Tag Archives: credit card trends

Understanding Credit Card Fees

Posted on May 3, 2012 by admin

One of the best tools a person can use in their day-to-day finances is a credit card.  When used properly this little piece of plastic can be a source of a free short term loan.  However, when used improperly or carelessly, it is the source of a lot of anguish.  Everyone knows about the extremely high interest rates charged by credit cards.  But many smart people forget to consider credit card fees when choosing a card. One fee that many people needlessly put up with is the annual card fee .  Often it is just $60 or $100 per year, and for someone that uses the card often to rack up reward points, this is not a big deal.  For someone who really wants to cut their costs though, they can have the card and negotiate their way out of the annual fee pretty easily. Getting cash from a credit card is one of the worst ways a person can get cash.  Most cards charge a minimum of 5% up front.  So if a person takes out $1,000 their card will add $1,050 to the bill.  Unless absolutely necessary, a person should never take a cash advance. There are some fees that are tacked on simply because the credit card can do so.  Take the reward redemption fee.  It is great to accumulate points on the card, and then redeem them toward airline tickets, hotels, or cash.  But many cards will add a small charge (in the $10 to $30 range) in order to redeem the points. With the internet gaining popularity, and almost everyone using email, many credit cards do not issue paper statements anymore.  Those that do will often charge a service fee ($1 to $5 per statement).  There is no point to pay this out of pocket, if you need a paper statement, print it from the credit card website. Travelers are well aware of the foreign transaction fee.  Adding on an extra 3% to every transaction done outside of the country will add up quickly for those who are frequent travelers.  If this is the case, find a card that waives this fee and use it when traveling. Credit card fees are annoying.  But by knowing what they are ahead of time the consumer can be sure to avoid them (check out some of the changes made to what fees may be charges in 2010 ).  The easiest way is to simply spend within one’s means.  Personally, I charge everything.  I then monitor my spending and make sure I can afford to pay the card off in full each month.  I avoid late fees and outrageous interest this way.  To get around some of the other fees that are wrapped into many cards, shop around for the one that offers the best deals (and make sure they are not just temporary marketing gimmicks).  If nothing else and you get hit with an unwanted fee, call the customer service line and negotiate.  Credit card fees are some of the easiest to get waived. Continue reading →

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The Appeal of No Frills Credit Cards

Posted on April 29, 2012 by admin

Remember before the great recession when your mailbox was stuffed daily with offers for premium credit cards with all sorts of perks? Remember how if you were late paying you got charged a late fee and were subject to a universal credit card interest rate hike? Remember how those offers became less common until this year? Last quarter did you notice anything different about mail solicitations for credit cards? Well, starting in the last quarter of 2011 and continuing into this year, banks are pushing basic, no frills credit cards; sometimes called “plain vanilla” cards and they are proving very popular. During the recession, the basic credit cards that typically offer no rewards and have no annual fee were only a small market. Banks competed fiercely for folks with sterling credit ratings and offered them all kinds of incentives and rewards to join. According to a report issued by Mintel Comperemedia , the company tracks information to analyze the credit card industry, these no frill credit card offers surged to 30 percent of all mail credit card offers in the fourth quarter of 2012 compared to 13 percent for the same quarter in 2010. Andrew Davidson, a senior vice president at Mintel Compermedia said that the cards appealed mostly to folks who carry a balance, especially those who are member of Generation Y who are also known as the Millennial Generation. CUInsite , a credit union industry newsletter, the financial issues faced by the Millennial Generation are of concern.   Issue Percent of Generation Y Gen Y workers do not have enough in savings to cover two months’ worth of living expenses 70 Do not pay bills on time 40 Carry a balance of more than $10,000 on three or more credit cards 20   However, according to Davidson, these basic cards do have some advantages that were non-existent before. For instance, the Citi Bank Simplicity card does not charge late fees, Chase’s Sapphire Card allows users to pick some types of purchases to be paid in full each month while other, big-ticket items are paid off monthly – Chase markets this as “The Blueprint Plan.” Capitol One is taking a different tack, and is marketing to those who are trying to rebuild their credit. After five consecutive monthly on time payments they will raise your credit limit. The Millennial Generation is a generation that has been hit very hard by the Great Recession. Born of parents (Baby Boomers) who were accustomed to entitlement, this later generation is the first to lag behind their parents. They have the highest unemployment rate, even among those with a college degree and many have had to return home at least once to save money. The economy is slowly gaining traction and the Millennial Generation is starting to make an economic comeback too. This is why there is such great interest in these simple, no-frill credit cards. No annual fee, gentle or no penalties for paying late – these cards are worth exploring. Especially as the interest rates are as much as four percent lower than on a rewards card. Continue reading →

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How Young is Old Enough For a Credit Card?

Posted on April 14, 2012 by admin

With today’s complicated credit market, parents are often confused about when and how to best let their children learn to handle checking accounts or credit cards. Some parents feel that their kid is old enough for a credit card when they begin college, some parents even feel that sooner is appropriate. Other parents feel that keeping their kids on a cash only basis is best, even for college students, especially if are not very disciplined, or as one mom said, her kid is a “free spirit.” In 2010, a law went into effect limiting the ability of college kids to have a credit card. They either had to have a job that would qualify them to pay their credit card bill, or have a parent as a co-signer. One argument for allowing a credit card for your child when they begin college is that it also will begin a credit history for them. But, parents who co-sign must be aware that if their kid misses a payment, their credit score is affected negatively unless they make it instead. However, if you have a good credit score and confidence that your child will follow the ground rules you set for putting them on your credit card account they inherit your FICO score – this is a real boost when they want to establish credit on their own. If you are concerned that your child needs a limit, set your kid up with a credit card like the ones available from American Express such as their Green or Gold card. These cards have a feature where you can put a child on the account but limit their monthly spending. The biggest drawback is that there usually is an annual fee for this type of card. Another way to keep your child’s spending in check is to get them a secured credit card. Once it has been maxed out there is no way for them spend more, unless you or they replenish it. Financial pundit Suzie Orman thinks starting a child off with a credit card at 15 or 16 makes sense as long as certain rules are established. She suggests: Parents have to set a good example. If parents handle credit in a good way it is likely that kids will too. Their initial credit experience is better with a card tied to your account. Not only do they enjoy your good credit score, you see all the activity they generated by the card. In addition, you establish the rules: allocate a certain amount of money for things you are willing to take care of, everything else they must pay for themselves. When the bill comes, have your kid sit down with you and go over the statement with them. If they used the card for something you had not agreed to cover and they do not have the cash to pay you back, you have a great teaching moment. They will learn the painful lesson of running a balance. Get your kid a credit card of their own when they go to college. If they do not have a job then you will have to co-sign. Suzie suggests that you ask the issuer to keep the credit limit low, as you will be responsible if your college student runs up a balance. Credit use ranks high on the list of things kids need to know to succeed in life. Continue reading →

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Using Credit Cards to Cut the Cost of Gas – Five Cards That Can Save You Money

Posted on April 1, 2012 by admin

With financial experts predicting that gas prices will hit $5/gallon in the future, it’s no surprise that many people are looking for ways to cut the cost of gas. Driving is necessary for everyday life, and unless you take public transportation, carpool or walk, there’s no way to avoid high gasoline prices. You can’t wish gas prices back to $2.50 a gallon, but you can find ways to save money on gas. Getting creative doesn’t suggest trading in your car for a hybrid or dusting off your bike. In fact, the solution to high fuel costs might be sitting in your wallet. Several credit cards feature rewards  programs that give you cash back on gasoline purchases. You can apply these cash rewards to future fuel purchases and save money. If you don’t have a rewards card, perhaps now’s the time to apply for one. Blue Cash Everyday form American Express Not only does this credit card offer 0% interest on purchases for the first 12 months, you also receive 2% cash back at gas stations. There is no minimum to qualify for cash back, no annual fee and no enrollment fee. What’s more, tell a family member, coworker or friend about the card, and receive a $25 bonus when they’re approved — that’ll get you at least a half tank of gas. Discover Open Road Card Get an automatic 2% Cashback bonus at gas stations and pay 0% interest on balance transfers and purchases for the first 15 months. There is no annual fee, nor do you pay a fee to redeem your reward. Request an additional card at no extra charge for your spouse and you both can save money at the pump. Citi Thank You Preferred Rewards Card Receive five Thank You points for every $1 you spend at a gas station for the first 12 months, and then one point for every $1 you spend after the introductory period. The more you drive, the more points you accumulate. Plus, you also receive points for shopping at grocery stores and drugstores. This credit card has no annual fee and no limit to the amount of points that you can earn. TrueEarnings Card form Costco and American Express Spend up to $3,000 in fuel costs a year and receive 3% cash back. The CashBack bonus drops to 1% once your annual gasoline purchases exceed $3,000. Earn 2% cash back at restaurants, 2% cash back on travel and 1% cash back on every other purchase. And the best part, AmEx wavies the annual fee for Costco members. Capital One Cash Rewards The more you shop with the Capitol One Cash Rewards credit card, the more you can earn. In fact, you will earn a $100 bonus simply by spending $500 within your first three months. Depending on how much you drive, this $100 bonus can pay your fuel expense for a couple of weeks — or more. This credit card pays 1% cash back on all purchases and you can redeem your points at any time. There is no annual fee and you pay 0% interest on purchases and balance transfers through March 2013. Continue reading →

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Should You Get Your Kid a Credit Card?

Posted on February 7, 2012 by admin

Most parents want to leave their kids with a legacy of smart money decisions, and with a good start on their finances.  Teaching kids about money and preparing them to make the right choices is at the top on the list of parenting projects.  One common issue that comes up when deciding how to manage children’s financial lives is the decision of when to get your kid a credit card. Getting Kids a Credit Card Children are not legally permitted to sign contracts until the age of 18, so they are not technically permitted to have a card of their own until this time.  Despite this, many kid have cards at a young age and some cards are even specifically targeted towards teens.  These cards are typically provided by parents, who co-sign or assume responsibility for the debts of their children. There is some controversy in personal financial circles about whether getting credit cards for kids before they turn 18 is a good idea, leading a lot of parents to wonder what the right choice is.  The problem, of course, is that there are both pros and cons to giving your kids access to plastic during their youth. The Argument for Early Credit The biggest and best argument for getting children a credit card early is to help kids build their credit history.  Part of your FICO score (approximately 15 percent) is based on how long you have had credit and how long your credit history is.  A child who got a credit card when she was young is likely to have a higher credit score when starting out on her own than someone who gets her very first credit card for the fist time at age 18. Another argument for getting kids a credit card is, of course, helping kids to learn how to use the card responsibly.  Many teens are first exposed to credit in college when they might be enticed to get a card by gifts such as free t-shirts offered at booths on campus.  These teens with no experience using credit might quickly get in over their heads and find themselves with several cards and a lot of debt.  Credit card companies will often specifically target kids since they know kids who find themselves in this situation will simply turn to parents who will bail them out. If you give your kids credit at a younger age, on the other hand, you have more time to monitor how they use the cards and to discuss responsible buying habits.  A condition of the card might, for example, be that the kids pay it off every single month. The Argument Against Early Credit One argument is that it teaches children early on to rely on plastic instead of cash, making it more likely that they will get into debt trouble with credit later.  Another risk is that studies have shown that people tend to spend more with credit, since they don’t associate the spending with cash in the same way they do when they actually have to part with physical money.  A credit card could prime kids to a life of spending more than they otherwise would as they just whip out their credit cards. What Should You Do? Parents who want to make the right choice should weigh the arguments carefully and should consider their particular child’s level of responsibility. Those who want to give kids the other lessons that go along with responsible credit card use should typically wait until their children are able to foot the bill themselves without any help for mom and dad; otherwise, the lesson will simply be that credit allows you to avoid spending your money. Continue reading →

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The Suze Orman Debit Card – Really?

Posted on January 19, 2012 by admin

Has Suze Orman grown tired of being a financial advisor and decided to become a financial player?  One would think so with the announcement of the Suze Orman debit card that many in the financial world consider a poor deal. Suze Orman’s Approved pre-paid card charges access fees of $3 per month, $2 per paper statement, and $2 per live agent customer call (one call per month is free)  and ATM withdrawal fees. With the Approved card, fees are assessed when the customer loads the card ($3.50 to $4.95 since customers must rely on Money Gram or Western Union to transfer funds.)  Electronic transfers and direct deposits are free, but consumers cannot post paper checks or cash onto the card. Many in the financial world are wondering why Orman’s potential customers don’t just open a free checking account. Why indeed? According to a survey by the FDIC , 25.6% of the population, 60 million adults, are either without a bank account or rely on “alternative financial services” like pre-paid debt cards, payroll cards, money orders, check cashing businesses and payday lenders.  Households making less than $30,000 a year are 71% of the unbanked households. Why don’t these households get a bank account?  The simple answer is that many who earn less than $30,000 are turned down by banks because of bad credit.  Many come from families who do not traditionally use banks because they don’t trust them.  The reason given for not having a bank account from 37% of those surveyed was not having enough money to need a bank account.  Other reasons given include “the minimum balance is too high” (12.9%) and “no reason to have an account” (12.4%). This market has made Wal-Mart’s pre-paid debit card and check cashing services popular.  It’s also the market Orman is targeting: “The majority of people who have these cards are called the unbanked and the under banked…,” she said in an interview with GOOD .  The 99 % movement, this card was developed for them, because this card… is a way for you to carry a little bank in your pocket with you… If you want to make a difference in your own life… I am telling you put your money on me.” It seems Orman considers her card the answer to the consumers protesting bank’s outrageous fees while promoting a service that charges for customer service and statements, items normally considered the cost of doing business.  Besides the monthly access fees and possible loading fees, customers are charged $2 to get cash, $1 to check a balance and yet another $1 if the card is declined by the ATM.  In addition, as for the one free call per month to customer service per month, how many calls does it usually take to straighten out a problem?  How many of the “unbanked” have the means to check their balance on line? So how does Orman justify her card, which does not pay interest and does not promote financial planning or savings as a “better way”?  The “Approved” card’s offers a way to establish credit through Orman’s agreement with Trans Union to collect customer’s usage information and build a good credit report. The cards also offers free Trans Union credit reports for a year and identify theft protection. Having a means to build a credit rating is a good thing. Including pitfalls that threaten to trip up that attempt with so many fees is not. Continue reading →

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Consumer Credit Surges to Largest Level in Ten Years

Posted on January 12, 2012 by admin

On Monday, the Federal Reserve Board’s Consumer Credit Report revealed a 9.9 percent increase in the number of people using credit cards to finance purchases, in November 2011. Outstanding credit rose by $20.37 billion.  This figure represents the largest increase in any month during the last ten years.  It also raises the total outstanding consumer debt to $2.478 trillion. The numbers tie in to the start of the Christmas shopping season – historically the best time of the year for retail sales.  Over 72 percent of the increase or 14.8 percent consist of non-revolving credit, which points to the strength of car sales for the month of November.  Resolving credit includes credit cards used by consumers. In October , consumer credit increased $7.6 billion. September’s number climbed to $6.9 billion.  Again, strong vehicle sales accounted for most non-revolving credit gains of $7.3 billion and $6.5 billion, respectively, for October and September. Understanding the Consumer Credit Report The Consumer Credit Report is a monthly release by the Federal Reserve Board, which provides an estimation of the changes in the dollar amount of consumer loans.  Consumers use these funds mostly to buy automobiles. The figures do not include loans made to individuals for real estate such as home equity line of credit transactions. The report has two components: revolving and non-revolving credit. Revolving credit, which consists mainly of credit cards, allows consumers to spend up to a predetermined limit and does not require the vendor to call the creditor for approval.  Non-revolving credit has fixed terms.  It consists primarily of automobile loans. The report furthered segregates the numbers according to commercial banks, finance companies, credit unions and savings institutions.  Other categories include securitized asset pools, federal government/ Sallie Mae and non-financial businesses. Other data contained in the report include the average interest rate for different consumer loan products, including vehicle loans, credit cards and bank loans.  It also has information about collective credit quality of consumers and areas of high growth. The Feds gather data by conducting a survey of banks, credit unions, finance companies and retail establishments.  Each monthly report contains data from three previous months. It also contains revisions for any recent periods. The Consumer Credit Report serves as an indicator for future spending in the economy.  Changes in the Fed Funds Rate or Prime Rate may take up to 180 days before consumers realize the effects.  Analysts and investors pay particular attention to consumer debt, credit card delinquencies and growth/decline rate. The Consumer Credit Report release does not drive the market because of some other reports released ahead.  It works like a “lagging indicator,” which provides useful information when used along with interest rates and personal wage growth indicators. Conclusion Most market watchers and economists look at rising credit as emblematic of consumers who have increased confidence in the economy.  It can also mean people rely more on credit to purchase basic items, such as food or gasoline.  Consumer credit has gone up 13 out of the last 14 months during a time when personal income has stagnated.  Credit cards usage has fueled a portion of the sizable increase in consumption. Continue reading →

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The Dangers of Maxing Out Our Your Credit Card For Christmas

Posted on December 24, 2011 by admin

The holidays are here, and it is time to buy presents.  For many people, the need to treat friends and family to great gifts at Christmas time leads to a bad financial decision: piling presents on a credit card.  When you max out your credit cards buying Christmas presents, not only do you end up having to pay off those gifts well into the new year, but you can also do damage to your credit score that can cost you over the long term. Maxing Out your Credit Card Is a Bad Idea Maxing out your credit card at Christmas time- or any time, for that matter- will impact your credit utilization rating.  Credit utilization is one factor that affects your credit score, and it accounts for as much as 30 percent of your score under popular credit scoring formulas pioneered by the Fair Isaac Corporation (FICO scores). Credit utilization refers to the amount of your available credit that you use.  It compares your total debt with the total credit that you have available.  For instance, if you have a credit card that has a $1000 limit on it and you charge $500 on that credit card, you will have a credit utilization ratio of 50 percent ($500/$1000). The higher your credit utilization ratio, the more dangerous of a risk you appear to creditors to be.  High credit utilization indicates an over-reliance on credit and a possible inability to pay your bills, should something happen that causes your income to go down. Most experts recommend that you keep this credit utilization ratio at around 30 percent or less in order to have the best possible credit score.   Maxing out your cards is going to bring your score down since you will exceed this 30 percent limit. What to Do If Your Cards Are Already Maxed Out? If your credit cards are already maxed out or your credit utilization is above your 30 percent limit, you have a few options for what you can do.  The most obvious option is to pay down your debt, but this can be a challenge, especially around the holidays when you have a lot of expenses coming your way. Another option might be to increase the amount of credit you have available to you. You should NOT do this by opening up new credit cards.  Opening up new cards lowers your credit score, both because it reduces the average age of your credit (a longer average age is better) and because it results in an inquiry showing up on your credit report (too many inquiries sends up red flags to lenders). Until you can lower your credit utilization, it can make sense to delay major purchase of a house or a car.  As you get further away from the holidays and you can reduce your credit utilization, these actions could raise your credit score, which can save you money in the long-term on big purchases. Continue reading →

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Cheap Convenient Mobile Credit Card Reader on Your Smartphone

Posted on December 5, 2011 by admin

Now that almost half of all cellphone owners in the U.S. have smartphones, small business owners are beginning to use smartphones to process credit card payments and expand their businesses.  It’s convenient, it’s cheap, and it’s mobile.  No longer do you need a landline and a traditional credit card reader to take credit card payments from your customer.  Simply power up your Android, iPhone, or iPad, and log into your bank account.  With fewer people carrying cash these days, it makes sense to own a device that can read credit cards.  Small business owners, entertainers, and craftspeople can now use cell phone apps to process their customers’ credit cards anywhere, anytime. Who Needs It? High-volume business owners may want to sign up for the programs that charge a monthly fee.  This kind of plan could be perfect for nightclub doormen, fairs/carnivals, chauffeurs, traveling entertainers and craftspeople, small kiosk owners, outdoor food vendors, and more.  It’s also convenient for anyone who occasionally needs to charge a friend for something like a taxi ride or dinner.  You can also email receipts to the credit card owner for their own records. Square Card Readers We can’t mention cell phone credit card processors without talking about SquareUp.com .  It’s quickly becoming the go-to device for anyone that needs a mobile processor.  The best part?  You can order a free swipe device online and then connect it to your bank account.  The fee structure is simple: The Square Company takes 2.75 percent of every swipe and deposits the rest into your bank account the next day. Moblized Moblized is a company like Square.  Consumers can order a free card reader without any monthly or annual fees.  The company takes 2.69 percent plus 19 cents per transaction.  They also offer other plans if you are a business owner who needs to process over $2,000 a month.  Like Square, Moblized requires customer signatures and emails them receipts. Intuit GoPayment The GoPayment card reader is free and plugs into the headphone jack on most iPhones, Blackberry phones, and Androids.  For infrequent users, pay only 2.7 percent per swipe with no ongoing fees.  High-volume users can sign up for the $12.95 a month plan that only takes 1.7 percent per swipe.  As with the other credit card readers, you don’t have to meet any minimum requirements. Non-Swipe Credit Card Apps Several other companies offer apps that don’t require any swipe devices.  All you need to do is key in the customer’s credit card information.  Most of these plans have monthly fees attached.  Some popular apps include iPay POS, MerchandWARE Mobile, vTerminal, and Mobile Merchant Pro. Continue reading →

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