interest rate. The changes are gradual. However, do not play a guessing game with your credit card interest rate. Get a low fixed rate, and you will be much happier.

Know the costs that are associated with a credit card. By doing this, you will be able to make the best decision possible based on your needs and wants.

How to save money and reduce your debt with zero percent credit cards

2009-01-11T23:06:00.000-08:00

When it comes down to it, a zero percent interest rate credit card can save you money as long as (1) the fees for owning the card do not amount to more money than would an interest rate; (2) you do not spend more on the card just because the interest rate is zero; and (3) the default interest rate on the credit card after the promotional period ends is not astronomically high.

First things first, think about this interest rate issue logically. If a credit card company does not charge interest, how does it make money? In lieu of interest, the credit card company may be charging some kind of annual fee and some other maintenance fees. If the fees cost more than the interest would, you are not saving any money. Additionally, if you have a low credit limit, the ratio of annual fee to credit limit may be higher than an interest rate. This, again, does not save you money and in fact, costs you money. Therefore, should you decide to utilize a zero percent credit card, make sure that you actually save money by using it.

The most common way a credit card will have a zero percent interest rate is in the form of an "introductory" rate. Basically, a credit card company will charge you zero interest for a set amount of time if you obtain their credit card and transfer a balance from one of your other cards.

Depending on the amount of your debt on your older car, it may be advantageous for you to transfer that balance to one of these zero interest, "introductory" rate credit cards. Many credit care companies will give you a zero percent interest rate for a set amount of time on these transfers. Therefore, should you transfer your balance, all of your monthly payments during this time will go towards paying your principal and thus, you debt will be paid sooner.

It is important to note that there are some disadvantages to this method. First, you have to open a new credit card and thus, instead of having one, as in our example above, you will have two. If this is the case, you cannot use the old card again because this would negate the purpose of transferring the balance. Additionally, you have to make sure that the interest rate of the new card is not higher than your old card. Remember, the zero percent interest rate does not last forever, and thus, should the new card have a higher interest rate, you will offset any savings that you have made while paying zero percent interest.

The point is, a zero percent interest credit card can save you money. However, should the costs of the new card offset any savings you get from transferring, you should think twice before doing so.

Using Worksheets in Planning Personal and Family Budgets

2009-01-11T12:58:00.000-08:00

Budgets can be a helpful way for you to get your finances under control. In order for budgets to work, you have to make sure that the budget is feasible and that you maintain the budget. If the budget is not feasible, trying to stick to the same will be an exercise in futility. Therefore, if you want to get your finances under control you have to make sure that you make enough money to cover all of the items in your budget, or you have to take things out of your budget that you cannot afford. Additionally, should you create a feasible budget, you have to maintain it in order for the budget to be successful. You cannot stop using your budget after a couple months because it is "too hard." It will take time for you to become accustomed to your budget. However, once that occurs, your budget will become second nature.

One of the biggest mistakes that people make in forming a budget is that they do not write their budget down. Therefore, the budget gets lost or becomes forgotten in the jumble and stress of everyday life. If this occurs, you cannot possible stick to the budget because you will not know what your budget is. Therefore, the entire budget making process that you endured will be for not, and your financial situation may suffer as a result.

Many people do not know where to start when forming a budget. It you are one of these people, you may want to think about obtaining budgeting worksheets. A budgeting worksheet is basically a chart that you use to allocate certain amounts of your monthly pay for the purposes of paying bills, saving money, or for whatever else is in your budget. Having a budgeting worksheet will make it easy for you to figure out where your monthly money should go. You may not think of everything for your budget and you may allocate too much money to a particular item. A budgeting worksheet will help you refrain from making these budgeting mistakes.

As stated above, a budget can help you save money, but unless you know where to start and how to form a budget, the budget that you attempt to create will be ineffective. As such, you may want to utilize budgeting worksheets in order to get your budget up and rolling.

Beware of Credit Repair Services

2009-01-11T12:32:00.000-08:00

It is true that many companies exist that will claim to clean up your credit report for a fee. Some of these companies are less than ethical and some are outright scams. However, there are many legitimate companies that will clean up your credit report for a small fee. Many people believe that all of these credit repair companies are cheats that take your money and do no work to help you out. This is simply untrue. However, if you do not know what you are doing or do not keep tabs on the credit repair company that you may hire, you may be take advantage of, your credit report may not be fixed, or both could occur.

If you have late payments, collection accounts, bankruptcies, or any or all of these things in your credit report, you know that these things lower your credit score (some more than others). If you have these things in your credit report, you may have to hire the services of a professional "credit cleaner" in order to maximize the use of your credit report. For the most part, these companies dispute inaccurate information on your credit report in attempts to remove some of the late payments, collection data, and other negative information that have been compiled in your report. The thing that you have to be most concerned about is that these companies not only behave ethically, but that they also behave legally. Creating a new social security number or a new identity in order to avoid your debt obligations is fraud. Therefore, do not engage in such activity.

Many skeptics argue that everything that these credit repair companies do can be done yourself for less money. This is 100% true, but I do not see how that is relevant. I can make dinner at home for less money than going to a restaurant. However, under the skeptics' logic, I should not go to the restaurant because it will cost more than making dinner at home. The point is, if you use a credit repair company, you are paying for experience and convenience.

Keep in mind that you do not have to use a credit repair company is you do not want. As stated in the above paragraph, you can clean your credit report yourself. However, if you decide that your credit report needs to be repaired, you should analyze your situation and decide which option (paying a company to do it or doing it yourself) is best for you. Either way, if done correctly, the results will be worth the time and money.

How Being Involved in Your Community Can Help Your Business Grow

2009-01-10T21:39:00.000-08:00

Being a small business owner can be a great way to build financial prosperity and ultimately build financial security. However, neither of these things will happen unless you have enough customers and/or clients coming in the door. Without customers and/or clients, you cannot make a profit. Without profit, your business will not be successful. Therefore, the issue becomes obtaining customers and/or clients.

Advertising is the most common way to obtain customers and/or clients. However, popular advertising methods cost a lot of money. For example, television advertising can cost you several thousands of dollars. If you are a small business, you may not have such a large advertising budget and thus, a television commercial may be out of the question. You can always utilize the Internet, but unless you are Internet and computer savvy or unless you are willing to pay a professional to construct a website for you, your Internet presence will be nonexistent. Additionally, if you do not get traffic to your website, your website will be ineffective. Therefore, in order to obtain traffic, you will have to pay an additional fee. The point is, if your advertising budget is small, you will have to think of creative yet effective ways to advertise your business.

If you are a small business, one great way for you to advertise your business would be to get involved in your community. Community involvement is a great way to get your business's name know. Additionally, depending upon the community activity that you organize, participate in, or sponsor, you could obtain a lot of positive word of mouth advertising. Positive word of mouth advertising is an extremely powerful form of advertising. This form could have many community members coming in your door and using your services or buying your products. The best part about positive word of mouth advertising is that it is free. Therefore, you get the benefits of advertising without having to pay the expenses.

If you are a small business, you will have to advertise in order to survive. However, many forms of popular advertising can cost a lot of money. Therefore, an attractive alternative to television and the Internet is word of mouth advertising. You can obtain a lot of word of mouth advertising by getting involved in your community. Therefore, you should get involved in your community in order to generate a buzz for your company.

How Long Can a Bad Credit Report Haunt You?

2009-01-10T16:32:00.000-08:00

A good credit report is an important financial asset to possess. A good credit report can help you obtain loans (including the big loans such as a mortgage, a car loan, and/or a college loan, to name a few), help you obtain a low interest rate on those loans, and will help you obtain favorable loan terms. Therefore, a good credit report will help you obtain loans and will help you save money by way of lower interest payments.

There are many things that you can do to your credit report that will negatively affect it. Some things are small (such as having a low credit to debt ratio, having too many credit report inquiries, and closing a credit card account, to name a few), but there are many "big" things that you can do that will severely lower your credit score.

A bankruptcy is probably the worst, one trick pony that can happen to your credit report. Before you decide to file for bankruptcy, you need to think long and hard about the benefits and penalties. The most obvious benefit is that most of your debts will be discharged (with the exception of certain debts like mortgages, student loans, and IRS liens), however, a bankruptcy also means that your credit report and your credit score will be severely damaged. By severally damages, I mean that your credit score will decrease by several hundred points.

Things such as late payments, charge offs, and collection accounts can also dramatically reduce your credit score. These things will not reduce your credit score to the same extent as a bankruptcy, but they will still do some pretty heavy damage. Therefore, you should consistently pay your monthly payments on time so these things do not happen to you and thus, will not be reported in your credit report.

Even though these things will dramatically reduce your credit score, many people may think that this is not a big deal because the information will be removed from their credit report eventually. What these people do not know is that late payments, charge offs, and collection accounts can stay on a credit report for up to seven years. Therefore, should you do things to improve your credit score during this time, those improvements will be offset by the negative information that remains. Even worse than the seven year time frame for the above listed credit report problems is a bankruptcy. A bankruptcy can stay on your credit report for up to ten years.

The point is, these problems do not go away overnight and thus, should you engage in this kind of behavior, you will pay for it for many years.

Financial Crisis: There is Plenty of Blame to go Around

2009-01-10T14:19:00.000-08:00

Ground zero for the United States economy started with both greedy banks and greedy consumers. First, greedy banks would offer loans to uninformed borrowers. These loans would begin with a tiny interest rate but would balloon into a large interest rate that would prevent a borrower from making monthly mortgage payments. However, as in Las Vegas itself was at the helm, greedy consumers would gamble on a home purchase. Greedy consumers would purchase a home that was far above their financial capabilities. Once the home was purchased, these greedy consumers would gamble that they could resell their newly purchased home for a profit before their interest rate ballooned into a payment they could not afford. Everything went great for a couple of years until the price of homes peaked. Once home sales started slowing, greedy consumers could no longer sell their heavily overpriced homes. As such, their interest rate eventually ballooned and because they could not make the monthly mortgage payments, the home fell into foreclosure. People lost their homes and lenders lost their money.

When home foreclosures started skyrocketing, small home lenders were the first victims. Large banks also felt the pressure because of the growing number of defaulting subprime loans. Banks are business savvy and as such, had insurance in the event their loans defaulted.

Insurance companies started getting many claims from many banks. However, the greedy insurance companies had learned how to exploit a loophole that allowed it to essentially insure a loan without having to set aside a matching amount of money in a reserve account. As such, the dollar amount of the bank claims was soon more than the insurance company could pay. Therefore, insurance companies started failing.

Before claims started coming into the insurance companies, some of the largest investment banks in the world had invested substantial amounts of money into funds made up of subprime loan paper. At first, the return on this paper was great, but as the foreclosure rate started rising, these funds became increasingly worthless. As a result, billions of investment dollars were wiped out because investment banks did not accurately assess the risk involved in these investments. Additionally, the fact that these subprime loans were not adequately insured made the risk far outweigh any potential returns.

As such, this snowball effect started to occur because greedy lenders borrowed too much money from greedy banks who were willing to lend to uniformed consumers. As the banks' greed caught up with them, they had to start trying to collect on their insurance policies. However, the greedy insurance companies insured more money than it had on reserve. As such, the insurance companies started to fail. As the insurance companies failed, so did the investment banks that had invested in the now toxic subprime paper and in the failed insurance company.

In response to this growing problem, the government tried to treat symptoms without fixing the underlying problems. First, the government tried to cut interest rates. However, because banks were failing, banks needed to hold onto as much money as possible in order to stay "adequately funded" per the FDIC guidelines. This in turn created the current credit freeze. As such, regardless of how low the interest rates got, banks were still unwilling to lend money. As such, no problem was solved.

Second, the government tried an "economic stimulus" package in which it gave people anywhere between $300 - $1,200. The government encouraged people to use the money to make a mortgage payment. However, being able to make one mortgage payment does not mean that the borrower can now afford the loan. As such, the effect of the "economic stimulus" package was that the inevitable was delayed for a couple of months.

Last, and most recently, the government attempted a $700 billion dollar bailout of the financial sector of the United States economy. No current effects have been realized, but given the state of things, this plan will also have to effect of merely delaying the inevitable "bottoming out" of the United States economy.

The point is, everybody is to blame for this economic disaster, and it is going to take everybody to get the United States out of its current financial state.

How Market Knowledge Helps to Sell Products

2009-01-10T14:00:00.000-08:00

It is important for any salesperson to have a thorough understanding of the market in which he/she sells his/her product. By understanding and having a vast knowledge of the market in which you are selling, you will be able to distinguish your product from the competition, be able to answer potential buyers' questions, and will be able to show the strengths of your particular product.

Being able to distinguish your product from the competition is important because doing so will enable the buyer to make an informed decision about your product's quality. By comparing your product to the competitions' products, you can point out their products' weaknesses and your product's strengths. Additionally, you will be able to inform the potential customer about the differences in pricing and service.

Potential buyers always have a lot of questions. Unless you are familiar with the market in which you are selling your product, you may not be able to fully or convincingly answer the potential buyers' questions. This can prevent you from getting sales, and, more importantly, will prevent you from getting repeat sales. However, by simply learning about your particular product's market, you can instill confidence in a buyer by fully and accurately answering questions and by reassuring the buyer that your product is the best on the market.

Knowing the market in which you sell your product will also help you attack another product's weakness while simultaneously promoting the strengths of your product. You will not be able to tell a potential buyer why your product is better if you yourself are unaware of the features of the competition's products. As such, possessing knowledge of your product's market will give you this advantage.

Everything comes down to perception and confidence. If you are perceived as unknowledgeable about your product and/or its market, a buyer will not buy your product. If you, as a salesperson, are not confident in your ability to answer customer questions or are not confident in your comprehensive knowledge of the product, such things will show when you deliver your pitch to customers. This again will lead to a negative perception of you, and because you are the one selling the product, this will lead to a negative perception of the product.

The key to success is preparation. If you are prepared to sell your product (such preparation can be had by knowing the competitors, market conditions, and the needs of your potential buyers), buyers will respond by way of purchases. If your product delivers what you promised it would, those buyers become repeat buyers. Repeat buyers means that your company will accomplish continued success.

How to Improve Your Net Profit

2009-01-09T09:42:00.000-08:00

Improving your business's profits is not an easy task. It would be a lie to state that there exists a "quick fix" that will make your company profitable or will increase your company's profits overnight. However, some traditional ideas of how to increase your company's profitability still hold true. In essence, there are only two ways to make your company more profitable: (1) increase your revenue while creating a justifiable increase in your costs; or (2) decreasing your costs.

By far, the easier of the two options to implement is to decrease your costs. Decreasing your costs can be as simple as laying off workers, discontinuing a product or a particular product line, reducing your advertising efforts, and/or any and all of these options. However, even though these options will reduce your costs, you have to be aware that other problems arise when you implement any of these cost cutting measures. A lay-off of workers, for example, can lead to a negative community image of your company. Additionally, should you need to rehire skilled workers in the future, such workers may be hard to find or such workers may be apprehensive about working for your company.

Additionally, discontinuing a product or a particular product line and decreasing your advertising efforts may cause reduced revenue. Granted, the cost savings may more than make up for the decreased revenue, but the fact that revenue will be reduced still needs to be taken into account when determining the financial strength of your company.

As is shown above, reducing costs is easier to do because it does not require customer support to implement. You can unilaterally reduce your workforce, product line, and your advertising budget without customers' help. Raising revenue, however, is a different story. Raising your revenue generally means that you need to increase your sales. As such, customer support is needed.

The key is not simply to raise revenue. Raising revenues in and of itself is not a difficult task. The key is to raise revenues will keeping costs the same or by keeping costs at a justifiable level. In other words, it is easy to spend $1 million to increase a business's revenue by $100,000, but obviously, this is not a sustainable business model. If, however, you increase your costs by $100,000 and by doing so increase your revenue by $1 million, then that increased $100,000 cost is justifiably because your company is more profitable.

There is no "cookie-cutter" answer on how to increase a business's revenue while keeping any increased cost justifiable. Every business has a unique situation and thus, needs to be analyzed by its particular situation. However, once a proper analysis is completed, you will be able to implement revenue raising measures that can increase your company's profitability.

How to Save Money on Stamps

2009-01-08T10:58:00.000-08:00

Every year it seems that the government is raising the price of stamps. Mailing letters, bills, and packages is getting more expensive. However, the good news is there are many alternatives you can utilize. You do not have to keep purchasing stamps to mail bills and letters. Nor do you have to keep paying whenever the price of stamps goes up.

The best way to avoid having to purchase stamps to mail your letters is by using e-mail. E-mail is fast, convenient, and easy to use. Best of all, e-mail is basically free. The only cost of e-mail is your monthly cost for an internet connection. However, there are many places where you can use the Internet for free (e.g., public library, your office, Internet cafes, etc.) and thus, do not have to incur this monthly expense. By using e-mail, your recipient receives your message instantaneously, and you can have multiple communications without having to attach a stamp to each communication.

Also, the Internet has made it extremely easy to send your friends and family pictures. You no longer have to get special padded envelopes and pay an extraordinary amount to ship your pictures. Sending pictures is now as easy as point and click.

The Internet also allows you to pay your bills on-line. Many banks offer their customers free, online bill pay. Basically, you tell the bank to pay your bills by telling the bank when to send payment and to whom. The bank sends the creditor a check and automatically deducts the money from your checking or savings account. No stamps, no mess, and no cost.

As shown above, the Internet can save you a lot of money because you will not have to purchase stamps to mail letters, bills, or even pictures. However, even with the popularity of the Internet, there are still many people who like to do things "the old fashioned way." As such, for the non-Internet users out there, you can still save money on stamps by doing two things, using your telephone or buying forever stamps.

If you want to say something to a friend, pick up the telephone. If something needs to be sent to somebody, send a fax (which uses a telephone line). When sending a fax, you use no ink and you do not have to print anything. Simply dial in the phone number and press "send." The machine will take care of the rest.

Some people may think that long distance telephone plans cost too much or that fax machines are too expensive and too complicated. Although I do not agree with either of these beliefs, there is a solution for people who refuse to embrace technology. That solution is the "forever" stamp.

Forever stamps are stamps that you can buy from any post office. These stamps can be used to mail a one-ounce letter regardless of when the stamps were purchased or used and no matter how prices may change in the future. Therefore, if you pay forty-two cents per forever stamp today but ten years from now a letter costs sixty-five cents to mail, you can still use a forever stamp that you purchased for forty-two cents.

The Internet is the best way to save money on stamps, but if you do not like computers or the Internet, you can always use a phone and/or fax machine. If those two options do not work, forever stamps are the way to go.

How to Avoid the Credit Card Trap for College Students

2009-01-08T10:30:00.000-08:00

For most people, college is the first time in their life that they are living by themselves. This means that they have to pay bills, get a job, make adult decisions, and take on adult responsibility. It is also usually the time when a person gets his/her first credit card. As such, this can be a time of tremendous financial hardship and temptation.

Many college students abuse their credit card. College students see a credit card as an extra bank account. However, they quickly forget that every dollar they spend with the credit card has to be paid back in full, with interest. Additionally, because these are college students, the credit card usually carries an extremely high interest rate. This means that it is very easy to accumulate more debt that you can handle.

In order to avoid becoming a victim of credit card debt, you have to know from the beginning that credit is a tool that can either make or break your financial future. You do not want to leave college with a low credit score.
Doing so can prevent you from getting student loans (should you want to go to graduate school) and can also prevent you from making the "big" purchases in life (for example, a home or a car). Therefore, the solution is to prevent yourself from being put into this position.

In order to prevent being put in the position of having too much debt, you have to realize that debt takes time. You do not go to bed one night with no debt and wake up the next morning with $10,000 of credit card debt. Debt accumulation is a process of bad choices. If you realize this and you notice that you are being careless with your credit card, you can break the cycle before it spirals out of control.

Another way to prevent a large accumulation of credit card debt is too limit yourself to one credit card.
By having only one credit card, you cannot get yourself in too deep should you start to abuse the privilege of having credit. Additionally, make sure that the limit on your credit card is no more than $500.
This is another "safety net" that you can put in place in order to avoid overusing your card.

The best way to prevent credit card debt accumulation while in college is to use the credit card for emergencies only. An emergency is not a late night run to your local fast food restaurant. An emergency means your car broke down on the highway in the middle of nowhere, you have no cash, and the tow truck costs money.

Realize that credit is a privilege, keep track of your spending and break the cycle before your debt gets too big to contain, keep only one card and make sure the credit limit is not above $500, and use your card for emergencies only. Follow these tips and you can leave college with an A+ credit score.

How to Lower Interest with Credit Card Consolidation

2009-01-07T09:14:00.000-08:00

Depending on what kind of credit cards you have, you may be paying an extraordinarily high interest rate. For example, credit cards offered on college campuses tend to have higher interest rates then credit cards offered at banks. Additionally, "student" credit cards tend to have higher interest rates than traditional credit cards. This is generally true because college students and young adults are just starting to establish their creditworthiness. As such, to offset the risk of giving credit to somebody without an established credit history, credit card companies charge higher interest rates and annual fees for these cards. The interesting thing is that you probably still use some of those cards today even though they are inferior to other credit products available to you.

It is important that you do not close these high interest credit card accounts (there is an exception discussed below). Closing a credit account will negatively affect your credit score. As such, in order to save money and your credit score, you should consolidate your debt onto one low interest credit card.
Consolidating your credit card debt onto one low interest credit card can save you money in more ways than one.

First on all, your old credit cards or your high interest cards carry a far higher interest rate than do other, easy to obtain credit cards. Additionally, many credit cards offer zero percent interest for up to one year on balance transfers. Therefore, if you transferred your debt from your high interest card onto a zero percent interest card, you would save a lot of money in interest payments, and you would pay down your debt faster.

Annual fees usually accompany high interest credit cards as another mechanism to offset the risk of the credit card companies. Annual fees are pointless. The only time a credit card should have an annual fee is if it is a charge card (if it is a charge card, you pay no interest and therefore, an annual fee is the only way for the company to make money). As such, if your high interest credit card has an annual fee, you should call that credit card company and see if you can get that annual fee eliminated.

If the credit card company is unwilling to accommodate you, transfer your balance on that card to a zero interest card and close the account. By closing the account, your credit score will take a small hit. However, this small hit is easily offset by maintaining a good history with the new zero percent interest card. Additionally, you will no longer have the expense of an annual fee.

Save yourself the expense of high interest and annual fees by consolidating your debt onto a low interest or no interest credit card.

The Difference Between Good and Bad Debt

2008-11-05T10:02:00.000-08:00

There are two different ways to understand the concept of "good" debt. Good debt can be described as either (1) debt that makes you money; or (2) debt that does not count against your debt to credit ratio. An example of debt that makes you money is a real estate loan. Although you are paying a loan, the real estate is appreciating, and you could collect rental income from a real estate property. An example of good debt that does not count against your debt to credit ratio is a school loan. One of the components of a credit score is your debt to credit ratio. If you have more than 30% (meaning that of all your available credit, you owe more than 30% in outstanding balances), your credit score is lowered. Student loans are not calculated into this ratio. Thus, if, for example, you owe $50,000 in school loans and have only $10,000 in available credit card credit of which you owe no money, your debt to credit ratio is still going to be zero, regardless of the fact that you owe $50,000 in school loans.

Now that good debt has been defined and you understand it, the question becomes, what is bad debt? There are many variations on the definition of bad debt, however, the consensus is that bad debt is debt that costs you money. In other words, if you borrow money to purchase something that will never increase, or in fact decreases, in value, you have bad debt. The most common example of bad debt is credit card debt. This is debt that costs you money.

The distinction between these two kinds of debt causes much confusion among people who carry the debt. In you are concerned about "getting out of debt," you need only be concerned about your bad debt. Bad debt is the debt that needs to be paid off in order to relieve any financial pressure you may be feeling. This means, car payments, credit card bills, and other high interest loans for depreciating assets need to be paid off as quickly as possible.

I understand the difficulty that people have with comprehending "good debt." Most people think that owing money is bad regardless of its use. However, if you stop and think about it, there are many things that debt can create. Using the real estate example above, if you take out a loan to buy an investment property, and then rent that house out to another, you are enjoying many benefits: (1) your rental property (assuming you did not overpay) is appreciating; (2) you are taking in a rental income that hopefully pays for the mortgage on the rental property and all other expenses on the property; (3) you are making a property available for another person to live; and (4) you are increasing your net worth. All of these things occurred because you incurred some debt.

Know the differences between the kinds of debt and you will be able to prosper. Get rid of all your bad debt and utilize the good debt to your advantage. A college education, an increased net worth, and additional income streams could be the benefits of good debt. On the other hand, high interest rates, fees, and depreciating assets accompany bad debt. Which would you rather have?

Teens and Car Insurance: Who Should Pay?

2008-09-04T14:58:00.000-07:00

Teaching teenagers financial responsibility is vitally important. Good financial lessons at an early age carry over to successful money management when such teenagers become adults. As such, you should educate your teenager about savings, credit, investing, and real estate, to name a few subjects. Doing so will help your teenager avoid common money traps that snare many young adults.

One of the most important financial lessons to teach teenagers is the effort that it takes to earn an honest dollar. As such, if your teenager wants to get a job, you should let him/her to the extent that the same does not interfere with his/her education. Additionally, once your teenager is working, he/she will start to understand that you have to work for things that you want in life. Therefore, if they want to spend there money on something, they will know the effort that is required to obtain the same.

One item that it seems that every teenager wants is a car. As we are all well aware, a car can be a very expensive purchase. Outside of the actual cost of the car, you have to pay for gas, oil changes, insurance, registration, and maintenance. These costs can add up and thus, should you get your teenager a car, he/she should have to pay for some of these expenses. On such expense that a teenager should pay for is insurance.

Having your teenager pay for insurance is good because it will help teach financial responsibility. Additionally, because insurance can be costly for a teenager, he/she will respect the car and thus, take better care of the car that he/she has. Teenagers, like all people, respect things more if they pay for it. Thus, although the cost of the car may be outside of the financial realm of your teenager, the insurance payment is not. As such, your teenager should make this payment.

Insurance can be expensive and as such, if your teenager does not have a job, he/she will not be able to pay for the same. Therefore, making the condition that in order for your teenager to get a car, he/she has to pay the insurance will make your teenager take on the responsibility of getting a job and of maintaining his/her finances in order to pay for the monthly insurance payment.

Teach you teenager financial responsibility by having him/her pay for his/her own car insurance. Doing this will make your teenager respect his/her car more and will help your teenager appreciate the work it takes to earn enough money to pay for such an expense.

Can Applying for Loans Bring Down Your Credit Score?

2008-08-09T14:24:00.000-07:00

A credit score has many components. Each component weighs differently on your credit score. For example, having a late payment recorded on your credit report will cause more damage to your credit score than will having too many inquiries on your credit report. However, it is important to know that regardless of what the negative information is, such information will stay on your credit report for many years. As such, you will want to weigh the consequences of the negative impact on your credit score against the advantage of applying for and obtaining a loan.

Applying for a loan can negatively impact your credit score in more than one way. First and foremost, whenever you apply for a loan (whether it is for a house, a car, a student loan, a personal loan, etc.) the bank or lending institution to which you applied is going to run a credit check on you to calculate the risk involved in lending you the money. The riskier you are, the higher your interest rates and/or fees will be. If you are too risky, you will be denied a loan.

When the bank or lending institution conducts a credit report check to calculate the risk level involved, each check is recorded as an "inquiry" on your credit report. Banks and lending institutions look to see how many inquires are on your credit report for a set period of time. If you have "too many" inquiries, this tells the bank or lending institution that you are trying to borrow money and thus, this means that you are acquiring or attempting to acquire a lot of debt. As such, you may not have the money to pay back a loan. Therefore, this makes you a risky loan and you will either have to pay more interest and fees or will be denied outright.

However, even though these inquiries are recorded on your credit report, this does not mean that every one of them negatively affects you credit score. The key is not to get "too many." The exact number that crosses the "too many" threshold is not exact, but to be on the safe side, you should try to keep the inquiries to no more than 3 per year. Remember, every time that you apply for a credit card or any type of loan, an inquiry is recorded on your credit report.

The other way that applying for a loan can damage your credit score is if you are approved for the loan. If you are approved for a loan, it will affect your credit to debt ratio. If you get a loan, this will create more debt. The closer you are to "maxing out" your credit limits, the worse off your credit score will be. The reason for this is because if you have no available credit, banks and lending institutions will be concerned that you have reached your limits and will have trouble paying off your debt. As such, there is a higher chance that you will default and thus, a higher chance that the bank or lending institution will not get paid.

As stated above, because of these negatives, you have to weigh the cost of getting a loan against the benefits of obtaining the same. Make sure you are applying for and receiving a loan for a good purpose (buying a home that you can afford, getting a college education, making a good investment) and are not obtaining a loan for something you do not need.

Actual and Potential Credit Card Usage Fees

2008-04-23T21:18:00.000-07:00

Yes, credit cards can have costs. There are two main costs associated with credit cards: (1) interest rates; and (2) annual fees. Interest charges result only from the use of a credit card. Annual fees, on the other hand, are charged regardless of whether or not you actually use your credit card.

You should never have to pay to use credit cards. However, this is the exact effect of an annual fee. An annual fee is a payment by you to the credit card company for the privilege of using that credit card. There are far too many good credit cards out there that do not have an annual fee for you to obtain one with an annual fee. In essence, do not get a card with an annual fee, it is that simple.

In addition to annual fees, credit card companies charge other fees of which you may not be aware. If you are ever late on a payment, there is usually a fee. If you go over your credit limit, there is usually a fee. Know what these fees are and factor them into your decision as to whether to obtain that particular card. It is important to note that almost every credit card will have these fees. Therefore, do not refrain from obtaining a good credit card simply because these fees exist. Should you do so, you will not find a credit card.

Interest rates are another fee charged by credit card companies. First, you should notice that the interest rate is different for credit purchases and cash advances. Cash advances always carry a higher interest rate. Additionally, your monthly payment will not count towards your cash advance balance until your credit purchases balance is paid off. This is because cash advances carry a higher interest rate. Therefore, the longer that your balance remains unpaid, the more money the credit card company makes.
Also, make sure that the interest rate that is advertised is not an "introductory" rate or a "variable" rate. Introductory rates only last a couple of months (at most, one year). After that introductory period, your interest rate resets to the default rate. The default rate is usually a lot higher than the introductory rate. Therefore, be aware of what you are getting yourself into because you do not want to see your interest rate jump over twenty points at the end of your "introductory" period.

Variable rates change with economic conditions. Therefore, you could have a great rate one month and a terrible rate another month. Granted, the rate changes are not dramatic. Therefore, you will not go to bed one night with a 9% interest rate and wake up the next morning with a 20% interest rate. The changes are gradual. However, do not play a guessing game with your credit card interest rate. Get a low fixed rate, and you will be much happier.

Know the costs that are associated with a credit card. By doing this, you will be able to make the best decision possible based on your needs and wants.

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How Long Should You Rent Before You Buy A House?

2008-04-01T13:22:00.000-07:00

There are many consideration to make before your should decide to buy a home. A home is an expensive purchase and thus, absent you having a large cash reserve, you are going to have to borrow the money to purchase your home. As such, you are going to have to consider your credit score, your monthly income, your monthly obligations, and the price range of homes that are within your economic range, to name a few. Additionally, depending on the current economic condition, your interest rate for your mortgage is another consideration. You also have to consider you job situation and whether it is likely you will move out of your current city or state. This consideration is important because if you need to sell you home in order to be able to afford to move, the status of the real estate market is going to dictate how quickly you can move.

If you discover that you cannot currently afford to buy a home, your alternative is to rent for the time being. This does not mean that you will never be able to buy a home. Renting for now simply means that due to your current financial or credit situation, you will have to refrain from purchasing a home. If this is your current situation, you may be wondering how long you have to wait until you can buy a home.

The answer to this inquiry depends on all of the factors discussed in the first paragraph. If you can financially afford to buy a home, have the credit in order to qualify for and obtain a loan (should you need a loan), and do not plan on making any long distance moves at any time in the near future, you should be in a position to buy a home. However, even if you are in position to buy a home, depending on where you live, there may not be any homes available for you to buy.

There are many cities and towns that are not expanding or have no room to expand, and as such, the total number of homes in that area remains constant. As such, you may have to wait for an opening or may have to look for a home in another location. Therefore, even though you are ready, willing, and able to purchase a home, the current real estate market may not allow you to do so.

If you can financially afford to do so, you should consider purchasing a home. Even though overcoming the financial and credit obstacles are the hardest burdens to overcome when purchasing a home, the current real estate market may be a factor that prevents your purchase of the same. If this occurs, be patient and maintain your financial and credit situation so that when a home becomes available, you will be able to purchase the same.

Should the Government Regulate the Credit Card Industry?

2008-03-12T13:16:00.000-07:00

The truth is, there is no industry that does not have some sort of government control over it. The credit company is no exception. Granted, a large part of the sector does remained "unregulated," however, there is government regulation is some respects. For example, the law states that a credit card cannot be denied based upon discriminatory reasons, credit card companies have to pay taxes and abide by other state and federal financial laws, and if you have a grievance, you can sue a credit card company. All of those examples show that there exists some level of government control over the credit card industry. However, many people believe that the government should regulate who gets a credit card, how many credit cards one should have, the maximum amount of credit one can have, and the maximum interest rate a credit card company can charge. Doing so would effectively cause the government to take over, and not regulate, the credit card industry.

It is important to note that nobody is forced to obtain a credit card. A credit card can be a powerful financial tool, but this does not mean that it is mandatory for a person to get one. Additionally, each individual person makes the decision on how to use or abuse his/her credit card privileges. As such, the credit card company is not to blame when somebody defaults on a payment.

Some argue that the credit card companies raise your credit limit so that you will spend more money. This is absolutely true, but it does not change the fact that each human has free will. Therefore, just because your credit limit is raised does not mean that you have to use the additional amount of available credit.

Another argument pressed by proponents of government regulation is that the interest rate on credit cards is too high because there is no limit on the amount of interest a credit card company can charge. Theoretically, this is true (however, I find it hard to believe that if a credit card company charged a 60% interest rate that lawsuits would not rain down upon that particular credit card company), but once again this argument negates a person's ability to choose. A person does not have to apply for, or accept a credit card offer that charges a high interest rate. Therefore, it is again not the fault of the credit card company if the person applies for and obtains such a card.

The bottom line is that credit cards are a privilege and not a right. As such, there is no need for government regulation as to the practices of credit card companies. Every person has the right to choose the card he/she wants and whether or not he/she wants a credit card in the first place. The answer is to educate people about responsible credit card use. Credit cards, like all privileges, can be abused, and as such, sometimes a person needs to learn a tough lesson before they figure out the proper use of such a privilege. If the government intervenes and "bails out" these people every time they get into trouble, no lesson will have been learned and the irresponsible behavior will continue.

Is the Credit Rating System Fair?

2008-01-14T13:06:00.000-08:00

The main reason that the credit rating system is fair is because each person controls his/her own credit rating. Your borrowing and payment habits are what dictate your credit rating. If you abuse your credit, your credit rating reflects the same. However, if you are a responsible credit user, your credit rating will be favorable.

Lenders need a system that can help them determine whether a person is a borrowing risk. By using the current credit rating system, lenders have some kind of barometer for measuring credit risk. Without such a system, obtaining a loan would be extremely difficult because lenders would require, among other things, years of financial records to help determine the potential borrower's creditworthiness. Our current credit rating system conveniently compiles all of a person's financial records and uses them to create a nice, neat number that lenders use to make lending decisions.

The people that complain most about our credit rating system are the people that have low credit scores. These people claim that their low credit scores are somehow not their fault. These people claim that the credit card companies kept sending them more and more credit, and that they just "had" to use this additional credit. Are these people serious? We reap what we sow. It is amazing to me that a person can abuse their credit privileges, and then complain about the penalties that are assessed as a result of their abuse. These complainers are proof that the system is fair and is effectively working. If the credit rating system was unfair, these credit abusers could continue to take advantage of their credit privileges to the detriment of responsible credit users.

Another common complaint that people make is that they have no credit score before they apply for credit. The argument that these people make is that they have never had debt, therefore, they should have a high credit score. How does this make sense? A credit score measures a person's creditworthiness. Therefore, how can one have a credit score without first having credit? This is not a hard concept to understand.

The system is not perfect, but it is fair. I have had my credit score reduced due to negative information being placed in my credit file that was not mine. I had to get the information removed by contacting the credit bureaus. I would be lying if I said that the information was immediately removed. In fact, it took a couple of months to get the information removed. I was not happy, but mistakes happen. If the system was perfect, there would be no complaints.

The point is, the system is as fair as it can be. If you feel that the credit rating system is unfair or unreliable, pay cash for everything. If you cannot afford to pay cash for everything, stop complaining about the system and use the system to your advantage. If you use your credit responsibly, you will have nothing to worry about.

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Pros and Cons of Debt Consolidation

2008-01-14T12:59:00.000-08:00

Debt consolidation can offer many great benefits, such as a lower monthly credit card payments, reduced interest rates, the prevention of being assessed late and over-the-limit fees, and faster debt reduction, to name a few. However, there are also some disadvantages that accompany debt consolidation, such as a freeze of your credit using privileges, closed credit accounts, and consolidation fees. Knowing how to weigh the positives against the negatives and becoming completely (or as well informed as possible) informed about consolidation are two important factors you need to consider before making a decision as to whether or not you should consolidate your credit card debt.

The first factor you should consider is the amount of your credit card debt. Many consolidation companies require that you have a minimum of $5,000 worth of credit card debt before you are allowed to participate in the program. Some companies require at least $10,000 worth of debt. The point is, if you have only a relatively small amount of credit card debt you can probably work the problem out by yourself. Additionally, because these debt consolidation companies charge an “administrative” fee every month, the longer it takes you to get out of debt equates to more money for the debt consolidation company. Therefore, they are not willing to help people who are only $1,000 or $2,000 in debt because it is not profitable to the debt consolidation company.

It is true that the debt consolidation company will combine all of your monthly debt payments into one monthly payment that you pay to the debt consolidation company who then distributes the payment to the various credit card companies. Additionally, it is true that the debt consolidation company will work with your creditors to lower the interest rates on your outstanding debt accounts. However, what they do not tell you is that sometimes credit card companies do not change the payment due date for your account. Thus, if your single monthly payment to the debt consolidation company is due on the 5th of the month, but one of your credit accounts is due on the 4th of the month, you may incur a late fee. Make sure that this situation is remedied before you start making payments to the debt consolidation company.

One of the negative aspects of debt consolidation is that your credit score will be lowered because all of your credit card accounts that are in this program will be closed. Closed credit accounts lower a credit score. Additionally, the credit accounts that are the subject of the debt consolidation program will be frozen. As such, you will not be able to use your credit card for any of these accounts. Therefore, you should choose carefully which accounts to consolidate. Do not leave yourself without an emergency (and I emphasize “emergency”) credit card. This does not mean that you keep your credit card for your favorite department store because there is a new clothes line coming in next week. This is not an emergency, and this way of thinking probably got you into the credit debt mess that you are currently facing. I suggest that you consolidate the cards with the highest amount of debt and with the highest interest rate. By doing this, you will be saving the most money.

Do your homework and do some comparative analysis if you are considering debt consolidation. Choose a company that you are comfortable with, that is easy to contact, and that has the lowest, or, if possible, no fee. If you are not comfortable with credit card debt consolidation, try solving the problem yourself. Contact the credit card companies and see if you can negotiate a lower interest rate or monthly payment. The point is, you have to take action to resolve your credit debt situation before it reaches the stage where bankruptcy is your only viable option.

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Simple Ways to Save Money

2007-12-28T15:02:00.000-08:00

Many people are on a tight budget. However, in order to break out of the norm and achieve success, you have to take a chance, a true entrepreneurial risk. Ninety-nine percent of the time, you have to make a monetary investment in order to change your situation. Therefore, the question becomes, “how can I make a monetary investment if I do not have the money to do so?”

Interestingly enough, the easiest way to make more money is not by earning a larger salary (because we all know that if getting a bigger paycheck was so easy, everybody would do it) but by cutting costs. This leads us to the topic of the article, “simple ways to save money.”

Step one: cut your costs. Some people have a very limited income, but have a top of the line cellular phone, the best cable package, and eat at a restaurant several times a week (including breakfast, lunch, and dinner). Reevaluate your situation and cut out what you do not need. Do not buy the $400 cell phone when a $100 cell phone will be sufficient. Do not get the unlimited minutes plan for $150 per month, when a smaller plan for $50 per month is all you need. Get rid of all the movie channels that cost $2 extra per channel per month on you cable bill. Bring lunch to work, and do not run to your local coffee house every morning to buy a $3 cup of coffee.

Taken individually, all of these costs seem insignificant. However, if taken together, you could be saving well over $100 per month on your expenses. This money could then be used for investment purposes, thus creating an income stream. Therefore, not only have you saved money, but the money that you saved is actually making you additional money.

Another good way to save money is to automate the process. Many banks will automatically take a portion of your paycheck and put it into a savings account at no charge (you will have to fill out some paperwork, but everything is usually very easy and takes almost no time to complete). By doing this, you are guaranteeing that you will save some money every month and makes the savings process easy for you. Keep in mind, every little bit can help you. Therefore, something as small as $50 per month is a good starting point if that is all you can afford. If you can do more, by all means, save more!

Just remember, you want your money to work hard for you. Therefore, put your money into a banking institution that pays you a good interest rate. There are many Internet sites (such as www.bankrate.com) that will give you the interest rates of the banks in your area as well as national banks. This way, you can choose the best option for you.

Start saving and you will soon see a difference. Once you have a little capital, keep your eyes open for investment opportunities that can help you achieve success.

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Companies that Improve your Credit Report for a Fee

2007-12-18T22:34:00.000-08:00

It is true that many companies exist that will claim to clean up your credit report for a fee. Some of these companies are less than ethical and some are outright scams, however, there are many legitimate companies that will clean up your credit report for a small fee. Many people believe that all of these credit repair companies are cheats that take your money and do no work to help you out. This is simply untrue. The company that I used to clean up my credit report definitely did its job, and has helped me raise my credit score over 100 points over the course of one year.

Many skeptics argue that everything that these companies do can be done yourself for less money. This is 100% true, however, I do not see how that is relevant. I can make dinner at home for less money than going to a restaurant. However, under the skeptics logic, I should not go to the restaurant because it will cost more than making dinner at home. The point is, if you use a credit repair company, you are paying for experience and convenience. Of course you can do everything yourself, however, if you pay a company to take care of the problem, this means less work for you and, if the company is reputable and experienced, faster results.

Does this mean that you should use a credit repair company no matter what? No, you should not use one of these companies no matter what. If you decide that your credit report needs to be repaired, you should analyze your situation and decide which option (paying a company to do it or doing it yourself) is best for you. Either way, if done correctly, the results will be worth the time and money.

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Can Student Loans be Discharged in a Chapter 7 Bankruptcy?

2007-12-18T21:55:00.000-08:00

First of all, what is Chapter 7 bankruptcy? Chapter 7 bankruptcy is also sometimes called “liquidation bankruptcy.” This is the bankruptcy option that cancels your debts. It is available to individuals, but does not cancel every debt that a person has. For example, a home mortgage is not a dischargeable debt. Could you imagine the amount of abuse that would take place if a home mortgage was a dischargeable debt? It is not hard to imagine a person buying something like 10 properties, filing for bankruptcy, having the mortgages discharged, and selling all the property for a large chunk of cash.

As with home mortgages, student loans are not dischargeable in a bankruptcy proceeding. I know the attraction that student loans bring. I have been there and done that. I have borrowed over $100,000 in student loans in pursuit of my Bachelor’s degree and my law degree. Student loans are relatively easy to get, pay quickly, and have a low interest rate. As a result, many students borrow more money than they actually need. This creates a problem when students have to repay the loan upon graduation or at the end of ten years, whichever comes first.

Students are shocked when the repayment period begins. Student loans can add up, and if you do not have the diligence to track your borrowing and cut your costs, you can end up in some serious trouble when the repayment period begins. Consolidating your student loan is a popular option that most students utilize in order to save on interest expenses. Although consolidation will save you money, it is not the “end all” solution to borrowing too much money. The truth is, there is no answer. The only way to solve the problem of borrowing too much money is to prevent it from happening. Remember, bankruptcy will not help you because student loan debt cannot be discharged in this way.

Watch your borrowing and keep track of your expenses. Save money wherever you can and only borrow what you need to live. Borrowing too much will burn you in the long run and will be a difficult obstacle to overcome, especially since many graduates start to accumulate big expenses (such as a home mortgage, a car, marriage ceremony, a new baby, etc.) soon after graduation.

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Explaining Compound Interest

2007-12-05T18:03:00.001-08:00

Compound interest is a great financial tool that can help you achieve a good chunk of wealth. There are many financial calculators that show you how compound interest can help grow an investment. The only thing you need to be aware of is that if you are relying solely on compound interest as you return on investment, you should be focusing only on the long term return. Usually, people use compound interest as their return on investment for investments such as individual retirement accounts (IRAs) and savings accounts.

Simple interest is calculated using a simple formula: Principal x Interest Rate x Time. So, for example, let us say that you deposit $1,000.00 in an account for one year that yields a 4% interest rate. Therefore, your return for the year would equal $1,000.00 X 4% or .04 X 1. This equals $40. Therefore, at the end of the year, your account balance would be $1,040.

If you wanted to figure out how much interest you would make per month, the formula is the same (Principal x Rate x Time), however, your “time” would change from 1 to 1/12. Since there are 12 months in a year and you want to figure out the return per month, you would use 1/12. Therefore, your equation would be $1,000.00 x .04 x 1/12. This equals about $3.33 per month.

Under simple interest, after 1 month, your principal investment of $1,000.00 would now be $1,003.33. Even though your principal increases, under simple interest, you would still calculate the interest based upon the original $1,000 investment. Compound interest is different in that you return increases as your principal increase. Therefore, after the first month, instead of calculating the interest on a principal amount of $1,000, you would calculate interest on the new principal amount of $1,003.33. Therefore, under simple interest, in month 2, you would have $1,006.66 in you account. However, under a compound interest account, you would have $1,006.67. I know that one cent is basically nothing, however, that is why compound interest is a long term investment. At the end of one year, under simple interest, your account balance would be $1040, however, under compound interest, your account balance would be $1040.69.

As you may notice, you get about $0.69 more under a compound interest scheme. Over the years, this number adds up significantly. In fact, the difference could be thousands of dollars. The point is, use compound interest as a safe, guaranteed, long term return on investment.

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What Does a Credit Score Mean to You?

2007-12-05T13:04:00.000-08:00

There are many frequently asked questions by people who are not entirely clear as to the significance of a credit score. These people understand that a high credit score is good because it will help them get loan approvals and lower interest rates, but these same people do not know how high their credit score needs to be in order to obtain these advantages.

A FICO score ranges between 300 to 850. Obliviously, if you have a credit score of 850 you have nothing to worry about. You have reached the pinnacle of credit worthiness and will get the best interest rate and best loan, guaranteed. However, what if I have a score of 720? Will a score of 720 get me a better interest rate than a score of 715? A score of 720 is higher than 715, thus, many would conclude that a 720 would get favorable interest rates and loans. However, such is not the case. Lender will treat a score of 715 and a score of 720 the same. Why?

In addition to being scaled between 300 to 850, most lenders create credit score categories. These categories have various different names depending on the lender, but generally, the credit scores are broken into 5 categories and have names similar to (1) Poor; (2) Fair; (3) Average; (4) Good; and (5) Excellent. The lender will then take your score and put it into the appropriate category. Once you are placed in a particular category, you are given interest rates and loan terms based upon that category.

Generally, a lender’s ratings are as follows: (1) Poor is equal to credit scores 619 and below; (2) Fair is equal to credit scores 620-659; (3) Average is equal to credit scores 660-720; (4) Good is equal to credit scores 721-749; and (5) Excellent is equal to credit scores 750 and over. So, what is the point I am making? The point is, a score of 715 is not different from 720 for lending purposes. Therefore, you do not need to worry about these couple of points when applying for a loan. The only thing you should worry about is the point difference between the categories. In other words, if you have a 720, you should try to boost your score a couple of points so that you can get the more favorable terms and interest rates given in the “Good” category.

Additionally, remember that your credit score is based upon the time it is pulled. Therefore, your 720 today could be 718 or 725 tomorrow. Everything such as paying a bill, taking out a loan, getting a new credit card, getting a larger credit line on an existing credit card, and/or having a credit card for more than three years will affect you credit score. Because many people do at least one of these things several times per month, your score will thus change several times per month. This is one of the reasons why lenders do the category system.

The point is, take care of your credit score, do not worry about the points in the same category (because, based on our example, a 660 will get the same rates and loans as a 720), and strive to get your score into the highest category.

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The Importance of Building a Good Credit History

2007-12-02T22:00:00.000-08:00

There are many reasons as to why people should strive to build a good credit history. First and foremost, a good credit history is an important financial asset to possess in order to obtain the big loans (i.e. a mortgage, a car loan, and/or a college loan, to name a few) in life. Additionally, beyond qualifying for these kinds of loans, the interest that you will have to pay for any such loan is an important factor to consider when getting the loan. If your credit is good, your interest rate will be lower and thus, make the loan a more attractive option for you.

Of course, these loans will not be a concern to some people. Some people rent (however, renting a place by yourself does require a credit check, therefore, if your credit report is bad, you may be denied the lease. If you do rent and do not want to have your credit history checked, you are going to have to have roommates, or have the apartment rented in the name of another person who is willing to be the primary tenant on the lease and who trusts you enough to make the monthly payments on time.). Some people buy cars for cash, get scholarships to college, or never go to college, and some people will never take out a loan. There are not many of these people. However, if you are one, or are striving to become such a person, there is another reason as to why you should have a good credit history.

What started in a minority of companies is now basically common practice. Many companies will check the credit history of all new employee applicants. These companies believe that the credit history of a person can determine, among other things, the responsibility level of a person and the true intention as to a person’s reason for applying for a job. A bad credit history will not be the end-all factor that prevents you from getting a job, however, many companies take your credit history into consideration when determining who to hire. Do not start with a disadvantage because you have a bad credit history.

Even though some of you may think that debt is evil and that there is no possibility of you ever taking out a loan or otherwise using credit and therefore do not care about your credit history, remember that there are many companies out there that check your credit. If you do not strive for a good credit history because of the financial benefits, at the very least, a good credit history could get you the job that you want. Therefore, a good credit history is in your best interest.

Do Credit Counseling Services Really Help?

2007-11-28T23:06:00.001-08:00

In order to answer this question effectively, one would have had to actually participate in a credit counseling service. Fortunately for you, I have participated in such a service. There was a time in my life (mostly during college) when I would irresponsibly use my credit cards. I was deeply in debt and was having trouble making monthly payments. I decided that I needed to solve the problem by hiring the services of a credit counseling company.

Basically, these companies contact your creditors and get your interest rate and monthly payment lowered. Your credit accounts are closed (therefore, you can no longer use them and your credit score is negatively impacted, although not by much) and all of your debt is pseudo consolidated. These companies claim that your debt is consolidated into one, low monthly payment. Although it is true that you do only make one monthly payment, your debt is not consolidated. Each one of your credit card companies is still owed its respective debt amount. You only make one payment because you pay your credit counseling service, which in turn pays each one of your individual credit card companies its individual share. Additionally, the credit counseling company takes a fee for this service.

For the most part, these companies help you get organized and do help you pay down your debt. In my experience, they do not completely cover all of the ramifications of participating in such a service, however, if you do your homework and ask all the questions you may have, you will discover the whole story. If you do not like the answer you are given, ask the question again or ask for clarification.

The only problem I had with my credit counseling company is that they sometimes were not timely with my payments to my creditors. You have to make sure that your payments are being made to the appropriate creditors for the appropriate amounts. Additionally, you have to make sure that the credit card companies are recording the payments and are not adjusting your interest rate. It can be a tedious process, but if you put in the effort and weigh the benefits against the disadvantages, you should conclude that a credit counseling service is one viable solution if you are struggling with credit card debt.

Should you Pay off your Debt or Invest?

2007-11-28T16:32:00.000-08:00

Many financial gurus advise that you should always pay off your debt first. In my opinion, whether or not you should pay off your debt first comes down to the interest rate you are paying on your debt versus the interest rate you could collect (or the return you could get) by investing.

Debt comes in many different forms. Many people have credit card debt, student loans, a mortgage, and some kind of auto loan. Many financial gurus state that you should pay half of your monthly mortgage payment every two weeks. By the end of the year, you will have made an additional monthly mortgage payment. This extra monthly payment will help you pay off our mortgage faster. Unless you plan on living in your home for the next 30+ years I do not like this plan. A mortgage is a fixed payment. Additionally, if your monthly payment is too high you can refinance your loan (if your credit is good). Also, many people do not live in a home long enough for the mortgage interest rate to take a toll on their finances. Also, most homes appreciate in value at a rate higher than the interest rate on the mortgage. Last, mortgage interest is tax deductible. Therefore, paying off a mortgage is not something I would take into account when deciding whether to pay off debt versus investing.

The main inquiry should be whether you should pay off your credit card debt before investing. Credit card debt usually carries an interest rate of anywhere between 8-30+%. If you have a credit card with an interest rate of 8%, you are in the minority. 8% is a very low credit card interest rate, therefore, it is more likely that you possess a credit card that has 10% or higher interest rate. Meanwhile, I am unaware of any risk-free investment that yields a 10% return. Therefore, in this case, you should pay off your credit card debt first.

If, however, you find an investment that yields a return higher than your credit card interest rate, than the investment looks like a good choice. However, you must take into account the risk involved in the investment. The stock market goes through many changes. You definitely do not want to pay your full credit card interest rate and at the same time lose a percentage of your investment.

Always carefully analyze the investment situation before you choose to invest in lieu of paying off your credit card debt. In most cases, it will be better and more profitable to pay off your debt before you invest. However, do your homework and there may be an exception that you discover.

Spending on Credit Cards

2007-11-28T15:28:00.000-08:00

Spending on credit cards can become a very large problem if you do not keep track of what you are doing. If a you have one credit card, it is easy enough for you to keep track of your spending. Additionally, if a credit card has a low credit limit, that limit will be a ceiling for your spending habits. Keep in mind that I am not suggesting that you use your credit card until you “max it out.” I am merely suggesting that the credit limit, if low, will prevent you from getting too deeply into debt.

As I stated, if you only have one credit card, it is relatively simple to keep track of your spending. However, what if you have more than one credit card? Two credit cards should still be easy to track, but what about three, four, or even five cards? At what number does credit management become difficult? This is the problem that many credit users face.

I was reading a survey in the October/November 2007 edition of Young Money magazine. The article stated that of the 670 college students that participated in the survey, 22% received at least 6 credit card offers per week. In addition, a separate survey in which 796 college students participated stated that 34% own at least three credit cards (specifically, 24% of the 796 participants owned more than three credit cards). Why is this relevant? This survey (although the survey sample is extremely small) shows that some college students have more than three credit cards. Here is the point; if you keep track of each credit card (let us say that you spend $100 per card) but you do not keep track of the entire balance on all cards, you can find yourself in a deep hole.

In your mind, you may think that you only spent $100, but when the bill comes for all the credit cards, you are going to be in for a rude awakening. What if you have five credit cards? $500 is very different from $100. The point is, you have to keep track of all your credit card spending as a whole.

The Importance of Knowing What is in your Credit Report

2007-11-27T23:54:00.000-08:00

Many people believe that they are immune from fraudulent or incorrect information in their credit report. I, however, have experienced a phenomenon I like call “credit reporting agency stupidity.” I would like to use a less harsh word than “stupidity,” but after what I have experienced with these credit reporting bureaus, “stupidity” is the only word that accurately describes their practices.

I am named after my father, therefore, we share the same name. The only difference between my name and my father’s name is that my name has the Roman numeral “II” following my name (denoting “the second”). My social security number is different and, quite obviously, my birthday is different. One would think that any one of these differences would lead a credit reporting agency to understand that my father and me are two separate individuals. However, such is not the case.

I cannot tell you how many banks and credit bureaus I have had to contact in order to remove items from my credit report that belong to my father. It is amazing to me that a credit reporting agency with millions of dollars cannot figure out that I am a separate individual from my father. Are they so ignorant to think that nobody in this country has the same name as another person? Is not that why the government provides social security numbers so as to distinguish between the numerous people with the same name? I can only imagine the problems in the credit report of a person named “Michael Smith!”

The point is, you need to check your credit report regularly to avoid any shenanigans that the credit reporting agencies love to create. Make sure that all the information in your credit report is correct. If you find any inaccurate information (even if it is something like your current occupation or your phone number) dispute the inaccuracy and provide the correct information. Trust me, you do not want to experience “credit reporting agency stupidity.”

How Bankruptcy Can Affect Your Credit Report

2007-11-23T03:07:00.000-08:00

A bankruptcy is probably the worst, one trick pony that can happen to your credit report. Before you decide to file for bankruptcy, you need to think long and hard about the benefits and penalties. The most obvious benefit is that most of your debts will be discharged (with the exception of certain debts like mortgages, student loans, and IRS liens), however, a bankruptcy also means that your credit report and your credit score will be severely damaged.

There are many people that advocate against using or even obtaining credit. I have actually read articles that suggest that Americans are completely ignorant as to the purpose of a FICO score, and that anybody who tries to obtain a higher credit score is a fool. In my opinion, these advocates are nuts! There is more potential harm in not having a credit score than there is in maintaining a good credit score. What does this have to do with bankruptcy? Well, if you care nothing about your credit score or credit report, a bankruptcy probable will not be a big deal for you. Your debts are discharged and off you go. However, if you are a person that realizes that a high credit score could be a great asset to possess during your journey towards achieving success, you need to know the harm that a bankruptcy will cause to your credit score and credit report.

First, your credit score will be greatly reduced. By filing for bankruptcy, you demolish your creditworthiness. You are basically telling potential creditors that you have a very high risk of defaulting on any loan, therefore, you will not qualify for most loans.

Second, if you file for bankruptcy, that bankruptcy will be reported on your credit report for up to 10 years. I would like to believe that the bankruptcy report is automatically deleted from your credit report after 10 years, but the truth is, you will probably have to contact all three credit reporting bureaus and tell them to remove the bankruptcy from your file.

Last, because a bankruptcy severely damages your credit score and credit report, you better not plan on moving or buying a car for at least 10 years. Unless you have cash to afford these things, you will either get denied for a loan flat out or your interest rate will be so high that it is not worth taking out the loan.

If your credit score and credit report are important to you, consider all of your debt management options before deciding that bankruptcy is the best choice.

When Credit Cards Become an Addiction

2007-11-20T14:41:00.000-08:00

There are many benefits to credit card ownership. You can develop a strong credit report and a high credit score. These will result in lower interest rates for you on loans that you may take. Additionally, your debt to credit ratio could help you apply for a big loan. Another advantage is the spending power that a credit card offers. Do not misunderstand what I am saying; a high spending power does not necessarily mean that you should utilize that power whenever you want. Doing so will result in financial hardship and probably, some legal issues.

One definition of “addiction” is “the state of being enslaved to a habit or practice.” Therefore, is it possible to be addicting to credit card spending? I believe that it is possible to be addicted to such a thing. Continuously using your credit cards without regard for the financial and legal consequences sounds like an addiction to me. Keep in mind, I am not a doctor of any kind and therefore am not qualified to give an opinion as to a person’s psyche. However, irresponsible credit card use can be a serve problem if a person does not know how to control the problem.

Solving the problem of irresponsible credit card use requires preventative measures. Teaching a person the possible dangers of irresponsible credit card use is the first step towards creating a responsible credit card user. Educate yourself as to the correct and responsible way to use credit cards. This is the best way to safeguard yourself against irresponsible credit card use.

Although this is sound advice, how do you kick the credit card spending habit after you are already “addicted?” Your primary concern should be for your financial welfare. Because of this, you may have to close all of your credit card accounts in order to achieve this primary concern. Closing all of your credit card accounts will negatively impact your credit score, however, it will save you from the continuous spending. Credit scores and credit reports can be repaired, however, your financial welfare is much harder to fix.

Remember, credit card ownership is a privilege. Therefore, if you cannot handle the responsibility of credit card ownership, do not get a credit card. There are other ways to build a credit score and credit report, and if you cannot do it with credit cards, you will have to utilize other methods.

Why You should Shred your Mail and Documents

2007-11-19T16:49:00.000-08:00

Identity theft is rampant. It seems that everywhere you look, somebody has had their identity stolen. Just recently, I saw a news story on the Orange County news about a pair of individuals that were going around to mailboxes and stealing all of the mail.

Due to all of the incidents of identity theft, you have to protect yourself at all times. There are many things you can do to protect your identity, including, (1) subscribing to a credit card monitoring service (you will get alerts if there has been a change to your credit report); (2) setting purchase limits on your credit cards (this means that you will be personal notified and have to give approval for any purchase over a set amount of dollars); and (3) you can safeguard your personal information. This list is not exhaustive.

One of the easiest and most effective ways to safeguard your information is to shred any mail or document with your personal information on it, before you throw it away. Many people get credit card offers, bank statements, and other pieces of mail that contain large amounts of personal data. People generally look at the piece of mail, and subsequently throw it away. The problem with this is that many identity thieves search through trash cans and steal people’s mail in order to gather enough personal information to steal that person’s identity. Know that it does not take that much information to steal an identity.

By running all of your mail or documents through a cross cut paper shredder (which are relatively inexpensive and can be purchased at any office supply store for around $30-$40) your mail and documents become a mass of confetti that making it near impossible for an identity thief to get information off of these documents.

Protect yourself from the frustration that is identity theft. The best way to do this is by limiting the opportunities an identity thief has to steal your identity. A simple as it may be, shredding your mail and documents through a cross cut paper shredder is a very simple, effective way to accomplish this task.

How Does a Debit Card Work?

2007-11-19T10:54:00.000-08:00

A debit card looks exactly like a credit card. It will have the same shape, color, and magnetic strip that a credit card has. A debit card is used almost exactly the same way as a credit card. In fact, there are times when a debit card is used exactly the same way as a credit card. For example, if you are at the grocery store and you want to pay with a debit card, you swipe your cad through the machine and type in PIN (PIN means personal identification number). If the bill clears your debit is approved and on you go. However, if you are in a restaurant, you card is swiped like a credit card and instead of having to type in a PIN, you have to sign a receipt.

So, if everything is exactly (or near exactly) the same as a credit card, what is the difference? The main difference (and the most important difference) is that a debit card is secured. In other words, a debit card is linked to a checking or savings account and uses that money to pay a bill. Put simply, a debit card is a glorified checkbook. If you do not have the money in the checking or savings account, your purchase will not clear (the purchase will “bounce”) and you will thus not be able to make the purchase.

You have probably all seen the television commercials for the Visa check card. This is a debit card. If you were to get that card, you would have to link it to a checking account of some kind in order to use the card. All of the national banks offer their customers a debit card when the customer opens a checking account. Getting the debit card from your bank is incredibly easy and convenient. However, if your bank does not offer you a debit card with your checking account, you can use other debit cards (like the Visa check card) with your checking account.

Debit cards offer much convenience, however, when people use debit cards, they tend to lose track of their spending. Therefore, if you use a debit card, I recommend that you still record your expenditures in your checkbook in order to keep everything balanced.

Online Credit Card Approval

2007-11-16T21:52:00.000-08:00

Needless to say, electronics and the Internet have changed the way that people maintain and conduct their financial affairs. Internet banking, Internet bill pay, and Internet credit card applications have paved the way for faster and more effective money management.

Pre Internet banking dominance, everything financial was done through the United States mail and telephone. Everything was a slow process. In regards to credit card applications, you had to go to your local bank and get one, or you had to wait for a credit card offer to be sent to you in the mail. You had to fill out the credit card application by hand and mail it to the credit card company. If your application was accepted, you would receive a letter a couple of weeks later telling you such. Another few days later, you would receive you credit card. On the other hand, if your application was denied, you had to wait those few weeks just to discover this fact.

Thank goodness for the Internet and instant credit card application decisions. Nowadays, all you have to do is go to the website of the credit card company in which you are interested. You select the credit card of interest. Next, you fill out the available credit card application. Once that is complete, you submit the application and get a credit card decision, usually, within thirty seconds. Thirty seconds sure beats a few weeks!

If you are in the market for a credit card and you have never used an Internet credit card application, I suggest you give it a try and get an instant credit decision.

Moral Issues Involving Credit Cards

2007-11-14T14:41:00.000-08:00

Some moral issues exist regarding credit card use, ownership, and providing. Credit card companies are faced with the moral issue of offering credit to people that cannot afford to have credit. On the other hand, credit card users are faced with the moral dilemma of maxing out a credit card with the intention of not paying back the debt. Both issues are equally important and both can be viewed as business decisions.

In regards to credit card companies; sometimes, a credit card company will target people with bad credit and/or low income. A credit card will be offered to these people. The credit card will have numerous fees and an astronomically high interest rate. Credit card companies will argue that these fees and high interest rates are necessary in order to offset any losses due to people defaulting on their debt. However, another way to look at it is that a credit card company can charge these high interest rates and numerous fees because people with bad credit and/or low income do not have an alternative option. Therefore, the moral issue of taking advantage of people comes into light. Should credit card companies be allowed to offer these sub standard credit cards to people with few assets? The quick answer is that credit card companies are not doing anything illegal. Then again, the plain for what is legal is far below the plain for it is considered “moral.”

In regards to people; many people take advantage of credit card companies by obtaining many credit cards, “maxing” them out, and then refusing to pay the debt. Basically, this is fraud because the person never had the intention of paying back the debt. Other consumers are hurt by this default by way of higher interest rates and more fees (as discussed above). Therefore, what if a poor person used a credit card to buy food and supplies with the intention of never paying back the debt? Should they be punished? Isn’t that person merely trying to survive and not trying to take advantage of a credit card company? Is it the credit card companies fault for giving such a person a credit card?

I cannot provide any answers to these questions because everybody has a different sense of what constitutes “morals.” There is no general standard for moral behavior. Therefore, the situations presented above are for personal consideration. What do you think the moral standard should be? Do you think that a degree of morality should be infused in the practices of a credit card company and an individual credit user? Would you be willing to pay more fees and a higher interest rate in lieu of a credit card company giving credit cards to people with bad credit and/or low income?

Credit Report Disputes

2007-11-10T20:40:00.000-08:00

Many times, inaccurate information will appear on your credit report. In my experiences, one of the most common mistakes credit reporting agencies make is that they mix up the credit information of family members with the same name. For example, my father and I share the same name. I cannot tell you how many times my father’s credit accounts have shown up on my credit report. It is very frustrating, however, all one can do is fix the inaccuracy.

The easiest way to remove inaccurate information is to dispute the inaccuracy. The three main credit bureaus (Experian, Equifax, and TransUnion) all have options where a person can dispute inaccurate information through the respective credit bureau’s website. First, you should only dispute the inaccurate information to the credit bureau that has reported the inaccurate information. Therefore, if the inaccurate information is reported only in your Equifax report, there is no need to dispute anything in your TransUnion report because the inaccurate information is not in your TransUnion report. It is important to note that these three credit bureaus are completely separate entities. Therefore, for example, if inaccurate information appears in your TransUnion and Equifax report and you successful get the inaccurate information removed from your TransUnion report, that does not mean that Equifax has to also remove the information.

I wish the process was as easy as sending in a dispute of inaccurate information and waiting for the inaccuracy to be removed from your credit report. However, it is not that simple. Credit reporting agencies are very stubborn. Things will not be easy and you may have to dispute the same inaccuracy more than once. However, with persistence, you should be able to remove inaccurate information.

Should you Transfer your Credit Card Balance?

2007-11-10T19:09:00.000-08:00

A credit card balance transfer is when you take the balance on one credit card and pay off that balance with another credit card. The balance on the first card is thus effectively transferred onto the second credit card. Why would anybody do such a thing? Put simply, people do this to save money on interest rates. However, there are some dangers that can defeat the purpose of a credit card balance transfer.

As I stated, people transfer credit card balances in order to save money on interest rates. If you have a credit card that has a 23% interest rate and another card with a 15% interest rate, why not transfer the balance on the 23% interest rate card to the credit card with the 15% interest rate? You will save money and you will only have to make one payment instead of two.

The first problem that people run into is that sometimes a credit card does not have enough available balance in order to receive the transfer. Therefore, if you need to transfer $500, but only have $300 available balance on the card to which you want to transfer, obviously you cannot transfer the whole amount. I would caution transferring $300 of the $500 because then you will have one card “maxed out.” This will negatively affect your credit score, and could lead to trouble with fees (over the limit fees) down the road.

The second problem people face is that sometimes they transfer a credit card balance to a card with a teaser rate. You might see a credit card that advertises a 0% interest rate for six months on all credit card balance transfers. You may think, “This is great!” However, you have to check the fine print. Most of the time, the interest rate after the six month introductory period changes from 0% to 20%+. Make sure that the default interest rate is lower than the current interest rate on your credit card or else the whole purpose for transferring your credit card balance will be defeated.

Third, make sure that there are no fees associated with your balance transfer. You should not have to pay additional money for transferring money. If the credit card to which you want to transfer your balance wants to charge you a fee, find another credit card.

Balance transfers can be a benefit. Avoid the teaser interest rates with sky high default interest rates. Additionally, if you conclude that a balance transfer will save you money, make sure that the card to which you transfer has a noticeably lower interest rate. It is a waste of time to transfer from a 22% interest rate credit card to a 20% interest rate credit card. If you use balance transfers effectively, you could literally save thousands of dollars.

Credit Card Rebate Programs: Are They Worth It?

2007-11-08T23:28:00.000-08:00

Of all the credit card rewards programs that are offered, cash back rewards cards are my least favorite. Many credit card companies offer many different types of rewards programs. The most common rewards programs are cash back, airline miles, and rewards points. Each card is different, and thus, you must carefully check the terms and conditions of each credit card so that a fancy rewards program does not blind you from a high interest rate and/or high fees.

Usually, when a card offers cash back rewards, the cash back reward is one percent (1%) of the amount you charge. Therefore, for every $1,000 you charge to your credit card, you will get a $1 reward. Is that really a reward? Think about it like this, in order for you to earn $1,000 worth of cash back rewards, you would have to charge $100,000. If a person is charging $100,000 to a credit card, do you really think that $1,000 is significant to that person? I do not think so either, therefore, I generally avoid cash back reward cards.

As I mentioned above, my favorite kind of reward card is a points card. I like the variety of options on which you can redeem your points. Additionally, some credit card companies offer “double points” or point bonuses on specific purchases (such a gasoline).

Regardless of the reward you choose, you must be aware of what you are giving back to the credit card company in order to obtain this reward. For example, if your rewards card requires an annual fee, do not get the card. Additionally, many rewards cards have a high interest rate. The point is, make sure that the rewards credit card is acceptable under regular credit card standards (this means a low, fixed interest rate and no annual fees) before deciding to obtain that rewards card.

Cash back rewards cards are not worth the effort, therefore, look for a rewards card with more benefits and better options. However, make sure that you are not sacrificing suitable credit card requirements in order to get a “rewards card.”

The Credit Card Trap

2007-11-08T19:24:00.000-08:00

I advocate owning and using credit cards. I believe that if a person uses credit responsibly, they can greatly benefit from such use by way of a high credit score and a strong credit report. However, there are two common, credit card blunders that many people make. If you avoid these two common blunders, you can avoid the credit card trap of creating more debt than you can handle.

The first most common mistake that many people make is that they only pay the minimum payment due. Paying only the minimum payment is the worst thing you can do, monetarily. If you make consistent, on time, minimum payments, your credit score will positively reflect such. However, your bank account will negatively reflect the same also. If you only pay the minimum payment, you should just take your balance and double it because this is the true amount you will probably pay. By paying only the minimum payment, you are basically only paying the interest. For example, if you had an outstanding balance of $1,500 at 12% interest, and you paid only the minimum payment of $20 per month, it would take you over 11 years to pay off the debt. Additionally, you will have paid over $1,200 in interest in addition to the $1,500 balance. Therefore, a balance of $1,500 cost you $2,700 to pay off. That minimum payment is not looking so good anymore is it?

The second most common mistake people make is that they use a credit card to pay the bill of another credit card. This practice baffles me. If you use a credit card to pay the bill of another credit card in order to obtain rewards points, and you pay off the second card in full each month, then paying a credit card with a credit card makes sense. However, this is not the situation to which I am referring. The mistake people make is when they pay a credit card with another credit card because they do not have the money to pay the bill of the first card. All a person is doing is making the situation worse. By using credit cards to pay off credit cards, a person is actually making the debt larger due to interest. Why do that to yourself?

Avoiding these two very common credit mistakes will help you practice responsible credit use and will also help you avoid the credit trap.

What are Platinum Credit Cards?

2007-11-07T22:35:00.000-08:00

Traditionally, credit card companies have levels for their credit cards if they offer more than one card. Usually, the credit card company has a base card. There is usually no color scheme attached to this card and it usually has the worst interest rate and credit limit. As you use that card and establish a good credit score, the company many offer you its gold card. This is the next level in the credit hierarchy. This card usually has a better credit limit and a lower interest rate. Additionally, this gold card probably comes with benefits like concierge service, roadside assistance, rewards points, or some other incentive. Eventually, you may be offered the platinum card. This card is usually the flagship card for the company. It will have the best interest rate and the best credit limit. In addition, it will have the best incentive and benefits package. Some companies offer a card that is “higher” than a platinum card. These cards are super exclusive and are very hard to obtain.

You need to beware of these gold and platinum cards. Sometimes, they are better by way of lower interest rate and higher credit limit. However, many times credit card companies will throw in annual fees on these “higher” cards. I am a firm believer that there is no reason for an annual fee, therefore, unless some amazing benefit is offered by the card, you should be wary of this fact.

Another thing you need to be cautious of is that credit card companies use the terms “gold card” and “platinum card” as marketing terms. Basically, you think you are getting something special, but it ends up being a terrible card in a shiny, attractive color. Do not be fooled by these marketing techniques. Always take a look at the credit card’s interest rate, fees, credit limit, and rewards options before you make any decision. Think about it like this: would you rather have a blue card that has a 9.9% interest rate, no annual fees, a credit limit of $5,000, and rewards points or a platinum card that has a 12.9% interest rate, a $50 annual fee, a $5,000 credit limit, and rewards points? To me, this is a no-brainer. I say, keep your platinum card if it is worse than my regular card. The point is, do not be deceived by marketing. Get the card that is best for your situation.

In a traditional sense, platinum cards can be a better card to possess and usually has to be earned, however, beware of marketing tricks and annual fees that tarnish the attractiveness of a platinum card.

Credit Card Safety: How to Check your Statements

2007-11-07T17:22:00.001-08:00

Checking your credit card statement is an important practice to establish. Many times, people just look at the minimum amount due or the balance and pay that amount. The problem with this is that they may be paying for a charge that they did not make or that was incorrectly calculated.

I have a story for example purposes: many quick cafés and small coffee shops have a small device that they use to swipe your credit or debit card to pay for your purchase. You may have noticed that some of these machines require that the employee type in the amount to be charged. The coffee shop I was at had one of these machines. My total was $6.07, however, the coffee shop employee accidentally added a zero to the end of my total. Therefore my $6.07 charge became $60.70. Luckily, I caught this error when I went to sign the receipt. The problem was immediately handled, however, had I got my credit card statement and just decided to pay the balance without looking at the charges, I would have paid about $54 more than I should have.

The point is, mistakes happen. Therefore, you should always check your credit card statement to make sure that all of the charges that appear on your statement are legitimate.

Credit Card Woes to Consider Before you Apply for your Credit Card

2007-11-07T16:34:00.000-08:00

Put in simple terms, you need to be responsible with money before you should even consider applying for credit. If you have trouble managing your finances, obtaining a credit card is only going to add to the problem. You may be tempted to purchase expensive items even though you do not have the money to pay off the charge; you may build a large debt with improper credit card use; you may also be paying more in interest than you ever do in principal. All of these things will damage your already struggling financial situation. Do not add to the stress.

Assuming you are responsible with your finances, a credit card is a powerful financial tool that can help you achieve whatever financial goals you may have. However, high fees, high interest rates, and improper use can quickly plague any advantage a credit card may give. Beyond that, there are also other factors to take into account before applying for a credit card.

There is an old saying, “out of sight, out of mind.” This is true when it comes to credit cards. The temptation of using a credit card is strong if you really want to buy something. This temptation can be avoided if you do not have the means with which to buy the item. Therefore, if you have a “temptation problem” leave you credit card at home. If you have a serious “impulse buy” problem, you need to consider this before applying for a credit card, and you may need to reevaluate your purpose for getting a credit card.

Another problem or woe you need to consider before applying for a credit card is the time frame of credit card bills. Many people do not consider the fact that their bank account decrease during a standard billing period. Therefore, if you have the money to pay your bill at the first of the month, that does not necessarily mean that you will still have the money at the end of the month. Other bills such as gasoline, food, water, mortgage or rent, utilities, cell phone, etc are also paid monthly. Therefore, consider whether you can really afford to pay another bill (in this case a credit card bill) before you decide to apply for the credit card.

Last, because credit cards are so easy to use, many people do not keep track of their spending. Not until they go online to look at their statement do people realize how much they have really spent. If you are a person that keeps track of his/her finances only because the internet provides you with a balance statement, you need to establish better spending tracking practices so that you do not end up spending more than you can afford.

The common woes will always be interest and fees, however, temptation to buy, time frame budget considerations, and keeping track of your spending are big considerations that need to be evaluated before applying for a credit card.

How to Eliminate Credit Card Debt

2007-11-07T11:09:00.000-08:00

There are many options you can use to eliminate credit card debt. Some of the options are fairly basic and will take time. Other options are extreme, and while they will eliminate your credit card debt, they will also heavily damage your credit score.

First, you can pay over time while eliminating credit card use. This is the most basic way to eliminate credit card debt. All you have to do is pay more than the minimum balance (and by more I mean 20% more than your minimum balance) while eliminating your credit card use. This means that you do not use any credit cards during the time period in which you are repaying the debt. What sense does it make to pay down one credit card while you are charging an equal or greater amount on another credit card?

It is important to note that you only want to stop using credit cards. You do not want to close the credit card accounts. Closing your credit card accounts will hurt your credit score and offer no benefits for you. Therefore, do not do it.

Second, you can call your credit card companies and ask for lower interest rate. This tip should be used in conjunction with the first tip. By lowering your credit card interest rate, your monthly payments will count more towards your principal. Thus, you will pay off your debt sooner.

Third, you could consolidate your debt. I am sure you have seen many of these kinds of companies advertising on television or on the radio. Basically, these companies call your credit card companies and negotiate a lower interest rate and a lower monthly payment. Your credit card accounts are closed (this is a negative because is negatively affects your credit score) and you send your monthly payment to the debt consolidation company. That company then sends your payments to the appropriate credit card companies. These consolidation companied are usually “non-profit” and take a small fee to cover “administrative costs.” Make sure you fully check out the company before giving them your business.

One other point on consolidation; your credit card companies will send you a letter once an interest rate and monthly payment have been negotiated. This letter will basically state that if you are late on a payment while you are using this debt consolidation program, the deal is off and your credit card will reset back to its original interest rates and back to its original monthly payment. Therefore, do not be late.

Last, you can file for bankruptcy. I am not going to pretend to be an expert in bankruptcy, therefore, if you choose this option, go see a qualified attorney. What I can tell you is that filing for bankruptcy will severely damage your credit score. Additionally, filing for bankruptcy will cost you several thousand dollars. The attorney fees for bankruptcy will be less than the interest fees you would have paid over the life of the debt (assuming the outstanding debt is large enough), however, bankruptcy should always be your absolute last resort. As I stated, if you have questions about bankruptcy, go see an attorney.

Many options exist for you to eliminate your credit card debt. Make your choice wisely because a wrong choice could damage your credit score for years to come.

How I Raised my Credit Score

2007-11-06T19:45:00.000-08:00

About two years ago (October of 2005) my credit score was in the 620s. In case you are wondering, a score of 620 is not particularly good. In fact, it is a bad credit score. Today, my credit score is over 740. A score of 740 ranks in the top tier of creditworthiness. How did I raise my credit score over 100 points in less than two years? Before I answer this question, I need to give you a little background information.

My credit score was low because I had late payments on my credit report. Late payments can stay on a credit report for up to 7 years. I did not want to wait 7 years because I had plans for certain types of investments. These investments required a decent credit score, and thus, I needed to find a solution.

First, I obtained a copy of my credit report. I noticed that some of the negative accounts on my credit report were not even mine. One of the negative accounts was opened when I was 6 years old. I called the credit card company and asked them when the started giving out credit cards to children in the first grade. The stunned silence on the phone proved to me that they got the point. The negative accounts that were not mine were removed from my credit report. This increased my credit score.

Second, I got a referral from my real estate teacher for a company that will fix a credit report. I called the company, paid a small fee, and followed the instructions that they gave me. Basically, I was told to continue to pay my outstanding balances in a timely manner and to refrain from using and applying for any credit cards. The company would contact the credit reporting companies and dispute any negative information on my credit report. Less than two years later (which is far better than 7 years) I sit with a score of over 740.

If this plan of action does not work for you, you can always pay your cards on time, reduce your outstanding balance, and wait for any negative information to be removed from your credit report. The choice is up to you.

Things You Need to Know Before Applying for a Credit Card

2007-11-05T15:04:00.000-08:00

Applying for a credit card is an interesting step along the financial journey of a person. There are many rewards and pitfalls accompanying credit card ownership and use, however, if you use credit responsibly, the rewards will shine through and the pitfalls will be minimized.

First, you need to know your purpose for getting a card. If you want a credit card to buy something you cannot afford or because it makes you feel like a responsible adult, then a credit card is probably not right for you. However, if your purpose is to establish a solid credit report and credit score and to build your creditworthiness, then a credit card can be an important tool to achieve these goals.

Second, you need to know if you have a credit report or a credit score. If you do, you need to obtain a copy and know what is contained in the report. If you do not have either, this information is also helpful. The point of discovering this information is to help you determine the credit cards for which you qualify. There is no need to apply for a card that has requirements that you cannot meet. Therefore, find out this information to narrow your available options.

Third, you need to know your limits. This means that you need to know your yearly salary and how high of a limit you can afford. Additionally, you need to know whether you want to pay over time or in a lump sum every month. Knowing these limits (i.e. yearly salary, affordability, flexibility of payment, etc.) will help you make a wise credit decision.

Last, you need to know the interest rates and fees associated with the card in which you are interested. Never get a card with an annual fee and focus on cards with low, fixed interest rates. Avoid cards that have a low introductory interest rate that resets to a high interest rate. Additionally, avoid cards with a variable interest rate. If undervalued by the applicant, these rates and fees can add up quickly and make the credit card have more pitfalls than rewards.

Discover your purpose for getting a card, find out your relevant credit information, know your limits, and find a card with good rates and little to no fees. Knowing these specific points will help you make a wise credit decision from which you could benefit for years to come.

Credit Card Applications for Beginners

2007-11-03T16:14:00.000-07:00

Credit card applications are fairly straight forward and need no special training or education to fill out. However, there are some things you should know.

First, put your full, legal name of the credit card application. The credit card company uses this name to check your credit report to determine whether or not you are approved. Therefore, if you use a shortened name (for example, if your name is Christopher, do not put Chris on your application) on your credit card application, you are going to cause confusion amongst the credit reporting bureaus and are thus going to set yourself up for a credit report dispute in the future. Avoid all of this by always using your full, legal name.

Second, do not lie about your monthly or yearly salary. You are not going to get a higher credit limit by doing this, and additionally, your credit report is not going to support this contention. The point is, do not lie on your credit application.

Third, sometimes you are a student and you are employed, therefore, which should you put down when the application asks for employment status? In my opinion, you should use whichever job title (student or full-time employed) gets you the most benefits for the card for which you are applying.

Last, use internet applications whenever you can. I do not feel comfortable mailing or giving so much personal information (e.g. phone number, address, full name, social security number, employer, employment status, yearly income, etc.). Therefore, submit your credit applications through secure websites. Additionally, when you apply online, you usually can get an answer on your application within 30 seconds.

Following these tips will help make your credit card application go faster and more successfully.

Credit Card Safety: Is your Number on that Receipt?

2007-11-03T15:43:00.000-07:00

Many merchants (including retailers, restaurants, grocery stores, etc) have fixed what used to be a regular practice. Not too long ago when you used your credit or debit card to pay your bill, your entire credit card number or debit card number (as applicable to the situation) would appear on both the merchant’s receipt and the customers copy.

Many people may not see a problem with this. However, if you think about it, many of us just toss our receipts into the trash when we get them. With the rise of internet banking (which automatically keeps track of your debits and credits on your accounts) many people do not know how or just do not balance their checkbook. As such, there is no need to keep your receipt. But what if an identity thief happened to find a receipt in the trash and your entire credit card number was on the receipt? Would you care? You should care because a lot of damage can be done with just a credit card number.

As I mentioned, many merchants have fixed this problem by only putting the last 4 numbers of your credit card number on the receipt. The other numbers are replaced with an “x.” However, if you use your credit card at a place that does not “x out” your credit or debit card numbers, make sure you shred your receipts in a cross cut shredder (after you no longer need them) before disposal. By doing this, you will limit the possibility of somebody stealing your identity.

Getting a Second Credit Card Without Good Credit

2007-11-03T15:24:00.001-07:00

First thing first; if you have bad credit, you should really evaluate your reason as to why you want a second credit card. If you have bad credit, that means that you were not using credit responsibly, and therefore, getting another credit card may get you into more trouble and more debt.

Reasons you should not get another credit card if you have bad credit include, but are not limited to: (1) to pay bills (this is probably the worst reason); (2) to go on vacation or any other trip; (3) to buy something you cannot afford; and (4) any other reason that does not include improving your credit report and raising our credit score.

If you have bad credit, your primary reason for getting another credit card needs to be to improve you current credit score. If this is your purpose, then I applaud your efforts and know what you are going through. Just know that your second credit card is not going to be as good as your current card.

First, because you now have bad credit, the second card is probably going to have a higher interest rate and a lower credit limit. Additionally, you may be subject to some fees that you did not have to pay for your first card.

Second, make sure that you do not get a card that has too many fees. The point of your second card should be to increase your credit score. However, you should not go broke on credit card fees to achieve this purpose. If worst comes to worst, do not get another card. Use your current card responsibly and gradually build your credit score over time.

The point is, do not put yourself in more debt just because you feel that a second credit card will help you achieve your purpose sooner. The ends have to justify the means, and thus, you should not obtain a card that requires the payment of tons fees and a higher interest rate. As I stated above, if you can only qualify for cards with high fees and high interest rates, do not get a second card.

What to do if You Think Your Credit Card Number Has Been Stolen

2007-11-01T13:47:00.001-07:00

If you think you credit card number has been stolen, the first thing you should do is make sure that your damage is minimized. Immediately go online or call your credit card company and check what recent charges have been made on the card. If no charges have been made, but you truly believe that your credit card number has been stolen, you are better safe than sorry. Have the credit card company deactivate your credit card. After this is done you should start the process of getting a new card from them.

If you check your account online or through a phone call to the credit card company and you discover a charge on your account that is not yours, you should immediately inform the credit card company that your credit card number has been stolen. Second, you should tell the credit card company to deactivate the card. After that you should dispute the charges as fraudulent and seek to have them removed from your statement so that you are not liable for the charges. Additionally, you should begin the process of getting a new card from the credit card company.

The best way to prevent theft of your credit card number is by making sure that any paper you discard does not have your credit card number on it and that if a paper does have your credit card number on it, that the paper is shredded by a cross cut shredder before discarding it.

Protect your credit card number and you can avoid the big headache of fixing this kind of problem.

The Truth about Secured Credit Cards

2007-10-31T20:21:00.000-07:00

A secured credit card is a credit card that is that is tied to a monetary fund of some kind (whether it is a deposit, bank account, or some other account). The monetary fund can be accessed and used by the credit card company in the event that the credit card holder defaults on a payment. These kinds of credit cards usually have an obscenely high interest rate and an inordinate amount of fees. Basically, they are terrible credit cards that target people with bad credit.

First and foremost, never get a secured credit card unless you absolutely have no other choice at all. In fact, even if you have no other choice, you should again analyze whether you should get a secured credit card. As I stated, secured credit cards have terrible interest rate and a vast amount of fees (including an annual fee, program activation fee, deposit fee, etc), therefore, they are bad credit cards to own. However, they are attractive options for people with bad credit because the requirements to get a secured credit card are very easy to meet.

As an alternative to getting a secured credit card, you should look at non-major credit cards. These types of credit cards include credit cards from various retail stores, department stores, and even gasoline cards. These cards usually have a high interest rate, however, the usually have no fees attached to them as secured credit cards do. Additionally, these “non-major” credit cards are unsecured, therefore, you do not have to put up a big deposit or tie the credit card to a bank account. It is easy to qualify for non-major credit cards, and thus, they provide an attractive alternative to secured credit cards.

Secured credit cards can help restore your bad credit, however, they come with a heavy cost. It might actually be cheaper to dispute negative information on your credit report. If some of the negative information gets removed, your credit score will increase, and therefore, you will have a better chance to qualify for an unsecured credit card.

The point is, if you have a choice, do not get a secured credit card. If you do not have a choice, make sure that you seriously consider whether or not obtaining a secured credit card is worth the potential credit score benefit.

Credit Card Safety: What to do if Your “Bank” Calls

2007-10-30T19:30:00.000-07:00

A very common technique utilized by an identity thief is to call you pretending to be an employee of your bank. These con artists usually make up a story about the bank losing your information and that he/she needs you to verify your bank account by telling him/her your account number, full name, social security number, and other personal information. The unsuspecting victim complies with the request hoping to solve any problems the bank is having. Unfortunately, that person is about to become another statistic in the growing number of identity theft cases.

Your bank, or any legitimate bank for that matter, will never call you and ask for your personal information. Think about it logically; if they had your phone number and name and knew you were a bank customer, why would they need your personal information? Do not fear hanging up on these criminals!

Many people fear that it really is their bank calling and that if they hang up on their bank, something bad will happen. Listen, nothing is going to happen if you hang up on your bank. It is not like you are going to get a letter the next day telling you your account has been closed due to your telephone rudeness. The point is, do not be fooled by these con artists.

Always remember (absent being inside the bank opening a new account), a bank will never ask you for your personal information! It is that simple. If you truly feel that it is your bank calling and that there really is a problem with your account, get the caller’s name and call station location. That same day (or the next day if the bank is already closed) go down to your local branch and tell the teller the situation. If the teller checks your account and everything is fine, then you know that you just prevented an identity thief from claiming you as his/her next victim.

Always look for subtle signs that an identity thief is trying to steal your identity. For example, a call after regular business hours; a “private number” showing up on your caller id; or the caller not be able to tell you what is wrong with your account are all signs of an identity thief attempting to steal your identity. Like I stated above, you would much rather be safe than sorry in these kinds of situations, therefore, error on the side of caution and never give out your personal information over the phone or through the mail.

Credit Card Safety: Should Sign Your Card?

2007-10-30T18:49:00.001-07:00

When you first get a credit card, there is a signature strip along the back of the card. Most of the time, the credit card company from which you received your card will instruct you to sign your card immediately. I do not really believe that signing the back of a credit card adds any extra security.

First of all, unless you use a certain kind of pen, your signature usually rubs off within a relatively short amount of time. Therefore, you have to keep tracing over your own signature so that the signature strip does not look like a jumbled mess.

Second, by signing the back of the card, you are giving would-be identity thieves a sample of your signature. Most retailers only briefly look at your signature, if at all. If the signatures look even remotely similar, no questions are asked. Therefore, I feel that by signing the signature line, you are unintentionally helping an identity thief steal your identity.

Third, as briefly stated above, most retail employees do not even look at your signature line. However, many do ask for you id. Therefore, signing the back of your credit card is usually a waste of time.

Instead of signing your name to the back of your credit card, you should print the words “SEE ID” in all capital letters. If the retail employee happens to look at the back of your credit card to match signatures, they will be instructed to ask for your id and match the signature on your government issued identification. This is helpful because now the employee can check your information against the credit card and can match your identification. Additionally, by placing those words on the back of a credit card, you are making it harder for an identity thief to steal your identity. Printing the words “SEE ID” on the back of your credit will not stop all attempts of identity theft. However, it will make it harder for the identity thief and will therefore, hopefully act as a deterrent. That is all you can really ask for in this day and age.

If you want to sign the back of your credit card, do what you feel will protect you against identity theft, however, as I stated above, I believe that signatures on the back of a credit card are ineffective and, at worst, help an identity thief accomplish his/her goal.

Should the Rules on Applying for Credit Cards be Tighter?

2007-10-29T13:53:00.000-07:00

This is a question of much debate among people of all kinds of financial and educational levels. The proponents of such a measure believe that “tightening” the requirements to apply for and obtain a credit card will help protect people against irresponsible credit card use. These people think that credit is evil and that only a select few, if any, should possess it.

The opposition to such a measure believes that credit itself is not evil and that financial education is the means by which to prevent credit misuse. These people also believe that restricting the means to obtain credit will have an overall negative economic effect.

I agree with the latter. Restricting the means to obtain credit effectively prevents poor and middle class people from obtaining credit. One cannot restrict the obtainment of credit based upon credit score because one cannot have a credit score until one obtains credit. Additionally, one cannot restrict the obtainment of credit based upon monthly or yearly income because, as stated above, this effectively prevents the poor and middle class from having credit.

The truth is, I have yet to hear one good reason as to why credit requirements should be “tightened.” Some people point to the current real estate market and credit crunch as reasons why credit card obtainment should be restricted. This is a very unreasonable way to think. Basically, these people have concluded, “it is bad, therefore, is should be taken away.” The first flaw in this conclusion is that credit is not bad; credit is a powerful financial tool that can help you achieve monetary success.

The second flaw in the conclusion is the remedy (that credit should be taken away). If this is the case, how are people supposed to purchase a home, a car, or pay for college, to name a few. The people that propose such a remedy do not consider all of the good things that credit can provide (most notable a place to live, a car to drive, and an education).

The point is, credit card requirements should not be “tightened.” In my opinion, the answer is to better educate people as to the dangers of credit misuse and as to the advantages that credit can provide if proper credit use is practiced.

Rewards Cards?

2007-10-29T00:18:00.001-07:00

Rewards programs are supplements to credit cards and should not be the primary reason as to why you get the card. In my opinion, the best reason to get a card is a low interest rate (and of course no annual fee, because there is absolutely no reason to have a card with an annual fee).

Look carefully at rewards card advertising. Many commercials state that you can get cash back from using your credit card. The commercials go on to show a person stating that they got $100, $200, or more back due to his/her “cash back” rewards card. These commercials are not telling you the whole story. Do not get me wrong, it is very possible get this amount back, but you have to charge upwards of $10,000 to get it. That is not a typo, $10,000 to get $100. That is 1%! Is it really worth it to apply for a card that offers 1% cash back, but has a higher interest rate than other cards? I do not think so either.

Also, make sure that the rewards card you want actually offers rewards that you want. Almost all credit card companies offer some kind of shopping mall in which you can redeem your rewards points. What if you do not like or need any of the merchandise in these credit card malls? What you end up with is a bunch of reward points that you will never use or, if you redeem your points, you will end up with a piece of merchandise that you do not want.

The point is, do not be awe struck by a credit card solely because it offers rewards. Get a credit card that has no annual fee and has a low, fixed interest rate. If you find a couple of credit cards that meet these criteria, then you can choose based on rewards. Just make sure you look into the rewards first so that you are not stuck with a 1% cash back rewards card or a point redemption mall full of unusable and unwanted merchandise.

A Basic Guide to Credit

2007-10-28T23:05:00.000-07:00

A credit guide can be summed up in three steps: (1) establish it; (2) maintain it; and (3) use it responsibly. There is nothing easier. This is the shortest way to credit success and also happens to be one of the best plans you can follow.

(1) Establish It

A person that tells you to never get a credit card is giving you bad advice. It is that simple. Despite what some people may think about credit card companies or credit in general, the fact is that we live in a time when a credit score is a powerful financial asset. Becoming monetarily successful is difficult enough without cutting off a significant financial asset. Establish credit by getting a low interest rate credit card.

(2) Maintain It

Many people have no idea what is in their credit report. Always do monthly checks of your credit reports in order to prevent identity theft. Additionally, you should check your credit reports monthly in order to make sure that no inaccurate information exists. Inaccurate information will affect your credit score.

(3) Use It Responsibly

This is the most important step. Credit is a privilege, not a right. Do not misuse your credit and you will have nothing to worry about. Do not charge something unless you have the money to pay it off; a credit card is not an alternative to lack of cash! Pay more the minimum balance in order to minimize interest payments. If you use your credit responsibly, you can always negotiate with your credit card company for a lower interest rate and a higher credit limit.

Following these three easy steps is the most basic and most successful guide to credit. In sports, the best teams are the ones that do the simple things well; the same is true in credit.

Ways to Deal with Junk Mail Credit Card Offers

2007-10-26T16:06:00.000-07:00

You will notice, if you have not already, that once your credit score gets high enough, you will receive nonstop credit card offers from all over the place. Some of the cards offer laughably high interest rates. I ask, if my credit score is good, why oh why would I accept a card with an interest rate of 15% or higher?

If you already have all the credit cards that you want, simply dispose of these offers. However, in order to limit the possibility of identity theft, you should shred these offers in a cross cut paper shredder. If you do not have such a machine, you should rip up, or cut up with scissors, all of the offers you do not want and dispose of the pieces into separate trash cans throughout your home. Chances are, you empty the various trashcans in your house at different times. Additionally, you probably have two trash pickup days a week in your neighborhood. Therefore, some pieces of an offer will be in one trash, while other pieces of the same offer will be in another trash.

Of course there is absolutely no way to entirely prevent identity theft, but you will be making near impossible for an identity thief to achieve his/her purpose by disposing of these credit card offers in this way.

Common Sense Credit

2007-10-26T15:21:00.000-07:00

The term “common sense” is a misnomer. Some people believe that it is common sense to get only one credit card. Other people believe that credit cards are evil and, therefore, it is common sense to never own a credit card. Still, others believe that credit cards are a necessity in today’s financial times and, therefore, it is common sense to own more than one credit card. Who is right? The truth is that they could all be right, and they could all be wrong. Everybody has a different situation, therefore, “common sense” for their situation will dictate.

My “common sense” tells me that most of us will buy a home and/or a car in our lives. Therefore, unless you are paying cash, you will need to have established some kind of a credit score in order to qualify for the loan that is necessary to pay for these things. You cannot establish credit unless you open a credit account. The most common type of credit account is a credit card. It is true that you can get loans from your bank, but without an established credit report, you will have to secure these loans with some sort of collateral.

If you do own a credit card or credit cards, there is “common sense” advice for you to follow. First, use your credit responsibly. People do not get into financial trouble overnight. It is a gradual process that people refuse to acknowledge before it is too late. Constantly monitor your spending habits and financial statements so that you know when to stop spending or when your finances will allow you a little more leg room.

Second, pay your bills on time. You would be surprised how many people, who have the money to pay the bill, just plain forget to pay. As a result, their credit score suffers. If you are that forgetful or lazy, as the case may be, set up an automatic bill pay through your bank’s internet site. If your bank does not have such a feature, there are many companies that can set up an automatic bill pay for you.

Last, get updated, monthly credit reports from the credit reporting bureaus. By doing this, you will be able to see if any incorrect information is reporting on your credit report. By checking monthly, you will be able to dispute inaccuracies as soon as possible and, thus, minimize your damage. It will cost you about $12-15 every month to get all of your reports, however, think of it as financial insurance against inaccuracies and identity theft.

Do these “common sense” things and you will be able to obtain and maintain a high credit score and sound financial health.

What are the Pros and Cons of a High Credit Limit?

2007-10-25T20:33:00.000-07:00

A high credit limit can be a great thing. First of all, it gives you more flexibility for purchases. Second, it gives you a lot of spending power. Last, it can increase you credit score because you debt to available credit ratio will be smaller. However, there are also some negatives that come along with a high credit limit.

As stated above, you will get more flexibility with your purchases, and you will have a lot of spending power with a high credit limit. While good in some respects, a high limit can get you into to trouble if you abuse it. If you have a high credit limit, this means that you have practiced responsible debt management. However, like most things in life, in you fall out of practice, you can get into trouble. Here, just because you have more spending power does not mean that you should utilize it unless you are making a planned purchase for a particular purpose. Do not make a big purchase just because you can. Doing this can turn the “pro” of having a high credit limit into a very big “con.”

Increasing your debt to available credit ratio can have a positive effect on your credit score. The interesting thing is that it can also have a negative effect on your credit score. It is all about timing. If you dramatically increase your debt to available credit ratio in a short amount of time, a credit reporting bureau may see this as you stockpiling credit in order to make a big purchase. This makes credit reporting bureaus nervous because they believe that you may not be able to pay off the big purchase (if made). Therefore, if you are going to increase your debt to available credit ratio, do it over a sizeable time frame and increase your credit limit in small monetary increments.

Both pros and cons exist with a high credit limit, but if you practice responsible debt management and increase your debt to available credit ratio over a sizeable amount of time, your high credit limit can be a powerful asset.

The Effects of Debt on Your Emotional Well Being

2007-10-25T19:13:00.000-07:00

I have seen debt cause more stress than most things or problems that people encounter throughout their lives. Debt is an interesting beast. People become so consumed by debt that it is all they think about. Like being told you have a terminal disease and are about to die, people lose sleep, lose their appetite, and let their personal life (including a marriage, children, significant other, and/or friends) suffer because of the constant worry of making next months payments. People actually risk their health with this amount of built up stress.

The good news is, there are ways out of debt. The better news is, once you are out of debt, there are ways to control your debt so that you never have to experience those feelings of worry again (at least not because of debt).

Depending on your situation, cutting costs and balance transfers, consolidation, and bankruptcy all are options to consider. Obviously, some of these options will negatively affect your credit score, but that can be rebuilt. Choosing between your health and your credit score should not be a difficult decision. The point is, you have to take action to change your situation. Stressing out every month at the expense of your health and your personal life is the worst thing you can do. Change this circumstance by doing what is necessary to get out of debt.

Getting out of debt is the primary concern. When you start to notice the decrease in you debt, you will start to feel better. You will notice a relaxing feeling like everything is going to be okay. It is a great feeling, therefore, to maintain this feeling (as far as debt is concerned), you need to manage your debt.

The bottom line is, like always, use credit responsibly. All of these problems could have been avoided had you stepped back and assessed your situation during the debt accumulation process. Control your debt and you will be able to take your life back.

How to Negotiate Credit Card Interest Rates

2007-10-24T19:15:00.000-07:00

Only two circumstances exist in which you can successfully negotiate to reduce your credit card interest rate: (1) when you account is in good standing; and (2) when your account is so badly defaulted that your only way out is bankruptcy. Hopefully your situation is the former and not the latter.

First, if your account is in good standing, you will have a better bargaining chip than you would have if your account is in severe default. In order for you to strengthen your bargaining position, make sure you have an offer from another credit card company. You do not have to apply for the other card, you only need to be able to qualify for the card and the card must have a lower interest rate than your current card. You can get this other credit card offer very easily. You can find this other offer by looking on-line, checking your “junk” mail, or going to your local bank and grabbing an application.

If your account is in good standing, give your credit card company a call. Do not be secretive or discreet about your reason for calling. Tell the card representative that you are calling because another company has offered you a better interest rate. Continue by telling the representative that you are happy with their card and you want to know if they can match the lower interest offer. At first, the representative may tell you that it is not possible or that he/she does not have the authority to authorize such a request. At this point, ask to talk to a supervisor/manager.

Tell the supervisor/manager the same line you told the representative. If the supervisor/manager seems reluctant, express you disappointment in a stern yet polite way. Yelling or getting abusive will not help your situation. It may take a few minutes but you should be able to work something out.

The problem that exists is that you do not want to close your account. Closing your account could negatively affect your credit score. The credit card company knows this, therefore, they will be reluctant at first. However, customer retention is important for credit card companies, therefore, they will work with you.

Be polite yet stern and present the situation intelligently. Make sure you have another offer for which you qualify. Doing all of these things will increase your bargaining strength and will help you succeed in your purpose.

The Dirty Little Secrets of Credit Cards

2007-10-24T13:58:00.000-07:00

There are many “dirty little secrets” that credit card companies hide in the fine print of your credit card agreement. Some of these secrets, although specifically stated in you credit card agreement and within the power of your credit card company to enact, are rarely used by the credit card company.

However, there are two secrets that a credit card company will not tell you. You have to scour your credit card agreement to even find mention of these two provisions to which you agreed. These two provisions are devious and are created solely to squeeze as much money out of you as possible.

(1) CASH ADVANCE INTEREST RATES

If you look at your credit card statement, you will see a section that shows you your interest rate (if it is too high, call the credit card company and get it reduced). There are usually two interest rates shown: (1) your purchases interest rate; and (2) your cash advance interest rate. I can almost guarantee that the cash advance interest rate will be several points higher than your purchases interest rate. For example, you regular purchases interest rate may be 12.95% while you cash advance interest rate may be 19.95%. Why the big difference? This difference exists because your monthly payments will NOT count towards your cash advance balance until you fully pay off your regular purchases balance!

Basically, while you are paying down your lower interest balance, you are get nailed by an interest rate that is 7% higher (in this example) then your normal rate. I hope you do not owe a lot of money on the card on which you took a cash advance or that the cash advance you took was very small.

(2) UNIVERSAL DEFAULT

Universal default is a credit practice where you will be in default on one card because you are in default on another unrelated credit account. For example, let us pretend you have two completely unrelated credit cards; Credit Card A and Credit Card B. Further, let us pretend that Credit Card B has a universal default provision in the credit card agreement. Now, pretend that you are late or default on a payment to Credit Card A. The credit card company that gave you Credit Card B can now put Credit Card B into default even if you have never missed nor been late on a payment to Credit Card B!

The effect of this is that it is possible for you to get nailed by a credit default fee for Credit Card B (even though you have never missed nor been late on a payment to Credit Card B) and that another negative impact will occur on your credit report.

Watch out for these dirty, credit card secrets that are buried in your credit card agreement. They can really sting you if you do not take notice of their existence and effect.

Comparing Credit Cards and Debit Cards

2007-10-23T20:38:00.000-07:00

Debit cards are cards that draw against your checking account. Basically, when you make a purchase with your debit card, the purchase price is deducted from a pool of money that you already have on deposit with your bank. If you spend more than you have on deposit, you are likely to pay overdraft fees and whatever other fees your bank is allowed to charge based upon your debit card agreement.

Some of you may have used your debit card as a credit card at the gas station and/or grocery store. In other words, you may have pushed the “credit” button on the payment machines available at these locations. You did not have to enter your pin and you had to sign a receipt or enter your zip code. Even though the transaction was executed and approved like a typical credit transaction, your debit card purchase is not reflected on your credit report and the purchase prices is debited from your checking account within a business day or two. Therefore, although transacted like a credit transaction, it is not in fact a credit transaction when you use your debit card. You do not get any credit report benefits and such transactions and subsequent debiting on your checking account does not affect your credit score.

Credit cards, on the other hand, are not secured by a checking account (there are some credit cards that are secured by a deposit and are known as “secured” credit cards; however, these cards have the affect of a credit card transaction although they work very similarly to a debit card). Most unsecured credit cards have a credit limit. This limit is the most amount of money you can “borrow” to make purchases. Absent a cash advance, you do not actually get the cash in hand. However, you do get make purchases against this credit limit.

Your charges are accumulated during a set billing period and (unlike a debit card where the entire purchase price is taken out of your checking account), only a portion of that amount becomes due and payable at the end of that billing period. If you do not pay back all the money you “borrowed” to make your purchases, the balance is charged an interest rate. This interest charge increases your outstanding balance. Timely and untimely payments are recorded on your credit report and affect your credit score accordingly.

The differences are many. However, if you know how to use these cards effectively, you will be able to build a great credit score without getting into any debt management problems.

Is a “Free” Credit Report Really Free?

2007-10-22T15:53:00.001-07:00

The answer to this question is, YES. A free credit report really is free, you just have to know where to get it. Federal law requires that the credit reporting bureaus provide you with one free credit report per year. Therefore, by law, you can get your credit report for free.

The best place to exercise this right is by going to www.annualcreditreport.com. This website allows you free access to all three of your credit reports (by all three, I mean your credit reports from Experian, Equifax, and TransUnion) once per year. The process is very simple and very safe. In order for you to access your credit reports, you have to answer security questions based on certain credit and/or revolving accounts that you own.

Note that federal law only requires that these companies give you a copy of your credit report, not your credit scores. Therefore, if you want your credit scores, you are going to have to pay for them.

When you obtain your credit report, make sure that you print a copy for your records. Even if your credit report is 20+ pages, it is worth the printer ink to have a copy of your credit report. Look at your credit report and make sure that no inaccuracies exist. If you find an inaccuracy, you need to dispute it so that your credit score is not negatively affected.

Get you free credit report, check your accounts, and maintain your credit.

How Many Credit Cards is Too Many?

2007-10-19T13:49:00.000-07:00

I am amazed when I read literature from people that advocate that credit cards are evil and that a person should never own one. The reason that these people give is that the credit card owner will incur a lot of debt quickly and will be trapped by these devices of evil. These people automatically assume that you are going to irresponsibly use credit. That is an unfair assumption!

In order to support there arguments, these credit bashing people back up their arguments by quoting statistics. Mark Twain once said, “There are three kinds of lies: lies, damned lies, and statistics!” The point Twain is trying to make is that people become slaves to statistics. For example, a statistic exists that states that 50% of first marriages end in divorce. Does this mean that you should not get married because it is doomed to failure? Of course not! The same holds true with credit cards. Just because there are people that struggle with credit card debt does not mean that you are going to struggle with it. Additionally, in this day and age, credit is a vital asset. Unless you plan on paying cash for your home and car(s), you are going to have to have credit in order to be approved for a loan.

If you are a responsible credit card user, the number of cards you have is irrelevant. However, for purposes of providing a finite number to the question presented above, I think 3 is a good number, but 4 at the most. My reasons are simple:

First, there are four major credit cards: Visa, MasterCard, American Express, and Discover. I am not a big fan of the Discover card, therefore, having one card from each Visa, MasterCard, and American Express would give you a total of 3 cards. However, if you like Discover, then that would be your fourth card.

Second, when applying for a home loan, a bank looks to how many credit accounts you have open for a specific term. Most banks require that you have at least three credit accounts open and current that are at least 3 years old. Therefore, owning only 1 credit card will not cut the mustard.

Third, different cards give different benefits. Therefore, if your Visa has a low interest rate and you are making a larger purchase that will take a couple of months to pay off, use the Visa so you do not get nailed by the interest rate (of course all of your cards should have a low rate to begin with). However, if your American Express offers rewards points for airlines miles or other merchandise and your purchase is relatively small, use the American Express. The point is, tailor your credit card use to your purchases and the benefit you seek.

Last, most wallets only have room for four credits cards, therefore, you should only have four credit cards! I am just kidding about this last reason.

When I stated above that the number of cards you own is irrelevant if you are responsible, I meant that it is irrelevant in regard to debt management problems. There is a one other reason why you should not have more than 3 to 4 cards. As you maintain these cards, your credit limit will increase. Getting more cards adds to your total credit limit. If you have ten cards and a total credit limit of $100,000 (ten cards at $10,000 each), but you only make $50,000 a year, a home lender may view this as a risk. Think about it; you could borrow twice your annual salary! A home lender will be nervous that if you utilize that credit limit and ended up owing more than you can afford, you will default on the home loan. Additionally, depending on how and when you opened these accounts, you credit score could be negatively affected.

Here is the bottom line, use credit responsibly.

What to Do If You Have Lost Your Credit Card

2007-10-18T13:37:00.000-07:00

Most of us carry our credit cards in our wallets or purses. What happens if the wallet or purse is lost or stolen?

First, as soon as you notice that your credit card has been lost or stolen, immediately call the bank that issued the card and report that the card has been lost or stolen (based on your situation). The effect is that the bank will put a hold on your card to prevent any subsequent purchases. Additionally, if your card has been used since you noticed its disappearance, most credit card companies will reimburse you for these fraudulent charges.

Second, find out the procedure for getting a new card from the bank. It may require some paperwork, but it is worth it to prevent fraudulent charges and to obtain a new card. If your card is stolen, you may have to file a police report in order for the bank to proceed with your request.

Third, if you use that card to auto-pay certain bills, you need to call those companies and notify them that your card has been stolen or lost and that you need to switch the account to another card (at least until you get the new card).

At this point there is not much else that you can do. I know it is frustrating and that you feel violated, however, as long as you notify your credit card company, initiate the process to get a new card, and notify any companies that auto-bill that card, you have solved the problem. One of the main things you should inquire about before you get a credit card is the procedure for disputing fraudulent charges. Make sure that you are not liable for these charges and that the dispute procedure is easy. Other than that, there is not much else you can do.

How to Get a Lower Interest Rate on Your Credit Card

2007-10-17T17:38:00.000-07:00

A lower interest rate is a great asset to have. The most noticeable benefit is that you can save a lot of money on interest charges. However, you can also use that credit account as a bargaining chip with other credit companies. You can use the time tested “can you beat this offer” routine. Thus, the question is, how do you get a low interest card?

First and foremost, if your credit score and credit report qualify, you can apply for a low interest card. This is the easiest and most obvious way to obtain a low interest credit card. However, this method is only the easiest and most obvious if you have the credit score and credit report to allow you to get such a card. If you do not have the best credit score or report, there are some tactics you could use to lower an interest rate.

If you already have a credit card and your record with that card is flawless, you can call the credit company and request a lower interest rate. You have to be firm and you have to make a credible request. As a general rule, credit card companies want to collect at least between 8-10% interest on credit balances. Of course credit companies love when you pay more, thus, they never tell you that you can get a lower interest rate than the one originally given.

Anyway, back to the credible request. If your interest rate is 18%, asking for a 6% interest rate is just a waste of time. Even if your credit was flawless, no credit card company would drop your interest rate 12 points at one time. It is more realistic that your rate would end up somewhere between 13-15% based upon your relationship and history with the credit company and on your credit score and credit report.

The bottom line is, your options are limited unless you have a good credit score and credit report. Therefore, if your score and report are less than par, you are going to have to deal with your current credit account companies in order to get a lower interest rate. The worst thing that can happen is that your credit card company will not lower your interest rate. The best thing that can happen is that the company will lower your interest rate, therefore, why not give it a try? Just remember to keep it credible, but stay firm with your request and bring up your great history with the company from which you are trying to get a lower rate if the company seems reluctant.

How to Profit by Using Credit Cards to Pay Bills

2007-10-16T20:27:00.000-07:00

You pay your bills month after month. Your either write a check and mail the payment, or (if your are technologically savvy) you make the payment online using your bank’s bill pay service. Paying bills with cash can actually cost you more money than just the cost of the bills. As you pay bills, your checking account balance is gradually reduced. Therefore, if you have an interest bearing account, you are losing the interest on those dollars. However, there is a solution that could not only take away this disadvantage, but could possibly reward you in three ways. The solution is to pay your bills with your credit card.

I know what you are thinking, “Why would I pay with a credit card? A credit card must also be paid, so what is the point?” The point is that you could be rewarded for paying things with your credit card. First, if you have a rewards card, you will earn points for the amount you charge. Rewards points are redeemable for cash, airline travel, and other merchandise.

Second, by the continuous use and timely payment of your credit card, you will be building a strong credit report and thus, building a strong credit score. A good credit score will save you tons of money in interest and will help you get approved for loans.

Last, you do not lose as much interest from your interest bearing account (assuming you have one) because the money stays in your account longer. Additionally, when you do pay your credit card, only that one sum comes out at that one time. Therefore, you do not gradually decrease your checking account. Additionally, paying the bills in a lump payment (by using your credit card and then paying off your credit card) will help you get an accurate number on your monthly expenses.

It is important to note that in order for you to realize these benefits, you must pay off your credit card balance in full every month. If you do not pay off the bill in full, you will incur interest and the whole reason to use the credit cards (to get the interest free benefits of reward points, a strong credit report and credit score, and more interest from your interest bearing account) will be frustrated.

Cash or Credit - Which Should You Use?

2007-10-16T19:40:00.000-07:00

As a general rule, you should never buy something with a credit card unless you have the money to pay off the charge. Many people like to buy things on credit (even though they cannot normally afford the item) with the intention that they will pay off the purchase in the long term. This is a mistake because you will end up paying more in interest than you would have had you paid cash.

Another way to use a credit card is as a rewards point builder. First and most obviously, you must have a rewards credit card for this to work. The process is very easy from here. All you do is use your credit card to make specific purchases throughout the billing period. When your bill becomes due, you pay off the entire amount. Obviously, you have to have the money available to pay off the entire monthly amount. Additionally, you must keep very accurate records of your charges in order to ensure that you have enough money on hand to pay off the monthly balance in full. The whole purpose is to build reward points without paying interest on your charges. Keeping accurate records and charging only specific purchases will help you accomplish this goal.

Most people are surprised when they get their monthly bill because they do not realize how much they have spent on food and gasoline. These charges can add up fast. If you are responsible with your credit and keep accurate records, this should not be a problem. How do you know if you are a responsible credit user? Let me put it this way; if you have to ponder whether or not you are a responsible credit user, chances are that you are not. This does not mean that you cannot utilize the rewards points strategy; all this means is that you probably should not purchase food or gas on credit because there is a chance you will charge more than you can afford. If this is the case, you should use cash (or a debit card) for food and gasoline purchases.

Basically, everything comes down to responsibility. If you are responsible, you could use cash and credit interchangeably without worry of getting in over your head. However, responsible or not, always keep accurate records of your credit so that you do not lose track of your spending.

What You Should Know About Credit Card Costs

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Yes, credit cards can have costs. There are two main costs associated with credit cards: (1) interest rates; and (2) annual fees. However, even though these are the two monetary costs, there exist many intangible costs (such as customer service).

First, the monetary costs. Why oh why would you pay just to own a credit card? Annual fees are just nuts! Unless you have bad or no credit, have absolutely no other choice, and desperately need credit, then it may be... NO, scratch that sentence – there is absolutely no reason to pay an annual fee on a credit card. There are far too many credit choices from which to choose. Do not get a card with an annual fee, it is that simple.

In addition to annual fees, credit card companies charge other fees of which you may not be aware. If you are ever late on a payment, there is usually a fee. If you go over your credit limit, there is usually a fee. Know what these fees are and factor them into your decision as to whether to obtain that particular card.

How about interest rates? These can be pretty sneaky. First, you should notice that the interest rate is different for credit purchases and cash advances. Cash advances always carry a higher interest rate. Additionally, your monthly payment will not count towards your cash advance balance until your credit purchases balance is paid off. Why? Cash advances carry a higher interest rate, therefore, the longer that that balance remains unpaid, the more money the credit card company makes.

Also, make sure that the interest rate that is advertised is not an “introductory” rate or a “variable” rate. Introductory rates only last a couple of months (at most, one year). After that introductory period, your interest rate resets to the default rate. The default rate is usually a lot higher than the introductory rate. Therefore, be aware of what you are getting yourself into.

Variable rates change with economic conditions, therefore, you could have a great rate one month and a terrible rate another month. Do not play a guessing game with you credit card interest rate. Get a low fixed rate and you will be much happier.

Intangible costs can ruin a credit card. Have you ever called your credit card company only to listen to an infinite amount of menu options? When you finally get a real person on the phone that person tells you that you have called the wrong department. In an attempt to transfer you, the main menu comes back up and you are back to square one. At the least, this whole process is a waste of time. Why put up with this? As I said before, too many credit card options exist for you to have to settle for one with mediocre service. Your time is valuable; do not waste it on bad customer service!

Know the costs that are associated with a credit card. By doing this, you will be able to make the best decision possible based on your needs and wants.

How to Apply For a Credit Card

2007-10-14T20:49:00.000-07:00

Applying for a credit card is a simple process. Everything can be done online nowadays. Additionally, you can receive an answer as to whether you are approved for the credit card, usually within thirty seconds. All you have to do is complete the application (which usually consists of you name, address, phone number, social security number, employment information, date of birth, etc.), click the submit button (if applying on-line) or mail in the application if submitting a hand written application, and wait for a response. The only part of this process that is difficult is determining what card is right for you.

There are many types of credit cards that offer many different types of options. First, you need to know if you want a charge card or a credit card. What is the difference? A charge card works just like a credit card except the balance is due in full at the end of a billing cycle, meaning that you cannot make payments over time. If you charge $1,000 during the billing period, $1,000 is due on your next bill. Charge cards are usually reserved for people with disposal income or people who have an established, high credit score.

A credit card, on the other hand, allows you to pay your balance over time at a set interest rate. The obvious advantage is that you can pay a charge over time. However, the additional advantage is that certain credit cards can be obtained even if you have no credit or bad credit.

Second, you need to determine your credit bonus. Do you want reward points that are redeemable for cash, airline tickets, and other merchandise, or do you want a low interest rate card? If you do not use you credit a lot or if when you do use your card you only use it for small purchases which you usually pay off in full, you may want to opt for the rewards card. This way you can build points towards rewards and the usually higher interest rate will not be a detriment because your balances are too low and because you always pay off the balance in full.

However, if you are just starting to establish your credit, you may want to go for the low interest card. This way, if you misuse your card, you will not get severely punished by the interest rate.
If you use your card a lot, look for a nice balance between rewards and low interest.

Third, should you have a card that charges an annual fee? Simply put, unless you have no other choice because your credit is bad, there is absolutely no reason to have a card that charges an annual fee. Do not get one!

Last, the type of card (Visa, MasterCard, American Express, Discover, etc) is important. I am not the biggest fan of Discover cards because they are not always accepted, but in all fairness to Discover card, I never have had any problems with customer service. If you are getting your first card, opt for the Visa or MasterCard. These two cards are accepted virtually everywhere, and the credit cards of the major banks in the United States are usually either Visa or MasterCard. It just makes sense.

Find out which card you want, submit the application, and get your shiny new card. Just remember not to abuse the privilege.

Saving Money While Paying Off Your Credit Card Debt

2007-10-14T19:33:00.000-07:00

Credit card debt can be a real financial drain. You have all heard the statistics and seen the commercials. If you made only minimum payments, it could take you over 7 years to pay off a debt of only $2,000! This is insane! Why pay off the interest when you could be paying off the principal? There are some simple steps you could follow in order to save money on your credit card debt.

First, you must make more than the minimum payment. If you broke down the minimum payment, you would discover that almost half of it goes to paying interest. This is money that you are paying that is not reducing your outstanding balance. If you pay more than the monthly payment, more money goes to the pay off the principal and thus, it takes less time to pay off the debt.

Second, you can utilize a balance transfer. This option is only good if your interest rate is high. Sometimes, credit card companies will offer to give you a card with a 3, 6, 9, or even 12 month interest free or very low interest rate (usually around 2%) introductory period. After the introductory period, the interest rate resets to the default rate. If this default rate is lower than you current interest rate, you should transfer your balance to this new credit card. It is a very simple procedure, you will save tons of money because you will significantly pay down your debt during the introductory period, and your default interest rate on the new card will be better than the interest rate on the current card thus, saving you more money. Everybody wins!

Last, you can call your credit card company and ask for a lower interest rate. You have to have good credit to do this and usually have to have had an account with the credit card company for over six months. However, if you can take advantage of this, I suggest that you do. Many people do not know that you can negotiate with your credit card company and raise your credit limit and reduce you interest rate. If they seem reluctant at first, threaten to close your account. Make them believe that you can receive a better deal elsewhere. Better yet, have a better deal waiting and see if your current company can match it. If they claim they cannot, tell them that you will no longer do business with them and hang up. However, do not close the account because this would negatively affect your credit score. Instead, never use the card and see if your current company comes around.

Saving money on debt is possible; you just have to know where to look and what to do. Take advantage of these easy to use tips, and you will be debt free for less money in a faster time frame!