Posts Tagged ‘credit limit’

Have you ever tried to read a piece of legislation only to ask yourself, “What the heck did that even mean?” Official decrees from Washington are notoriously verbose at the best of times. The latest credit card bill, the Credit CARD Act of 2009, is no different. Fortunately, the kind folks at CreditCards.com have created a far more user-friendly guide to understanding just what the credit card bill is all about.

The Credit CARD Act of 2009 multimedia guide breaks down each title, section and legislative reference into digestible chunks just about anyone can understand. The guide also allows credit card holders to find the sections that apply to them directly through an easily navigable list of subtopics.

A multimedia breakdown of the Credit CARD Act of 2009 is ideal for this credit card bill because, let’s face it, the same text pasted into a PDF document would be almost as difficult to wade through as the legislation itself. By designing the guide with clickable links and breaking down the text into terms, quotes from politicians and even links to related stories, the site ensures that consumers will not be overwhelmed by impenetrable text. Even better, CreditCards.com has also included the original text of the Credit CARD Act of 2009, so those who believe in thorough research will be able to relate the simplified information to the transcript of the law.

Credit CARD Act of 2009 Multimedia Guide: A Closer Look

The major sections of the credit card bill are broken down into five simple headings:

• Rates, terms and fees
• Youth and credit
• Disclosure
• Studies
• Other

Each of these is further divided into numerous subheadings to help you navigate the text.

Many are unfamiliar with the jargon of the credit card industry — from double-cycle billing to grace periods — terms that the Credit CARD Act of 2009 understandably references frequently throughout its text. Naturally this means many consumers are unable to understand the credit card bill even if they can manage to wade through the wordy transcript. Fortunately, the multimedia breakdown of the Credit CARD Act of 2009 defines all of these terms as you roll your mouse arrow over each one.

This type of legislation affects everyone differently, depending upon spending practices and credit history. This handy tool can help consumers understand the Credit CARD Act of 2009 and, more importantly, comprehend what the credit card bill means for them.

Now, if only someone would do this for every other piece of national and local legislation, perhaps there would be a better understanding of our government throughout our great land.

Steve Thompson

During “Confessions of a Shopaholic,” Rebecca Bloomwood (Isla Fisher) says she fell in love with shopping as a little girl, a time when she saw grown women using “magic cards” to buy things. For a long time, most people shared Rebecca’s love for the plastic money known as credit cards, but the unstable economy has made folks more cautious about what they carry in their wallets.

Before filling out an application, it is important to look at the four basic types of credit cards:

• Charge cards
• Credit cards
• Check cards
• Debit cards

Be sure to weight the pros (credits) and cons (debits) of each.

Charge Cards

A Forgotten Wallet Leads to the First Official Charge Card

Frank McNamara gets the credit for creating Diner’s Club, the first official charge card. After he forgot his wallet and was unable to pay the check at a popular New York City restaurant in 1949, McNamara came up with the charge card concept, where diners would sign for meals during the month and then settle up just one tab at the end of the month.

Although McNamara’s first card was made of cardboard, the charge card became a hit, inspiring the American Express Corporation to come up with their own charge card designed with business travelers in mind. Credit cards are still king with consumers, but the charge card continues to thrive.

• Credits: Typically, charge card issuers set no upper limit for purchases, which means no worries at the checkout line. Because the balance must be paid in full at the end of the month, you aren’t carrying a debt load from month to month. Annual fees tend to be high, especially for premium American Express cards, but these cards come with personal concierge services.
• Debits: With no ceiling on the credit limit, it is all too easy to overspend each month. Companies like AMEX also offer the option to carry a balance on many of their cards, which means paying monthly interest.

Credit Cards

From Babylon to Bank of America

Historians have said that credit was extended as far back as 3,000 years ago with the “bill of exchange” in places like Babylon and Egypt. In the 20^th century, Mr. McNamara once again gets the credit for creating one card that could be used to purchase goods and services at various businesses. Instead of maintaining credit accounts at several places, consumers needed just one or two credit cards like McNamara’s Diner’s Club.

These days, Citigroup, Bank of America and other issuers have several different credit products, some tailored to students, business travelers and those who covet frequent flyer miles. You can get a card tailored to your exact business and personal needs.

• Credits: Merchants around the world accept MasterCard and Visa, making them an invaluable credit product. Other cards, such as Citigroup’s Chairman, carry excellent concierge services and allow the cardholder access to special events.
• Debits: Until the new credit card reforms started taking effect on August 20, credit card companies had a pretty free hand with their products. If you missed making the minimum monthly payment just once, for instance, your interest rate might skyrocket. Late fees also could, in some cases, be more than your regular monthly payment. Even with the new reforms, lenders are warning that interest rates might increase to compensate for lost revenues.

Carrying a balance from month to month also increases the cost of an item purchased on credit. Banks sometimes mail out cash advance checks with a low interest rate, but if you miss a payment, that super-low interest rate goes up.

Check Cards

Cards to Access Your Bank Account

The 1990s became the decade of the debit card, which is linked to your checking and/or savings accounts. Instead of writing a check, you simply swipe the debit card, which carries the MasterCard or Visa logo, and the money is automatically drafted from your account. Debit cards also work like traditional ATM cards, allowing cash withdrawals.

• Credits: A debit card offers consumers a way to control their spending because you typically can’t charge more than your account balance. This piece of plastic carries much of the weight of a credit card without the crushing interest rates.
• Debits: Debit cards are just as vulnerable to fraud as credit cards. If thieves steal your account number, they could wipe out your entire checking account in short order. When using a debit card to secure a hotel room, the front desk will “block out” a certain amount of money in your account to cover room charges. Even if you don’t charge anything to the room, it takes several days for this hold to go away.

Debit Cards

A Reloadable Credit Card

More than ever before, consumers are having trouble getting credit cards because of their credit history. People need plastic to rent cars and make airline reservations, which makes the reloadable or prepaid card an option for those with a history of late payments or defaults. Walmart even offers incentives to consumers who cashed their paychecks at a local store and put the money on a prepaid card.

• Credits: A reloadable card is good for people who have a habit of misusing credit because you can’t spend more than the amount available on the card. To get a prepaid credit card, you simply have to open an account and deposit money into it.
• Debits: The fees required to open an account, monthly maintenance charges and the cost of reloading the card can add up quickly. Merchants such as Walmart do offer free reloads, though, if you set up a payroll direct deposit.

Do the Debits Exceed the Credits?

When weighing the pros and cons of each type of card, the biggest factor to consider is your own spending habits. If you are a careful shopper and a good saver, a credit card could be your best option. If your credit score is below 600, however, preloaded and debit cards can give you all the power of plastic.

Steven Bryan

The new Current Card from Discover is one of many financial solutions aimed at the teen and young adult market. This particular tool is a debit card that offers an unprecedented level of control for parents, while helping teenagers learn how to manage their finances before they step foot in the “real world.”

Unlike credit cards, the Current Card allows teens and parents to load it with whatever cash they feel is appropriate. Once they have put cash on the card, parents can set parental controls on how their teenagers can use the card as well as where they can use it.

Loading the Card

The Current Card from Discover is different from most teen credit cards in that the amount available to use for purchases and withdrawals is established by how much is deposited into the account. For example, if a teenager’s parents load it with $500, he or she cannot spend more than $500. In other words, it works like debit cards do when attached to savings or checking accounts.

The Current Card can be loaded for free from any bank account or credit card. It is even possible for parents to establish recurring deposits, such as $200 per month from a credit card. There are no minimum balances, loading fees or credit checks required with this card.

Free direct deposit is also available for this teen debit card if it is more appropriate. For example, teens with summer or after-school jobs can have their paychecks deposited directly into their Current Card accounts.

Setting Limits

The most unique feature of the Current Card from Discover is the ability to set myriad parental controls so parents can monitor and control their teenagers’ spending habits. The available controls include:

• Spending Limits:
  Parents can decide how much money their teenagers can spend in a given period of time. If the teen tries to exceed that limit, the card is declined.
• Shopping Categories:
  With cash or other teen credit cards, teenagers can spend their money wherever they wish. This isn’t the case with the Current Card, as parents can restrict certain shopping categories, such as tobacco or liquor stores or hotels.
• Activity Alerts:
  In addition to letting parents decide how teens will use the Current Card, this card also informs parents of purchases and withdrawals. Messages can be sent via text message or e-mail.

Other Perks

The Current Card comes with the same convenient perks you might expect to find in other teen credit cards, such as no liability for fraudulent purchases. Card holders can withdraw cash from the card at any ATM if they are unable to use the card itself, and the card also comes with exclusive discounts at many favorite teen shopping destinations.

There are seven available designs for the Current Card from Discover, which makes it particularly attractive to the younger market. Teens can not only learn to manage their finances, but do it with a sense of style.

Steve Thompson

For years, American Express ran a series of “membership has its privileges” commercials, which were intended to show potential cardholders the benefits of having one of its cards in your wallet. As much as the company likes to advertise and use celebrity endorsements, American Express keeps most details about its mysterious “black card” hidden from the general public.

Urban Legends Make the Black Credit Card Real

On one episode of the television sitcom “Frasier,” Niles Crane and his radio psychologist brother kept trying to reach the most exclusive levels of a new local day spa, which had became the stuff of legend among Seattle’s movers and shakers. Frasier and Niles would not be satisfied until they were eligible for every perk the spa had to offer.

American Express credit cards have always had the same allure as that Seattle spa, so much so that rumors about an ultra-elite American Express credit card began circulating during the 1980s. Waving that piece of black plastic around allegedly could give the über-rich unlimited access to secret floors at major department stores and tickets to sold-out concerts.

The mystique surrounding the American Express black credit card became so great, in fact, that the myth finally became reality. In 1999, the company unveiled its new Centurion card, according to the marketing blog Branding Strategy Insider. Named in honor of the company’s corporate logo, American Express made the black credit card so exclusive that only a select few are invited to apply for one.

Benefits of the Black Credit Card

A call to the American Express media relations department about the Centurion card was not returned, but a few hours of Web surfing uncovered some fairly consistent details:

• The black credit card is made of anodized titanium, according to AdSavvy.org, which makes it heavier than the average credit card.
• Unlike other American Express products, you have to be invited by the company to apply for the black credit card. To even be considered for membership, you must have a near-perfect credit history and spend at least $250,000 per year on an existing American Express Platinum or Gold card.
• American Express charges a one-time membership fee of $5,000 for the black credit card, followed by an annual fee of $2,500, according to BlackCardSource.com. You also have to have the financial credentials to show that you can afford to spend a quarter of a million dollars each year.

Besides the prestige of carrying a titanium card in your wallet, American Express offers several benefits and perks for those who carry the black credit card, according to BlackCardSource.com, including:

• A personal concierge and travel agent. The company offers similar benefits to American Express Platinum cardholders, but these personal assistants are reportedly the best of the best customer service agents in the company.
• Automatic first-class upgrades and companion seats on several airlines.
• Personal shoppers at the finest stores in the world.
• After-hours access to shops.
• Membership points that can be redeemed at upscale merchants.
• Thank-you gifts from American Express such as digital cameras and expensive gift cards.

Keeping Company with the Centurion

Despite its exclusive nature, the American Express black credit card has become a part of popular culture. Britney Spears casually mentioned giving it to her then-husband Kevin Federline in 2006. Singer Kanye West even refers to it as “African American Express” in his song “Last Call.”

The American Express black credit card is only one of several credit cards for those with impressive financial resources. Competitors also offer exclusive black cards, but few can achieve the aura that surrounds the Centurion card.

Steven Bryan

Like many people, I have a love/hate relationship with bars and restaurants that allow you to open a credit card tab. Why? I’m one of those people who sets out to have a “couple of drinks,” but “just one more” always sounds like a good idea.

Handing over my credit card each time I buy a drink is sobering, especially when drinks can cost more than $12 a pop. It’s much easier just to start a credit card tab and face the music when the statement comes.

Lately, I’ve encountered a credit card tab buzz kill, which is credit card pre-authorization. Bartenders have requested that I sign for as much as a $50 pre-authorized charge on my credit card. Now, I understand that they want to protect themselves from customers who open tabs and then skip out without paying their bills. Unfortunately, this forces me to face the harsh reality that I will probably be spending (and drinking) more than I intended.

With the slumping economy, bars and restaurants are experiencing more deadbeat customers than usual. Bartenders who start credit card tabs without making sure the credit card is good may get left without a tip or, worse, may be forced to pay for a customer’s drinks. Credit card pre-authorization is their only line of defense.

Customers need to be alert, too. There are unscrupulous people (who may work at bars and restaurants) who are not above adding an extra gratuity to a credit card tab receipt that wasn’t correctly filled out or leaving the pre-authorized amount on a patron’s card even though the patron didn’t spend that much.

Also, leaving your credit card after a long night of fun is a perfect opportunity for a criminal—someone with access and opportunity—to steal your credit card information. As it so happens the US Justice Department notes individuals between 18 and 24 are the most likely to experience identity theft.

Some patrons, who have had too many beers, may forget to close their tabs and pick up their credit cards at the end of the night. Restaurants typically lock those credit cards in a safe and make the customers settle the tab when they come to retrieve their credit cards. Some establishments, however, are now automatically charging a fee for this service.

For better or worse, credit card pre-authorization for bar tabs is here to stay. It’s a good business practice for the establishment and provides a safety net for its employees.

As a patron, stay sober enough to make sure you’re not being unfairly charged. If pre-authorization is too much of a downer for you, grab some friends and relax with friends and a bottle of wine at home.

Lindsay Woodland

I have an American Express One card that I used to love. The two main reasons are:

• 1% of what I spend goes into a high-yield savings account
• No credit limit

It’s widely known that we’re in a credit crunch, and my old friend is not spared from the crunching.

• The high-yield savings account, which at its peak was 5.25%, is now only 2.75%.
• My credit limit has gone from none to…some.

My once stellar (to me, anyway) savings account is now terrestrial. My once unlimited resource (Vegas, anyone?) is now tethered.

An article in the Washington Post mentions how a sudden credit limit drop can affect your credit score. Using their example: If you start with a limit of $10,000 and revolve $4000, you’re utilizing 40% of credit available. However if the issuer lowers your credit to $5000, your suddenly utilizing 80%. So when your credit score is calculated, you look as if you’re nearing your maximum. And that counts against you.

The Good

I was told (by American Express themselves) that having a card with no limit can damage my credit report. It seems that when calculating the score, if the scorer encounters a card with no limit, it considers the balance as the maximum available. Say I have a $3000 balance on a no-limit card. The credit-scorer wants to figure out my debt-to-available-credit ratio, but it can’t—there is no pre-determined limit. So it uses my balance, $3000, as the credit limit. This makes it looks like I’m maxed out on that card, but in reality I can’t max out.

So, with my newly established credit limit, I no longer look maxed out.

The Bad

By establishing a credit limit, Amex has formed an opinion about me: This guy can go off the handle at any moment. It’s an exaggeration, but it still hurts. I thought Amex and I had something.

The Ugly

But others with the One card have had it worse. One One card holder had his balance reduced to $5000, but he was revolving $6000. Then Amex requested he immediately pay it off in full.

My friend the One card has gone from telling me it’s OK to push my limits to being the voice of reason. Instead of, “You need a new laptop”, I’m hearing “You don’t really need that DVD.” That’s a good thing…after all, Vegas is almost paid for.