Should you Pay off your Debt or Invest?

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

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.

When Credit Cards Become an Addiction

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.

Online Credit Card Approval

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

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?

Should you Transfer your Credit Card Balance?

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?

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.”

What are Platinum Credit Cards?

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 Woes to Consider Before you Apply for your Credit Card

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.

Credit Card Safety: Is your Number on that Receipt?

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.

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

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.

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

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?

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?

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.

How to Negotiate Credit Card Interest Rates

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

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.

Is a “Free” Credit Report Really Free?

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.