NOTE: THIS BLOG IS MEANT INFORMATION ONLY.
Most of us are familiar with credit scores, but are not really sure how the score is generated. The first thing to understand is there 100 different ways to score your credit. They are all based on your credit report and the most recognized is the FICO score. Developed by Fair Isaac, FICO scores entail a highly complex formula to determine a credit score with each factor’s value dependent on other pieces of information. There are five main factors that weigh into your FICO score to know.
• Payment History – This makes up 35% of your FICO score. This is the largest portion of the score and is due to the direct relationship of defaulting on loans and not paying bills on time. Your FICO score looks at the negative events and judges based on the recentness of late payments, the frequency of late payments, and the severity of late payments. Severity meaning how late were you in paying your bills, 30 day, 90 days and so on.
• How much you owe makes up to 30% of your FICO score. Utilization is the term used and it the sum of all your outstanding debt divided by your credit limits. Your FICO score see this as the lower the better since the higher default risk on those who are close to their credit limits.
• How long you have had credit equates to 15% of your FICO score. Lenders like a longer history of accounts. There are two major factors here are the oldest account’s age and the average age of all your accounts.
• Applications for credit make up 10% of your FICO score. This factor looks at how long has it been since you last applied for a new credit account. A negative factor here could be if you apply for several accounts in a short period of time. It is a factor based on the viewing times of your credit report by lenders.
• The credit mix you use makes up the last 10% of your FICO score. They want to see a “healthy mix” of credit. There is no rules to what a healthy credit mix really is, but certain types of debt are seen as better than others.
Putting this all together generates your FICO score. An important note is your FICO score will put more emphasis on recent events compared to the past. You can easily lose points on your FICO score and it is not easy to gain them back. That is why understanding and knowing your FICO score is so important.
Tuesday, March 16, 2010
First Steps To Choosing A Credit Card
For many, if not most people, choosing the right credit card when just starting out in adult life is a fairly simple process. It basically boils down to getting whatever card someone is willing to issue. For example, college students are often deluged with card offers from oil companies and department stores. While an easy way to build credit for a possibly more thoughtful approach in the future, such practices on the part of card companies also begin creating consumer debt at an early age. With card companies competing for consumers, it only makes sense that, even at an early stage of establishing credit, one should take one's time in deciding what cards to carry and use.
The most important factor in choosing a credit card is how you plan to use it. Before any other considerations, such as rewards, interest rates, or annual fees, decide what you will be doing with the card and how you plan to pay it. Basically, there are three types of usage to consider before proceeding any further. Figuring out which of these best describes your situation will go a long way in determining what card to get.
First, if you plan on paying off the card balance in full each month, the interest rate is not much of a concern. You should probably look for a card that has no annual fee, as well as a longer grace period in which to pay. Conversely, if you have a tendency to carry a balance from month to month, the interest rate becomes a determining factor. Finally, if you often use a credit card to get cash advances, you need to be aware that many cards charge a higher interest rate on cash advances than on purchases. Therefore, you need to make sure to look for a card that charges the same rate for both.
With all the credit cards on the market today, it is easy to get distracted by all the ancillary features offered. However, before deciding on a credit card based on bells and whistles, decide what kind of card user you are. This will vastly simplify the process at the start and help you focus on choosing extra features of those cards to which you are already best suited.
The most important factor in choosing a credit card is how you plan to use it. Before any other considerations, such as rewards, interest rates, or annual fees, decide what you will be doing with the card and how you plan to pay it. Basically, there are three types of usage to consider before proceeding any further. Figuring out which of these best describes your situation will go a long way in determining what card to get.
First, if you plan on paying off the card balance in full each month, the interest rate is not much of a concern. You should probably look for a card that has no annual fee, as well as a longer grace period in which to pay. Conversely, if you have a tendency to carry a balance from month to month, the interest rate becomes a determining factor. Finally, if you often use a credit card to get cash advances, you need to be aware that many cards charge a higher interest rate on cash advances than on purchases. Therefore, you need to make sure to look for a card that charges the same rate for both.
With all the credit cards on the market today, it is easy to get distracted by all the ancillary features offered. However, before deciding on a credit card based on bells and whistles, decide what kind of card user you are. This will vastly simplify the process at the start and help you focus on choosing extra features of those cards to which you are already best suited.
Make Credit Card Balance Transfers Work For You
Credit card balance transfers are simple in premise. You transfer a balance from one credit account to another. However, the benefits, goals, and results of transfers can often be quite different from one product and one opportunity to another.
Credit card balance transfers are routinely offered by card companies as a way to entice new customers away from competitors. Promotions vary, but the most aggressive offers typically include zero per cent APRs on balance transfers, for a specified length of time (the best offers are for 12-15 months). Some cards also combine rewards programs or other perks as part of this initial inducement.
Transfer offers are also used by companies when customers have low balances in their account. Companies throw promotional offers, convenience checks, and the like at customers to get them to transfer balances from other accounts. The idea is to infuse more balance into the customer's account and to get them back into the 'borrow and pay' cycle.
Using credit card balance transfers can certainly be beneficial if consumers use them wisely. Reading the fine print of transfer offers is essential. Some zero per cent offers come with transaction fees for each transfer. Additionally, timeframes vary. Borrowers need to know what happens with the remainder of the transfer balance at the end of the promotional period. For instance, at the end of a six month, zero per cent offer, does the balance return to the normal purchase APR?
Borrowers also need to know in what order credit payments are applied. Many companies slyly apply payments to the lower rate balances first, which leaves higher rate balances sitting on your account to accrue interest. This can actually lead to more interest payments over time than if you had not accepted the balance transfer, if the transfer offer comes from a card with a higher rate than the card the transfer is coming from. Beware of accepting zero per cent offers from cards that have high regular rates and that stipulate that makes apply first to lower rate balances.
Finally, consumers must be aware that while there are some good financial opportunities with balance transfers, transfer of balances do not make them obsolete. Some struggling borrowers simply move money around and take on new credit cards to transfer balances for lower rate promotions. When considering the benefits of credit card balance transfers, the borrower must think both about the short-term gain and the long-term results of a move.
Credit card balance transfers are routinely offered by card companies as a way to entice new customers away from competitors. Promotions vary, but the most aggressive offers typically include zero per cent APRs on balance transfers, for a specified length of time (the best offers are for 12-15 months). Some cards also combine rewards programs or other perks as part of this initial inducement.
Transfer offers are also used by companies when customers have low balances in their account. Companies throw promotional offers, convenience checks, and the like at customers to get them to transfer balances from other accounts. The idea is to infuse more balance into the customer's account and to get them back into the 'borrow and pay' cycle.
Using credit card balance transfers can certainly be beneficial if consumers use them wisely. Reading the fine print of transfer offers is essential. Some zero per cent offers come with transaction fees for each transfer. Additionally, timeframes vary. Borrowers need to know what happens with the remainder of the transfer balance at the end of the promotional period. For instance, at the end of a six month, zero per cent offer, does the balance return to the normal purchase APR?
Borrowers also need to know in what order credit payments are applied. Many companies slyly apply payments to the lower rate balances first, which leaves higher rate balances sitting on your account to accrue interest. This can actually lead to more interest payments over time than if you had not accepted the balance transfer, if the transfer offer comes from a card with a higher rate than the card the transfer is coming from. Beware of accepting zero per cent offers from cards that have high regular rates and that stipulate that makes apply first to lower rate balances.
Finally, consumers must be aware that while there are some good financial opportunities with balance transfers, transfer of balances do not make them obsolete. Some struggling borrowers simply move money around and take on new credit cards to transfer balances for lower rate promotions. When considering the benefits of credit card balance transfers, the borrower must think both about the short-term gain and the long-term results of a move.
Slot Machine Strategies Should Always Include This Advice
There isn't a lot involved in most legitimate slot machine strategies but they should all include this advice and if they tell you differently then run.
There is a lot involved in respect to how you choose to gamble your bankroll which is a very different approach than one would take if playing blackjack or baccarat where there is a pretty good chance of winning your wager every time you put your money down. Well a much better chance than you have on any single wager made playing the slot games anyway. Slots are made to pay back much larger amounts than is wagered (unlike baccarat or blackjack which pays even money) but they pay back much less often.
This means your slot machine strategies must include the fact that you'll need to endure stretches of not winning and still be able to fund further gambles down the line. So the need to find a slot machine game online that you can afford to play for extended periods without getting any help from small wins does exist and must be satisfied if you want to have any kind of staying power.
Keep in mind you'll want to always play the maximum wager whenever your slot machine strategy tells you that the bonus awarded for playing the maximum number of coins is well-worth the effort. An example would be if you're playing a two coin slot machine and the top payout for one coin wagered is one thousand and the top payout for two coins wagered, which would be the maximum amount on this machine, was twenty-five hundred then it is obviously a worthwhile effort to always bet the max.
This is a slot game tip for online games as well as for playing at real world casinos because it is definitely one thing the two worlds have in common is rewarding a maximum wager.
If you are wanting to bet less then take advantage of the one opportunity that online slot games offer that is not found in Las Vegas, Atlantic City or most other real life casinos and that is the ability to change your credit values at any given time and not leave the machine you're playing which in the case of increasing your credit values the machine will likely be hot and paying out nice wins on a somewhat regular basis. If the machine is cold then either cut back to the least possible credit values or move on to another game or perhaps a different casino offering the same game.
Keep your slot machine strategies simple because the game is simple but give extra attention to how you use your bankroll and the choices you make when deciding credit values and you should be able to find that happy medium that allows you to be entertained for an extended period of time and every once in a while get that added boost of hitting a really big win, hopefully at one of those times when you've just increased your credit values.
There is a lot involved in respect to how you choose to gamble your bankroll which is a very different approach than one would take if playing blackjack or baccarat where there is a pretty good chance of winning your wager every time you put your money down. Well a much better chance than you have on any single wager made playing the slot games anyway. Slots are made to pay back much larger amounts than is wagered (unlike baccarat or blackjack which pays even money) but they pay back much less often.
This means your slot machine strategies must include the fact that you'll need to endure stretches of not winning and still be able to fund further gambles down the line. So the need to find a slot machine game online that you can afford to play for extended periods without getting any help from small wins does exist and must be satisfied if you want to have any kind of staying power.
Keep in mind you'll want to always play the maximum wager whenever your slot machine strategy tells you that the bonus awarded for playing the maximum number of coins is well-worth the effort. An example would be if you're playing a two coin slot machine and the top payout for one coin wagered is one thousand and the top payout for two coins wagered, which would be the maximum amount on this machine, was twenty-five hundred then it is obviously a worthwhile effort to always bet the max.
This is a slot game tip for online games as well as for playing at real world casinos because it is definitely one thing the two worlds have in common is rewarding a maximum wager.
If you are wanting to bet less then take advantage of the one opportunity that online slot games offer that is not found in Las Vegas, Atlantic City or most other real life casinos and that is the ability to change your credit values at any given time and not leave the machine you're playing which in the case of increasing your credit values the machine will likely be hot and paying out nice wins on a somewhat regular basis. If the machine is cold then either cut back to the least possible credit values or move on to another game or perhaps a different casino offering the same game.
Keep your slot machine strategies simple because the game is simple but give extra attention to how you use your bankroll and the choices you make when deciding credit values and you should be able to find that happy medium that allows you to be entertained for an extended period of time and every once in a while get that added boost of hitting a really big win, hopefully at one of those times when you've just increased your credit values.
How Can You Get A Credit Card With A Bad Credit Rating?
Nothing is more frustrating than having such bad credit that you can't even qualify for a credit card. Without a credit card it can be almost impossible to do even basic things like renting a car or even renting a hotel room. So how can you get a credit card if you don't have the most impeccable credit?
First off you need to come up with a plan of action. Unfortunately you can't send an application to every credit card company on the face of the earth without having a real negative impact on your credit score. Credit bureaus watch very carefully how many lines of credit you apply to at a time. Applying to too many card companies at once will be a red flag to the credit report companies, who will subsequently lower your credit rating. Potential lenders will also have access to how many lines of credit you have recently applied to. Too many recent applications will be an almost automatic rejection for a line of credit with their company.
Your first option for credit cards is to look at rebuilding your credit through store credit cards. Many stores offer their shopping cards to those with less than perfect credit. Remember that the goal is to continue to put your credit on the right track, so be sure and pay at least the minimum on your card.
Your next option is to look at cards that are specifically marketed to those with bad credit. Keep in mind that since you have a bad credit score you are a risk to the company issuing the card. This means that in exchange for giving you a card regardless of your credit score, they will charge you an incredibly high interest rate, much higher than if you were to have even ok credit.
Your final option, and probably the most recommended, is to start with a secured credit card. Secured cards work by you putting down a deposit to secure the line of credit you will be given. So for example, if you were to put a deposit of $300 dollars down, your credit line would be $300 dollars. If you fail to pay your bills on time, the credit card company will just take what you owe them from your deposit and refund whatever is left. The great thing about secured credit cards is that if you prove yourself to the credit card company, most of them offer unsecured cards that will eventually be offered to you as a reward for doing so well with your secured card.
As long as you stay vigilant on your finances, only use less than half of your credit limits, and pay your bills on time, you will be on your way to having a normal credit card, as well as a normal credit score, in no time.
First off you need to come up with a plan of action. Unfortunately you can't send an application to every credit card company on the face of the earth without having a real negative impact on your credit score. Credit bureaus watch very carefully how many lines of credit you apply to at a time. Applying to too many card companies at once will be a red flag to the credit report companies, who will subsequently lower your credit rating. Potential lenders will also have access to how many lines of credit you have recently applied to. Too many recent applications will be an almost automatic rejection for a line of credit with their company.
Your first option for credit cards is to look at rebuilding your credit through store credit cards. Many stores offer their shopping cards to those with less than perfect credit. Remember that the goal is to continue to put your credit on the right track, so be sure and pay at least the minimum on your card.
Your next option is to look at cards that are specifically marketed to those with bad credit. Keep in mind that since you have a bad credit score you are a risk to the company issuing the card. This means that in exchange for giving you a card regardless of your credit score, they will charge you an incredibly high interest rate, much higher than if you were to have even ok credit.
Your final option, and probably the most recommended, is to start with a secured credit card. Secured cards work by you putting down a deposit to secure the line of credit you will be given. So for example, if you were to put a deposit of $300 dollars down, your credit line would be $300 dollars. If you fail to pay your bills on time, the credit card company will just take what you owe them from your deposit and refund whatever is left. The great thing about secured credit cards is that if you prove yourself to the credit card company, most of them offer unsecured cards that will eventually be offered to you as a reward for doing so well with your secured card.
As long as you stay vigilant on your finances, only use less than half of your credit limits, and pay your bills on time, you will be on your way to having a normal credit card, as well as a normal credit score, in no time.
How Easy Is It To Be Approved For A Credit Card?
Credit card approvals depend primarily on the banking environment and your credit score. The approval process will carefully weigh risk factors determining your ability to pay your bills.
Lately, international banking has seen a credit crunch related to high debt levels, real estate problems and job losses. With all of these economic troubles damaging banking's bottom line, lenders are reducing their risk. Banks have lowered their credit card approval rates accordingly.
The Wall Street Journal ran an article entitled, Credit Cards Play Hard To Get, by Jane J. Kim, on February 4, 2008; where Robert Hammer, CEO of R.K. Hammer (a bank consulting firm,) said that credit card approval rates have declined from 40% to 32%.
This decrease can be blamed both on banks reducing exposure to high-risk customers and the diminished financial health of consumers worldwide. Big card issuers are requiring higher credit scores for new card issuance due to higher credit-card delinquency rates. Wary lenders are sending out fewer offers through the mail. There is more intense scrutiny for all applicants, but consumers still find many options available.
Consumers can apply for Guaranteed Instant Approval Cards; by phone or the internet, offering approval in minutes. This fast, convenient process allows for comparison of different credit card features. It still takes time to receive physical cards by mail.
Experts disagree about the success rate for these sites; some say that good credit is required, others say that few customers are turned away - as sites adjust interest rates based on the credit score. Avoid e-mail schemes trying to lock you into a credit card with high interest rates and fees.
Your credit score is determined by your address, work and speed in paying bills. A high credit score and low debt will improve your credit card approval chances.
If you have a credit history, you might want to contact the credit card bureaus - (Experian, Trans Union and Equifax) - to receive your free annual credit report. If you've been denied any service, product or job due to a bad credit score, you have the right to request a free credit report within 60 days. If you dispute a bad credit report and win, you can raise your credit score. Also, applying for too many credit cards at any one time is seen by bankers as an expression of a worsening credit position. So be careful.
If you research your options carefully and make sure your credit rating is accurate you will optimize your chances of being approved for a credit card.
Lately, international banking has seen a credit crunch related to high debt levels, real estate problems and job losses. With all of these economic troubles damaging banking's bottom line, lenders are reducing their risk. Banks have lowered their credit card approval rates accordingly.
The Wall Street Journal ran an article entitled, Credit Cards Play Hard To Get, by Jane J. Kim, on February 4, 2008; where Robert Hammer, CEO of R.K. Hammer (a bank consulting firm,) said that credit card approval rates have declined from 40% to 32%.
This decrease can be blamed both on banks reducing exposure to high-risk customers and the diminished financial health of consumers worldwide. Big card issuers are requiring higher credit scores for new card issuance due to higher credit-card delinquency rates. Wary lenders are sending out fewer offers through the mail. There is more intense scrutiny for all applicants, but consumers still find many options available.
Consumers can apply for Guaranteed Instant Approval Cards; by phone or the internet, offering approval in minutes. This fast, convenient process allows for comparison of different credit card features. It still takes time to receive physical cards by mail.
Experts disagree about the success rate for these sites; some say that good credit is required, others say that few customers are turned away - as sites adjust interest rates based on the credit score. Avoid e-mail schemes trying to lock you into a credit card with high interest rates and fees.
Your credit score is determined by your address, work and speed in paying bills. A high credit score and low debt will improve your credit card approval chances.
If you have a credit history, you might want to contact the credit card bureaus - (Experian, Trans Union and Equifax) - to receive your free annual credit report. If you've been denied any service, product or job due to a bad credit score, you have the right to request a free credit report within 60 days. If you dispute a bad credit report and win, you can raise your credit score. Also, applying for too many credit cards at any one time is seen by bankers as an expression of a worsening credit position. So be careful.
If you research your options carefully and make sure your credit rating is accurate you will optimize your chances of being approved for a credit card.
Making The Most Of Credit Card Cashback And Rewards Deals
Credit card cashback deals are usually divided between actual cash (payable by check or credit) and rewards (oftentimes, denominated in gift cards or even eCertificates - redeemable for merchandise.) Many favor the flexible parameters of the actual cash, money back in the United Kingdom. Cash allows you to choose where you spend your money.
Many rewards program items have inflated price tags. Gift cards usually require another expenditure, since most gift cards only offer a percentage off your purchase price. Some cards offer conversion between cash and gift cards.
Cashback credit cards have grown in popularity. One of the reasons is the so-called transaction fee. Whenever a credit card is used, the merchant must pay the credit card company a transaction fee for the credit card service. Since credit card companies make more money with each purchase, they have encouraged usage of their cards by splitting the fee with their consumers through these programs.
Most cashback credit cards have rates between 0.5% and 5%. There are many specials, promotions and bonuses offered for purchases at specific online merchants, favorite shopping venues, grocery stores - the list seems endless. Some target when you buy - weekend purchases.
Credit cash back can go towards many goals. It can pay down your credit card debt, mortgage or even be added to your IRA account.
The high price of gas has led to gas rebate credit cards, with rewards calculated monthly.
Rewards programs usually have higher Annual Percentage Rates (APRs) or 'Prime +' Rates.
If you can; avoid credit cards with point expiration, earning caps, spending requirements, short grace periods, or default rates. Be sure you know which purchases count towards the total.
Most, if not all of the most clever ways of maximizing these deals require financial discipline and paying off your balance, so the penalty doesn't wipe out any accumulated cash or rewards. One easy benefit is to use your card where you shop already. You can oftentimes multiply your gains with discounts and coupons at these stores.
Linking your credit card to your savings or checking account (especially when it receives direct deposit,) can optimize your returns; if you channel your basic expenses through the card, then pay off the balance before the end of the month.
Caveat Emptor: you don't really gain new money in cash back deals - you really only receive a discount. So far, this discount has never been considered taxable. Be smart, careful and disciplined if you want to make the most out of credit card cashback deals.
Many rewards program items have inflated price tags. Gift cards usually require another expenditure, since most gift cards only offer a percentage off your purchase price. Some cards offer conversion between cash and gift cards.
Cashback credit cards have grown in popularity. One of the reasons is the so-called transaction fee. Whenever a credit card is used, the merchant must pay the credit card company a transaction fee for the credit card service. Since credit card companies make more money with each purchase, they have encouraged usage of their cards by splitting the fee with their consumers through these programs.
Most cashback credit cards have rates between 0.5% and 5%. There are many specials, promotions and bonuses offered for purchases at specific online merchants, favorite shopping venues, grocery stores - the list seems endless. Some target when you buy - weekend purchases.
Credit cash back can go towards many goals. It can pay down your credit card debt, mortgage or even be added to your IRA account.
The high price of gas has led to gas rebate credit cards, with rewards calculated monthly.
Rewards programs usually have higher Annual Percentage Rates (APRs) or 'Prime +' Rates.
If you can; avoid credit cards with point expiration, earning caps, spending requirements, short grace periods, or default rates. Be sure you know which purchases count towards the total.
Most, if not all of the most clever ways of maximizing these deals require financial discipline and paying off your balance, so the penalty doesn't wipe out any accumulated cash or rewards. One easy benefit is to use your card where you shop already. You can oftentimes multiply your gains with discounts and coupons at these stores.
Linking your credit card to your savings or checking account (especially when it receives direct deposit,) can optimize your returns; if you channel your basic expenses through the card, then pay off the balance before the end of the month.
Caveat Emptor: you don't really gain new money in cash back deals - you really only receive a discount. So far, this discount has never been considered taxable. Be smart, careful and disciplined if you want to make the most out of credit card cashback deals.
Student Credit Cards - A Safe Choice For College Students
As competition in the credit industry continues to heat up, credit companies are working harder than ever to offer customized loan products and solutions for consumers. One market that has benefited in recent years from a wider selection of quality card products is the college student audience. Many credit card companies and providers have developed quality credit card products tailored specifically for the benefits sought be college students with added protection.
College students are an extremely importance audience for card companies. While this group has always been a big target of card companies, they have never seen as many quality customized card solutions as are available today. The reason college students are targeted by card companies is that they offer an excellent opportunity for growth and future revenue. Many college students have had limited exposure to lenders and credit card companies, thus offer a great emerging market that all providers desire to tap into.
Although student credit cards are much the same as conventional credit cards, they usually offer a few unique components designed specifically for students. As most college students have little to no established credit, many marketers try to position their cards as a low-risk way for these young adults to build a solid credit history. Student cards generally have lower borrowing amounts, which both protects the lender, and reduces the potential of the irresponsible borrower digging himself a huge debt hole.
While risk reduction is an important selling point with student credit cards, perks and rewards are often a more enticing way to appeal to this group. Many card companies combine the need for groceries and gasoline with the desire for cool toys and technology. By rewarding card users with cash or rewards rebates for everyday purchases, card companies offer the users an opportunity to earn rewards in the form of cash or products from their partner network. For many college students, the ability to earn rewards from card use is an important consideration.
It is important that students carefully examine any credit card offers put in front of them. Again, college students are a common target of aggressive credit card companies. While all lenders are in the lending business to make money, some do a better job of supporting card users and protecting them. Others are more out to snag an inexperienced borrower and take advantage of them to generate interest revenue and other fees.
College students are an extremely importance audience for card companies. While this group has always been a big target of card companies, they have never seen as many quality customized card solutions as are available today. The reason college students are targeted by card companies is that they offer an excellent opportunity for growth and future revenue. Many college students have had limited exposure to lenders and credit card companies, thus offer a great emerging market that all providers desire to tap into.
Although student credit cards are much the same as conventional credit cards, they usually offer a few unique components designed specifically for students. As most college students have little to no established credit, many marketers try to position their cards as a low-risk way for these young adults to build a solid credit history. Student cards generally have lower borrowing amounts, which both protects the lender, and reduces the potential of the irresponsible borrower digging himself a huge debt hole.
While risk reduction is an important selling point with student credit cards, perks and rewards are often a more enticing way to appeal to this group. Many card companies combine the need for groceries and gasoline with the desire for cool toys and technology. By rewarding card users with cash or rewards rebates for everyday purchases, card companies offer the users an opportunity to earn rewards in the form of cash or products from their partner network. For many college students, the ability to earn rewards from card use is an important consideration.
It is important that students carefully examine any credit card offers put in front of them. Again, college students are a common target of aggressive credit card companies. While all lenders are in the lending business to make money, some do a better job of supporting card users and protecting them. Others are more out to snag an inexperienced borrower and take advantage of them to generate interest revenue and other fees.
What Is Credit Card Universal Default
One of the most controversial and polarizing features of many credit cards is what is known as universal default. Most people are aware that if they are late with payments, they may be charged what is called a default interest rate. What they may not know is that there may be universal default language in their user agreements. What this basically means is that if the user defaults on payments with any lender, their card company can still raise the interest rate to the default level. For the average consumer, such a practice seems predatory at best; however, since the mid-1990's universal default has become a fact of credit life. Knowing the implications of this fact becomes of paramount importance to the credit card user.
Regardless of whether or not one thinks universal default is right or wrong, it is important to understand what can happen if you default on a payment while carrying a balance on cards that enforce the universal default language of your agreement. Obviously, the best defense against any repercussions is to make all payments in a timely manner. Unfortunately, if through some misfortune that is not possible, the consequences can be severe, to say the least.
The first problem is that someone in dire financial straits may default on one payment. Suddenly, several balances will be subject to default rates, creating a cascade effect that will essentially make it impossible to catch up. Worst of all, even after someone turns the corner financially, the default rate applies until the balance is paid in full. Anyone making minimum payments knows how long that can take.
However, it is possible never to default on a payment and still run afoul of the rules. For example, suppose through some sort of fraud or institutional error a payment is not properly credited. Suddenly, every credit card you have starts charging the default rate. While it is possible to get the error corrected on your credit report, credit card issuers are under no obligation to normalize your interest rate.
So, while legislation has been repeatedly proposed to get rid of such perceived abuses as universal default, it still exists. The best way to deal with it is to see to it that your credit card issuers do not engage in the practice. As of now, only about half of them do; and in 2007, Citibank became the first lender to discontinue the practice voluntarily. So it seems that the day may not be too far off when universal default is a thing of the past. Until then, it is one more thing consumers need to keep in mind when choosing what credit cards to carry.
Regardless of whether or not one thinks universal default is right or wrong, it is important to understand what can happen if you default on a payment while carrying a balance on cards that enforce the universal default language of your agreement. Obviously, the best defense against any repercussions is to make all payments in a timely manner. Unfortunately, if through some misfortune that is not possible, the consequences can be severe, to say the least.
The first problem is that someone in dire financial straits may default on one payment. Suddenly, several balances will be subject to default rates, creating a cascade effect that will essentially make it impossible to catch up. Worst of all, even after someone turns the corner financially, the default rate applies until the balance is paid in full. Anyone making minimum payments knows how long that can take.
However, it is possible never to default on a payment and still run afoul of the rules. For example, suppose through some sort of fraud or institutional error a payment is not properly credited. Suddenly, every credit card you have starts charging the default rate. While it is possible to get the error corrected on your credit report, credit card issuers are under no obligation to normalize your interest rate.
So, while legislation has been repeatedly proposed to get rid of such perceived abuses as universal default, it still exists. The best way to deal with it is to see to it that your credit card issuers do not engage in the practice. As of now, only about half of them do; and in 2007, Citibank became the first lender to discontinue the practice voluntarily. So it seems that the day may not be too far off when universal default is a thing of the past. Until then, it is one more thing consumers need to keep in mind when choosing what credit cards to carry.
Prepaid Credit Cards - An Option For The Credit Impaired Customer
Credit is an equity that you can't afford to lose. Unfortunately, if you don't have credit, it's almost impossible to build it, and if you have bad credit, trying to recover your good standing may be one of the most difficult life challenges you ever face.
One option that may be valuable to you in the hard fought battle to obtain/restore your good credit is a prepaid credit card.
What is a Prepaid Credit Card?
It works like any major credit card and is accepted at the same locations. The biggest difference is that you are not using a fixed line of credit which you are 'borrowing' from the credit card provider based, essentially, on the equity of your name... your identity. (Who you are is representative of the assets you hold.)
With a prepaid credit card, you are extended a credit line based on one of your most solid assets... your actual cash on hand. It works much the same as depositing money into a checking account and using checks to make purchases, but with a prepaid credit card you stop spending the minute your cash is gone... no 'bounced checks', as it were.
And unlike major credit cards, there's no spending limit with a prepaid.
Needles to say, the benefits are all too readily apparent. You have the spending power and convenience associated with checks and credit cards, without all the negative fees and sky-high interest rates.
You do have some small fees, however. It costs up to $10.00 just to open an account and you will also have to pay a minimal fee each time you deposit cash into that account.
But when you consider that this opens up a whole new world of opportunities you didn't have access to before, you might definitely consider it a 'must'.
What benefits, you may ask. Remember, in today's society you can only secure a car rental with a credit card. You can also only pre-order movie, concert and sporting tickets using a credit card. Most major expenses or purchases can only be broken down into payments with a credit card, at the very least you avoid the heavy financing charges associated with a payment plan done any other way. You can also recharge prepaid cell phones and cards with credit cards. You can also only make hotel and airline reservations using credit cards.
The world runs on a credit line, and in today's society it's a much more accessible option than it ever used to be in the past.
One option that may be valuable to you in the hard fought battle to obtain/restore your good credit is a prepaid credit card.
What is a Prepaid Credit Card?
It works like any major credit card and is accepted at the same locations. The biggest difference is that you are not using a fixed line of credit which you are 'borrowing' from the credit card provider based, essentially, on the equity of your name... your identity. (Who you are is representative of the assets you hold.)
With a prepaid credit card, you are extended a credit line based on one of your most solid assets... your actual cash on hand. It works much the same as depositing money into a checking account and using checks to make purchases, but with a prepaid credit card you stop spending the minute your cash is gone... no 'bounced checks', as it were.
And unlike major credit cards, there's no spending limit with a prepaid.
Needles to say, the benefits are all too readily apparent. You have the spending power and convenience associated with checks and credit cards, without all the negative fees and sky-high interest rates.
You do have some small fees, however. It costs up to $10.00 just to open an account and you will also have to pay a minimal fee each time you deposit cash into that account.
But when you consider that this opens up a whole new world of opportunities you didn't have access to before, you might definitely consider it a 'must'.
What benefits, you may ask. Remember, in today's society you can only secure a car rental with a credit card. You can also only pre-order movie, concert and sporting tickets using a credit card. Most major expenses or purchases can only be broken down into payments with a credit card, at the very least you avoid the heavy financing charges associated with a payment plan done any other way. You can also recharge prepaid cell phones and cards with credit cards. You can also only make hotel and airline reservations using credit cards.
The world runs on a credit line, and in today's society it's a much more accessible option than it ever used to be in the past.