Will a Credit Card Company Accept a Payoff of a Certain Percentage?

Usually, when a credit card company sees that a person is close to going bankrupt, they will allow a credit card holder to pay off a percentage of the amount they owe on their balance. This is only due to certain factors that the credit card companies take into consideration. There are certain qualifications and requirements that a card holder must meet before the credit card company will allow them to arrange a settlement.

The criteria that must be met before you can get a credit card to settle for a percentage of your debt will differ from company to company. Each credit card company will evaluate you and your credit situation differently, and may very well give you very different offers. Here are a few of the things that would qualify you for, or sway the creditor’s opinion on whether or not you meet the requirements to arrange a debt settlement.

1. Credit Crisis

The main thing that credit card companies look at when you request to make a percentage payoff is what kind of trouble you are in with your credit. If you owe a bunch of money on your credit card, and you have a credit history that reflects bad payment habits, they will be more likely to accept your request.

This will also determine what percentage they allow you to pay off. This plays a huge role because if you have had an easy time making your payments on time, you havea great payment history, and you have been easily paying your other creditors as well, the credit card company you are requesting a settlement from will assume automatically that you can just as easily continue to make the payments you are currently making.

2. Income and Assets

Credit card companies will take into consideration what kind of money you are making, and what items you have within your possession that are of a descent value. They do this, because, in the worst case, if they were to sue you for not paying your credit card bills, they would want to know how much they would be able to get. They may compare that to the amount you would pay them if they were to allow you to pay just a certain percentage of your debt. It is a morbid thought, yes, but it is still possible.

3. On the Verge of Bankruptcy

What credit card companies often see is that you are at a high risk of going bankrupt. Because credit cards will often choose not to sue, they would like to choose a debt settlement over bankruptcy. This is because, if you pay a percentage of your credit card debt, though it may not be the full amount, it is better than the amount they would get from you if you went bankrupt. If you chose bankruptcy over a debt settlement, they would not end up getting any money from you. So naturally, they would rather that you paid a partial amount of the debt you owe than none at all.

What is Credit Card APR?

Credit card APR is the actual percentage of interest you will be paying yearly on your credit card. APR stands for Annual Percentage Rate. This is an estimate, and can be changed any time by the credit card company if you make late payments on your credit cards.

The Annual Percentage Rate is what will determine how much interest you pay through a year, rather than just the first flat interest rate that they often advertise, that will only calculate the interest from month to month, which calculation may be quite different from the yearly payment. The APR calculates the actual cost of the loan. However, it is dependent upon conditions concerning the payment regularity of the credit card holder and other conditions unique to the company.

One thing the APR does is it does not allow credit card companies the right to any hidden fees. It prevents them from giving you a freakishly low interest rate and then socking it to you in fees. A few of the fees that they are restricted from charging on the Annual Percentage Rate are: Escrow fees, notary fees, appraisal fees, recording fees, and transfer taxes. That is just to name a few.

How Annual Percentage Rates are calculated is a process that differs from credit card company to credit card company. There are several factors that contribute to this complex calculation, and each factor depends on the individual credit card company. One company may give you a great interest rate, but the APR could be totally out of your payment ability, when another company may give you the same interest rate with a lower APR.

There are certain fees that may be included and taken into consideration when credit card companies calculate your Annual Percentage Rate. These fees can also differ from company to company based on that company’s policy and your credit eligibility. Here are a few of those fees and how they work:

Origination Fees

Origination fees are charged to you for the work that is done by the credit card company in your behalf. It basically pays their employers for the time they spend handling your account and working with you to straighten out mistakes. This type of work they do includes checking your credit and preparing the legal documents that have to do with your credit card account.

Loan Processing Fee

This is the fee they charge you when you open an account. This is charged to you for the work they do to gather information so that they can process the loan, and the actual processing itself. This is also something that will affect the Annual Percentage Rate.

Underwriting Fee

Another fee they have is called the underwriting fee. This takes care of any of their expenses when considering you for a loan. It also takes care of the expenses they have for lending you the money on credit.

Should You Do a Credit Card Consolidation?

Credit card consolidation is when you have a large amount of debt that is branched out in several different credit cards, loans, mortgages, and other form of credit, and you take all of those forms of debt or credit, and you “consolidate” them into one big form of credit. In many cases, consolidating your credit card debt is not a bad idea, but in others, this type of solution only makes things worse.

Say you have three credit cards, all on which you have a balance within a seventy-five percent range of your credit limit. Besides that, you have a mortgage on your home that you are only six years away from paying off after a twenty year mortgage plan. You are thinking about debt consolidation, and you want to know what would be the best way to go about it. It is important to know what kind of debt consolidation possibilities exist out there, and to know just which one is going to get you out of debt faster with the least amount of risk.

Option 1: Low Interest Rate Credit Cards

When you think about consolidating your debt, this may be one of the best ways in which you could do it. Shop around for a new credit card that has a great interest rate that you could easily pay a large balance on. These kind of credit cards could be a great solution to your old, high interest rate cards if you are disciplined enough to pay your bills on time and not rack up the debt on this new credit card too.

Be careful, though, because sometimes these credit card interest rates are too good to be true. You need to know if the low interest rate you got on your card will change over an extended period of time, because sometimes these rates are only introductory. Credit card companies use teaser rates to get people interested in their cards, then eventually the new and wonderful card is not so wonderful anymore, leaving you in more of a tight spot than you were to begin with.

Option 2: Home Equity Loan or Line of Credit

This option can be very risky. By putting your credit card debt into your home, you basically say, “If I do not pay my bills, you can have my house.” Be careful when you consolidate your debt into your home, and be completely certain that you will be able to pay your bills on time and with ease. If you do this, consolidating your debt into your home equity line of credit will be a great solution, because the interest rates are usually much less in this case than with credit cards.

Option 3: Debt Consolidation Loan

Getting a loan may be the solution for you. However, you must know first if you will really be paying less. Because of your financial trouble, you may not be qualified for a low interest rate, therefore you end up paying just as much or more than you did before.

How Secure Are Credit Cards?

You have had credit cards for a while, you have a good credit score, you are pretty good at controlling and managing your debt, and you feel that you have handled credit cards and the responsibility that comes along with them fairly well ever since you started out. But how safe are credit cards? Despite the ability you have to keep your credit cards under control, is there anything outside of your control that could hurt you and your credit score?

The form of security differs with each secured credit card. Many credit cards do not have really great security. So when you are shopping for a credit card, make sure you know what you will be protected against and what kind of risks you will be taking.

There are several things that have improved about credit card security, and technology is one thing to thank for that. The security that protects you from getting ripped off has gotten better recently, and is continuing to improve. It is getting more difficult for thieves to get money off of your credit card without you knowing it. Here are few examples of the security that is being used to protect you against such fraud.

One way to protect yourself from getting your credit card misused by someone you do not even know concerns purchases made online. When you buy something off the internet, many places you buy from will ask for a shipping address along with a billing address. This makes it so that if someone who has stolen your credit card account number buys something online, they would have to pick it up at your home in order to get it at all.

Another form of security is basically a fake account number. This is also for online purchases. Certain credit card companies will provide an account number that is different from your credit card number, sending that number instead of your real one to the person you buy from. This allows only you and the credit card company to see and use your real account number, and no one else.

Once the transaction has been done with the fake account number, it is verified through your credit card company, then charged to your real account. A credit card thief would attempt to use the fake credit card number to make other purchases. This person would be denied access to your account, because once the transaction is finished, that number becomes invalidated.

There are these and several more forms of security that will protect you from credit card fraud. Many people out there can get away with purchases made on your credit cards that you end up having to pay for, but the amount of fraud in recent years has gone down considerably, and the credit card world is becoming a little safer. It is important, when you are looking for a credit card, to know what type of security it has, if it has any at all, and the things you should do in case you are a victim of credit card fraud.

How is Your Credit Card Balance Calculated to Figure Out the Finance Charge?

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You get your credit card bill every month, review it, and see that the interest has changed, yet again. You wonder how on earth they ever decide how the interest rates are figured into your expenses. Is it all a scandal or do they really havea formula for this type of thing?

Believe it or not, they do have some rhyme and reason for the differing amount of interest they charge you each month. It is based on the type of balance that is being figured. Here are a few of the types of balances that are important factors when it comes to calculating the finance charges that are charged by the credit card company you are with.

Average Daily Balance

First, your credit card company takes all the money you spent in one day and averages it out. After that, they average all the days of the month together so that they have the average daily balance for that certain month. Once they have that, it is multiplied by one twelfth of your APR. That is one method of coming up with the finance charges on your credit card balance.

Previous Balance

Some credit card companies will charge you more interest based on how much of a balance you carry over from month to month, rather than paying off your credit card debt completely. The beginning balance and the ending balance are both shown on your bill, and you will see how much you have left that you did not pay last month, or the last time you were billed. This amount of money from the previous month and the amount that billed to you this month combined will be what determines your finance charges for this specific month.

Daily Balance

The company will take the amount that you spent each day within the specified month and, rather than multiplying it by one twelfth of the APR, which fraction represents the months in the year, they multiply it by 1/365th of the APR. This, of course, represents each day in a full year. This method is based on how much you actually spend in a day, and therefore is more precise because it has more detail than an average daily balance, which only takes into account the possible average amount spent in a month.

Two Cycle Balance

This type of calculation of your finance charges is basically the same thing as your average daily balance, but instead of involving one month, it takes into account the last two months or billing periods. This can be difficult to handle if you carry a balance over each time. The interest rates build up and climb with each billing period.

Who is Responsible for Your Credit Card Debt After Your Death?

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During a devastating time like this, the last thing you want to think about is money. Your spouse just died, but credit card companies do not necessarily consider how you feel at the time. All they have to worry about is whether or not your spouses credit card debt will continue to be paid, even after their death. So are you the one responsible for his debt, even at a difficult time like this?

Credit card debt is something that is sometimes necessary. We need it to buy some of the necessities in life. But what happens when you buy things on credit that you are paying for not only for years, but for a lifetime? What if yours or your spouse’s life does not last long enough for you to pay off the debt that extends beyond it? Who ends up paying the bills?

It depends on who you are, what kind of debt you have, and whose names were joined on the credit card account of the diseased. If yours or someone else’s name is on the contract along with the original card holder, you or that person are responsible for the debt they leave behind. That is why it is important to consider all the factors when you go to cosign on someone’s credit card agreement. When you agree to have a joint credit card account, you are agreeing to pay the debt that the card holder cannot pay, and the same goes for them.

If the credit card debt was in the diseased’s name alone, with no one else that agreed to take on the debt that was incurred by that specific card, then no one pays for it. The credit card company is required to just eat the debt that is owed, whether or not there is existing family to pay the debt or not.

Sometimes, if you are the only one living in your home or you are not married, or even if you are married, credit card companies will try to make up the money you owe by taking your assets. This type of payment is only applicable under certain circumstances, but it is one way that your credit card debt could be paid off after your debt.

If you are in debt and you are concerned about your family, knowing the facts about how much debt you will be leaving behind when you die and who will be paying for it will help put your mind at rest. Being able to know the ins and outs of the debt world and how it is paid when you can’t make the cut is important when it comes to you and your family. Knowing what will happen to your loved ones after you die will give you more comfort in life.

If I File Bankruptcy, Can I Keep My Credit Cards?

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Several years ago, my sister and her husband had to file for bankruptcy. I did not really know what all that meant back then, so I asked my mom. She told me that it was what happened when you can’t pay back the money you owe on credit cards or loans, and that they take away things that you have to pay for them. She also told me that it is very difficult to get a credit card after you file bankruptcy, but was it really true that you could not have any credit cards at all?

Now that I am older, I know a little bit more about the subject. When a person file for bankruptcy with existing credit cards that have an existing balance on them, you have to list it as a debt. After all, that’s what it is, because you owe money to the credit card companies. Because of this you cannot keep your credit cards.

However, if you have a credit card that does not have a current balance, you are allowed to keep it. Because you do not owe that company any money on the credit card, it does not have to be listed as a debt, therefore allowing you to retain your card for further use. But if the credit card company in which you are borrowing this money from find out that you have filed for bankruptcy, they may want to change the terms and conditions that the card comes with, like your credit limit on that card and the interest rate you are paying each month.

Still, the credit card company that gave you that card does have the right to cut off your credit line through that card if they ever find out that you filed for bankruptcy. It all depends on whether or not they are willing to keep you, but most credit card companies still want your business, even afterwards. Some credit card companies, however, will see you as irresponsible and take away the credit line you have through them, despite the fact that you do not have a current balance, just because of bankruptcy.

Getting new credit cards after bankruptcy is not really hard at all. One thing about bankrupt victims of debt is that they continue to get credit card offers, and perhaps even in more quantity than they were given to them before. Of course, the interest rates may very likely be higher than they normally are, and the offered limits might be lower, all because of your high risk of not paying off your debt.

To me, the whole point of getting out of debt by taking the path we call bankruptcy is to learn from our mistakes. We should not file bankruptcy with the goal in mind to just get more credit cards and get deep into debt again. The whole idea of it is to learn from our mistakes and trying not to repeat those mistakes.

How Soon After Chapter 7 Bankruptcy Can You Get a Credit Card?

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Chapter seven bankruptcy is the most common form of bankruptcy that is used in the world today. It is the type of bankruptcy that liquidates your business or assets to allow them to be used to pay the people that you owe money to that you cannot pay back yourself. This liquidation happens all too often in our atmosphere of misused credit today.

There are several small steps you can take to get back on your feet after bankruptcy. However, most of these methods take time, because it is impossible to be instantly qualified for credit and back on track right after you have claimed that you cannot pay off your debt. Having credit card companies, banks, and other lenders trust you with credit again is going to take some time.

Build Your Credit Score

The best thing you can do to qualify yourself for good credit, better interest rates, and descent credit limits again is to build your credit score. Unfortunately, the only way you can really do this is to use some form of credit, like credit cards. So at first it may be difficult to pay those high interest rates and have such low credit limits, but you must face the consequences of filing for chapter seven bankruptcy and pay the price until you are back on your feet. Once you have again established a good credit rating, you will have lower interest rates and higher limits because you have rebuilt your trust and lowered your risk of another bankruptcy.

Manage Your Credit Wisely

The fact that you had to file for chapter seven bankruptcy alone should be a lifelong lesson that will get you to be more careful about your spending habits and your payment abilities. Now that you are trying to move on, you should create a budget for yourself so that you know just how much you can spend on credit, how easily you will be able to make the monthly payments on that amount, and how many things you could go without so that you can gain a better credit score.

Getting Another Credit Card

Getting a credit card after you have filed for bankruptcy will not be difficult. You will still receive offers and qualify for several different kinds of cards. In fact, if it is used more wisely than it was prior to your bankruptcy, a credit card may be the very thing that gets you out of your slump.

Having a credit card and using it sparingly after bankruptcy will help to build your credit score and get you back to where you were. The way in which you could do this is by getting a card, only spending a small amount of money on it, and paying it off each month. Keeping your credit card account open and paying it off frequently will build your credit score more rapidly than it would if you just let your credit card debt stay at a plateau or continually increase.

The Best Credit Card Offers

Good credit cards are hard to come by. Even half descent credit cards are not easily found. You can get one that looks great when you apply, but down the road you learn that you could have had it better. Sometimes looking at the credit card advertisements alone will make it difficult for you to know just how good the card actually is. Here are some things to look for when you are searching for a credit card that will be of benefit to you when you use it to buy items on credit.

Interest Rates

Any credit card can offer you a great interest rate to start out with, but will that rate change after a certain period of time, and what will that rate change to once that time is up? Knowing what your interest rates are at the beginning, what they will be if they change, and what they could be if you make late payments is important. If you have a good idea about just how much you will be paying on interest, it is easier to shop for the best card and figure out what card will save you the most money because of their rates.

Credit Limits

What the credit card limit should be depends on what you want to buy, how punctually you will be able to make the monthly payment, and how long it will take you to pay it off. Many credit card companies will offer you sky high maximum credit limits, but the best thing is to determine yourself how high you can allow your limits can be. The credit limit will differ for each person according to their credit rating, but credit cards should give you a fair range of money in which you can spend.

The Companies

The credit card you get is only as good as the company it belongs to and the people that run it. They decide what the terms are when you apply for their credit card. You have to know what you’re getting into and who you are dealing with so that you can not only compare credit cards, but you can also compare the companies that make them.
Services

You need to be able to take advantages of certain services offered by credit card companies. You need to be able to do things such as cancel your credit card and cut it off from your account if it ever gets stolen. You need to be able to talk to someone who is willing to listen if you feel that there has been a mistake made by that company.

Rewards

Any kind of credit card you get should have some sort of rewards program. Not getting rewards on your credit card is like buying something at one place when you could have gotten the exact same thing somewhere else on sale. It’s a really good way to save money, and any credit card that saves you money should definitely be considered.

Lowering Your Credit Card Interest Rates: All You Have To Do Is Ask

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The greatest thing about credit card interest rates is that you can call the company and ask them to lower your interest rate. It’s as simple as that. But there are a few conditions. Allowing just anyone to call up and lower their interest rates would be just ridiculous, and it would probably cost the companies quite a bit of money, considering all the irresponsible spenders out there. But this attribute can act as a reward for those who are disciplined in their use of credit cards. Here are a few of the conditions that must be met before your credit card company will lower your interest rates.

1. Have a good credit rating

Maintaining a good credit score will increase your chances of getting an interest rate reduction. Your credit score is what will determine the company’s trust in you, and it will increase or decrease your chances of getting a lower interest rate, depending on how good or bad it is. Having good credit says to the credit card companies that you are dependable, therefore because you are a good customer with good credit, you deserve to have your interest rate lowered.

2. Don’t have a big balance

Having a large balance on your credit card account will lessen your chances of changing your interest rates for the better because if you are deep in debt, credit card companies may believe that your potential to get further into debt is greater. The deeper into debt you get, the more likely you are to fail to pay your bills on time. This will in turn not only disqualify you for a decrease, but it will actually increase your interest rates.

3. Send in more than the minimum

When you pay on your credit card, there is a minimum monthly payment you must make, no matter what. If you have the means to pay a little extra on your credit card bills, do it. This will show that you are eager to pay off your debt, so you are less likely to go bankrupt, and more likely to make your payments on time.

4. Pay on time

Getting an interest rate decrease will be much more difficult if you have not paid your bills on time. In fact, one of the consequences of not paying on time is having your rates INCREASED. You must pay your monthly credit card payment each month, even if it is just the minimum, because the rewards are substantial, but so are the punishments.

Getting your credit card interest rates raised is can be a great advantage to you, but just like any other rewards you might get, you must obey the rules before you reap the benefits. You have to use your credit wisely. You must pay your bills on time and keep your balance at a level in which you can pay it off soon and without strain. These, among other things, will help to raise your credit score, allowing credit card companies a reason to give you a decrease on your interest rates.

4 Things To Teach New Credit Card Holders

New credit card customers, especially teenagers who are planning to apply for student credit cards, need to know the basic rules that will keep them financially safe and secure. Some rules are easier than others to follow, but they are all very important.

Increase Credit Card Limits

Some people believe that increasing your credit card limits is too difficult and can only be accomplished by those with at least an upper middle class income. Surprisingly enough, however, raising the limits of your credit cards can be done by anyone, no matter what type of income you have.

High Credit Score

Another important rule includes securing a high credit score. This not only comes from paying off your credit cards, but also from properly upholding every other credit investment that you become involved with: car payments, mortgages, businesses, etc.

Obviously, maintaining good credit and thus increasing your credit score will make it much easier to gain the trust of credit card companies, who, in turn, will feel more secure in raising your credit limit. This may seem like an easy and even apparent rule to remember, but most people are rejected from increased credit limits because they fail to follow this “simple” rule.

Make Payments On Time

Another way to improve your chances is to maintain a good financial relationship with the credit card companies. Making your credit card payments on time is the first step, but by also consistently making big payments on your credit cards, companies will be more than happy to continue to increase your limits. Consistency in making large payments on time is the key to constantly gaining the approval of enlarging your credit card limits.

Using Rewards Cards

When making ordinary purchases, people mostly use cash and/or debit cards, which is a safe yet unrewarding way to increase personal benefits. If people would simply switch their usage of cash and debit cards for reward cards, their amount of skymiles and other financial rewards would automatically increase. When buying gas, going grocery shopping, getting new clothes, paying bills, and making other ordinary purchases, remember to use your rewards card.

This simple technique will help you earn skymiles that would otherwise not be gained, obviously, with cash or debit cards. Although credit cards can cause people a lot of pain when used unwisely, they can also be very rewarding when used properly and wisely.

Other ways to maximize the skymiles on your credit cards is to apply all your major purchases to the credit cards. Wisdom must be used when this technique is used, but when used properly, it can harvest huge skymile rewards. Such major investments on credit cards include buying new or used motorized machines such as cars, motorcycles, dirt bikes, boats, etc.

A brand new credit card customer can be very naïve and sometimes suffers the unfortunate consequences of credit card penalties. If teenagers simply follow the rules stated above, they will be able to avoid unfortunate late fee charges and actually gain real life rewards and advantages in the credit card business.

Credit Card Offers

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Millions of credit card deals are offered to people everyday through email, letter mail, television, radio, magazines, and even the newspaper. Credit cards have become such a dominant part of our financial life that we often fail to realize both the dangers and benefits of these offers.

Credit card companies know that many people in today’s society are very naïve and accepting of credit card advertisements that seem too good to be true, which they really are. The marketing teams of the credit card companies create credit card ads that are very appealing and attractive to the eyes of people who do not know any better. A few of the following simple pointers should help prevent people from becoming victims to ads that would normally cause many unfortunate problems.

Too Good To Be True

If a credit card ad seems too good to be true, it probably is. Whenever a credit card ad offers big prizes or incentives to people who sign up for the credit card, this should be a big red flag and the person should immediately stay away from the ad. Companies only offer large incentives because they are able to make up for it with excessive credit card fees and charges.

Initial Low Rates

Sometimes credit card companies try to trap people by offering very low initial rates. What people don’t understand is that the rates only last anywhere from a few days to a few weeks. After this initial time period is over, the credit card rates dramatically increase and customers find themselves financially trapped.

Fine Print

People must beware of the fine print of these credit card offers. Obviously, all the incentives, low rates, and attractive aspects of the offer are printed in a large format, whereas the extremely high rates, catches, and real information is printed in a very tiny format in order to hide them from careless customers. A person must remember to read the fine print and acquire the necessary offer details in order to prevent them from becoming trapped by credit cards

Junk Mail

Whenever people receive emails concerning credit card offers, it usually is not a good offer. People call these emails junk mail, and that is exactly what these emails are. Get rid of the junk, and you will ultimately get rid of many potential financial problems.

The smartest way a person can sign up for a credit card is to go directly to the credit card companies for information. Forget the ads and marketing schemes because they are specially designed to entrap and snag unknowing victims. People should obtain as much information about the credit cards as possible by asking the credit card company representatives detailed and compulsive questions.

People should also seek to obtain information about all the many different options that credit card companies offer. Rewards cards can be a great option for potential credit card users if the necessary information is obtained. These types of offers and incentive are real and can provide a very successful financial future for customers who know how to correctly use the credit card.

How Do Charge Cards Differ From Credit Cards?

You have probably often heard of a credit card being called a charge card. Or you may have heard of a charge card being called a credit card. Many people believe that they are the same thing. However, the two are quite different.

1. One difference between a credit card and a charge card is that credit cards allow you to have a balance. Charge cards do not, because they require that you pay in full the amount that you charge on an annual basis. This is how credit cards can be used for long periods of time without ever being paid off, though payments are made monthly that may reduce the balance, but never actually eliminate it. With a charge card, you must pay off the amount you owe periodically, no matter how great the amount is.

2. Another difference is that credit card holders must pay interest fees. This is because the card holders are not required to pay their debt in full periodically. They only have to pay the minimum monthly requirement. Interest is where credit card companies make their money. Though they do not require you to pay your bill completely by a certain deadline, they do charge you interest for the entire time that you do not have it paid off.

3. Credit cards give you the opportunity to pay off your balance whenever you want, but charge cards have more rewards. There is such a thing as a rewards credit card, but many charge cards outweigh these in benefits.
Depending on who the card holder is and what their spending habits are, preferences between charge cards and credit cards differ depending on the person. The different aspects of each can determine which one is the best for you.

Credit cards

Credit cards are beneficial to you if you need to buy on credit and can afford to pay on a balance along with the interest fees. It can be better to have a credit card because they have no annual fees and they allow you to pay off your debt when you like.

Charge cards

If you are the kind of person who would be able to pay off your debt when the card company requires it, charge cards are a good investment. They allow you to buy things that you cannot pay for now, but because of the periodic pay off requirement, it keeps you from getting into debt further than you can escape from.

Whether you are willing to pay on interest rates and be allowed a credit balance or pay annual fees and get great rewards is up to you. Depending on what kind of spending you need to do and how well you will be able to pay it back are big factors to consider when comparing the two types of cards. There are benefits and pitfalls to both sides, but if you manage either or both of them wisely, you will be able to reap the benefits they bring and control the expenses they incur.

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.

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.

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.

Guaranteed Secured Credit Cards

In the financial world the name of the game is return on investment. I read (okay, I only started reading) a book written by one of Warren Buffet’s two mentors. His name was Benjamin Graham and you could sum up his whole investing philosophy by saying this: “Find investments that offer safety of principle and a reasonable rate of return.”

With this in mind, the credit card companies are very careful about who they issue credit to. They don’t make billions in profits every by throwing their money around willy-nilly to anybody who just walks in and says sign me up. The reality is most people wouldn’t offer “safety of principle and a reasonable rate of return.”

Two of the biggest indicators the credit card companies use when evaluating you are 1) your credit score, 2) your credit history. This is how they judge whether you’re going to pay them back their money or not.

If you have a low credit score or not enough history, you’re not going to get approved for a standard, unsecured credit card. That means a secured credit card is the way for you to go.

To make the start of you credit-building journey as easy as possible, you should be looking for guaranteed secured credit cards. What do I mean by that? I mean you should only apply to credit card companies that offer guaranteed approval. After all, you’re putting down a big security deposit, which means their principle is complete safe and they’re going to make a reasonable rate of return off you. There’s no reason not to approve you.

Is it possible to Get Guaranteed Approval on Non-Secured Credit Cards?

The short answer is no. If you think about everything we just talked about as far as risk and reward for the credit card companies, you realize it would be corporate suicide for them to hand out a credit card to anybody and everybody that wanted one. A lot of those applicants aren’t credit worthy, and they wouldn’t repay their balances. We can’t have that can we?

If you want an unsecured credit card there’s only one way to get it. You’ll have to have some credit history and at least a decent credit score. They may start you small, but if you can get approved for even a small limit it will help you prove yourself to the credit bureaus and soon you’ll be to get as much credit as you want or need. Depending on your discipline and habits, this might be a blessing or a curse. Until your credit is back on track you’ll find that this type of financing – guaranteed loans for bad credit no fees – is really your only option.

Secured Credit Cards in the UK

Safe to say that people are people right? I mean, whether you’re talking about folks in the USA or the UK, we all have characteristics in common. One trait we all seem to share is impatience. You know, the desire for instant gratification. We’ve al heard the saying “Why put off till tomorrow what you can do today.” How about the 21st century edition of that saying: “Why save up for the things you can buy with credit cards today.”

I’m kidding, but only a little. People around the world are able to satisfy their appetite for NOW because of the proliferation of credit cards. It’s no different in the United Kingdom than anywhere else. You’re going to find people looking for secured credit cards in the UK as much, or more, as you do in the United States.

Credit card offers and terms in the UK are very similar to those in the US. They’ve legislated laws to ensure that credit issuers are completely truthful in explaining the terms of their credit agreements. Interest rate and annual fees will also be similar, and so will credit limits.

Unfortunately for some, credit card companies in the UK are just as careful about who they extend credit to. If you’ve committed financial sins in the past, or if you haven’t established much credit history, you probably won’t be able to get a normal credit card. For you, the best way to go will be no fee secured credit cards in the UK.

There are plenty of companies in the UK offering secured credit cards. Here’s a short list:

• Capital One
• FirstPlus
• Vanquis
• Aqua Card
• Cash Plus Mastercard

These cards won’t be dissimilar form those in the US. You’ll have to secure your credit line with a cash deposit, you’ll probably pay a fee to keep the account open, and you the interest rate will be high. Hang in there though. Over time your credit rating and history will improve to the point that you’ll be able to get a normal credit card and my research tells me that’s not such a bad thing. For starters a lot of the UK credit cards I’ve searched for seem to have an initial 56 day grace period (as opposed to 25-30 on cards in the US). Not a bad deal at all. I’m sure we’ll talk more about that in the future.

Credit Cards for Student Looking To Build Credit History

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There are plenty of credit card companies that are willing to send offers in the mail, bombard your e-mail account, and call to see if you want credit cards. These companies are drooling to offer credit cards for students looking to build credit history. I remember when I turned 18 my mom kept a huge stack of all of the credit offers that I started receiving. It was relentless and made me think of how many companies out there are looking to prey on college and high school students to get them to spend money carelessly. Many credit card providers take the same stance as gun dealers, “Card issuers don’t kill credit, customers do.” This can be a very true statement because many students are willing to dump their credit in the trash very quickly.

First of all I think that you need to realize quickly how important your credit is. There are so many things you can purchase out there where your credit is going to be vital. Good luck getting a car or house without good credit. You better have liquid assets to use or even if you get your desired items then you will probably have to pay high interest rates or have large payments required. You will appreciate good credit often, even in simple purchases where a credit check is necessary to get a security system, a boat, furniture, televisions, cell phones, etc. It is basically your financial integrity to society.

Here are some things to look at before getting a credit card. Start by opening a checking account and a savings account. This is a good sign for a creditor to tell of your financial history and if you pay off bills like rent or utilities. Next get a store credit card and pay off your items you buy there promptly. These are easy to obtain, they give you some kind of discount, and can help you to start intelligent credit habits. You might have to get a secured credit card initially, which will require a deposit that equals the credit limit you are going to establish. This is another nice way to get your foot in the door.

When I was in high school I got a line of credit through my mom’s account that she cosigned on. This helped me out a lot. I really never used the card and my mom taught me early on how to pay these cards off consistently. If you are concerned you will not be able to pay it off or just want to save time then do what I did and set up an automatic payment relationship. When it came time to get my own account it was easy. So approach your parents and explain you want to establish your credit. Most parents would consider that very mature of you and look for some way to help you do that.

Are College Students Misusing Credit Cards?

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In the last several years credit card companies have pursued college students a lot more aggressively. I hate to say it, but the marketing strategy of the big tobacco companies comes to mind – Hook ‘em while they’re young. I’m not saying big credit providers are as predatory (and at least using their product won’t kill you – physically anyway) as the tobacco companies. I’m saying they recognize that if they can snag college kids while their young they’re more likely to retain that customer for a long time – maybe life.

What’s the affect on the financial situation of our young men and women on the nations college campuses? It doesn’t look great.

Here are four statistics I can point out:

• In 2004, 83% of students with at least one credit card in their name had a credit card with a balance in excess of $2300.
• 32% of students had four or more credit cards in 2004.
• As of 2004, the average graduate student had six credit cards and one in seven owes more than $15,000.
• In 2005, 65% of teens failed a financial literacy test according to the Jump$tart Coalition.

Consider them individually, then consider them as a whole. What you see is a lot of debt carried by the majority of students in a country where most kids don’t really understand how to manage their finances. Scary? A little. College students do appear to be misusing credit cards.

Credit cards may not cause lung cancer, but it wouldn’t be too much of a stretch to call them a financial cancer – if they’re used unwisely and mismanaged. As I’ve said before, I love credit cards. I use them to my financial advantage every day. Our students need to be equipped with the knowledge so they don’t misuse their credit cards.

Here are the three most important methods for avoiding exorbitant credit card debt as a student:

1. Keep your limits low – for now. When I got my first credit card it had a limit of $1500 and I promptly maxed it out. Stupid right? Yeah, it was. I wish I’d had a limit of $500 so when I made the mistake it wouldn’t have taken me as long to pay for it. Once you’ve learned discipline with your cards, get higher limits. I have several large limit cards now and they’ve served me well. Just make sure you know how to handle them.
2. Make it a habit to pay the balance every month. You hear this one a lot, but you never hear that the biggest reason to do it is it becomes a habit. Once you’ve done this for a couple years it will come naturally to you to pay the card every month, avoiding late fees and high interest charges.
3. Don’t carry more than 2 cards. The more you get, the harder it is to keep track of them. I really wouldn’t recommend opening department store credit cards. They have ridiculous interest rates and they don’t help build your credit much. Use a couple of cards a lot and pay them off, and you’ll get the credit building benefits you’re looking for.