Credit Card Tips / Terms

Most Americans carry an average of 8 credit cards in their wallet. While this number seems high, having more credit available to you can actually boost your credit score. Conversely, the trick is not to maintain a high amount of debt on each credit card.

There is no single glaring number of what constitutes too many credit cards. While its not unusual to hear about individuals who hold 50 credit cards, they are typically high income earners. Given that banks are dropping delinquent customers, it’s probably best to trim those credit cards which you aren’t using. Because credit card debt in the United States is on the verge of becoming an economic crisis, lenders no longer consider ample available credit to be a positive. Rather, they view applicants as a higher risk opportunity.

By cutting down on the number of credit cards in your name and diligently focusing on managing those critical few, you will likely reap the rewards of a healthier financial situation and higher credit score.

All of us get wrapped up in the joys of the Holiday season. It's one of the best times of year to show others what they mean to us. Many times, when it comes to gift giving, we think more with our hearts than with our minds. As a result, after the Holidays, we are stuck with liabilities of our generous nature - credit card debt that is more than we can afford to pay.

The current state of our financial markets and health of our economy is a painful learning experience for most of us. However, as challenging as this year has been, it's clear that many of us need to return to a fundamental principle of prior generations who lived during difficult times: don't live beyond our means. Yes, it's really just that simple.

To help you structure your Holiday use of credit cards, we have come up with five things to consider in order to make sure you are charging responsibly this Holiday season.

1.      Ask yourself before every purchase: Do I really need to buy this?

This isn't as easy as it sounds, but once you have applied it a few times, it becomes somewhat of a fun game. Similar to weight loss, or so I have heard, once you start seeing results your hooked.

2.      Budget how much you can afford to spend for every item related to the Holidays

As rudamentory as this may be to some, it will force you to understand how much you should truly be spending. When you get caught-up in determining gift ideas, it's a good tool for being grounded.

3.      Don't use a debit card online

Debit cards are great for using when shopping offline, but online they can be a potential security threat. If your card information is stolen, you are 100% liable for any funds stolen from your checking account.

4.      Use a select number of credit cards

Write down when your January credit card bill is due. This is the date when you will receive your Holiday gift of no credit card debt. It's best to select 1-2 primary credit cards for Holiday spending so that you don't have unanticipated charges coming in the mail after the Holidays.

 5.      Don't apply for multiple credit cards

Historically, credit card companies typically tighten lending criteria in November and December because they know that this is the time of year when consumers look for special promotional purchase and balance transfer rates. Therefore, if you are going to apply for a new credit card, make sure you choose the right one first. Multiple credit inquiries will limit your chances of being approved.

The holidays will come and go this year like they always do. Without a doubt, it will take sacrifice to avoid the urge to spend on yourself and others. Refocus your spending energy on the non-material things that matter most in your life.

Won't it feel great, come January 2009 to know that your disciplined approach has helped launch the right financial start for 2009.

Check out a free tool from Vertex42 which will calculate how long it will take to pay off your outstanding credit card debt balance. 

Instructions of how to use the spreadsheet are contained in the worksheet after its download to your computer. This might really helpful if you are about to transfer a credit card balance from a higher interest account to a new credit card account with a low promotional rate.   You can really plan out how you will become debt free!

Last month, I went over my credit limit on my Chase business credit card by a few thousand dollars. I use my Chase business credit card primarily for online advertising expenses and there were outstanding charges that hit my account before I could update my Google Adwords account with another credit card. Chase honored the transactions, but clearly I need more available credit in order to avoid a similar situation in the future.

I called Chase to see if they would waive the auto generated $39 over-limit fee, which they graciously did. I didn't want to ask the representative about increasing my credit line because I didn't want to go through the formal process of a credit review that could cause an additional credit inquiry on my credit report. The representative pro-actively checked my account and stated that it was possible to transfer available credit from my Chase personal credit card account to my Chase business credit card account. In other words, the $20,000 in available credit that I wasn't using on my personal chase credit card could be transferred to my chase business credit card, raising my Chase business credit card available credit from $8,500 to $28,500. I kept thinking to myself, "this is such a smart thing for Chase to do for its customers."

This creative solution to my available credit issue made me re-think my loyalty to Chase. They prevented a bureau inquiry and solved my business credit issue. While its easy to transfer from one credit card issuer to another, account flexibility like this makes one company really stand out from the rest of the pack. 

When you apply for credit cards, there are several important factors to keep in mind. Getting a credit card requires much financial responsibility as well as understanding. Racking up a debt and failing to make the payments can severely damage a person’s credit, as well as leave them in a bad situation. These situations, when applying for a credit card, can include bankruptcy and unnecessary stress. When you apply for a credit card, also keep in mind that it will have an affect on your overall credit score. The more credit cards a person tends to have, the more impact it has on their chances for a positive credit score.

There are many types of research that you can do before you apply for a credit card. First of all, look at the interest rates and APRs offered by the credit card company. The lower the APR and interest rate, the chances are the better the card. There are also credit cards that offer incentives for using their credit card and paying down the balance. Frequent flier miles and free bonus points are also items to consider when you apply for a credit card. Another option is credit cards that help pay down student loans. In these cards, a portion of your purchase goes towards your student loans at your respective college.

Other Resources:

• Credit Card Essentials
• Credit Card Guide
• Eight Things a Credit Card User Should Know

As you acquire a new credit card, you may want to cancel out some of your old and unused credit cards.  But, there’s more to closing out an account than simply cutting your old card in half.  The first step to closing an account is to make certain that your entire balance has been paid off.  Closing an account with an existing balance could actually do damage to your credit score.

Once you are certain that your balance is 0, call the credit card company to verify that your balance is zero and notify them that you will be closing your account.  Be aware that many credit card companies will use this opportunity to make offers that will entice you to keep their card. And, sometimes their offers can be good enough (such as free airline tickets or a lower interest rate), to make it worth your while to keep the card.  If you still want to cancel the card, you’ll need to follow your phone call with a confirmation letter (sent via snail mail) again stating that you intend to close your account.

And, finally – and this step is critical – wait 30 days and get a copy of your credit report to verify that your account has been closed.  In particular, pay attention to the terminology.  Your report should list the credit card along with, “closed by account holder” or something along those lines.  If your report says that the account was closed by the issuer, you’ll need to contact the credit bureau to have them change it. Showing closed by card issuer or bank could negatively affect your score.  And, if you find that your account was not closed as requested, you’ll need to repeat the entire process again.

Other Resources:

• How to Cancel a Credit Card
• Low Interest Credit Cards
• Credit Card Tips for College Students

Each year in the United States there are over 1 Million divorces. There is a lot of great information available to those considering divorce on how to divide up marital assets, determine the custody of children, and deal with the emotional toll a divorce can take on its participants. Unfortunately, many people neglect to handle outstanding debts in a manner, thru the Divorce, that will prevent serious financial problems down the road.

The primary issue results from many believing the Divorce Decree will supersede any original debt obligations or contracts and the impact that can have on someone’s credit and their ability to obtain financing, employment, or housing in the future. It’s not uncommon at the time of divorce to have outstanding credit card debt that is jointly held. You have 3 options to handle this debt to protect you from future problems:

1)      Sell Something – The first option is to sell a joint asset and use the proceeds to wipe out any and all outstanding credit card debt while also closing the accounts or converting them into individual accounts.

2)      Apply for separate credit – The second option is for each spouse to apply for new credit in their own name and then transfer their share of the existing debt into their new account while closing out the joint account.

3)     Free the Account -  If you cannot afford to pay off the existing debt and have difficulty applying for new credit, another option is to have the account frozen so new charges cannot be added. While this won’t eliminate your obligation to ensure the debt is being paid, it will prevent your ex-spouse from charging more to the account.

If these options just aren’t feasible in your situation and your ex-spouse will be responsible for making payments on a joint debt, it’s your responsibility to monitor that account and ensure it is being paid on a timely basis. This can be done by having copies of the bills sent to your home, gaining online access to the account, or regularly checking your credit report.

If your ex-spouse is unable to make the payments in a timely manner, regardless of what the Divorce Decree says, to protect your credit, you will need to jump in and begin making payments on that account.

Anyone considering a Divorce should seek legal counseling due to the complexity of what is involved. Do not be bashful in bringing up these issues with your Attorney to prevent a financial nightmare down the road.

Other Resources:

• Balance Transfer Credit Cards
• Debts in Divorce
• Credit and Divorce
  

If you receive a call from a “credit card company” offering you a balance transfer offer that seems too good to be true, it probably is.  The best action you can take is to politely decline and quickly get off the phone. 

If a balance transfer offer is legit, the offer should be available online as well.  And, when you apply online, you’ll be able to print off the important details of the offer such as rate and terms. 

However, the bigger danger of the telephone balance transfer offer is the identity thief posing as a credit card issuer in order to get your personal information.  These guys can be very good at what they do; making it almost impossible to know if an offer is legitimate or not.  A better idea is to make it a regular practice to never accept a credit card offer by phone and rely instead on secure online applications from reputable resources.

 Other Resources:

• Scambusters.org: Credit Card Fraud
• FTC Bureau of Consumer Protection
• Identity Theft Awareness: Credit Card Fraud

Interested in applying for a credit card but short on time?  You can save yourself a lot of time and headache by following a few simple steps.  The first step always, is to have a recent copy of your credit report and score in hand.  (You can even get a copy online in very little time.)  Next, make a list of the features that are most important to you:  low interest, miles rewards, balance transfer, bad credit options, etc.  You can then use these keywords with the Online Card Comparison tool to narrow your search.  You can also search by card issuer such as Visa, MasterCard or others. 

Once you’re able to compare cards side-by-side, it will be easier to determine which card is right for your situation.  And, when you’ve found that card that will best meet your needs, you can complete your application online and, in some cases, receive instant approval in as little as 60 seconds. If you have excellent credit, above 720, then you will likely have a good shot at receiving instant approval from banks such as American Express, Capital One, HSBC and Chase.

Other Resources:

• Fool.com: A Fool's Guide to Credit Scoring
• Instant Approval Credit Cards
• Now Instant Credit is Just a Click Away

Of course we all want the very best credit card rate but sometimes, what we see is not always what we’re getting.  Comparing credit card offers can be really confusing; especially when you include extra features like rewards, cash back or balance transfers. 

Whenever someone is searching for a new credit card I always encourage them to get crystal clear on what features are most important.  Making a list is a great way to start.  If you want the opportunity to earn reward points on your purchases then you might be looking at a higher rate but, as long as you pay your entire balance off each month, the rate isn’t nearly as important.  On the other hand, if you already have a high-interest balance and you’re interested in a balance transfer card, you’ll want to make certain you know the introductory rate and term as well as the regular rate.  With these types of cards you’ll also want to take note of whether the rate applies to purchases only or purchases and transfers.  Generally these cards will charge an even higher rate for cash advances.  And, maybe the very best advise is to take your time.  The compare cards online comparison tool can help identify all of the cards that fit your criteria but once you have them side-by-side, you’ll want to make certain you review all of the details before you choose.

Other Resources:

• Most Popular Credit Cards
• Lower Your Credit Card Rates
• National Credit Card Rates