Of Credit Cards, Credit Scores and Creditworthiness

Over the past few years, I have realized that many people have misconceptions about credit cards, credit scores, and creditworthiness. Credit cards are considered as liabilities and looked at as if it’s a loan. However, in reality, a credit card is nothing but just another mode of making payments and much more rewarding as compared to other methods of making payments in terms of credit period, reward points, offers, discounts, and cashback, etc. among other things.

It only gets messier when people behave in an indisciplined manner while using credit cards for spending beyond their means just because people have huge credit limits on their cards—defaulting on payment of credit card bills by not paying the full amount due on time, using credit cards for withdrawing cash in times of emergency, etc. People behave casually while falling into these financial wrongdoings without bothering/realizing that all of this indiscipline comes at a substantial financial cost in terms of massive interest, fines & penalties, and severe damage to their creditworthiness.

If one can use the credit cards efficiently by exploiting their features and benefits without getting into overspending beyond their means and without indulging in any financial wrongdoings, credit cards can be one of the most significant assets. Therefore, a person who follows below discipline while using credit cards can have a very healthy personal finance and creditworthiness:

  • Utilizes his credit cards for making his regular payments, which he would otherwise do irrespective of whether he has a credit card or not;
  • Does not get into overspending just because he has a credit card and a significant limit on it;
  • Pays all his credit card bills in full on or before due dates without any exception;
  • Does not use any of his credit cards for emergency cash in times of crisis;
  • Never takes any loan or spends with costly EMIs on credit cards etc.

Often, a person not having any credit history (i.e., no record of loan or credit cards) is denied loans by banks / financial institutions despite having adequate income levels.

Credit Score / Creditworthiness:

Another big misconception is one or more of the following factors adversely affect the credit score/creditworthiness of a person:

  • Having one or more credit cards
  • Having a considerable credit limit on credit cards
  • Upgrading the credit limit every time there is an offer to do so

The truth is none of the above factors impact a person’s credit score unless there is a default or high credit utilization ratio on his credit card. Apart from theoretical knowledge about these aspects, I have my own practical experiences to back my above observations. I have been using seven different credit cards for the last many years. All of them issued by various banks / financial institutions having different credit limits, and every time I get limit enhancement, I opt for it.

Apart from these credit cards, I also have two home loans and one car loan in my name. Still, my credit score never went below 750 since I took my 1st credit card eight years ago and my latest score, checked yesterday, stands at 800.

How you can effectively use credit limits on your cards to improve your credit score

One of the crucial factors which affect your credit score is the credit utilization ratio. It means how much percentage of credit limit you utilize on an average, e.g., if you spend Rs 10,000 on your credit card, which has a limit of Rs. 1,00,000, you have used just 10% of your credit. Likewise, if you spend Rs. 50,000 on the same card, your credit utilization ratio is 50%. The lower the credit utilization ratio, the better for your credit score/creditworthiness. You can manage your credit utilization ration in two ways, either by keeping your spending on credit cards as low as possible or enhancing your credit limits on your credit cards as high as possible. I preferred to choose the latter.

Over the years, I built a portfolio of 6 credit cards, setting different billing cycles for each one of them so that I get to use all the cards every month for a few days. See the table below for easy understanding:

Card  Bill Date Usage Dates  Credit limit  Spends  Utilization Cumulative Limit Cumulative Spends Cumulative Utilization
 1  3rd  4th – 8th  1,50,000  6000  2.5%  150000  6000  2.5%
 2  8th  9th-13th  2,10,000  10500  5%  360000  16500  4.58%
 3  13th  14th – 16th  5,00,000  5000  1%  860000  21500  2.5%
 4  16th  17th-21st  3,50,000  14000  4%  1210000  35500  2.93%
 5  21st  22nd-28th  1,40,000  7000  5%  1350000  42500  3.15%
 6  28th  29th-3rd  1,50,000  2500  1.67%  1500000  45000  3%

You can see in the above table how one could build a portfolio of credit cards  to make the best use of the credit period by setting different billing cycles and also keep your utilization low by spreading it over several cards in a month.

I have been practicing this for several years now, and it has neither affected my creditworthiness nor the health of my personal finance negatively. Instead, effective utilization has strengthened my personal finance and boosted my credit profile. I hope you find this note insightful.

This is CA Anand Kankariya’s indigenous note on credit cards as part of financial awareness. Please share your feedback/suggestion below.

Limiting how much someone can steal from your credit card

I’m sure anyone reading this page has ordered something from the internet if not many things. Every time you make a purchase you’re exposing your credit card to strangers, you might think its just computers talking to computers but at my previous company, I was hired to create a new e-commerce site for them that interacted with an AS400 system they used for phone orders.

Their old method was

1. Someone places an order online
2. Each day it was someone’s job to PRINT out the orders WITH CREDIT CARDS NUMBERS
3. That person would then hand key them into the AS400 system, if they didn’t finish them they left a stack of orders on their desk overnight tech supports, janitors, salesman, etc… basically, anyone could stroll by, glance at the order on top and get your CC number and your billing address, everything they need to use your card. This was at a multi-million dollar e-commerce site too, not just some 5 order a day place, we’re talking hundreds of orders a day, just sitting around.

As a consumer you cannot prevent your credit card information from being stolen in this manner, all you did was key it into a browser now it’s on someone’s desk waiting to be keyed in. Since that experience what I did was contact my bank and get a credit card that I specifically use for the web with a $1000 limit, so the most I could get hosed for is a grand or less if there is a balance. I’m sure a lot of people out there enter their cards with 10, 20, 30 thousand dollars available. Why take the risk, get a small card just for the net, $250, $500, $1000 limits. This is also helpful for gas stations, restaurants, etc.

I know a few people first hand, one waiter and one full-service gas pumper who would copy CC numbers down from customers cards and then use them that night to order whatever they wanted, it worked and they got away with it.

Use a Prepaid MasterCard, Avoid overspending on your Credit Card!

In previous article, I’ve written about the pros and cons of the Credit cards and how we need to be careful on how we use them. In this post, I write about another plastic/virtual MasterCard that can be used just like a credit card, but you will be less likely to overspend on!

Prepaid MasterCard is designated to be used exclusively for remote transactions, such as online shopping, phone purchases and ordering. With online prepaid MasterCard you can enjoy the great benefits of credit cards and at the same time have a secured online shopping and manage your spending as well as enjoying anonymous and discreet online purchase.

Enjoy an upgraded online shopping experience; control your monthly budgets, purchase discreetly and comfortably, be generous to people you care about, be in control with your kids’ spending – All in one virtual prepay credit card anywhere and anytime. You can find more information at https://tbffinance.com/visa-cards/.

Tight Economy? Tighter Budget!

Control bad spending habits with easy access to reliable credit. Secured prepaid plastic MasterCard enables you to stay on top of your monthly budgets and pay debts to avoid much needed utilities from being cut off due to late bills. If you cannot qualify for credit or have trouble staying on top of your debit card usage- you can now budget your monthly allowances by reserving cash in the form of a prepaid MasterCard and avoid the embarrassment and hassle of getting bills paid on time.

Let your family enjoy the freedom of a prepaid

With a prepaid MasterCard, parents all over the globe are letting out a collective sigh of relief. By utilizing prepaid money cards parents can now effectively monitor their children’s spending habits with an allowance card. Whether it’s a prepaid plastic money card for a monthly gas allowance or giving children the ability to shop online with constraint- virtual prepaid money cards is the new carefree alternative in giving children freedom with a budget.

Are you gifted?

Prepaid visa cards are the perfect gift for anyone, anywhere, anytime. Since a prepaid VISA card isn’t a just ordinary gift card or a voucher, and it is not restricted to a specific store or brand, it can be used through any online service. This, literally, puts a world of possibilities in your hands.



The Pros and Cons of Having a Credit Card

I am a full time student and recently I applied for a student credit card with a limit between $300-$500. This is not a lot but it will be very releasing for me to use my card online and begin to build up my business and be released to do that. I am very disciplined so I know that I will not get into excessive amounts of debt. I will be using my credit card to move my financial situation forward.

Seeing as I am applying for a credit card I thought I would share with you guys what I believe to be the pros and cons of having a credit card. You should weigh up the pros and cons for your situation before you ever decide to get a credit card for yourself.


  • You can buy whatever you need to now and pay for it later
  • You can receive rewards for using it such as frequent flyer points
  • You can use it to make purchases online
  • Many hotels require a credit card to be able to check in
  • It allows you the freedom to do whatever you want
  • Many companies and stores accept credit card as the easiest form of payment
  • You can use the money you don’t have as a way of investing into your business (as long as your return is greater than the debt you pay).


  • You can get into some nasty debt if you are not careful
  • If people find your credit card or details then they can easily use it to make purchases
  • You can live beyond your means spending more than you can afford
  • You have to pay sometimes over 20% in interest on your payments
  • Sometimes if you are not aware of the fees you can be charged fees for reasons you weren’t aware of

So I weighed up the pros and cons of getting a credit card and decided that I needed wanted a credit card because it would be useful to move my business forward and it would release me now to buy some things that I need which I can pay off when I start working full time.

Note: Personal Finance tip 101 is to never get a credit card if you can avoid it. But if it is seriously going to make your finances better through investing in appreciating assets then a credit card can be a great tool. But be careful you don’t get into too much debt or get stung by fees. The convenience of credit cards makes it extremely difficult to avoid accruing tons of debt. The general rule of thumb is: If you always ran out of money before your next paycheck, you probably shouldn’t be getting a card. On other other hand, if you saved your money and had some left before you got paid again, you probably can handle the freedom that comes with having credit.

Credit Card Users & Financial planning

Credit cards can be an excellent tool to help you manage your finances. But sometimes we make poor choices, or sometimes the events in life take us beyond our expectations and we are left to foot the bill. Perhaps you have had a few months of extra, unexpected expenses that you are now paying for. What can you do?

Gather together all of your credit card bills and add up the amount that you owe. Factor in the extra expenses you haven’t heard on your credit cards since you receive those bills. Add to that about ten or twenty per cent, which is the “whoops, I forgot about that” factor. Then, with that figure, start shopping around for a loan.

Get the loan and pay off your credit card bills. If you think that you may still use your credit cards, you may want to hide them away so that you reduce the temptation to use them. Now, instead of having several credit card bills at a high interest rate due by the end of the month, you now have one bill that is due once a month at a lower rate. This is called consolidation. At first glance it may not seem obvious why you’d want to do this but there are two reasons:

The first reason is that you will save a lot of money on interest rates. In fact the interest rates might be as much as half of regular credit card interest rates. The second reason is that you will get one bill with a fixed amount due every month rather than several bills with several amounts due throughout the month. This will help you budget.

Credit cards can be an excellent tool to help you manage your finances and buy the things you want or need. But when things go on a ride and your bills get out of hand, which happens to even the best of us, choosing a personal loan as a way to consolidate those bills will help you reduce your interest rates and set up a fixed amount of payment. Reduced interest rates will ultimately increase the amount of money you keep and a fixed amount due every month will help you plan your budget.

12 Questions You Should Consider Before Signing Up for a Prepaid Card

Curious about a prepaid Visa or Mastercard?

Well they can be extremely helpful to you if you no longer want, need or have no choice anymore when it comes to a bank checking account.

Tired of banks that charge overdraft fees?  Have you had some problems in the past with opening up a checking account?  Do you have no credit history?  If any of these questions apply to you, then you are definitely in the market to find a prepaid card that will give you everything you need.  So what questions might you want to consider before signing up?

One.  How do I open a prepaid account?

The prepaid card company’s website should offer you a user friendly sign up page or the option to call them and sign up by phone.

Two.  How old do I need to be to get a prepaid card?

Some companies will allow you to open a card as young as 14 years of age.

Three.  What do I need to apply for a prepaid card?

Applying for the card should be hassle free.  Most prepaid card companies only need your name, phone number, email address, social security number, and mailing address.  The company usually sends a confirmation letter along with other information about the company and additional services they offer.

Four.  How much does it cost to sign up for a prepaid card?

It’s usually free to sign up; however once you add money to your prepaid account, they will charge you an activation fee and monthly service charges will begin. If you use direct deposit to add money to your prepaid card, some companies will waive your activation fee.

Five.  How much does it cost to activate a prepaid account?

Activation for a prepaid account is usually free if the company offers a service where you can setup direct deposit to your account. However, if you choose not to use direct deposit, a small activation fee will be applied.

Six.  Can I open an account if I am on ChexSystems?

Yes. Prepaid card companies do not do a ChexSystems verification when opening new accounts.

Seven.  Do I have to maintain a minimum balance on my prepaid account?

No minimal balance is usually required for prepaid accounts; however read the fine print.

Eight.  Does prepaid cards provide monthly account statements?

Yes.  Prepaid companies typically provide monthly online statements free of charge. You can also sign up to receive monthly paper statements sent to your home and some charge a small fee.  Also, some  prepaid card companies do offer options to get free text or email alerts.

Nine.  How long does it take to receive a card?

Most prepaid cards are typically delivered within 5-7 business days after you sign up. If you need a replacement card, you will have to request it and you may be charged a fee .

Ten.  How do you know that a prepaid card company is legitimate?

Be sure to check to see if they are an accredited member of the Better Business Bureau.   A full report on the company can be found on the Bureau’s website.

Eleven.  Can I use the prepaid card like a credit card too?

No, only money that is added to the prepaid account can be used; however check to see if the company offers a line of credit if you have direct deposit setup on your prepaid account.

Twelve.  Who can I call with questions about my prepaid card?

Every prepaid card company should provide business hours and contact information.

Other things you may want to consider when signing up for a prepaid card would be:

  • Do they have a referral program?
  • Are there any special promotions?
  • Can they help me build up my credit history?
  • When you are satisfied with the information you have obtained and all fees are outlined, sign up.

How Many Credit Cards Does One Person Need?

It’s all in how you use your card. Personally, I think one credit card should be enough for any person. Consider these points before applying for your credit card:

  1. How are you planning to use your card? Interest rates are much too high to use a credit card as a loan.
  2. Can you pay the balance off every month? If the answer is no then you should apply for a bank loan instead, they have cheaper interest rates than a credit card.
  3. Are you a compulsive buyer? If so maybe cash is a better way to control spending. Packing a limited amount of cash will slow down your spending.
  4. Do you need to keep certain expenditures separate from other expenditures? A credit card for specific expenses may work – if you pay the bill off every month!
  5. Are you observant and responsible? You need to keep track of your credit card – don’t lose it! – and review statements to catch errors and avoid theft.

Remember a credit card is relatively easy to get but nothing can drive you into debt faster than the unquestioned credit available from a credit card.


Finding the Right Credit Card for Seniors

Before even considering a credit card, check your income. If your surplus cash at the end of the month is always near zero, any credit is going to be hard for you to repay. This also means that you will be tempted to buy things near the end of the month on the credit card. This will result in less cash next month when the payment comes due, and that is how a vicious cycle of unending debt begins.

For you the best card is no card. However, if you feel that you need a credit card for things like car rentals and genuine emergencies, get one card and put it away until you really need it.

Start your search for a good card by realizing that your debit card is not a credit card. If you spend beyond your checking balance, overdraft fees will kick in. You will regret it in a hurry. Not very many accounts these days return checks until you are way overdrawn, but the fees still apply.

Sort through the applications that come in the mail. Look for a card with a fixed low rate. Low introductory rates will expire within the first twelve months and a higher rate will be applied to outstanding balances. This will make for higher payments and possible financial hardship on you.

Any card that costs you more than 15% is too high. It is better if you can get it into the 10% to 12% range. Cards that offer cash back are good, but not at the expense of higher interest rates. Read the fine print.

Citibank and Bank of America tend to be two cards that are not too quick to pull the trigger on rate increases. They also work with customers to keep rates manageable if you have minor problems arise. Chase tends to have a short fuse in this area and is not flexible about fixing it, but will sometimes offer a great rate as long as you never have a late payment or a spot on your credit report.

Look for cards that offer better deals to seniors. This can sometimes keep you out of trouble by having room for a mistake or two in the fine print.

How to Wisely Use Credit Cards

A sad but true statement: more and more Americans are becoming financially dependent on credit cards for their day to day living expenses. Given the economy, rising interest rates, and fees, you can imagine where many of these folks will end up at in ten or fifteen years, if not, let me help…they will literally be up to their eyeballs in debt. What started as an account with a three hundred dollar credit limit is now a closed account, being assessed astronomical late and overlimit fees every month, with a balance of at least $600 or more. Keep in mind, that even though these people may have only purchased $200 on their card, they are still required to pay this outrageous balance due to the contract they agreed to when they filled out the original application.

It basically works like this- You have a job making good money, and decide you need a credit card for expenses, say booking a plane ticket, rental car, hotel, etc. You start to get offers in the mail for more cards, and not looking at the terms and fine print, you fill out those applications to, thinking it is no big deal, just another small monthly payment. You use the card up to the available credit limit, and make the minimum monthly payments on time each month. If you use the card for cash advances, keep in mind that you are going to pay a considerably higher interest rate than you would for regular purchases. Not all of a sudden, you have thousands of dollars in credit card debt, and the company you work for announces they are down-sizing, and that your job is one of the ones that will be getting the axe. You run off of your pension for a while, but that runs out and you still have been unable to find new employment. Now, you are having a hard time just making all those minimum payments, and keeping food on the table, and the creditors start calling. The debt continues to pile up, your credit score gets lower and lower, and the calls continue to come in, while the balances go up due to fees and default apr being charged on all of the cards. You find a new job, but it will take you years to dig out of this hole you have now put yourself in… and you look back, and ask yourself, could I have prevented all of this? Well, here are a few tips for the average consumer who relies on unknowingly gets into the credit card quagmire that may help get you out before it gets really bad.

First and foremost, on every application you receive in the mail, always pay special attention to the terms and conditions listed on the card. By law, this has to be enclosed somewhere within the application, but it may not necessarily be easy to spot. You want to really look at the area referring to annual fees, late fees, overlimit fees, finance charges, credit limit, and default interest rates. Unless you absolutely have to have a credit card and cannot do without one, try to never take a card that has an annual fee, and never one with an annual fee of more than $50 a year. You shouldn’t have to pay to have the card, especially if you have a decent credit history.

Almost all credit cards will charge late fees the day after your payment is due, most ranging from $29 to $35. If you pay everything by mail with money orders, it is a good idea to try to send your payment in the day you get your statement each month, that way you allow plenty of time for mail processing, payment posting, and will have a cushion in case the payment never makes it to the company. Always make certain that your full credit card account number is written on the money order, and that it is sent to the correct mailing address with the correct postage. Keep your money order receipt, because in the event that the company does not receive your payment, you can have it traced. If it comes back that the money order has not been cashed, the money order amount will usually be refunded to you within four to six weeks. The bad thing to this is that you will have to send in another payment to cover this one, probably before you get the money back for the lost money order. If this happens to you, it would probably be better for you to send your payment electronically by either Money Gram or Western Union Quick Collect, to ensure you don’t receive additional fees or a negative credit bureau reporting.

When mailing a check, it is still a good idea to give it plenty of time to post. The only difference with a check and money order is that if gets lost in the mail, you will not be out any money. You simply need to reissue a check. It is also easier to verify if a payment has been cashed or not simply by looking at your bank statement or calling your local branch, therefore eliminating the need to run a trace, as with money orders.

Your safest solution is to pay your bill electronically, either by the methods mentioned above, online banking, or check by phone. For those people who don’t have a checking account, Money Gram and Western Union are fast, quick options. Money Gram payments usually take around 2 days to be received, and usually will cost you around $9 to send, but in terms of late fees, $9 is better than $35 going on your credit card balance and possibly making you go over your credit limit, costing you an additional $35 for an overlimit fee. If you wait until the last minute, and have no checking or savings account, Western Union is really your only solution if you want to avoid the late fee. They guarantee the money to arrive the same day, and usually charge around $13, again cheaper than that late fee the credit card company will charge.

For those people who do online banking, this is probably the safest way to make your payment. You simply enter all of your account information, credit card account number, company name, billing address, and phone number, and then whenever you want to make a payment you just enter the date and amount and it is automatically sent out. Depending on the company you are paying and the bank you use, your payment will either be send electronically, posting in about two or three business days, or sent thru the mail by the bank, posting in seven to ten business days. Either way, you have proof of payment with your bank, and are covered in the event a payment doesn’t post to your account.

If you wake up one morning, and realize your payment is due today, you probably should call in a check by phone, as it will process that same day and post to your account, beating the late fee for you. The downside, however, is that most companies charge fees for the convenience of check by phone, ranging from $4.00 all the way to $15.00. But again, $15 being added to your card balance is better than $35.00.

You always want to stay away from your credit limits whenever possible, at least by $100.00 if you can. By doing this, in the event your annual fee catches you by surprise, or you get hit with a late fee, you can be sure you won’t be assessed the additional $35 overlimt fee.

Never send just the minimum payments if you can avoid it, it is a good idea to try to send you minimum required payment, plus and finance charges or any other fees that are charged to your card on a monthly basis. This will keep your interest charges low, and help you avoid additional fees.

Take advantage of balance transfer offers you receive, especially if they come with no fees, and no interest for a certain period of time. Just make sure that the interest rate after the introductory period is lower than what you currently pay, to ensure you are making a wise decision. By playing the balance transfer game, you can save the most money in finance charges, especially if you are able to pay your entire balance while you have the low introductory interest rate.

In closing, if you have to play the credit card game, you need to make sure that you always know what you are getting into, and constantly stay up to date on your balances, payments due, etc. If you start having problems, contact a credit consolidation company or your lender before it gets out of hand, to discuss possible solutions, before you ruin your credit and possibly triple your credit card debt. Credit cards can be a good thing, but you have to be smart, and know how to use them wisely to protect both your credit and your financial future.

The credit card trap.

The credit card trap is what I have come to call any credit card company looking for a new client. I have found myself in large debt because of credit cards, and have watched many friends and family fall into the same trap that I had. Credit cards have become the highest source of where people become high in debt. That isn’t a great thought for anyone who wants a credit card.

Some credit cards have started getting you to pre pay part of the credit cards balance before you even get the credit card. That is great because if you don’t have the money you can’t get the card. That is one thing that I like about credit cards now. But there is so much that is attached to credit cards that people don’t look into when they apply for that credit.

One trap that I have found to be common recently is the “no annual fees”. That is one of the favorite things that I have laughed about. With the no annual fees you find that if you had annual fees the interest rate would be lower. But as things are not read into that far and not very many people have accounting backgrounds I would expect that things just slide by.

Another trap is the introduction rate that creditors are offering to possible clients. By the time that the card has been used, responsibly or not, the interest rate has tripled or more. Paying out more money towards creditors. That introduction rate will not be the only rate that you get.

If the card is used responsibly, then what happens is that the credit limit increases and increases. The more you are allowed to use the more likely you are to drive up the balance and have to pay out more interest. That is the trap that is most likely to have people cringing.

If you do have the opportunity to look into the credit cards before you get them make sure that you specify the highest limit that you will allow yourself. The more that you use the card the more likely you’ll pay more to. There are transaction fees that they don’t count towards your balance until after you have paid minimum payments.

The best way that I can suggest is to stay away from the “easy” money and use cash. If you can’t afford it don’t buy it. The more that you want something the more popular that it is the more likely you are to use the credit card to get what you want without thinking about how long and at what price you are going to be paying the creditor.