USA TODAY reports, “Credit card rates hustle higher“, in an article that describes what banks are doing to make up for losses on consumer lending and home loans. Some credit card customers’ interest rates are being increased by 100%. And good credit scores don’t seem to matter according to the article. It’s not looking pretty.
How do you avoid making late fees on your credit card accounts? Make credit card payments on time.
How do you make sure you’re never late? Schedule automatic credit card payments.
Most credit card companies allow card holders to schedule automatic payments that are deducted from a checking account. While you might be concerned about giving your credit card issuer access to your checking account, if your credit card issuer allows scheduling automatic payments with a preset amount, this limits the monthly payment to the amount you authorize.
Scheduling automatic payments prevents you from paying late and incurring a late payment fee. If your credit card issuer allows it, automatic payments can make your financial life a little bit easier.
You have probably received credit card “convenience” checks without requesting them. They may have arrived with your monthly statement. Or maybe they arrived all by themselves before school starts, before Christmas or anytime your credit card issuer wants to generate additional revenue.
And they probably came with an enticing, inviting letter containing a compliment similar to, “Because of your good credit, you deserve these convenience checks.”
Credit card convenience checks are mostly convenient for your credit card company. For card holders, the checks hold more risk than reward. Here are some tips about protecting yourself from the potential negative outcomes of credit card convenience checks:
If you ever have money taken from you, you should hope it’s taken from your credit card account and not from your checking account. While credit card companies may charge exorbitant interest rates and have outrageous penalties for late payments, credit card companies are usually much quicker than banks when it comes to taking care of you in cases of fraud or theft.
In fact, if you’ve ever used your credit card in an unusual manner (perhaps you use a card you haven’t used in a few months), you may have received a call from the credit card company seeking to verify that you indeed made the odd purchase. If you do the same with a debit card, you will probably not get a call to check on the charge. And if someone else is using your debit card, you probably won’t know it until you get your bank statement or review your account online between statements.
Debit card fraud is real. One of my favorite consumer blogs is written by Bob Sullivan, MSNBC’s Red Tape Chronicles. In ‘Money disappears from checking accounts, again’, Sullivan writes of how thieves have been able to use debit and ATM card numbers to take money out of checking accounts.
When a bad guy uses a debit card or debit card PIN to steal from your checking account, your money actually disappears from the checking account. You have 60 days to report the theft to your bank. If you wait more than 60 days you lose your right to expect the bank to make it right. And while you and the bank spend weeks or months working out the details of what happened, you’ve lost access to your money. It was effectively stolen.
A credit card company, however, will remove charges from your card that are fraudulent. While you may be required to fill out a police report and fax it to your credit card company to document the theft, your bank may not be so willing or quick to help you without hassle.
Debit cards are good for over-spenders because you’re not borrowing money or paying interest when you debit your checking account. Read the ‘Money disappears …‘ article and decide whether debit or credit cards are better for your ability to tolerate financial risk.
Paying your credit card bill online is actually a good thing for most credit card users.
First, remember a late payment dings your credit score. Mail travels at varying speeds and even gets lost. (Though I don’t believe this happens as often as credit card companies hear this as an excuse.)
Online credit card payments generate a verification code. Once your payment is made or scheduled, you will receive this code. Keep it. It’s proof your payment was made and verifies the time. As one credit card company advertises, “Paid online is paid on time.”
Second, while most credit card company’s offer to suspend your paper statements once you begin paying online, I recommend you continue to receive paper statements. Believe me, you’re paying for them, and if you ever need paper, electrons may not be a good substitute.
Third, take care of computer security. Be certain the computer you use is secure and without viruses or malware. Don’t use the same user name or password for different accounts. Avoid using a publicly-accessed computer. Take all the precautions necessary to ensure your electronic transaction is protected from hackers.
Fourth, verify you have enough funds available in your checking account to cover your payment when you click, “Pay Now”.
Other benefits of paying your credit card online are that you can do it without going to the post office or mail box, you can usually schedule payments in advance, you have access to a lot of information about your account when you log in and in most cases can easily review a history of your payments and transactions. You can even schedule email reminders about upcoming payments or cautions about credit amounts, ala “your balance is now over $800.00″.
The term “Credit Card” begs a question: why is it not called a “Debt Card”. It was a brilliant marketing move to avoid calling them what they really are: Debt Cards.
Here’s an idea that you might find helpful. The next time you take out a credit card, look at it and think to yourself (or say it aloud if you think it will help), “This card in my hand is a Debt Card.”
Sure the bank offers you credit, but once used, it is absolutely debt. Teach your children to call them debt cards, too. They may thank you for it in the future. Think, “This card in my hand is a Debt Card.“
The Federal Reserve publishes current data on the status of what they call “Consumer Credit”. The BIG picture is not improving. This month’s report states, “Consumer credit increased at an annual rate of 3-1/4 percent in January”. It continues, “revolving credit increased at an annual rate of 7 percent.” The full release is here: Federal Reserve Consumer Credit Report
Credit cards are like fire.
Use them wisely and you have a tool that enhances your ability to accomplish things. Use them unwisely, and like those who play with fire, you’ll get burned.
Using credit cards wisely requires that faithfully do the following.
1. Always pay on time.
2. Pay the balance in full each month.
3. Always pay at least the minimum balance if you can’t pay the balance in full.
If you pay late, you’ll get burned with late fees. Pay too late and your interest rate will increase.
If you fail to pay the balance in full each month, you’ll pay interest. If you use your card for unnecessary things like coffee or eating out, you’ll pay more than the drink or meal was worth.
If you pay less than the minimum balance, at a minimum you’ll get burned with an higher interest rate and a rising balance.
If you pay your credit card at least monthly as most credit card agreements require, there’s one more thing you should do each month if the interest rate on the account seems too high: Ask for it to be lowered.
Make this your monthly credit card question: “Would you please lower my account’s interest rate?”
It won’t hurt to ask each month until your rate is reduced to something that you think is correct for your credit history. And even if you have a poor credit history, it won’t hurt to ask.
On the back of your credit card you will probably find a toll free phone number. If it’s not there, it will be in the monthly statement you receive. Call this number and be prepared to provide your credit card number, name and identifying information. When the customer service person asks how he or she can help you, ask politely, “Would you please lower my account’s interest rate?”
It’s that simple.
Don’t be disappointed when the answer is, “I’m sorry. You have the best rate we can offer,” or something similar. The chances are good you’ll need to call several months in a row (all the while making payments as you should) before you receive a positive response.
But when you do get your rate lowered, it will be a good thing.
If you’ve watched the television news lately, you’ve heard about the housing bubble. You’ve probably also heard about the general debt bubble. One thing that you may not have heard mentioned frequently is the credit card bubble.
You may have heard it in passing. The comments were similar to, “home owners are maxing their credit cards to pay for basic necessities like food and clothing.” Or maybe you’ve heard the astounding statistics about the number of credit cards the typical person has and the average credit card debt they carry on their cards.
While it hasn’t received as much attention (yet) as the housing bubble and the current credit crunch, you’ll hear more and more about the credit card bubble in the coming years. And it won’t be good news.
Now that lenders are tightening requirements for home owners who wish to get home equity lines of credit (HELOC) or home equity loans, more people will be turning to credit cards for cash.
It won’t be pretty for many.
The Credit Card Bubble Blog at http://www.creditcardbubble.com is a place to consider the impact of the credit card bubble on individuals and the economy. So jump in! Share your thoughts, ideas, tips and forecasts. It’s likely to be down hill from here for a while ..
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