Signature Loans Vs. Credit Cards

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Signature loans are generally pretty easy to get. It is easiest when you have a good credit history, but not impossible to get when you have bad credit. These type of loans are founded upon a single signature. You do not have to put up any collateral up to get a signature loan. This is one way in which it differs from most loans, including the usage of credit cards.

Which is better?

There are pros and cons to both signature loans and credit cards. Which one is right for you is dependent upon your financial situation and the kind of spending you want to do on credit.

Credit cards

The good thing about credit cards is that you almost ultimately control how much you get to spend on credit. If you have a good credit history, you can qualify for a very large amount of credit. You can choose, within that amount, what your credit limit will be. With signature loans, often times the maximum amount you can borrow is ten thousand dollars. Of course, in some cases, having a smaller limit on how much you can borrow might not be such a bad idea. It all depends on your spending habits and your ability to pay the money back.

The payments you make on your credit card depend on how much you spend. The larger the balance on your credit card, the more you pay monthly. With signature loans, you pay a set amount every month, or even every two weeks. This depends on how much money you took out on loan, but it does not vary depending on how much of that money you spend or what you use it for.

Signature loans

When you apply for a signature loan, there is no requirement of collateral. The thing that they lenders look for is a good credit rating. This assessment alone will determine whether or not you qualify for a signature loan. Once you qualify, all they need is your signature, and you have the loan. Sometimes it’s easy to forget that it is STILL borrowed money, that you must pay back.

Interest rates on signature loans are based also upon the applicants credit rating. It is not impossible to get a signature loan if you have bad credit, but you will better chances and lower interest rates on your loan if you have good credit. With credit cards, a larger variety of people can qualify for credit cards with low interest rates, even if they don’t have great credit ratings. The problem with credit cards is that, usually, if the person has a bad credit rating, they probably will not be able to pay back the money they would owe on a new credit card. Still, credit cards are offered to many people regardless of their financial abilities.
Whether a signature loan or a credit card is best for you depends on how much you want to spend, how well you can control your spending habits, and how well you can make your set payments.

Rewards Cards Are My Best Friends

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There are many types of credit cards out there. So when you are searching for a good one, you should take into consideration what you can get back by using that credit card. Sure, you can get the lowest interest rates ever, make your payments on time, and end up saving money, but is there such a thing as making money with a credit card? Many people associate the word “credit” with the word “debt”, but when you use rewards credit cards, you can actually get money back from the things you bought on a credit card. Think of it as buying something on credit and getting a free gift to go with it. How much you spend depends on what the free gift is. Here are a few examples of the kinds of rewards you get by using these certain credit cards.

Points

Rewards cards will often give you however many points for a certain amount of money that you spend using your card. After a period of time, you can cash in your points to get discounts on certain items, such as gasoline, food, clothing, travel, and sometimes you can even trade them in to get cold hard cash. The longer you let your points rack up, the more rewards you get at one time. In a way, it’s like getting back some of the amount you spent on your card.

Travel Rewards

If you use your credit card to travel by air a lot, you can build up your air miles. Buying an airline ticket with your credit card earns you a lot of points, allowing you to get huge discounts on airline tickets. With some cards with specific rewards, you could get points added on if you buy a new car with your credit card. In any case, if you travel a lot, a travel rewards credit card will allow you to get discounts on your traveling expenses.

Zero Balance Credit Transfer

Some credit cards offer you the opportunity to transfer your balance from another card to theirs, giving you the benefit of having interest free payments if you pay them within a certain period of time. This is beneficial if you have high interest rates on one of your existing cards and wish to get them down at least to a low number. This allows you a certain period of time to pay off your debt with absolutely no interest to worry about.

If you are shopping around for a good credit card, why not get one that will give you a little back? Saving money in any case is a huge opportunity, and rewards programs allow you to get back some of what you spent. Depending on the type of person you are and your spending habits, it is up to you to decide what type of rewards credit card will be most beneficial to you. The biggest thing is to pay your credit card bills on time. If you make a lot of late payments, these rewards are not applicable to you because you don’t pay back what you spent.

Will Canceling Old Credit Cards Hurt My Credit Score?

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So you have had a couple of credit cards for several years, and you have finally paid them all back down to a reasonable amount. You are thinking maybe you should close them out so that you never have the chance to spend on them again. But what are the consequences? Will it really help or will it hurt your credit score? One of the biggest misconceptions about closing out credit card accounts is that you should close your oldest ones first. Not true! Closing the accounts that you have had for the longest amount of time will not improve your credit score. In fact, it will most likely make your credit score go down.

Why will my credit score suffer just because I close my old accounts?

Having credit cards for a long time, whether or not they are active, actually help your credit score because it shows that you have long and healthy credit history. If you close those credit card accounts, it will lower your debt-to-available-credit ratio, making it appear that you have a shorter credit history than you actually do. So shortening your credit history makes it look like you have less experience buying things on credit cards, which puts you at a higher risk of being undependable with your payments. If it appears that you may not make your payments in full or on time, your credit score will not be as high as it should be.

Won’t closing my old credit card accounts erase all the late payments I made?

Maybe you had late payments on a few of those old credit cards, and you think that if you close them out they will be forgotten. This is false. Negative records, such as late payments, can remain on your credit report for up to ten years, whether or not you have paid off and/or closed out those accounts. So whether you have had negative reports on those credit card accounts or not, it is best to keep those accounts open, and allow time to erase any mistakes you made on those credit card payments.

Should I keep my accounts open even if I’ve paid them off?

Yes! Even if you do not plan to use those accounts anymore, it is best to keep them open to prove that you have a long credit history. The longer you have your credit cards and the older the accounts get, the more benefit they are to you. If you feel that there is too much of a temptation to spend the credit that is on those accounts after they are paid off, perhaps you should consider closing out the newer and more recently opened accounts. If all you have are new credit cards, even if they do have low interest rates, your credit score will not be as high because it will look like you have not used credit cards for very long, and have less experience using them and paying the bills on them.

Top 3 Pitfalls Of Misunderstanding Promotional Interest Rates

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Interest rates are commonly misunderstood. It is difficult sometimes to take in all the detail that comes with them, and the many different kinds of interest rates. Still, understanding how interest rates work is an essential part of having credit cards. The penalties for misunderstanding interest rates, especially introductory or promotional rates, can be a mistake that ends up costing you way more than you thought it would. It is important to know everything about the interest rate on a credit card before you even get it. That way, there are no surprises.

Top 3 Pitfalls of Misunderstanding Promotional Interest Rates

1. Buying on credit cards and paying later… in more ways than one

This seems to happen a lot when you buy things on credit from specific stores. They promise you a tempting 0% interest rate for a certain period of time, during which you do not even have to make any payments if don’t want to. But the thing about interest rates is that whether you are paying interest or not, it still builds up, slowly increasing during that time and adding up to be more than you bargained for. For instance, you could buy a couch from a furniture store because it promised a low interest rate for the first six months, in which you don’t pay a dime, and then find out six months later that the interest rate has been climbing and is suddenly ten times more than you started out paying.

2. Balance transfer offers

Along with low interest offers that you often find in stores, balance-transfer offers present great promotional interest rates. But if you find out more about it, you may come to see that these rates may only be in effect when transferring a balance or when a new purchase is made with your card. Sometimes it only applies to one of those cases, leaving you stranded with a high rate when you use one or the other. For example, if you were to transfer your balance to one credit card that seemed to have a low interest rate, but proved only to apply that low rate to new purchases, you come out paying way more than you thought you would starting out.

3. Having low promotional rates sky rocketed into high regular interest rates

Find out exactly when your seemingly perfect interest rate expires. You could get a great interest rate on a credit card at first, but because you did not read the fine print, you come to find out that great rates only last for so long. Many credit card companies will start out with low interest rates, but can increase them after a certain period of time, making you pay ten times more than you started out paying.

Understanding how interest works and knowing just exactly what you’re getting into when you apply for a credit card that has low rates is very important. Paying on credit cards is much easier when you know how much you will be paying now and what you will pay once the promotional rates expire.

Top 3 Myths About Paying Off Your Credit Cards

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So you have finally paid off all your credit cards. It took you a long time, and for a while it didn’t look like you were going to get it done, but you are finally at the point where you are debt free. It’s a great feeling, isn’t it? So you sit back in your easy chair, patting yourself on the back…but what happens now? Will this add or take away any points from your credit score?

Would it be better to just close your account so that you won’t be tempted to get into debt again? Since you paid off your debt, will your late payments and other negative records be forgotten on your credit report? Maybe you should know a little bit more about what is fact when it comes to paying off your credit cards, and what is fiction.

Myth: Your Credit Score Will Improve by At Least 50 Points Because You’re out of Debt

Fact: Some would like you to believe that just because you paid off your debt, your credit score is going to improve enormously… fifty points is the most popular belief. But because of the complex formula that is used to calculate your credit score, it is difficult to say just how many points exactly will be added to your score. Even if it isn’t fifty points, your credit score will, in actuality, improve.

Myth: Negative Records Will Be Taken from Your Credit Report Once You Pay Them Off

Fact: Whether or not you pay your credit accounts off on time or even early, your late payments and other negative records could stay on your credit report for up to ten years. Paying off your accounts early will improve your credit score, but it will not take away the mistakes you’ve made that hurt it. Eventually those mistakes will be erased from your credit report. It is just better to not make a late payment in the first place, keeping your credit report clean.

Myth: Your Credit Score Will Get Better If You Close Your Old Credit Card Accounts

Fact: The longer you have an account, the better. Having an old account, whether it is active or not, is good for your credit score because it shows that you have a long credit history. This is beneficial especially if you’ve paid all your bills for that account on time. Closing an old account can lower your score because it can make your credit history look shorter. If any accounts should be closed, it is best if you pay off and close the newer accounts rather than the old ones.
Getting out of debt is a big relief, but knowing how to pay off your credit cards can be beneficial when it comes to keeping a high credit score. The key things to remember are that it’s best to pay them off, but keep the old ones open, and pay the requirements on time so you can avoid negative records on your report.

Top 3 Myths Surrounding Your Credit Limits

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Credit card limits allow us to set a range of the amount of money we can spend on credit. When used appropriately, this limit will help keep us from spending beyond our means to pay back the amount owed plus interest. So why have so many people gotten into credit card debt by spending on a high credit limit when they knew that they would not be able to pay it back?

Sure, a high credit card limit can be alluring because it makes it look like you can spend all you want and have whatever you want. But a smart credit card holder would know the difference between what looks good, and what will save them money in the long run.

Top 3 Myths Surrounding Your Credit Card Limits

There are a few misconceptions that people often experience when they set their credit limit. Credit card companies can lead them into believing myths that will eventually get them into financial trouble. Here are a few of those myths:

• The Higher Your Credit Limit Is, The Better

Credit Card companies would like you to believe that it is good to have a high credit card limit, and that is true… it’s good for them. High credit limits increase the possibility of excess spending, or spending beyond your means. That leads to larger amounts of money to be paid on your bills, which may cause you to make late payments. Of course late payments result in higher interest rates, making it even harder to pay your dues. Eventually it will take you longer to pay off your credit card debt because you spent more than you can pay back.

• Going Over Your Limit Is Okay If Your Credit Card Company Approves It

Whether or not you pre-approve a purchase that will go over your limit with the credit card company, it will still hurt your credit score dramatically. Your credit score doesn’t depend on whether or not you have authorization to go outside your credit card boundaries, it depends on whether or not you can stay within your limit, no matter what it is, and efficiently pay back what you owe. So even if the credit card company says it’s okay, you still appear unreliable because you went over your set limit, therefore significantly lowering your credit score.

• A High Credit Limit Will Not Threaten Your Ability To Pay Off Your Credit Cards

The best way to stay out of debt is to not allow your spending opportunities to go beyond your reimbursement abilities. If you can easily see that you could not pay back the money you would owe if you spent up to the amount on your credit limit, you simply should not set your limit that high. Keeping your debt as minimal as possible is everyone’s goal, and the debt you incur is more likely to increase if your credit limits are high enough to tempt you to spend beyond your means.

What Are The Pros And Cons Of High Credit Limits?

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Pros and Cons of High Credit Limits

When using a credit card, a limit is set upon how much you can spend before you max it out. This limit varies for each person and each credit card. So how high can your limits be? Or, more appropriately, how high should they be? Many would agree that a high credit limit would allow you freedom to buy as much as you want of whatever you want. Oh sure, you can pay for it later, it’s no big deal. Others would say that in reality, high credit limits bind you with debt that you cannot pay back. So who’s right? Is it really that bad to have high credit card limits?

Advantages of High Credit Card Limits

• Using your credit card more, as long as you pay the bills on time, adds points to your credit score.
• Purchasing expensive items is less of a hassle.
• You have money on hand for emergencies should the need arise.
• You do not have to worry about maxing out your credit cards.

Disadvantages of High Credit Card Limits

• If you cannot pay your monthly bills, the interest rates increase more quickly with a high credit card limit than if you were to have a low limit.
• Someone may steal your credit card, and with so much space within your limit will allow them to spend more money that you would have to pay back.
• With a higher limit, it would be more tempting to buy things with money you don’t have, even if you know that you could not pay it back.
• There may be less of a risk using some other form of credit, like taking out a loan.

Do It the Smart Way, Or Don’t Do It At All

When you put a limit on your credit card, be sure that even if you got to the limit that you could pay the money back without strain. Anything that you want that is more expensive than the amount you have within your limit is probably more safely purchased with a loan. It may even be worth it to save up money to buy it. Otherwise, if you cannot afford to increase your credit limit, you probably cannot afford to buy something that expensive.

Make It Easy To Give Back What You Borrow

It is good to keep in mind that no matter what you buy on credit, whether it is expensive or not, it is not yours until you have paid back the money that you borrowed to get it. The pros and cons of high credit limits do not change the fact that credit is money that you do not have, and so the best type of credit is affordable credit. Keeping your limits low will allow you to more easily pay your monthly bills and pay off your credit cards more often, and overall, you will be less likely to get trapped in debt that you cannot get rid of.

How Much of My Credit Limits Can I Use Without Damaging My Credit Score?

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You know that your credit score is based on how well you can pay back your credit card bills. So how do we know when we’ve spent too much to pay back? Thank heaven for credit limits. We set these limits so that we do not exceed the amount that we know we can easily afford to pay back. So how close can you get to your limit before it starts to damage your credit score? Here are a few tips to help you understand how much you really should spend within your limit in order to maintain a good reputation in the credit world.

DO NOT go over your credit card limit

No matter how much you want to pay for that riding lawn mower with your credit card, even if it costs more money than you have within your limit, don’t do it! Going over your limit can cause your credit score to go plunge dramatically. Even calling in to the credit card company and prearranging an expense that will exceed your limit will not excuse you from the penalties. If the credit card companies authorize you to go beyond your limit it may exempt you from getting your interest rates heightened, but you will still be subject to the consequences on your credit rating.

Spend only up to about 50% of your credit limit, then pay it off

Sometimes the best way to ensure that you do not go over your credit limit is to set a goal that you will pay off your credit card bills once you have spent half of your limit. That way you will not even get close to maxing out. This also helps you to keep your monthly dues at a reasonable amount, allowing you to pay them easily and on time. Being smart and conservative with your money will show that you are responsible enough to pay your debts, allowing for your credit score to steadily improve over time.

Don’t set your credit card limits too high

You should set your credit limits to an amount that you know you will be able to pay back. Having a limit that is too high puts you at risk of spending more than you can afford to make a monthly payment on. It may be somewhat beneficial to set your limit a little bit above your afford ability in order to keep from getting too close to exceeding it. But having a credit limit that is too high for you to ever be able to pay back lulls many into believing that just because they don’t go over the limit means that it’s okay to go up to that amount.
The main thing to remember when you set your credit limits is that your credit score can benefit only if you do not exceed your limit, and if you pay off your debt before you get too close to that limit. Credit cards can either help or hurt you, depending on how you manage them.

How Many Credit Cards is Too Many?

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Is there such a thing as too many credit cards?

There can be. Honestly, it goes both ways. Most people would agree, though, that they are at a higher risk of getting into debt that they cannot escape if they own way more credit cards than they can control. Having so much credit can be too tempting, and many people have given in to that temptation, spending more than they can pay back and ending up with a bad credit card and debt up to their earlobes.

This is why it is often difficult to keep, or build up to, a good credit score. Creditors look at how many credit cards you have and almost automatically see a potential threat that you will not be able to pay off your debt. This automatically decreases your score, and it also may make it difficult to receive other forms of credit, like a loan, or another credit card.

So how do you escape the automatic assumption that just because you have a lot of credit cards, you cannot pay your debt?

Well, there are some cases in which people do not have a bad credit score, even when they have several credit cards. What did these people have that those with even a few cards did not? A good credit history. That and regular payments helps your credit score either stay in the high numbers, or increase to where you want it to be.

So how do I know how many credit cards I can have?

How many credit cards you can handle is up to you. If you have a large number of credit cards in your wallet and are confused as to why you are having difficulty paying your bills on time, you may want to cut down a bit. Your spending habits and our monthly income are what determine how many credit cards you can have without letting your debt get out of control, and how well you control your debt is what will determine your credit score.

How do I build up a good credit history?

If you are just starting to get familiar with credit, you should probably start out with a low number of credit cards, if not one. Buying too many credit cards at once will make you appear as a potential over-spender, and even worse, someone who will not be able to pay their bills. To start out low and use your credit card wisely, like paying your bills on time and paying your cards off frequently, will eventually prove that you can handle credit cards carefully and result in a very good credit history, allowing for you to build up to an excellent credit score.

How can I show creditors that I’m dependable with my credit cards?

Always pay in full and on time. The thing that will hurt your credit score the most is having frequent occurrences where you make your payments late. Paying your bills on time every time will show that whether you have one or fifty credit cards, you can pay back the money that you borrowed on those cards.

Rewards Credit Cards

We use our credit cards for a lot of things. In fact, we use them for almost everything. Here’s an interesting tidbit: the only thing I’ve found I couldn’t buy with a credit card was a money order. Can you believe that? I want to know what powerful lobbyist in Washington made sure I had to go through the credit card companies’ exorbitant cash advance fees.

Anyway, my point isn’t the slimy lobbyists. My point is that if you’re going to use your credit cards for every purchase under the sun you might as well get paid.

What? Get paid to use your credit cards? In a sense, yes. Rewards credit cards are making it possible for credit card holders to get a little something back. Call it a thank you from the banks – a thank you for those billions of dollars in credit card interest we all pay every year.

Let’s make one thing clear – the credit card companies make a lot of money whether you ever carry a balance on your card. I’m fine with it. Companies need to make a profit to survive. Every time you swipe that card the merchant pays visa a fee. Multiply a few cents times millions of transactions per day and you’ve got large stacks of cash. I’m only telling you this so you understand the credit card companies aren’t going out of business even if you pay your balance every month. So do it.

In fact, the key to making rewards credit cards a good deal for you is to never carry a balance. Think about the different rewards you can get – cash back, points toward purchases, airline miles, etc. In every case, one point or one mile has a dollar value you never think about. For example: if a $50 laptop back costs 1,000 points to purchase, then each point is worth 5 cents. So you get 5 cents for every point, and you usually get 1 point for every dollar you spend.

That’s all great right? But wait, what if you spend $500 per month on your card, and you carry the balance from month to month. It’s not going to take very long before the finance charges will far outweigh the rewards points. I doubt they want you thinking about that. They want you thinking about the ‘free’ stuff you can get.

Listen, I want you to take advantage of rewards credit cards. I love mine. I take at least one trip each year courtesy of American Express or Capital One thanks to their airline miles programs. All I’m saying is you have to make sure those ‘free’ miles don’t cost you hundreds of dollars.

Big Money With Credit Cards Affiliate Programs

Most website owners out there are looking to monetize their site however they can. The explosive growth of blogs has introduced a whole list of new ways for people to make money online.

You don’t want to forget some of the old reliable ways to turn a visitor into a buck. In the reading I’ve been doing on blogs lately  I see a lot of material about google adsense and Pay Per Post, and I almost never see anything about affiliate programs.

This site is about how to apply for credit cards, so of course I’m looking for affiliate offers from some of the major credit card companies. Did you know there are credit card offers that pay $200 for a single sign-up? That’s a huge commission for one sale.

Let’s put this in perspective. I think the average click through rate for google adsense is about 2% for most sites. So if you get a thousand page impressions on your site and 2% of them click ads you’ll get 20 clicks. If you get paid $1 per click (and most ads won’t pay that much) you’d end the day with $20 in revenue.

That same 2% conversion with the $200 credit card affiliate offer would have paid you $4000!

Okay, I know the comparison isn’t sound and the math is ridiculous. I’m just trying to get your attention. But let’s say the conversion is only 1/10 as good with the affiliate offers as it is with adsense clicks. That’s still a $400 day. In fact, to outperform the adsense clicks you would only have to convert 1 visitor every 10 days with the credit card offer. Really makes you think twice doesn’t it?

It’s true that most offers don’t pay $200 per conversion. To bring into more realistic terms, think about a $20 payout. You’d only have to get one per day to match the performance of adsense.

I know you’re not dumb, you can do the math yourself. It’s worth thinking about thought isn’t it? Are you maximizing the profitability of your site?

Build Skymiles While You Fix Up the House

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Every year Americans spend millions and millions updating and repairing their homes. It’s our biggest asset (or liablility, depending on your perspective), and we take a lot of pride in its appearance. Home improvement isn’t cheap though. Let’s say you want to finish your basement so you have a new family room and a couple more bedrooms. You could easily spend $20,000 on the project.

The question is how are you going to pay for it? If I asked what is the financial tool most often used to pay for large-scale home remodeling, your quick answer would be probably be home equity loans. What would be the number two tool? Credit Cards.

We can could have en entirely separate conversation about whether you should go into a bunch of new debt for sake of an updated house. The short answer is probably no. The best thing for your financial health would be to save up for a while and pay cash for the improvements. But if you’re going to put the money into your home you should consider the best way to go about it.

Here’s my advice. Open the home equity loan. It’s a relatively low interest loan where the interest may even be tax deductible. But before you write those home equity checks, I’d advise adding one more step.

Get a credit card with  a large limit and a great rewards program. I have an American Express card with a Delta Skymiles rewards program. Every 25,000 skymiles gets you a round trip ticket anywhere in the continental United States. $1 spent gets you 1 skymile.

Now think about that $20,000 basement you’re putting in. Use the credit card to pay for all the materials and the pay it off with the home equity line before the statement comes due. That way you avoid the high interest rate on the credit card, but you got yourself most of the way to a free plane ticket while you were at it.

Not a bad deal, right? New basement, extra square footage, and a free trip to boot. I love my credit cards.

Student Credit Cards. Your Millions Start Here.

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As members of the under 30 crowd one of the biggest topics we talk about is credit and debt. Our parents are, for the most part, baby boomers. Unfortunately that mean they are, for the most part, broke and up to their eyeballs in debt. That’s not a true statement in every case, but it’s the reality for a scary percentage of the over-50 set. A couple of years ago I read that only 1 out of 50 baby boomers are financially ready for a comfortable retirement. Yikes. I guess we better start making some serious money or our parents are going to be in a world of hurt.

Lots of people want to point the finger of blame at the credit card industry as America’s financial downfall. I agree they’re giving us the gun, but we’re the ones pointing it at our own foot and pulling the trigger not once, but several times (For insight into that analogy, google ‘bankruptcy statistics’. You’ll see what I mean.).

Young people should be establishing credit for themselves. Credit is a tool, nothing more. If we’re dumb we’ll use it poorly; if we’re smart we’ll use it to get rich. It’s that simple. If our club-wielding ancestors had given up on fire after they burned themselves the first time, where would we be?

I’ve heard a rumor that Bill Gates started Microsoft with his credit cards. True? I have no idea, but it makes for a good story. I do have a friend whose website made $100,000 in one month thanks to the advertising he was able to do with his credit cards. Without them he would only have been able to accomplish a tiny fraction of that success.

What does this mean for the rest of us? It means we have a few choices: 1) we can buy into the advertising and use our credit cards to buy lots of thing we can’t afford and don’t need, putting ourselves into a hole from which we may never emerge, 2) we can hide our heads in the sand with statements like “I don’t believe in credit cards.” or 3) we can educate ourselves, develop self-restraint, and use credit as a vehicle to help us get to our financial goals a lot more quickly.

Door #1 leads to great friendships with bankruptcy lawyers. Door #2 leads to, well, it leads to being very bored, but probably sleeping well at night. Door #3 probably leads to a few mistakes, but eventually it leads to financial independence.

Here’s how to avoid Door #1 while you’re in college. Open a couple of student credit cards, but keep the limits low. If you’re going to screw up and spend all the way to your limit a couple times, better to do it with a $500 limit and not a $5000 limit right?

Also, get in the habit of paying the balance every single month. If your credit card offers a program where they’ll pay your bill out of your checking account, use it! Anytime human beings can automate good habits into our lives we definitely should. If they don’t offer that program, your bank probably offers something similar through your online bill payer. Use it!

If you’ll get in the habit of paying your bill monthly you set yourself up to use your credit cards intelligently for the rest of your life. I love credit cards. I believe that, used with care, they are the best financial tool in the world today.

Credit Unions That Offer Visa Credit Cards to Students

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First of all you should probably understand what a credit union is. Credit unions are what is known as a ‘co-op’ or cooperative. What does that mean? A cooperative is a business or organization owned by its members, as opposed to being owned by an individual or corporation. The single biggest difference between credit unions and banks is that banks are run for profit.

Other than being a non-profit entity, credit unions run pretty much the same way as banks. They offer checking and savings accounts, investments, mortgages and other types of debt tools -including credit cards.

Lots of people seem to prefer dealing with credit unions as opposed to banks, and a lot of students are looking to get credit cards from credit unions. The question is whether they can find any. The answer is, of course, yes.

Before I get into what credit cards a student could get through a credit union, let me explain a little about why people would rather belong to a credit union than a bank.

Credit Unions are dedicated to a philosophy of service to the members. Over 60 years ago the philosophy was outlined in the ‘Seven Cooperative Principles of Credit Unions’. Here they are:

1. Voluntary Membership. Any person willing to accept the responsibilities of membership can become a member.
2. Democratic Member Control. One member, one vote. Credit unions are owned and controlled by the membership.
3. Members’ Economic Participation. Members make the decisions about the financial choices of the institution.
4. Autonomy and Independence. Membership makes decisions about decisions that affect the co-op as a whole.
5. Education Training and Information. Credit Unions want their membership to be well informed about what it means to be a member.
6. Cooperation Among Cooperatives. Credit Unions seek to work in unison with other cooperatives, especially other credit unions.
7. Concern for Community. Credit Unions were formed for the benefit and strengthening of communities in their financial lives.

Basically, credit unions are by the people and for the people. Seeing these seven governing principles you realize why credit unions are able to charge lower fees and interest rates on all their financial tools – they’re established and maintained by the people paying those fees and interest rates.

Here are a few examples of Credit Unions Offering Student Credit Cards:

• The Student Credit Union Alternatives Visa Credit Card.
• Fort Belvoir Federal Credit Union Student Visa Credit Card.
• University of Wisconsin Student Visa Credit Card.
• State Employees Credit Union (Maryland) Student Visa Credit Card.
• Missouri Student Federal Credit Union Student Visa Credit Card.

There are a lot of government organizations and most universities will have a credit union. Any one of them should be able to help you get the student credit card that will get you on track to building credit history and raising your credit score.

American Express Student Credit Cards

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American Express has some of the best credit card commercials on tv right now. They’re really working the snob angle with all these celebrities talking about how their “card is American Express.” I’m partial to Shawn White’s commercial, being a snowboarder myself.

Some of you might want to join that elite club of American Express card holders. If you’re a college kid now I’d recommend getting started with an American Express student credit card. If you form the relationship with AMEX while you’re young, someday you might work your way into owning a Black Card. We’ll talk about what that is some other time.

Here are some of the benefits of American Express student credit cards:

1. Online account management: check your statements and pay your bills online.
2. Account alerts delivered to your inbox: they’ll send you reminders so you’re never late or miss out on special card holder opportunities.
3. Automatic Bill Pay Program: a great way to build credit history by using your card consistently. Protects you against ever being late with your bills.
4. Membership Rewards Program: a points system that allows you to buy promotional items. You can also apply points to airline travel. They’ll give you double points through over 100 different online retailers.
5. Benefits through American Express Travel: when you’re going to travel you can earn double points by booking through American Express Travel.
6. Insurance against rental car damage and loss: One more reason to beat up on your rental car. They insure it for you!
7. Purchase Protection Plan: protects items you purchae against damage or theft for a period of time (can be up to three months). American Express will reimburse up to $1000 on an item, up to $50,000 total in a year. This is a pretty amazing benefit.
8. Fraud Protection: They’ll cover any fraudulent charges on your student credit card, whether you made the purchase online or off.
9. Buyer’s Assurance Plan: for items you buy with warranties, American Express will cover extend the warranty up to one year on items costing less than $10,000.
10. American Express Selects: there’s a long list of benefits for cardholders traveling inside and outside the United States. Check out the website for more details.

There’s a price to pay if you’re going to be a member. American Express cards almost always have annual fees, and their interest rates could be called less than competitive. You don’t want to carry a balance on an AMEX.

Other than that, this is a credit card company known for taking care of its card holders. Membership brings a certain status and the VIP treatment. Get in now; you’ll be in good company.

Secured and Prepaid Credit Cards

Over the last month or so I’ve done a whole series of posts about secured credit cards. We’ve looked at their requirements for approval, their fees, their interest rates, and the benefits they have for people trying to rebuild their credit. You can sum up our conversations about secured credit cards this way: they will help you rebuild your credit score or establish credit history, but it’s going to cost you in the form of security deposits, relatively high interest rates, and fees.

To wrap up the series I wanted to use at least one post to discuss prepaid credit cards. Secured and prepaid credit cards have some things in common, but they also have some big differences.

What is a Prepaid Credit Card?

A prepaid credit card is basically a charge card. What does that mean? It means you open an account with a card provider and you deposit a certain amount of money into that account. The card provider gives a card with a credit card logo on it that acts just like a credit card. You can use it to buy things online, in stores – pretty much wherever credit cards are accepted.

But here’s the big difference between a normal or secured credit card and a prepaid credit card. When you use a prepaid credit card you’re actually using your own money. That’s different than a secured credit card because secured credit cards are actual credit cards with interest rates; they’re just secured by a cash deposit you made when you opened the account.

There are a few misconceptions about prepaid credit cards. One is that they help establish or rebuild credit. It’s not true. Prepaid credit cards don’t help your status with the credit bureaus because the card providers don’t have anything meaningful to tell them. Think about it – what would they say? “He successfully spend his own money until it ran out.”

I guess if you look hard enough you may find a prepaid card that reports to the credit bureaus, but it will be tough to find one.

The other downside I see in prepaid credit cards is they have fees. They’ll ususally charge between $5 and $10 to open the account and then there may be ongoing fees just to keep the account open.

What’s the Upside?

I’m actually not sure there is much of an upside. The only time I can think of that you’d be wise to open a prepaid credit card would be if you can’t get a checking account with a debit card. In that case it may be worth it to open one.

Wait – there may be one more circumstance where you might want to have a prepaid credit card. If you’re a person that has some fear about online shopping with one of your own credit cards or your debit card, a prepaid card gives you a credit card number to use on ecommerce and other shopping sites without having to worry about someone stealing your card and charging big purchases to it.

Secured Credit Cards are the Way to Go

I’d recommend that instead of opening a prepaid credit card, get a secured one instead. Your cash out of pocket will be basically equal, but the secured credit card will help you on your way to improving your credit score.

Get Free Secured Credit Cards

I have to be honest here. I’m not sure what you’re even talking about.

Are you looking for free secured credit cards as in those that don’t have an annual fee? Or are you looking for those that don’t have any monthly fees? Or are you looking for one that doesn’t charge interest?

Since I’m a little confused I guess I’m just going to have to answer all three questions and hope you’ll find what you’re looking for.

Credit Card With No Annual Fee

Let’s start with a list of secured credit cards I found that don’t charge you any kind of fee just for opening the account:

• GTE Federal Credit Union
• Amalgamated Bank of Chicago
• Suncoast Schools Federal Credit Union
• Orange County Teachers Federal Credit Union
• Municipal Federal Credit Union
• Digital Federal Credit Union
• The Golden 1 Credit Union

*Note: I found this list on bankrate.com. The list they provide shows that for the most part, credit unions usually don’t charge annual fees, and banks usually do. Just something to keep in mind.

Credit Cards With No Monthly Fee

Well, I can’t seem to find any secured credit cards that do have monthly fees. Apparently the majority of them don’t charge a monthly fee for keeping the account open, but I know some of them do. The fees are usually between $4.95 and $7.95 per month. You might say to yourself “That’s not so much.” Well, guess what. That’s exactly what they want you to think. Make sure when you’re considering different offers to watch for that montly fee. There couldn’t be anything worse than a card that charges and annual fee and a monthly fee to keep the account open.

0% Secured Credit Cards

C’mon folks, let’s be reasonable. Why in the world would a credit card provider ever do that? You might as well hope for the government to stop making us pay taxes. It’s not going to happen. Would it be great? Of course it would. It would also be great if John Elway came out of retirement to lead my beloved Denver Broncos to another Super Bowl championship. We might as well push those thoughts from our heads.

Instead of hoping for the credit card companies to start giving away free money, find the best card you can with low fees and a reasonable interest rate and then use it wisely.

Go Broncos.

Why Should You Establish Secured Credit Cards?

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I think the bigger question is Why should you have credit cards at all? Think about it. What is the point of using a financial tool when all that tool does for most of the people that use it is get them into high interest debt? Debt from which most of them never recover? Let’s cover that before we cover why you should establish secured credit cards.

Credit cards are a curse for a lot of people out there. They opened a few when they were in college (because filling out the application got them a free tee shirt) and they ran up some balances. Maybe they got those balances paid off while they were in college, and maybe they didn’t. Then they graduated and nailed down their first job.

With that first job came some kind of salary, and with the salary came the belief that they could ‘afford’ nicer things than what they had during four years of poverty at school. So they get higher limits on their credit cards and they buy nice furniture, new clothes, etc. Now they probably have balances that will take years to pay off, if they ever pay them off at all.

In my line of work I talk to people about their credit cards a lot. One thing I hear is “I made some mistakes with credit cards in college so now I refuse to use them.” What? These people are basically saying “I’m an undisciplined slug that can’t handle a credit card so I have to hide them in a safe deposit box.” C’mon, people. Do you use the credit card or does the credit card use you?

Credit Cards Should Be Your Best Friends.

Let me just give you two examples of why you should love your credit cards:

1. Rewards and Sky Miles. It is my mission in life to find ways to use my skymiles card. Nothing makes me happier than flying to fun destinations with my wife and letting the credit card company pick up the tab. I recommend opening a card that doesn’t cap the number of miles you can earn. Also make sure the miles never expire. It may take time to get enough miles to earn that free first class ticket to Europe.

If you’re not into traveling much, get a credit card that rewards you with cold hard cash. 1% back isn’t much, but it’s money for dinner and a movie.

2. Buying advertising for a business. I’ve had a busines online before that allowed me to spend as much as $1000 per day on advertising. Trust me, at the time I didn’t have $30,000 per month in my bank account to buy that advertising. Luckily I had opened a credit card with skymiles and I put all of my ad costs on it. I was able to make a healthy profit thanks to all that advertising, and I got a few free plane tickets out of the deal as well.

So Why Establish Secured Credit Cards?

One simple reason: secured credit cards open the door for you to be able to do the things I just talked about. If you’re in a position where you’re looking for secured credit cards, it probably means you can’t qualify (yet) for a great credit card with rewards. Use a secured credit card to open that door for yourself.

No Fee Secured Credit Cards

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Fees. Business owners dream of being able to charge them, customers will do almost anything to get out of paying them.

Why do businesses charge fees? Of course the simple answer is they want more profits. There’s more to it than that though. The reason for fees has more to do with a business minimizing its risk than anything else. A lot of you are looking for no fee secured credit cards. It annoys you to think you’d have to pay anything up front for the privilege of using a credit card. You might say “What does charging stupid fees have to do with minimizing the risk a business faces?” Well, I’ll tell you. And you’ll be surprised you at how reasonable the concept really is (from the credit card companies’ point of view, anyway).

As an example, let’s look at credit card providers. They’re in the business of giving you unsecured (read: risky) lines of credit. Then they have to wait for you to buy things with those credit cards (and who knows if you ever will), and they have to hope you don’t pay off whatever balance you ran up during the month (if you don’t then you got to use their money for free). In other words, a lot of things have to go right for a credit card company to make money off you.

But while they’re waiting for you to spend money you don’t have, and carry that balance month to month, are they incurring any expenses? You bet. Think about it – marketing costs for those TV commercials and all the junk mail they send you. Then when you respond to an offer the sent you in the mail they have to pay people to process those applications, people to answer your questions when you call in to ask when you’re new card will arrive, people to manage the people on the phone, leases on buildings, the list goes on.

That’s a risky venture for the card provider – they might spend a few thousand dollars on you before you ever give them a penny of revenue. And what if you never spend the money or carry the balance? They’re out of luck, and out a few thousand dollars.

So here’s what they do. They look at patterns. They know that for every 1000 pieces of junk mail they send out, a certain percentage of people will respond and apply. Of the applicants, a certain percentage will be approved. Here’s where the fees come into play. At this point if the credit card company could charge $39 or $79 to every person that got approved, they’ve recovered a big part of the upfront cost of acquiring you as a card holder.

It may not stop there. With a lot of secured credit cards they charge a monthly fee just to keep the account open. By now, you know why. It’s just a way to make sure they make at least some money off you in case you’re not using the card they gave you and paying outrageous interest. It’s the same revenue model as so many subscription-based websites we all pay $9.99 or $14.99 per month for.

All that being said, in many cases the competitive nature of the credit card industry has forced them to stop charging such ridiculous fees. Most of the credit cards you apply for won’t require you to pay any fees at all. So, when you get ready to open any kind of credit card, make sure you’re getting something excellent in return for any fees you pay.

Getting Out of Credit Card Debt

The unfortunate reality of today’s financial world is Americans are sinking deeper and deeper into credit card debt. There are so many reasons for it, but the main one has to be our inability to delay gratification. We want it now, and we’re not willing to wait for it, especially because we either have credit cards to buy it with, or we have a store offering us 0% promotional interest rates for up to 12 months. Everything around us tells us to go ahead and get it and pay for it later.

Have you heard the analogy of boiling the frog? You probaby have – if you throw a frog into a pot of boiling water, he jumps right out to avoid getting burned. But if you put a frog into a pot of cool water and gradually turn up the heat until it boils, he’ll sit right there until he’s dead.

I don’t think we humans (and especially Americans) are very different in our spending habits. For example, let’s say the pot of water is a furniture store. You walk in and see these amazing leather couches that would be perfect in your living room. But wait – the couches are $2000 each! “$4000 is way too much money for me right now,” you say to yourself as you turn to walk dejectedly toward the store exit.

But wait – here comes the trusty sales rep who noticed you eyeing those couches. “Anything I can help you with?” he says enthusiastically. “No,” you reply sadly, “I really like those couches, but I can’t afford to spend $4000 right now to buy them.”

“No problem!” replies the salesman with a big smile. “We’ve got a promotion going where you can get those couches with no interest and no payments for a full year!”

Well, now he’s got you doesn’t he? You start telling yourself that in a year your situation will be a lot different. You’ll have pleny of money to pay those off. In fact, you’ll pay them off before the year is up, won’t you? Yeah, of course you will. Which means you get to take those couches home today.

Here’s the problem: you are human (just like the rest of us) and you probably won’t pay off those couches in a year. In fact, you’ll probably take years to pay them off. If the salesman had said, “How would you like to pay $8000 for these $4000 couches?” you would have laughed and walked away. But that’s exactly what a lot of us do!

I’m not criticizing people for doing this (because the first finger would be pointed at me). I believe we make these mistakes emotionally and in ignorance of the real consequences.

Let me suggest one great way to take advantage of these promotional offers while completely protecting yourself from horrible interest payments that last a lifetime.

Let’s say you buy those $4000 couches with no payments and no interest for one year. It’s very simple to make sure they’re paid off before the year is up. The day (and I mean THE VERY DAY) you buy them, log into your online banking services and set up your bill payer to automatically pay off those couches before the 12 months ever arrives.

Here’s how you do it: take $4000 and divide it exactly by 11. This comes out to about $363.64. That is the amount you should tell your bill payer to send to you the furniture store every month. Why 11 instead of 12? For safety. Why let it go down to the wire?

Now that you’ve set up the automatic payment plan, you can enjoy those couches worry free. Best of all, you got to experience the instant gratification of the purchase without ruining yourself financially.

Here are two big disclaimers:

1. Before you make these kinds of purchases, you better make darn sure that monthly payment fits your budget. This is a strategy for people who could have paid cash for the couches (or whatever else) but decided to keep the money in their interest bearing accounts while the couches were in the interest free period.

2. The first automatic payment plan you set up must be THE PAYMENT YOU MAKE TO YOURSELF every week or month. Get a good online savings account (like ING Direct) and have them automatically withdraw from your checking every week. Save an uncomfortable amount! Heaven knows we all spend an uncomfortable amount. Pay yourself first, and then you can spoil yourself with what’s left over.

Hope this is helpful.