This blog has mentioned enough about changing credit card terms that canceling your credit card might seem like the easiest way to dodge recent hiked up interest rates, cut credit limits, and new fees. But before you take scissors to your MasterCard, read ahead on for what to consider before canceling your card :

1. Right off the bat: don’t cancel your credit card. Why? Depending on your total available credit, canceling your credit card can negatively impact your credit score. Also, make sure to never cancel you oldest credit card. It anchors your credit history, so canceling will shorten your credit history and heavily damage your credit score.
2. Instead, keep your cards active—just pay responsibly. The key to a good credit score is on-time payments and active use of your credit. If you just stop using your credit card all-together to avoid any late fees or charges, your issuer might close your card and consequently lower your credit score. Instead, use your credit cards to make small purchases on them that you pay off ON TIME and IN FULL every month. That way, you can show responsible credit use and avoid any interest charges or additional fees.
3. …except if you have an annual fee. The only exceptions to the “don’t close your credit card” rule is a card with an annual fee. If you don’t plan to use a credit card that has a steep annual fee, its probably worth it to close your card and just take the hit to your credit score rather than spending needlessly on an annual fee.
4. If your interest rate jumped or you have extra charges, negotiate. You can negotiate with your issuer to lower your interest rate or opt out of a fee. Some banks may also offer a promotional program to defer or get a good rate on your current balance. Cardholders with excellent credit scores and great payment history have a good shot at this because issuers are more likely to compromise with you rather than lose a good customer.
5. Don’t add any more credit cards! The danger in owning more credit cards is that the more access to credit you have, the more you are tempted to overspend credit without the funds to back it up. Stick to credit cards with low interest rates and no annual fee, and ignore the temptation to open a new credit card just for a rewards program, a retail discount, or that really cool t-shirt you just have to have.
6. Build up your credit score! Build your credit history and be mindful of your credit score. For example, paying down your credit card debt rather than closing it all together can actually help your credit score. Even if you don’t have the best credit card right now or are still in credit card debt, a better credit score down the road can qualify you for better credit cards with lower interest.

At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!

SmartMoney suggests a surprisingly delicious indicator of global economic recovery: McDonald restaurants. The fast food chain reports that an increase in overseas store sales–from up-scale districts of Paris to emerging economies in developing countries–indicates global expansion is a sign of an improving global economy. While you can be the judge on whether or not orders of burgers with fries is the new barometer for global economic health, your credit score is still the status quo on gauging your own financial health. Check out tips on credit reports and personal finance news to keep your credit score from getting swallowed by recession.

Personal Finance News

• MSNBC explores 4 life-changing events that impact your finances.
• Best online bank: savings and checking accounts, brought to you by Money Blue Book.
• Frugal Dads suggest you consider a few things before you relocate to end unemployment.
• Kiplinger helps you avoid an empty piggybank this season with 10 ways to fatten your wallet on Black Friday.
• Travel hacking for noobs from Man vs Debt.
• Can you believe it? Mainstreet claims that retail therapy is cheaper than ever.

Credit Report & Credit Score News

• Cash Money Life points out the difference between credit score and credit report.
• Avoid the top credit card mistakes that hurt credit scores says WBZ.
• ABCNews gives you the credit score don’ts to keep your score from dropping.
• Confused about credit? The Clarion Online gives a good, simple overview of how to navigate the credit matrix.
• How to get credit cards with a 550 credit score– advice from Moneyblogger.

The average credit card debt across the U.S jumped a near $1,000 in the month of October, according to Credit Karma. A $1,000 debt increase in a single month for every American with a credit card is a scary number, especially when credit is still tight, jobs are scarce, and with Christmas shopping madness just around the corner.

Credit card debt is not a new problem — consumers have always had to navigate the perils of owning a credit card, from the hiked-up fees, the hits to their credit score, and the temptation to overspend on credit. The sudden increase from September to October could be a tell-tale sign of deepening consumer debts going into the holiday spending season, which means consumers need to tighten up credit usage or pay down debt if we hope to survive financially going into the new year.

Some spenders have the right idea to sidestep credit card usage altogether. A recent Credit Karma poll shows that 79% of CK users plan to use cash to pay expenses for the holidays, versus 18% who will be charging it all on credit cards (2% will pay with pre-paid card, 1% are spending gift cards). Interestingly enough, the users who plan to charge on credit cards have an average credit score of 740, while the majority cash spenders had an average score of 654. Even if you have a high credit score now, be weary about overspending these next few weeks if you opt to charge credit this season. But if you don’t want to dig deeper into debt and want to protect your credit score as you shop this season, tuck your credit card to the back drawer and consider these two old-school shopping tricks that are making a comeback:

• Layaway – Layaway programs have gone out of style since credit cards took over as the norm, but they are being offered again from the usual places like Sears and Kmart to new layaway offer from Toys R Us and online at eLayaway.com. Layaway programs allows you to put the item you want on hold, pay a fee plus a deposit of 10-20% of purchase price, and then make regular payments over a period of time until you finish paying it off and take the item home. This old-school shopping tactic appeals to people who don’t want to take to tack on more to their credit card balance and risk debt, but still want to buy something they can’t pay in full right away. Just be careful of cancellation fees and read and understand the terms of the layaway plan, and watch out for any price drops because you aren’t usually guaranteed any sales that happen after you put something on layaway.
• Re-gifting – is it really a question of ethic in the shopping world? More along the lines of socially acceptable or not, then you can talk about its financial benefits. It’s a taboo in the shopping world—to regift or not to regift? In an ideal world, it’s a perfect option: it is no cost to your credit card, your unwanted gift doesn’t go to waste, and it’s a sustainable form of shopping without the price of debt. You can decide whether or not its socially acceptable, but there is no doubt that it has many financial benefits. If you’re thinking about recycling some presents from last year, follow these pointers to avoid a re-gifting faux pas: the item should not be used and look new and in proper giving condition; you didn’t like it, so make sure you that you are re-gifting to the right person and they will like it; wrap it up presentably; make sure you don’t give the gift back to the original giver; and most importantly, make sure you can get away with it.

At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!

The U.S debt load, a measurement of the total amount of debt the federal government has accumulated, is now at $11,893 trillion and rising closer to the self-imposed $12,104 trillion ceiling limit imposed by Congress. The interest on that alone could cost the country $4.8 trillion between 2010 and 2019! What happens after that, you might ask? The limit will soon be raised, and lawmakers are working on putting together a bipartisan commission to push Congress to make more decision-forcing actions to inch the huge national debt downward.

Should you take a page from Uncle Sam’s book in being that aggressive and gung-ho when it comes to dealing with debt? Read on for more updates on the battle against your personal debt, plus credit card news this week.

Credit Card News

• Newsweek puts it to the test: Credit card company or loan shark? Find out if consumers are being overcharged.
• Can you believe it? Free Money Finance can’t either– now even god takes credit cards.
• Mark your calenders for the top 10 consumer credit events of 2009 from The Wisdom Journal.
• You might have suspected it, but The Business Insider says its true– 10 ways credit card companies are still screwing you.
• “My credit card raised my interest rate! Here’s what to do,” a lesson learned from Money Under 30.

Debt News

• You can handle debt issues better than agencies MSNBC tells consumers.
• Chip away at your debt with some not-so-common-sense money saving tips from Being Frugal.
• Beware of ‘debt-relief’ offers warns The Wall Street Journal.
• More ways to save money to pay off debt with Bible Money Matter’s great big list of 75 budgeting tools.
• How to sue debt collectors blogs Bargaineering.
• Tired of the dealing with debt the same way? Check out The Digerati Life’s DIY Debt Management Plan: GO On Oprah’ Debt Diet!

Capitol Hill seems to be taking up the pro-consumer fight on two fronts this week with the extension and expansion of the Home Buyer Tax Credit and the sped-up start date of the Credit Cardholder’s Bill of Rights. Today, Obama officially signed off on the Homebuyer Tax Credit extension, which will extend the original November 30, 2009 deadline to April 30, 2010 and also opens up a $6,500 tax credit to eligible repeat buyers. On the frontlines of credit card reform, the proposed measure to speed up the Credit Cardholder’s Bill of Rights, from its original February 2010 date to December 1, 2009 was signed off by the House and is now awaiting Senate approval.

The passing of the revised Homebuyer Tax Credit, coupled with mortgage rates dropping below 5% again for the first time in 4 weeks, has many politicians and analysts hoping for another boom in the housing market to last well into 2010.

As for the credit card reform, if approved, the earlier-than-expected December date would be “just in time for the holidays,” when consumers are likely to more heavily rely on credit cards and could most benefit from the restrictions the reforms will place on the price-gouging practices of the credit industry. Cardholders and lawmakers in support of the proposal complain that since the passage of the Act in May, credit card companies have been abusing the grace period as a last ditch effort to raise interest rates, change card terms, add fees, lower credit limits, and even close accounts in order to recoup losses that the coming regulations will cost them. The reform is needed to help protect consumers by “locking a ban on interest rate hikes on existing balances, and tricks that have kept far too many consumers trapped in a never-ending cycle of debt,” reports CNNMoney.

On the other hand, credit card issuers have contested that the expedited start date would ultimately hurt the entire industry. Making the reforms effective a full two months sooner than planned won’t give their systems enough time, issuers argue, to get acclimated to the new regulations, and they have even gone so far as to defend the recent interest rate hikes—some as high as 30%–as fair considering the current state of the economy. Another lawmaker defended the measure, saying, “They have retained the right unilaterally and retroactively to raise the interest rate on what you already owe them. It is the single unfairest (sic) economic transaction I can think of that doesn’t involve a pistol!”

The CARD Act’s major provisions that will affect cardholders includes prohibiting arbitrary rate increases on existing card balances, requiring customer permission to opt into the ability to overdraw on accounts, and the “reasonable and proportional” penalty fees that require issuers to review all interest rates and reduce it where warranted. The measure awaits the Senate’s vote and Obama’s signature to become law.

The consumer protections and consumer incentives of these two key pieces of legislation are under hot debate as to whether the stimulus measures will be effective enough to spark sustainable activity in the struggling economy.

At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!

TGIF and thank goodness mortgage loan rates are still at or below 5%! It’s another good house-hunting weekend, but headlines remind us to be weary of homebuyer hiccups in our uncertain home market. Plus, Credit Karma trends have been all over the blogosphere and news. Here’s today’s scoop:

Home & Mortgage

• MarketWatch reports on mountains of modifications.
• Refinancing: when is it worth it?, MSN Money asks.
• Kiplinger writes that there are more troubles for housing: mounting foreclosures.
• Saving to Invest blogs on 10 deadly mistakes buyers make when purchasing a home and how to avoid them.
• 7 red flags for home buyers and more advice from Kiplinger.
• Doughroller brings you a buyer’s guide to rent to own homes.
• The Associated Press delivers some good news: home sales rise 9.4 percent in Sept.

Credit Karma in the News

• Gmail users have higher credit scores than yahoo mail users blogs Mashable.
• MoneyWatch answers the questions, Why should you have to pay for your credit score?
• Finanacial start-ups form “coalition for new credit models” reports Reuters.
• WalletPop takes an interesting look at what your e-mail address says about your credit score.
• Financial start-ups form lobby group @ Finextra.com.

Pre-Paid debit cards are the “Other Plastic”, an alternative to credit cards that won’t rack up interest charges, increase your debt, or give you that queasy feeling of buyer’s regret the next day. If you are unable to pay off your balance and with credit card interest rates sky-rocketing to nearly 30%, you’ll want to curb your credit use this holiday season. Think of pre-paid cards as plastic cash, which will prevent you from spending beyond your means and make you think twice when you splurge because splurging will deplete your money immediately, rather than be just a line item on a receipt to be paid off later.

Pre-paid credit cards are especially useful for people with poor credit or no credit history who can’t get approved for a typical credit card. It’s a credit-healthy way to spend responsibly while building positive credit history and a better credit score. It’s simple: you pre-load the card with money, spend as you wish, and you have no bills to pay at the end of the month. You still get the perks of the convenience of a credit card, while avoiding unnecessary fees and finance charges. Best of all, you can still build a positive credit history (but always check with your issuer if they report to the credit bureaus). Your pre-paid card will be your training wheels to help you get the hang of credit without the risk of incurring debt or defaulting on payments. This is also a smart option for younger consumers affected by the upcoming CARD act provisions .

The pre-paid trend isn’t just limited to credit cards; these other pre-paid products can help you monitor your spending and still get what you want:

• Pre-paid cell phones have been around for awhile, and are still the no-hassle alternative to a contract phone. You pay for the minutes you want and load up more when needed; the only catch is that you might run out of minutes sooner than you think. You don’t even have to worry about a credit check, which some carriers do when you sign up for phone. One of Credit Karma’s favorite deals is the T-Mobile’s FlexPay for BlackBerrry Curve 8900.
• Gift cards are the “more personal than cash, less hassle than a present” staple at birthdays. You might have thought these were on the wane, but PlasticJungle.com has revived the gift card marketplace by allowing consumers to trade, sell, buy unused gift cards so you can buy stuff at places where you actually shop. It’s a better answer to retail therapy that won’t max out your credit or damage your score.
• Pre-pay your college tuition? Believe it. Some programs, most notably the Florida Prepaid College Plan in Florida and the Independent 529 Plan for 270 private universities nationwide, are urging parents to consider prepaid college tuition plans to secure their children’s future at a more affordable rate today. How much you can save depends on how soon you start saving, and with the inflating cost of higher education, locking in your costs at today’s tuition prices will save you potentially thousands. Keep in mind that these prepaid plans does not account for books, food, transportation, and lab fees that can add up to nearly half the cost of the entire college price tag.

Bottom-line?
Pre-paid is a good way to go if you are prone to overspending or need to get you back on track to good credit . With credit still tight in the marketplace but consumers showing a growing appetite for spending, I wouldn’t be surprised to see a lot more gift cards being swiped at the register or showing up under the Christmas tree this year.

If you own a credit card or read this blog regularly, you should be familiar with the restrictions and fees credit card companies have been imposing on cardholders in recent months. Cardholders have been complaining about jacked-up interest rates, sudden fees, lowered credit lines, closed accounts, and unfair penalties. These changes to the terms on your user agreements for credit cards may not necessarily be due to your poor credit management or late payments; another reason is that banks have been trying to increase the profitability of consumer accounts before the reforms of the Credit Cardholders’ Bill of Rights take effect in February 2010.

With the credit crunch and rising consumer defaults, banks are doing what they need to do to stay in business. Consumers need to look out for the fine print on any notice of changes to your credit card from your issuer, like the one that Bank of America customers received, and see what you can do to protect your credit and your credit score.

ATM surcharge and fees

The Cost: As high as $5 per transaction. Every time you go to use another bank’s ATM for quick cash, you are likely to get slapped with increased fees from both ends of the transaction—the ATM’s bank and your own bank. You have to pay an average surcharge of $2.22 to use another Bank’s ATM, up nearly 13% since last year according to Bankrate.com. Then there is the fee your own bank will charge you for using another bank’s ATM, which has risen to an average of $1.46 from last year’s $1.25.

How to Avoid it: You can only plan ahead and be prepared with cash, or you can switch banks. If you want to stick to your bank, the best way to avoid this fee is to estimate how much cash you need for the day and withdraw what you need from your own bank’s branch so won’t be desperate for cash and tempted to use any ATM. If you’re sick of surcharges and fees, opt for an online bank, such as ING Direct, Bank of the Internet, NetBank, and First Internet Bank, that will reimburse ATM surcharges up to amount per month. Charles Schwab Bank and E-Trade off unlimited rebates for ATM surcharges.

Annual Fees

The Cost: Anywhere from $29-99. Bank of America announced last week that they plan to tack on a $29 to $99 annual fee to an undisclosed amount of its credit accounts starting in February. If cardholders don’t voice too much of a protest, other banks may follow in BofA’s steps very soon.

How to Avoid it: BofA calls the annual fees an “experiment”, so complaining might get some results. If you have an excellent credit score in the mid 700s range, you are in luck. You can try and negotiate with your issuer and even mention that you will take your business elsewhere; chances are they will want to keep a reliable customer like you. If you have poor credit, you can close your account to dodge the fee, but your already-low credit score will take a hit. If the account happens to be your oldest credit card, you might want to consider paying the fee because your credit score will take a big drop with closing your oldest credit line.

Reduced Limits

The Cost: None, but you will have lowered credit limits and a potentially lowered credit score. About 20% of U.S cardholders between October 2008 and April 2009 saw their credit card limits slashed involuntarily, and in some cases, their accounts arbitrarily closed, according to a FICO study. However, 73% of the cardholders complained that they were penalized with no apparent credit problem. Lowered credit limits means higher credit utilization (a ratio of your current credit balances against your total available limits) which unfortunately also means an average of a 20 point drop on a credit score; that could be the difference between being approved or not approved for a loan.

How to Avoid it: You can fight back, or at least make the most of it. Try calling your bank and asking to have your credit limit increased, especially if you are in good credit standing. Otherwise, you can minimize the damage to your credit score by lowering your credit utilization accordingly and paying down your balances. Make sure you don’t go over your new credit limit or maintain a high credit utilization rate—your funds and credit score will shrink.

Overdraft fees

The Cost: As high as $35 per overdraft. If you make several purchases on an overdrawn account in a single day, banks often charge more for repeat overdrafts. That means that you don’t just pay an increased fee on overdrafts—you’d pay it several times over in a single day. Some issuers, including JPMorgan, Wells Fargo, and Bank of America, are planning to reform overdraft fees following criticism from Congress over the exorbitant practices.

How to Avoid it: Monitor spending on your debit card or stick to using a credit card. When you do get overdraft charges, especially if it was multiple charges in a short amount of time, call your issuer and try and pare it down to a single fee–sometimes issuers will do 4 overdraft fees in a single day while the customer doesn’t even realize they overdrew on their account. Avoid using this by using a credit card so you can’t overdraw your account–however, make sure you pay off your balance in full each month and don’t exceed your credit limit or else you’ll be paying fees all over again.

Interest rate hike

The Cost: As high as a 29.99% interest rate hike. Issuers have been squeezing in interest rate hikes for the last few months and will continue to do so in the upcoming months to profit as much from consumer accounts before the credit card reform legislation sets in. Rates rose by 20% just in early 2009, which is already taking a big financial toll on consumers who rely heavily on credit cards or with outstanding balances.

How to Avoid it: If you have good credit, try calling your issuer to have the interest rate dropped. Doing a balance transfer to another credit card with a lower interest rate is another option to ease your payment charges; make sure you don’t get hit with a transfer fee on the new card. However, the best, long-term way to avoid getting burned with these ever-increasing rates is to pay off the debt you have and to hold back on spending so you don’t carry a balance from month to month.

If you want to know more specifically the changes on credit cards each issuer is taking, check out Credit Card Changes by Issuer and Date for a good list of the fees that you might be unaware you are being charged. As banks look for ways to make a profit on plastic while they still can, these fees and hikes might be a red flag to ease up on your credit usage to avoid unnecessary charges all together.

Its “hump day” again, when Wednesday feels like forever since Monday and forever till Friday. Two factors that shouldn’t be a hump in your personal finance is your credit card and your debt. While you’re trudging through with your 3rd cup of coffee, read on to find out how to make it through the rest of your work week with less debt and more credit.

Credit Card

• How to save and make money with credit cards reports Saving To Invest.
• Money Under 30 warns, “Beware credit card skimmers and how to spot them.”
• Consumerism Commentary reports on Bank of America adding annual fees to credit cards.
• Pay or Walk? Annual credit card fees test limits; read about it in the Associated Press.
• Check out Mainstreet’s scoop on gift cards getting a makeover.



• Washington Post asks, is frugality falling out of fashion? Read more on the returning hunger for retail therapy.

Debt

• Worried about debt? Tips on managing your loans from Wisebread.
• Los Angeles Times questions, how about a bailout for student debtors?
• More Americans fall behind on debts reports Reuters.
• Ever wonder what the average household credit card debt is? Bargaineering tells all.
• Cash Money Life blogs on DIY debt consolidation options.

A sunnier forecast of our stormy recession

The thought of today’s stagnant economy is enough to make consumers tighten their wallet, throw credit cards in the freezer, and brace for more fiscal hard times as we push through the U.S’s worst recession since the Great Depression. But forget the doomsday reports and take a closer look at the good and bad of the recession headlines right now because an understanding of our economy can help you change your personal economy –how you handle your finances– for the better. Let’s take a look at various segments of the economy that are rebounding.

JOBS

The national unemployment rate has been teetering at the 10% mark for some time now, but its primed for change. The federal government’s near $500 billion stimulus plan is powering up for a new media blitz to promote job growth and policies that the administration says will create 20 million new jobs over the next 10 years. The White House reports that stimulus spending has helped create or save 1 million jobs so far, new jobless claims have dropped to lowest levels since January, and economists say the willingness of companies to begin adding jobs is getting close. While the current unemployment rate is still a dark cloud hovering over Americans, job creation efforts hold the possibility of brighter prospects.

HOUSING MARKET

The mortgage rates dipping below 5% is a promising gauge of a stabilizing housing market. Refinancing has been on the rise, the First-Time Homebuyer Tax Credit has spurred traffic in house sales, and the Federal Reserve’s continued purchases of mortgage-backed securities has been keeping the housing market afloat in spite of foreclosures and dropping home prices. Also, buzz of Congress possibly expanding the $8,000 tax credit to apply to all homebuyers may jumpstart the housing market back to pre-recession activity. “The most fundamental argument for the Credit is that nothing works in the economy if housing is falling – it hurts household wealth and credit becomes tight,” writes CNN Money.

RETAIL SALES

Before you cringe at these numbers, this is actually good news. Retail sales in September were down 1.5%, but that’s better than the expected 2.1% fall economists predicted. Outside of auto sales, which plummeted about 10% after the Cash for Clunkers auto sales incentive expired, retail sales are actually up 0.5%, which is also higher than economists projected. And when consumers spend, everyone profits. Stronger-than-expected gain in retail shows a boost in consumer confidence, which is a great omen for the coming holiday season. More spending is both an effect and a cause of a slow, gradual recovery, and may be reflecting broader progress in other areas of the economy.

STOCK MARKET

Even the average consumer has reason to be excited about the Dow’s highest close in a year. Better-than-expected retail sales and strong earnings from some big-name companies have helped drive climbing index points, and continued upward market trends indicate a strengthening economy on a larger scope. Analysts say that while the 10,000 point threshold isn’t a significant technical milestone, it is “meaningful on a psychological level” and will bring more confidence in buying and selling on the floor. While the ongoing problems in the financial industry and a potential stock market pullback make some economists skeptical, growth on Wall Street is a general precursor for good things to come.

CREDIT DEBT

Trends of decreasing credit debt reflect an overall healthy shift in consumers’ financial lives and more responsible credit use in the economy’s current credit crunch. Better consumer management of debt suggests that consumers will also be better customers in the marketplace by being more creditworthy and thus less at risk of defaulting and throwing the economy into another credit spiral. On top of that, credit scores are on the rise for 39% of consumers. Healthier credit for consumers spells more liquidity in the market, more consumer activity, and a healthier, more productive economy.

FUTURE FORECAST

The coming holiday season may be the clearest temperature check on the state of our economy—it may explode into a spending frenzy or it might be another conservative Christmas for many of us, but there is hope for significant growth in a better-than-expected end to 2009 and a recovering 2010 if spending keeps up. By no means is this a concrete financial analysis of our economy, but step back and look at the bigger picture—economic recovery may not be smooth sailing but at least consumers are beginning to look forward. People are gaining back their appetite to shop as the U.S economy slowly but surely emerges from deep recession. Sure, credit is still tight and rising unemployment could stall a full recovery from recession, but consumer demand is up, markets are stabilizing, and there is more reason to hope that darker times could give way to sunny skies in our economy.