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Most of us have emergency or other expenses that require quick funds. While many resort to credit cards for these expenses, a better option may exist: the personal loan.
The personal loan is a contract created between a bank, credit union or other lending entity and an individual. It states an amount to be lent to the individual and terms like interest rate and duration of the loan. Because establishing a personal loan requires discussion with a bank or credit union representative, however, many feel intimidated to embark on this kind of funding. This said, the personal loan may be the more financially savvy option in several situations.
First we want to cover the biggest advantages of using personal loans over credit cards. These include:
1. the personal loan can be “unsecured,” requiring neither collateral (like a credit card) nor a credit card inquiry that can lower credit scores; this said, some personal loans DO require collateral and perform a credit inquiry. Get these items straightened out with a loan agent BEFORE signing the contract;
2. personal loan interest rates are typically lower than credit card rates and negotiation with the loan officer for even lower rates is possible;
3. unlike rates for credit cards, the interest rate stays fixed for the entire repayment period;
4. monthly payments stay even. Credit card payments change as charges accrue.
With the advantages clear, you can determine whether the money you need should be gained through a credit card or personal loan. The following includes the situations that we think make the most sense for a personal loan.
1. Unexpected Income Shortfall
People make errors. Sometimes these fallible people have jobs in payroll and forget to cut checks. The good news is that banks and credit unions issue small personal loans relatively easily, requiring a few pay stubs and the last few months of bank statements. While going to the bank to discuss the situation can be uncomfortable, people in this situation get money within 24 hours when they use convenient online personal loan solutions. Online banking solutions often have lower interest rates and better terms because these alternative lending institutions do not need to satisfy shareholders or spend exorbitant amounts on marketing. As Bill Gates said in the nineties, bricks and mortar banks “dinosaurs.”
People looking to finance an adoption, in vitro fertilization, a cross-country move or other big activity without traditional financing (like a car or RV loan) turn to the personal loan to move life forward at reasonable cost.
2. Consolidating Credit Card Debt to Increase Credit Score
Who wants to pay 19% when they can pay 11%? An 8% difference per year can save the borrower with a $10,000 credit card balance $800 each year or $67 monthly. Fill out our convenient personal loan application. First Financial lenders’ lower loan rates and better terms may surprise you! We have all the security of the big, bricks and mortar banks, namely 128-bit “banking level” security. We have to. The Security and Exchange Commission and other federal institutions demand it.
3. Borrower Prefers or Needs a Fixed Rate and Term
Borrowers (or their parents or spouses) often advocate for the personal loan because it involves making the same payments at the same schedule until the loan is paid off. Credit card rates are variable and could rise several percentage points yearly. Those who make a clear decision about one large purchase appreciate the clarity of paying for it consistently over a limited period of time.
First Financial Personal Loans Provide the Savings only Online Functionality Delivers
First Financial’s lending partners can provide low cost personal loans because of their cost-saving, online structure. Apply for an affordable personal loan here, even if your credit rating is “fair,” “poor” or even “bad.” Our comprehensive application was designed by financial professionals who understand that an applicant’s financial history can be complex, particularly in the post-recession era. Fill out the application in minutes and learn how much you qualify for within 48 hours. Follow First Financial on Facebook to get smart budgeting and saving tips, too!
By the end of 2018, United States Americans owed over $800 billion in credit card debt.
And the same source tells us that 48% of those credit card users make only minimum payments on their credit cards. Those customers typically have rollover amounts each month.
To keep up with friends, almost 40% of millennials spend money they don’t have. And 3 in 10 cardholders don’t even use their rewards.
If you aren’t financially aware, credit cards can be a detriment to your future earnings. But if you use them correctly, they can improve your credit significantly and help set you up for success.
Before you get your first credit card, make sure that you’re ready. Keep reading to determine when you’re ready and to learn some essential tips for being a responsible user.
Getting a credit card is an essential step in almost every person’s life. But before you get one, you should understand the way they work.
Plus, it helps if you already have a bank account. Understanding how to deposit, save, spend, and budget money is an integral step in learning about finances.
When you use your debit card that’s attached to your checking account, you’ll get practice for when you use a credit card.
Do you already have self-discipline? Do you prioritize? If the answer is yes to either, you’re one step closer to being ready for your first credit card.
You should know about how much money you have in your checking account at any given time.
Make sure that you don’t overdraw your account and can manage any regular payments before spending money on anything else.
Have you ever saved up for anything, big or small?
It’s good to be in the habit of saving up for things, especially when it comes to bigger purchases.
Don’t think of your credit card as a blank check. It’s a great idea to only buy things on your credit card that you could already pay for with funds from your checking account.
Using a credit card is an excellent way to build credit, especially if you pay it down regularly, and don’t max out your available credit.
There are a few different types of financial institutions that offer credit cards.
Your bank is a great place to get your first credit card. While it used to be harder for someone with no credit to qualify, there are now quite a few options for those with no credit.
And applying through a bank where you already have an account may significantly increase your odds of being approved.
Sometimes these cards are easier to get, as you can typically only spend money in the store for which you hold the card. However, many of those stores have different card options, some of which DO work in other venues.
If there’s a particular retail store you frequent often, try there, especially if you have no credit. These are easy to get approved for, but they generally have higher interest rates.
Lenders other than banks also offer credit cards. Some only offer to low to high credit, but some lenders who offer cards to those without any credit yet.
Getting your first credit card isn’t always easy. If you don’t get an offer on your own, you could always try enlisting a co-signer in your application.
Your co-signer’s credit history and income will be used to determine whether or not you are eligible.
A secured credit card is another viable option, and banks offer them a lot of the time.
The way it works is that you’ll put a deposit on the card first, and the lender may match those funds, or approve you for a certain amount.
It makes things less risky for the lender in choosing to trust someone with no credit.
There are a few tips and tricks that will make your first credit card adventure a success.
First and foremost, make all of your payments on time. Late payments will only lower your credit rating and put you further into the hole. Plus, there’s no sense in starting with bad habits.
If you can help it, don’t ever spend more than what you could pay in full. If you pay your balance in full every month, you’ll avoid significant interest charges and a lower credit rating.
Plus, when you purchase things you technically can’t afford, you’re borrowing from and making decisions for your future self.
Try to keep your credit utilization ratio under 30%. If the amount of credit you’ve used is not significantly lower than the credit you currently have available, you won’t be building good credit.
Before you get your first credit card, it’s in your best interest to open up and use a checking account with a debit card.
You must know how to manage your money and to put bills and essentials ahead of other purchases.
Plus, you must make your payments on time and make more than the minimum payments. And the lower you keep your credit utilization ratio, the better it is for your credit.
If you’re determined to better your credit, here are some life-saving tips that’ll boost your score quickly.
And if you’re ready for your first credit card or have any questions, give us a call.
The average American carries approximately $6,375 in credit card debt. For many, the stress associated with trying to pay off this high level of debt is significant.
If you find yourself in the group of people stressed about how to go about paying off credit card debt, you will be happy to learn there are some tips and tricks you can use. While your debt may seem insurmountable now, with time, effort, and dedication, you can get out of debt for good.
If you’re ready to learn what steps to begin taking, keep reading.
Are you carrying a balance on more than one credit card? If so, you need to make sure you are always paying the minimum required on each.
However, don’t stop there. Once the minimums are paid, you need to concentrate on paying down the balance on each card. Be sure you choose one card to focus on at a time.
You can choose the card with the highest interest rate to pay off first, or the one with the smallest balance. Both of these strategies are effective but choose the one that works for you, and then stick with it.
If you want to get out of credit card debt and stay out of it – for good – you have to take some drastic steps. One of these is to destroy the cards.
Regardless of what you think, there is no such thing as responsible credit card use. There is no good reason to keep these cards around, especially the department store cards that would not even be helpful in an emergency situation.
While this step may sound somewhat drastic, it’s the only surefire way you won’t get right back into credit card debt once you have paid everything off.
Another option is to consolidate your debt. You can combine several of the higher-interest balances into a single payment. In most cases, the transfer fee is going to be three to five percent, but you can compensate for this with the savings you are going to see from the transfer.
If you have any equity in your home, you may be able to use that to pay down your credit card debt, as well. Home equity lines of credit often provide a lower interest rate than what the typical credit card charges.
It’s important to understand that closing costs will apply. However, the benefit is that the equity interest payments are usually tax-deductible.
If you choose the consolidation path, remember, you need to control your spending. This can help you avoid accumulating new debt, along with the debt that’s just been consolidated.
If you are planning to pay off and destroy your credit cards, then you still need to ensure you have some type of safety net for emergency situations. This is where an emergency fund comes in.
Building an emergency fund can take some time, but it will also be valuable if you encounter an unexpected expense or some type of income disruption. All you have to do to create an emergency fund is put a little back from each of your paychecks. By doing this, you can avoid missed payments and the need to use a credit card in the future.
You need to get a handle on your budget and make sure you fully understand what it is and how you can make the most of it. For example, top priorities should be transportation, groceries, housing costs, and entertainment.
A great way to begin this reorganization process is by looking at your credit card statements, as most issuers categorize your spending.
Be sure you scrutinize this information closely. Find areas where you can cut back how much you are spending. Then take the money that you have “found” and put it toward paying down the debt you have.
If you are like most people, you didn’t get into credit card debt overnight. As a result, you are aren’t going to be able to get out of it that quickly either (unless you find a windfall of some sort).
Be patient and continue on the path to living a debt free life. While this is bound to take some time, in the end, it will be well worth it, and you will be in a position to take charge of your finances and finally achieve the financial freedom that you want and need.
There’s no question that paying off credit card debt is something that takes time. However, it’s possible when you use the right tactics and rely on the right information.
Be sure to use the tips and information found here, as they’re going to help you on your journey to financial freedom. You may also want to reach out to a financial advisor, who can provide you even more information on how to best manage your finances to remain debt free.
If you are ready to take control of your finances, rather than letting them control you, we can help. Our team can provide the information you need on any finance related topic. For example, we have a recent blog on how to take the pain out of monitoring your finances.
Stay tuned to our blog for more insights.
16% of Americans have a credit score of below 579. This is the lowest level of the FICO score and is categorized as “very poor”.
A poor credit score can have a serious impact on your personal life and can affect your business negatively as well.
While no one can guarantee that you will hit an exceptional score, there are steps you can take to improve your credit score.
Here are seven tips to raise your credit score quickly.
The very first step to take is to get a copy of your credit card report. This is the only way to know where you stand before you figure out the specific actions to take to make things better.
This is, however, not all you will be doing with your report. Go through it carefully, checking for any error and omissions.
Look for things like a repaid debt that’s been listed as a default or a loan you repaid on time that is not listed.
If you identify any of these issues, move to have them corrected. This action in itself can add a few points to your rating.
You will be surprised at how helpful your creditors can be. Unfortunately, if you never ask, you will never find out.
If you are having trouble making payments, make contact with your credit card issuer and communicate this with them.
Most providers have temporary hardship programs you can take advantage of. The benefit of this is that you can have your repayment amounts reduced until you get back on your feet.
Smaller, more manageable installments mean you can pay a lot more comfortably. This is better than skipping payments and having a creditor send a negative report that sheds a few points off your score.
This is a great way of giving your credit score an immediate boost. This works particularly well if you are just starting out and have little information on your credit rating.
You do this by getting someone with a high credit card limit and an even greater repayment history. Their card issuer sends them a card with your name on it.
Legally, you are not obligated to make payments on any debt accrued on the card. But its usage reflects positively on your credit score.
The key is finding someone with above board transactions. In a sense, you inherit the person’s positive credit history.
However, not all credit card companies report authorized users. Before you get on it, do your research and find out if it will be reported.
It’s not uncommon to fall behind on payments from time to time. However, these small mistakes lower your credit score.
If you are in good standing with your creditors, it does not hurt to request them to delete some of the reported late payments. Financial institutions regularly communicate with Credit Referencing Bureaus, and all it would take is a quick phone call on your behalf.
If the request goes through, then you will have fewer negative reports, which will add some points to your credit rating. Nevertheless, try and restrict your late payments to 30 days. Creditors will not report late dues failing in this time frame.
If your issue is forgetfulness, rather than availability of funds, you can have your banker or employer make direct payments if this facility is available. If not, there are numerous software tools you can use to remind you when your payments are due.
You might be eager to forget about your car loan or student loan debts once you make the final payment.
However, as long as you completed your payments promptly, those records may help your scoring. The same is true for credit card debt.
All you need to do is keep these debts on your record. If they were entirely left out, then provide all the information to the credit Reference Bureau so they can use it to calculate your credit score.
Bad payment histories are deleted with time. However, bankruptcies stay on your report for 10 years and late payments for seven years. You don’t have much leeway with these.
Credit utilization is the amount of credit card balance you have compared to your credit limit.
This is the second largest factor affecting your credit score. The first is your credit repayment history.
The more credit you use on your credit card, the further down your credit rating drops. This trend indicates you are spending a significant portion of your income to repay debt, which makes you likelier to default on payments.
The best credit utilization is 0, which means your credit card limit is untouched. This defeats the purpose of applying for a credit card in the first place.
As a rule of thumb, keep your credit utilization ratio at 30%. This means using less than 30% of the credit limit availed to you. Anything above this can cause your rating to drop.
Under the FICO system, people with the highest scores have a utilization rate of 7%. The lower your utilization, the better.
The average age and number of accounts you have held are an important consideration in evaluating how you handle debt.
This tends to disadvantage people with a limited credit history.
UltraFico and Experian Boost allow people with limited credit histories to puff it up using other information.
Experian requires access to your online banking data and allows Credit Referencing Bureaus to add utility payments to your history.
In the same way, UltraFico allows you to give permissions for savings and checking accounts to be used alongside your report when calculating your credit score.
All in all, while it is possible to raise your credit score quickly, expect a few bumps along the way and allow yourself some time.
At First Financial, we understand that while you work on your credit rating you might still need help from time to time. No matter your credit score, we have a financing solution for you. Contact us today for more information.
Go from bad credit to good credit without beating yourself up
Can there be any joy in monitoring your finances? Your bank balance is disappointing more often than not. Trimming expenses doesn’t bring any joy. Reminders of irresponsibility can be a gut punch.
Still, a different mindset can help you make the changes to put you on the path to good credit.
Begin by forgiving yourself for financial mistakes
The shame and blame we heap upon ourselves for not being where we want to be financially can make our situations worse. It leads us to avoid confronting credit spending, recurring debits from bank accounts, balances on personal loans or car loans, and important conversations with family members.
Shame springs from an idea that the individual has departed from social norms. Start dismissing your shame when you understand that one in three others you’ll meet today also have credit under 601. That’s right—one-third of Americans today have bad credit.
The individual experiencing bad credit has lots of company. And is this all their fault? With aggressive companies relentlessly bombarding us with messages that we deserve their products and that we must keep up with our peers, it’s no wonder we overextend ourselves.
If you can grab your financial issues “by the horns” so to speak, you have made the first
step on the path to success. Some psychologists tell us that, “a willingness to endure discomfort and capitalize on challenge is a trademark among successful, fulfilled individuals.” While it will require a little effort, put a budget in place, inform those who may impact it, stick to it. You’ll quickly find positive feelings about yourself and your financial situation multiplying. As Benjamin Franklin told the framers of our constitution, “Once begun, half done.” Those quill pens got to writing, despite their enormous task.
Gamify Your Savings
Rather than tracking every $3 coffee, focus more on a positive indicator: your savings level. As that rises, set a reward after reaching certain amounts. The reward could be you get to buy a new piece of clothing or 10 shares of SnapChat stock. Set these levels up ahead of time and stick to these commitments. These rewards can offset the sense of loss from avoiding day-to-day overspending.
Take the pressure off when you avoid social media
First and foremost, understand that social media is simply carefully selected snippets of your friends’ and family members lives. What they choose to share is designed to elicit envy. Those of us here at First Financial are constantly surprised at friends’ life-is-so-great posts and how these compare to what we know are their real struggles.
What’s more, when you focus on others, you remove your attention from your own issues. If you have bad credit, all your attention needs paid to your spending and savings plans.
Let the social world turn without you when you use a religious tradition, mindfulness, meditation or good old smart reading to understand how pointless it is to compare yourself to friends, relatives.
Deepen Your Relationships when You Lay It All Out for Loved Ones
Serious conversations with loved ones can be intimidating, particularly when they’re about money. Strategize how to take the sting out of belt-tightening before you tackle it with those you love. In other words, have alternate plans to take the place of lavish habits so that your new financial regimen doesn’t translate as 100 percent loss.
First, explain how it’s important now to join forces for common goals and how these efforts will unite you. Emphasize that working together for financial fitness by cooking meals together, going to resale and thrift shops and competing for better money saving strategies will get you talking and sharing more. Also, make sure you include your family members’ long- and short-term goals in your planning. Study after study reveals that children and spouses prefer experiences and time spent together over material goods anyway. Shared experiences just connect us better and for longer than shared material consumption. Use that research if you have to!
Your new financial fitness system may benefit from gratitude journals. Everyone should jot down at least one thing they’re grateful for every day. Sharing is optional, but when these grateful moments that include others are shared, it strengthens bonds. These journals, particularly effective when an individual is feeling particularly short-changed, have proven to increase happiness significantly.
Want to maximize your money and scrutinize your spending? Use credit cards! Most come with no monthly fee, and if you pay them off every month, no interest accrues. In addition to convenience at the parking structure exit and online store, credit cards make life easier in so many ways.
Credit Cards Protect Your Purchases
Hopefully, you choose your purchases only after careful consideration. If you want extra protection, however, use credit cards for online purchases and even large in-person transactions. Money transferred via debit card, check or cash is far tougher to retrieve if the purchase turns out to be defective or not what you have expected. With credit cards, however, you can call the issuer and dispute the charge. This puts the financial transfer on hold until the vendor can satisfy the buyer, until the vendor agrees to return the money, or the bank sides with the consumer and refuses to pay. The protections afforded by the credit card give you a chance to try out the product so you can make sure you’ve gotten what you expected.
Consider, too, putting home and lawn remodeling on a credit card to protect yourself. If you cut a down-payment check up front, that money is gone. A landscaper can leave your yard an excavated mess and never show up again. If you put the down-payment on a credit card, you can dispute the charges and hopefully get your money back from the bank. While a dispute is pending, you won’t have to pay interest charges according to federal law. If your credit issuer decides in your favor, you won’t owe anything.
Credit Cards Protect You from Fraud
Barely a month goes without hearing about how a large company’s customer data has been hacked. Your financial liability for charges resulting from identity theft depends how quickly you find out about it and alert the card issuer. Federal law mandates that your liability for credit card fraud can never be more than $50.00.
You Want Vacation Benefits
Hotels, restaurants and car rental companies know your credit card most likely has a higher limit than the money in your checking account. They want you to use your credit card and will offer all kinds of incentives if you pull out the plastic. All you need is a little self-discipline to take advantage of the perks without getting into over-spending. And, whatever you do, don’t fall for messages that you can afford more. Stick to your budget. They’re happy to run your credit cards up to the limit, but you have ultimate control.
The cards themselves, too, pass along incentives from time to time. If you read your credit card agreement, you may find extended warranties on large purchases, insurance coverage on rental cars or price guarantees on products bought with the card. Want to leverage every penny you earn? Read your credit card fine print! You won’t find rewards on debit cards.
Transacting business in the United States today often takes credit cards. They not only make life convenient, they make it safer and filled with more fun perks. If you want a credit card that fits your lifestyle and helps you achieve your goal, don’t hesitate to review First Financial’s wide variety of credit cards here.
Technology continues its forward charge and no aspect of our lives is left untouched. Even credit cards are changing based on advances in coding, competition and rewards. When you know the innovations unfolding in 2019 from the best credit card issuers, you can hold out for the best perks, the most iron-clad safety and the best in customer service.
First, understand that that Gen Z, the generation born between 1995 and 2015 uses Google, Amazon and the social networks like the rest of us use laptops and texting. Gen Z will be 40% of of all US consumers by 2020, so credit card issuers will be catering to them as well as the Millennials. That means the rest of us must push ourselves to understand the newest bells and whistles that come with new credit cards. Most of all Gen Z wants highly personalized credit card experiences . . . a good thing, as card issuers will deliver more relevant offers to each of us as the years go by. Keep in mind, too, that GenZers use mobile banking apps more than desktop or tablet access. That could mean that card issuers will spend more money on their apps than on their desktop/laptop interfaces. Getting proficient with every issuer’s mobile app will ensure you get all the convenience available.
Mobile Payments Will Continue to Evolve
Up to now, consumers have dealt with clunky mobile credit card payment options. With advancing APIs and open banking, card issuers will begin to offer more valuable, customer-centric payment experiences. These will include immediate rewards, card balance alerts coming to smartphones and more, as issuers work to bring true value beyond simple credit card transactions.
American consumers have embraced rewards cards. It’s no wonder. In 2018, they got a total of $15 billion in rewards value through airline miles, cash back and other perks. While the rewards enticements are raising marketing costs for card issuers, they must continue them to keep up with the competition. In fact, these marketing costs have doubled from 2008 to 2016. Still, they’re all the better for the consumer, who consistently demand more rewards. If a rewards program isn’t robust enough, consumers don’t hesitate to switch.
Another rewards-related development is real-time rewards delivery. While today rewards get redeemed after a month or so, experts predict they could come through with every purchase soon. Look for that advantage as you review your options in the coming year!
Credit Cards Getting Even Safer
Chipped cards did help with credit card safety, but even more safety measures are coming down the pike. “Tokenization” is a system that creates a unique code for each customer and purchase on each website. If this code is stolen, it won’t work for any other transaction. Listen for the term, tokenization as credit cards advertise to you via the internet and live streaming.
Cards used everywhere
Babyboomers remember when only department stores accepted credit cards. Now Etsy vendors, salsa makers at the Farmer’s Markets and ecommerce stores ALL accept credit cards. This trend will grow to include service providers as well. This means, soon, you won’t have to stop for cash to go to the resale shops or roadside stands. PayPal, Venmo, Stripe and Square will enable even the smallest businesses to accept payments. Universal acceptance is on its way!
Be alert to these changes and demand them from the credit card issuers you are considering. In the customer-centric era, they will be competing with each other to give you the lowest rates and the best rewards.
The bill for the holiday fun comes due in January when the credit card statements arrive. You may even have used a quick cash advance to get all your gifts purchased during November and December. Prepare now to tackle those bills AND improve your credit score throughout the new year.
The first of the year inspires all kinds of resolutions. If you want this new year to be when you get your financial house in order, it’s time now to tackle that daunting document: your credit report.
You’re entitled to a free credit report every 12 months. Annualcreditreport.com is the only free site authorized by the U.S. government’s Federal Trade Commission. Don’t be intimidated. Just fill out a few fields, check some boxes and it comes right to you.
Statement in front of you? Good. We’ll take it step by step.
The first element of your credit card examine is your credit utilization–basically, how much credit you have used compared to the total that banks are willing to lend you. Those using 50% of their available credit on any one account or 50% of credit offered across ALL accounts have lower scores than card holders using less than that halfway point. If you’ve spent $10,000 of a $15,000 limit, you’re using 67% of your available credit. Your annoying brother-in-law using only $5,000 of a $15,000 limit has a 33% credit utilization rate.
Credit utilization accounts for a whopping 30% of your score. It’s also rather simple to improve. How? Apply for new credit cards and ask for the highest limits. Then, assuming you start with the $15,000 credit limit we discussed above, an additional $10,000 in new credit available to you gets you to a new limit of $25,000. $10,000 out of an available $25,000 credit line creates a 40% credit utilization, far lower than 67%. Keep working on it and you’ll be below 30% in no time.
Credit card limits are tricky. Even if a credit card issuer approves you for $10,000 or $20,000, it doesn’t mean they think you have the income to spend all of that. Approved for $20,000? Best to keep your debt to $10,000 and under.
Your new January approach will be to work your credit card balances down below 50% of your limits or the amount your bank permits you to borrow. Whether that’s through paying down balances or opening new credit lines depends on your financial situation.
Where credit utilization accounts for 30% of your credit score, late payments impact it even more. Even one payment that’s late 30 days starts shaving points, but 60 and 90 day late payments wreck real havoc. At 120 days, most card issuers hand the account over to a collections agency. Now you’re talking about having your credit score drop into the 500s.
If you see that you have late payments, don’t despair. These three options may get them removed:
After you’ve addressed your credit utilization and payment history data, you can go forward knowing exactly how to put your best foot forward in rebuilding your credit.
With a firm understanding of how credit scores are calculated and how your behavior contributes to them, you can be confident about finding credit cards that will stabilize your finances.
Keep that positive in mind when you find out that you most like will need to start out by using “secured” credit cards that have fees, low limits and may even require a deposit. Banks and the U.S. government want you spending, so the secured credit card is the way they make it happen.
These credit cards work just like a regular credit card, except you deposit often the same amount of cash collateral that they permit you to spend. What’s the benefit, then? These secured credit cards report to the three credit bureaus ( Experian, TransUnion and Equifax ) that you’ve shown responsible use of your secured credit card. Every on-time payment gets documented.
Eventually, the secured credit card company should approach you about using an unsecured credit card, where you don’t have to put up the cash. If they don’t after six to nine months, by all means apply for a different unsecured credit card or approach your current company for the same opportunity. The credit card company will consider how you’ve managed –not only your secured card– but all of your credit cards and loans.
Once you get the unsecured card, your collateral from the secured card comes back to you, given you’ve paid all charges.
Holidays are not ALL about the gifts, but they sure make these few days out of the year more fun. And the fun is not just in receiving, but giving. In fact, studies have shown that those who spend money on others feel happier and have more of a sense of purpose than those who don’t. Gift exchange has promoted connection and well-being since prehistoric times. If your generosity is crushing your credit score, rest assured you can work your way out slowly but surely.
Whether you’re in a financial crunch or just lack a second Ferrari, credit card offers landing in your mailbox might look like an answer to a prayer.
Don’t succumb to temptation, says Cate Williams, vice president of financial literacy for Money Management International in Chicago.
“The first thing consumers need to do is walk from their mailbox to their shredder,” says Williams. “A new credit card might give you that sparkling feeling for about 24 hours, but as a way to clean up your finances, borrowing money to pay back other money is not a solution.”
Experts’ advice can steer you away from the top 10 credit card mistakes.
1. Getting too many Bypass the shredder and you could make one of the most common credit card blunders by collecting too many credit cards.
“Ask yourself,” says Williams, “ ‘Do I need another credit card?’ Probably 95 percent of us don’t need another one to keep in the sock drawer or in the little metal box in the kitchen.”
Howard S. Dvorkin, founder and president of Consolidated Credit Counseling Services, a nonprofit debt management company in Fort Lauderdale, Fla., agrees. “The worst mistake is that people don’t know when to stop. Too many credit cards is not a good thing.”
Even if the cards have zero balances, multiple open accounts could cause a lender to question what could happen if the account holder gives in to temptation and maxes out on all that plastic.
2. Misunderstanding introductory rates But, you argue, that new card will help you manage your money better because you can transfer other balances to a no-interest account. Welcome to credit card mistake No. 2: being misled by introductory rates.
“People don’t look at what the rate’s going to be once the teaser is over,” says Daniel Wishnatsky, certified financial planner and owner of Special Kids Financial in Phoenix. “The assumption is that it’s going to be a reasonable rate. But with these particular loans, it’s not unusual for it to go up to 18 to 20 percent. They’re surprised six months later when it expires. But if they’d done their homework, they wouldn’t be.”
3. Not reading the fine print That homework is reading the offer’s fine print. Not doing so is credit card blunder No. 3.
That tiny text insert is where you’ll discover when the zero-percent or very l ow interest rate expires. It’s also how you can find out about any balance transfer fees, as well as any offer limitations. In most cases, the introductory rate applies only to balance transfer amounts or new purchases for a certain period of time, says June A. Schroeder, a CFP with Liberty Financial Group Inc. in Elm Grove, Wis., a private financial planning and advisory firm.
4. Choosing a card for the wrong reasons You might be tempted to ignore the fine print because the card has other attractions, such as a rebate or rewards program. Don’t, or you’ll make credit card mistake No. 4: choosing a card for the wrong reasons.
“Credit card granters are not a consumer’s friend. It is a business,” says Dvorkin. “They don’t know what’s right for you. Their job is to extract as much money from you as they can. Your job is to not let that happen. People need to go through and find a card that’s right for them. There’s every sort of card out there — points, cash back, donations to your college.”
5. Not rate shopping Look for the best possible interest rate. Not shopping around is credit card mistake No. 5.
It’s especially important to note the rate on unsolicited offers. If you’re struggling financially, you’re not likely to get the most favorable rates or terms. You’ll be paying higher interest rates. So comparison shop for a credit card.
6. Making minimum payments OK. You do need another card. You read the fine print, you completely understand the terms and you got a competitive rate. But even after choosing the perfect credit card, people still make mistakes, such as No. 6 on our list, making minimum-only payments.
“Credit cards are not a form of supplemental income,” says Dvorkin. “They’re for convenience, and should be paid off at the end of every month. Paying the minimum is not going to get you anywhere. It’s going to get you in trouble, that’s where it’s going to get you.”
And it’s going to get you into trouble for a long, long time. “People don’t realize how difficult it is to pay off loans at a high rate,” says Wishnatsky. “You’re going to be paying it for your next three lifetimes.”
CreditCards.com’s calculator can show how long it will take to pay off a bill if you send only the minimum each month.
7. Paying your bill late Making late payments, blunder No. 7, is better than not paying at all, but not by much. Not only will you face a late-payment charge, which could be higher than your minimum payment, your tardiness will show up on your credit report, damage your FICO score and make it harder to get better terms for future loans and accounts.
Check your account statement for the due date and make sure you send your check in plenty of time. But the date alone isn’t enough, says Liberty Financial’s Schroeder. Some companies have cutoff times. If your check arrives on the 22nd as required, but in the afternoon mail, your payment is counted as late because your account terms called for payment by 9 a.m. that day.
If you’ve set up an automatic payment via your bank, make sure the time and date are taken into account, says Schroeder. And find out your bank’s payment policy when the due date falls on a weekend or holiday.
8. Ignoring your monthly statement You can avoid late payments by checking your credit card statement. Not doing so is mistake No. 8. Checking your statement will help you pay your bill promptly, as well as allow you to make sure that the charges on it are correct. “In these days of ID theft, you need to check your bills religiously,” says Schroeder. And you need to do so as soon as the statement arrives. If you wait too long to dispute a charge, says Schroeder, “you’re essentially accepting it.”
9. Exceeding your credit limit Checking your statements also can keep you from exceeding your credit limit, mistake No. 9. “If you’re near the top of your credit limit, try really hard to pay in cash for subsequent purchases or get an increased credit line,” says Schroeder. “If you don’t, you’ll get over-the-limit charges, which are costly and look bad on your credit report.”
10. Buying things you don’t need Careful statement examination also could prevent the 10th credit card blunder, using plastic to purchase things you don’t need.”Go over your credit card bills every month and you’ll be amazed at the number of items that, upon reflection, you could have done without,” says Wishnatsky. “It’s surprising how many purchases we make that we think are needs, but are impulse buys.”
The Phoenix financial planner tells his clients who are considering a significant purchase to wait 48 hours, if at all possible. “If you still want it, wait another 48 hours,” Wishnatsky says. “Then if you have to get it, then get it.”
Also use your statements to help you create a budget. Wishnatsky realizes many people cringe at the “B” word, but he says control of your spending and your credit card usage doesn’t have to be a way to deprive yourself. Instead, it can be a way to make things happen in financially positive ways.
“Once you get control, even to a degree, it frees you from this constant money worry,” says Wishnatsky. “You might find there are things that you can actually end up having if you just have a plan, if you get your financial desires in tune with your financial resources.”
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Credit card rates remained unchanged this week, according to Bankrate’s latest survey of interest rates. The average annual percentage rate, or APR, for variable-rate credit cards stayed steady at 14.52 percent for the sixth week in a row. The fixed APR was 13.81 percent, where it has remained since the beginning of March.
AAA, the largest travel organization in the U.S., joined the chip card revolution this week. On Monday, the organization said it is offering its co-branded Bank of America credit cards with EMV chip technology — named for the developers of the technology standard Europay, MasterCard and Visa. It is widely used around the world and better defends against counterfeit fraud. Current cardholders simply need to request a new chip card to get one.
There are two times as many credit card fraud cases involve phone or online transactions than retail sales, according to new data from FICO. Researchers found that sophisticated counterfeit rings have raised the stakes for merchants over the most recent 20 month period.
There have been reported an increase in “skimming,” a technique where criminals tamper with ATMs and payment devices to capture both card details and (PIN) personal identification numbers. Criminals can use magnetic stripe blanks or other stolen cards as “clones,” passing details of a stolen account to a payment device without the victim’s knowing. ATMs, grocery stores, and gas stations topped the list of places where criminals use stolen or cloned debit cards.
Fraud rings usually test the stolen cards with smaller online transactions. The online tests as a “relatively safe” way for thieves to learn whether victims notice extra purchases on their monthly statements.
Researchers at J.D. Power and Associates, where the results of an annual customer satisfaction survey show that nearly a quarter of credit card problems involve fraudulent transactions.
FICO’s numbers show American consumers rely on debit cards more than ever, driving a fifteen percent increase in authorization compared to the previous period studied. Federal rules leave consumers responsible for only $50 of fraudulent debit card transactions if reported within 2 days, though Visa and MasterCard now require member banks to follow tougher “zero liability” rules. Debit card fraud can leave consumers on the hook for bounced check charges or failed bill payment fees while investigators to restore the funds.
The FICO monitored millions of credit card transactions between January 2010 and September 2011. Researchers use the data to develop complex algorithms that protect client issuers and their cardholders from identity theft and fraud. Analysts found fraudulent transactions in only 1 percent of their sample.
Poor credit card use is an out of control problem with many consumers and the results have been devastating in some cases. Poor Credit Card Offers In this section we’ve collected the top online deals from the major companies and banks such as Visa, MasterCard, and many others. There are some definite consequences of poor credit card use.
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