Posts Tagged ‘credit card industry’

With lenders tightening their standards, and with new credit card rules, many are finding that it is not as easy as it once was to get a credit card. Indeed, proof of income is needed, and for the best credit cards you will need a credit score that is at least fair to good. If you do not meet these qualifications, you may need a co-signer to get a credit card.

What is a Co-signer?

A co-signer is someone who accepts responsibility for the loan or credit card if you cannot pay. If you do not have good enough credit or a high enough income to qualify for a credit card or some other type of loan, a co-signer will vouch for you, taking on the responsibility for the loan. This person should have good credit and sufficient income.

When someone co-signs for a loan, it means that he or she is basically taking on the debt. You should still make your payments on time, but if you don’t, the creditor can come to the co-signer to fulfill the debt. Additionally, the co-signed debt shows up as part of the co-signer’s debt burden, so their debt-to-income ratio rises. A co-signer is taking on risks when he or she backs you up, agreeing to pay on the loan if you default. If there is a chance that you will default, or if there are doubts about whether you are responsible enough to pay on time, you may have a hard time convincing someone to co-sign for you, since most of the risks are taken on by the co-signer.

Choosing a Co-signer

If you are responsible but you do not have established credit or a full-time job, you might be able to convince someone to co-sign for you. This person is usually a relative, often a parent. You might also find a very good family friend to co-sign on a credit card for you. When looking for a co-signer, you should find someone who has good credit, a low debt-to-income ratio, and who is not planning major purchases for at least six months. This is someone who is likely to handle the debt well, and who can afford to co-sign for your credit card.

Once you have your credit card, you should show your appreciation to your co-signer by using it responsibly, paying on time, and in full.

Jean Marquit

Everyone is familiar with the credit card advertisements people receive in the mail, but direct mail marketing has declined in response to the struggling economic climate.

However, according to DM News, credit card issuers have ramped-up their direct mail marketing efforts recently. They are now sending out more advertisements to consumers, raising awareness about new cards and renewing interest in their popular cards.

The total amount of direct marketing sent out by all banks rose 47 percent between the third and fourth quarters of 2009, which is a significant change in only a few months. Chase led the pack by increasing its efforts by 87 percent.

Banks are becoming more optimistic about the future of the U.S. economy, and are once again encouraging consumers to take advantage of credit card offers. DM News reports that banks sent out far more direct mail before the recession hit, but a steady climb could bode well for the credit card industry.

Of course, credit card offers sent through direct mail might not be as enticing as they once were. Annual fees, shorter grace periods and higher interest rates are still common among current terms. It is important for consumers to pay attention and to make smart decisions about which credit cards they decide to obtain.

New changes to the CARD Act of 2009 will take effect in February, which might have an impact on direct mail marketing by credit card issuers. Banks will be keeping tabs on delinquencies and monitoring consumer activity to determine where they should take their efforts from here.

Staying abreast of credit card news and paying attention to direct mail advertisements will help you make effective decisions about your finances. If this trend continues, it could mean that card terms will steadily become more favorable as well.

Steve Thompson

If you are drowning in credit card debt, or have collection agencies calling you at work and at home, it’s understandable if you feel overwhelmed right now. However, you can get your credit card debt under control, eliminate it, and show the credit card companies that you can handle credit responsibly. Here are some useful tips for getting out of credit card debt for good.

Work with the credit card issuer

If you sense that you won’t be able to make next month’s credit card payment, proactively contact the credit card issuer yourself. Explain your situation to the company and ask for a lower monthly payment, a lower interest rate, or both. Most credit card companies are reluctant to resort to a collection agency to collect on their debts, since this results in your debt being sold to an outside agency for pennies on the dollar.

Pay more than the minimum

If you ever hope to reduce and eventually eliminate your credit card debt, you must pay more than the credit card’s minimum monthly payment. Even if the additional amount is only $100, every little bit of extra cash helps you on your journey to getting out of debt.

Transfer your balances

Many banks and companies offer zero or low annual percentage rate (APR) balance transfer credit cards to new credit card holders as a promotional incentive. Usually, balances from other credit cards can be transferred to these new cards. If you are able to obtain such a card, transfer as much of your high-interest credit card debt to it as you can. Then, try to pay off this debt before the promotional period ends.

Use only cash

Once you start paying off your credit cards, it is easy to fall back into the routine of using them to make purchases. If you do this, you will never be able to reduce your credit card debt. The solution is to use only cash when you make purchases. Using cash also makes you more aware of how much money you are actually spending on various items.

Once a credit card is paid off, destroy it

It is very tempting to go back to using credit cards that are no longer “maxed out,” especially if the cards have a very high spending limit. Once a credit card is fully paid off, destroy it. This will prevent you from sabotaging your own efforts to stay out of debt.

Keep one or two credit cards

Credit cards do make certain purchases easier (e.g., hotel reservations); however, there is no reason why you should keep five or more credit cards. One or two low-interest credit cards should be sufficient; the rest should be destroyed or made unavailable (e.g., placed in a safe deposit box) for use only in an emergency.

File for bankruptcy

If you simply cannot reduce your credit card debt by cutting back on purchases and even taking on an extra job, the best resort may be to file for bankruptcy. Granted, your credit will be ruined for seven years, but you’ll be able to start fresh. This may be your best option if you see no other way to pay off your credit card debt, or your credit card issuers refuse to consider a mutually beneficial debt payment plan.

Hally Z.

Going to college is the first step towards independence for many young adults. Many attend colleges in their home state, living on their own in dorms or apartments. During these college years a student’s main concern should be on studies and how to pursue a career upon graduation. Unfortunately, rising debt lurks in the shadows for many of these students and when they graduate, the harsh reality of this debt brings puts a tether hold on some of their plans and goals.

College Debt

It used to be that credit card debt was the big culprit for the debt college students had upon graduation. However, with the Credit Card Act of 2009, that debt won’t be a factor. But the debt of college students will still be as high as before and some instances higher. In recent years college students have been borrowing more money than they ever have in the pursuit of higher education. So many students’ borrowing has increased to keep up with the costs of rising tuition.

Tuition Hikes the Main Culprit

There used to be a time when a person entering college fresh out of high school only needed to take out a college loan for a couple of thousand dollars each semester. However, with the cost of tuition rising significantly each year, students are borrowing twice as much just to pay for an education. In fact, college tuition hikes have passed the rate of inflation. According to the College Board, between the years of 1999 to 2000 and 2009 to 2010, college tuition has increased at an average annual rate of 4.9 percent over the general rate of inflation.

Life-Altering Effects of Increased Student Borrowing

Federal Direct and Stafford loans typically give graduates a six-month grace period before they have to begin repaying their loan. However, with the current economic situation and unemployment still high, finding good paying jobs is becoming difficult for some. Even when a decent-paying job comes along, plans such as getting married and purchasing a home are put on the back burner, as graduates find themselves living paycheck to paycheck.

There may not be a way to avoid borrowing for college tuition. However, if college students are made knowledgeable about how student loans affect their lives after college, they can be better prepared to handle the debt. Financial education on debt and borrowing can benefit students a great deal and help them develop a plan to handle the debt college tuition helped them to accrue.

ShawnTe Pierce

The U.S. Census Bureau claims there are roughly 1.5 billion credit cards in use across the nation, which translates to an average of eight credit cards per American adult. At the same time, a company that advises the credit card industry, R.K. Hammer, reports that Americans annually pay more than $20 billion in credit card fees. Perhaps it is no wonder that 41 percent of U.S. adults told the National Foundation for Credit Counseling that they grade their knowledge of personal finance at “C,” “D” or “F.”

Knowledge is power. Here, then, are 10 credit card industry facts that may help you better deal with the world of credit cards.

1. Beware of the “universal default clause”

Just one late payment on any credit card can prompt the entire credit card industry to raise your interest rates on all of your cards.

2. Identity theft

A plague upon the credit card industry and personal finance in general, identity theft is described by federal authorities as America’s fastest-growing source of crime. Monthly reviews of credit card statements and credit reports are the best ways to combat identity theft.

3. Credit card offers can lead to identity theft

A typical household receives several credit card offers per year. The trouble is that if the household doesn’t shred these offers, identity theft criminals can obtain vital personal information and open credit card accounts in your name.

4. Maintain that credit score

The magic number for your credit score is above 600. Go below that and you likely will face severe credit limits and high interest rates.

5. Make some noise

The fact that you may receive multiple pitches from the credit card industry, even if your credit score is below 600, reflects the fierce competition between companies. Call the credit card companies and ask to speak to supervisors for the lowest interest rates, and even negotiate for consolidation of credit card debt. The same determination on the phone can help if you believe an unwarranted late fee or penalty has been assessed.

6. Watch those gas stations

Folks seem to run into all sorts of problems when they use credit cards at gasoline pumps. First, if you don’t have a minimum of $50 remaining on your limit, your purchase attempt may be rejected. Gasoline stations may also be slow to record your transaction. Sometimes it’s best to simply pay with cash.

7. Keep an eye on payment time frames

If a few days are shaved from a payment time frame, such as 25 days instead of 30 days, credit card holders may falsely assume that they’re paying on time, only to run into a costly late fee and all of the accompanying troubles.

8. Minimum monthly payments will cost you dearly

Minimum monthly payments often consist of little more than interest on the lump sum. The laptop you purchased for $300 could end up costing $1,000 or more if you’re paying the minimum monthly payment. In this sense, credit card purchases can cost even more than rent-to-own arrangements.

9. Shop locally

If you restrict your purchases to within your home state or within 100 miles of your billing address, you will have an easier time disputing charges for unsatisfactory goods or services. Federal law gives credit card companies more rights for purchases made out of state or beyond the 100-mile radius.

10. Sometimes, “big government” actually can work for you

When looking for advice, keep in mind that the Federal Trade Commission monitors trade within the 50 states. There’s even a U.S. Financial Literacy and Education Commission, and local nonprofit credit counseling agencies are abundant.

Michael Thompson

Most people know that credit history is important for obtaining loans, finding a job and applying for a credit card, but do you know why your credit report is important? This single aspect of your life can have an enormous impact on your finances, so it is essential to understand how to build a better credit report.

Why Should I Build a Better Credit Report?

When you build a better credit report, you will likely save money and enjoy a more secure financial future. Each time you apply for a credit card or a loan, the lender will access your credit history to determine what kind of risk you pose as a borrower. A better credit report will result in better terms for your loan or line of credit.

This means lower interest rates, fewer fees, better chances for approval and improved terms. A better credit report often results in your ability to take advantage of lender promotions such as zero-percent financing for a specified term.

What is the Fair Credit Reporting Act?

One of the most important things you need to know when building a better credit report is how the Fair Credit Reporting Act affects your financial life.

The FCRA determines your rights as a consumer and the requirements of credit reporting agencies. Under the FCRA, you have the right to access your credit report and to know when lenders, employers and other entities have used information in your report against you (denying your loan application, for example). You also have the right to dispute any information you believe is inaccurate and to choose who has access to your report, and when. Knowing your rights and the requirements of the credit reporting agencies can help you build a better credit report faster.

How can I Improve my Credit Report?

The only way to build a better credit report is to practice positive financial habits. This means paying bills on time, carrying as little debt as possible, maintaining good relationships with creditors and living within your means. Just because you have access to credit does not mean you should use it.

Having a credit card (or several), for example, can help your credit report, but carrying a hefty balance on all the cards in your wallet can hurt it. This is why many consumers choose to pay off their balances each month, which also saves you from paying interest and fees on the money you borrow.

Too many inquiries on your credit report can be detrimental, so you don’t want to apply for 10 credit cards at once. Keep your applications to a minimum and spread them out so they don’t all hit your report simultaneously. Similarly, avoid applying for multiple loans at the same time.

You will also notice that building a better credit report is easier as you get older. One of the factors that impacts your credit score is the longevity of your credit history; the presiding wisdom dictates that mature consumers are less likely to act irresponsibly with credit.

Finally, dispute any inaccurate statements on your credit history immediately. Building a better credit report is impossible if you don’t know what the report contains, so take advantage of the annual free report that the agencies — Experian, Equifax and TransUnion — provide. If something seems inaccurate, file a written dispute so it can be investigated.

How Long Will it Take to Build a Better Credit Report?

The length of time required to build a better credit report depends on your situation. For example, it might take less time for a young consumer to develop a credit history from scratch than for an older consumer to repair negative accounts on a credit history.

Most negative information on your credit report will be there for about seven years, though some delinquencies and defaults can remain for much longer. However, increasing your positive payment history can reduce the impact of a bankruptcy or defaulted credit card, so don’t give up.

Steve Thompson

Twitter creator Jack Dorsey may have just revolutionized the credit card industry with a piece of plastic the size of a sugar cube. Called Square, the little device will soon allow anyone — not just businesses — to accept credit card payments on their Apple iPhone or other mobile device.

How it Works

Square works by plugging into your mobile device’s audio-in jack. Run a customer’s credit card through Square’s card reader and it uploads the credit card information to a central database for approval. Receipts can be emailed to customers instantly.

Currently there are only 100 or so Squares in existence, as the company is running a pilot program for the service in Los Angeles, San Francisco, St. Louis and New York. But as Square (the company) starts to ramp up operations, these little plastic devices may soon become ubiquitous, as the limits on accepting credit cards quickly fall away. Most paradigm changing of all: Merchant accounts are completely unnecessary with Square.

Why it Matters

There are certain advantages Square has over the traditional credit card swipe machines and the very infrastructure of credit card administration today.

1. Square is simple to use. All you need at the moment is an iPhone, though soon the Square will work on several mobile communication devices. To use Square to accept a credit card payment, all the merchant or private citizen needs to do is swipe the card and input the dollar amount. The software does the rest, sending the information to the secure Square Web site, which processes the transaction.

2. Square is secure. No information is ever stored on the iPhone, and all data that is transmitted from the iPhone to the Square Web site is heavily encrypted.

3. Square is inexpensive. Even factoring in the cost of the iPhone, vendors will still come out ahead when compared with the cost of credit card swipe machines and credit card merchant accounts. With Square, the device itself is free, while the software may have a minimal cost of around $1. Square — the company — makes its business profitable by taking a small percentage of each transaction.

4. Square is for everyone, not just merchants. Dorsey envisions not only retail outlets, but also individuals using the Square for payments. Owe a friend money? Just enter the information into Square, and the money is on its way. It is also perfect for mobile vendors such as roadside stall keepers, farmers markets and other businesses where a wireless credit card terminal would be too much of an added expense and a traditional credit card terminal impractical.

Square makes everyone capable of accepting credit card payments, and makes it fast, simple, secure and inexpensive while it’s at it.

Eric Fleming

In these turbulent financial times, identity theft is rampant, and credit card fraud is a popular way for identity thieves to wreak havoc. Though many don’t realize it, credit card companies do not require consumers show their IDs when using a credit card to make a purchase. In fact, most specifically forbid retailers from asking for ID in their merchant agreements. There are two primary schools of thought on requiring IDs for credit card transactions: One is that requiring IDs helps prevent identity theft, while the other is that it can actually lead to identity theft.

Those who support the requirement of identification feel that it will help protect the card holder from identity theft. If the credit card falls into the wrong hands, the culprit could be caught more quickly if the cashier asks for their ID and sees that it does not match the name and other information on the credit card.

Secure Cards
While all credit card issuers have respectable policies for protecting their customers, Citibank and American Express are standouts. Be sure to check our Citi and Amex credit card deals section.

On the other hand, some believe that the more frequently IDs are used in public, the greater chance they have of being exposed to thieves. A card holder does not need to lose a credit card or ID for their information to be stolen. During a transaction, nearby thieves can quickly record information from IDs, including names, addresses and dates of birth, all of which can be used to steal an identity without the card holder’s realization.

Companies may choose to ask consumers for their identification when they use a credit card, but it is not essential for the transaction to be completed. Credit card signatures (i.e., the signature on the back of a credit card) are the preferred means of verification for most credit card companies as they provide decent protection against all but the best of forgers. Signatures are always required on credit cards.

The differences of opinion on requiring IDs are likely to continue. In the meantime, some retailers will request IDs from their customers and some consumers will encourage retailers to ask for their ID by writing “ask for ID” or “see ID” next to their signature.

Lindsay Woodland

First and foremost: It’s illegal to gamble online in the United States. Those interested in gambling online should take the time to familiarize themselves with the legalities related to Internet gambling, and the rules followed by the Internet gambling sites they plan to patronize. Such sites often use loopholes in the law (or violate the law altogether) to allow gamblers in countries with tough laws to fund their bets. Here is some basic information on the laws concerning Internet gambling, and how some Web sites get around them.

The quickest and easiest way to fund an account on an Internet gambling site is by using a credit card or debit card. In fact, many Internet gambling sites reward customers who use a major credit card such as MasterCard or Visa to fund their accounts with bonuses of, say, 20 percent of their deposit. While European gamblers typically experience little trouble with this method, U.S. gamblers often find themselves out of luck because of the Unlawful Internet Gambling Enforcement Act of 2006 that pressures banks into prohibiting the use of their credit and debit cards for Internet gambling purposes. (This law prohibits the transfer of funds from a financial institution to an Internet gambling site, with some notable exceptions, e.g., horse racing, fantasy sports and online lotteries.)

Some Internet gambling sites use electronic money services to get around this dimple. A U.S. bank that does not allow money to be transferred directly to an Internet gambling site may very well allow money to be transferred to a third-party electronic money service, which takes a percentage and then feeds the funds to the Internet gambling site. Many of the most popular electronic money services have ceased serving U.S. residents.

By now, however, someone would have figured out a loophole, but the complex and ever-changing laws concerning Internet gambling are keeping U.S. residents from risking it. Although federal laws do not prohibit Internet gambling on games of chance, some states have specific laws prohibiting Internet gambling of any kind, including poker, chess and bridge.

Perhaps the most notorious example of Internet gambling gone wrong is the case of BetOnSports.com. That company settled a multibillion-dollar civil lawsuit after criminal racketeering charges were brought against the company and several employees, including its founder Gary Kaplan and former CEO David Carruthers. Many BetOnSports’ customers assets were frozen in the United States while the government wrangled with the company in court.

Other Internet gambling customers have lost their funds when Web sites suddenly went belly-up. Those who engage in or wish to engage in Internet gambling should do their research. Although there are no easy answers in the world of Internet gambling, researching state and local laws, as well as the laws of each site, will save U.S. gamblers time and money in the long run.

Jack Oceano