June 28th, 2010
Is A Balance Transfer Card The Key To Conquering Your Debt?
The benefits of a balance transfer credit card is a mystery to many people, which is a shame because it could be the key to dealing with your credit card debt efficiently and cost-effectively.
The catch-22 of credit card debt is that even when you pay off little by little each month, the card’s APR constantly charges additional interest on top of the principal debt. Interest charges will run up to hundreds dollars a month if your debt is in the thousands; see for yourself with the Debt Repayment Calculator. Paying off credit card debt can feel like trying to run a marathon, sprinting 3 steps forward and falling 1 step back.
March 5th, 2010
Dear Credit Karma… More On What Affects Your Credit Score
Dear Credit Karma,
How could moving affect my credit score?
Moving from one home to another will not directly affect your credit score, but beware of any fallout that may occur with misplaced bills that could end up hurting your credit score.
When you move, make sure you update your new address for all financially-sensitive mail like credit card statements, utility bills, and loan payments. Remember, it takes a week or so to have your mail forwarded. These changes can get lost in the transition of moving and ultimately hurt your credit score. Missing or paying late on a bill just because you didn’t receive it at your new home and forgot to take care of it will deal an unnecessary blow to your credit score. Also, if you left your previous home because of an eviction (which may be reported on your credit report, depending on your landowner) or a foreclosure (can cost up to 160 points in damage to your credit score), it will negatively affect your credit score.
February 24th, 2010
Wednesday Trends in Credit Cards & Debt
When consumers were asked if their bank does what’s best for the customer, the nation’s biggest banks ranked rock-bottom of the list, reports CNN Money.. Last on the list in regards to customer service were Bank of America, Chase, Capital One, TD Bank/Commerce, Citibank, and HSBC.
Customer dissatisfaction is old news in the banking and credit card industry, as the CARD Act–in effect this week–attempts to reform and regulate practices to improve consumer protections. For customers looking to break up with their bank, financial institutions that scored well amongst consumers in the survey include local and regional banks, as well as credit unions.
More credit cards and debt news and advice included in today’s roundup.
December 30th, 2008
Credit Crunch Affecting My Credit Cards
Last week, Capital One cancelled one of my older credit cards for non-usage. With credit card companies and banks scrambling for capital and looking to reduce risk, this was bound to happen. For background, I’ve had this card for almost 6 year and have only used it once for a promotional balance transfer. It had a $5,000 credit line and I haven’t used it at all since I opened the account.
From Capital One’s point of view, I can understand why they are doing this. It costs a few dollars to issue new plastic (every 2-5 years), and figure $.50 for every mail notice. My account probably costs Capital One $3-4 per year to maintain while I generate absolutely no revenue for them. In addition, with the current economic environment, I represent a liability. In many cases, people who start using their card after a long period of inactivity are often more risky; so, this is an appropriate action, in my humble opinion.
Now, with all modesty, this account closure has little impact on me. I have good credit and access to several other credit cards. But for others, this could be a very different situation since lowering of available credit could have a negative effect on one’s credit score. Here are some tips to protect against reduced limits and credit card closures:
- Have Multiple Credit Cards. Like any good stock portfolio, you should diversify your access to credit. Don’t let one bank control all your credit. People with good credit have 3-6 credit cards, on average.
- Use Your Credit Cards to Show Activity. My account was closed because I didn’t use it for more than 5 years. You should try to use each of your credit card a few times a year to show activity. I recommend gas or groceries since those are necessities that don’t encourage splurge spending.
- Be Consistent With Credit Usage. Erratic spend behavior can be another indication of risk. So, don’t charge large amounts or use cash advances unless this is your normal usage. Otherwise, your actions may trigger a reduced line or account closure.
If you read our blog frequently, you will think these tips are repetitive or are the same advice for other scenarios. The reality is that good credit habits are relevant in almost all situations so please forgive the repetition.
November 5th, 2008
Balance Needed As Credit Card Rules Experience Change
Over the past forty years or so, credit cards have taken a place as fixtures in the average American consumer’s wallet. Unfortunately, with the worldwide financial crisis along with increased pressure for regulation in Washington, the lending system is beginning to see reshaping in ways that is making credit not only harder to get, but also more costly to use.
These changes are going to have a significant effect on American consumers in different ways, as American consumers are currently carrying nearly a trillion dollars in credit card debt according to estimates from the Federal Reserve. For the majority of credit card holders who pay their balances off every month, this system of buying now and paying later will remain an excellent convenience that often comes with additional benefits and discounts. However, for nearly 50 million Americans who carry balances from one month to the next, using credit to cover the rising prices associated with food, gasoline, health care and housing, things are going to get a little tricky in the coming months.
It would obviously be wonderful to report that all that needs to be done is to cut back on extra expenditures, but most of the people who are carrying credit card balances are just absolutely incapable of paying their expenses because their real incomes are declining at a rapid pace. Signs of tightening in the American credit card market actually began to appear as early as last fall as many credit card offers came with aggressive teaser rates which are now very rare if available at all. Many come with incredible fees after the fact that makes the very few available credit offers truly deadly ones.
Historically, balance transfers were used as life preservers, allowing them to manage their debt. The rules have changed however and these once 0% balance transfer rates are now hitting as high as 3.99 and only lasting a few months before skyrocketing even further. In the 1960s, credit cards were so hard to get they were almost treated as status symbols, then standards loosened up and everyone had one, two or a dozen credit cards in their pocket. Now the standards are tightening up within the industry, and getting anything is near impossible, even just extending your limit, or getting a credit card at all. These much stricter standards are coming not only as a reaction to the current economic crisis, but also the fact that other things are causing consumers to have difficulty paying off more than the minimum on their credit card balances which defeats the purpose of having them in the first place.
According to Scott Crawford from DebtGoal.com, consumers are being forced to adjust to an environment where credit is simply much tougher to obtain. There are no easy ways out right now, so what consumers need to focus on doing is changing how they handle credit, paying off their debt and getting their credit cards paid off as quickly as possible. Even consumers with excellent credit ratings are urged to leave the cards at home and start using cash whenever possible, because there is no telling what the credit market will be like in coming months.
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