Category: Credit Cards

Whether you have no credit, slow credit, bad credit or are coming off of a recent bankruptcy discharge, getting approved for new credit can be a nightmare. Sure there are companies out there willing to lend to you, but the terms are so terrible that you find yourself back on a path towards financial meltdown. Using secured credit cards to rebuild credit allows you to limit your costs while developing your revolving credit history, all without the lender risking any money.

Here’s How Secured Cards Work

You pay a deposit to the lender to be held in trust. That deposit is used as collateral to guarantee repayment of the credit that is extended to you. If you default, they simply claim your deposit to cover the loss. For this reason, secured cards can be an excellent way to build or rebuild credit when other options are too expensive or not offered.

Most secured cards require a deposit of either $300 or $500 and then provide you with a credit card that carries a matching credit limit. You use the card the same as you would any unsecured credit card, and you make payments to repay your charges on a monthly basis. In order to benefit from your use of a secured card, you must make your monthly payments on-time and avoid charging too much to the card. Similarly to unsecured cards, if you use too much of your available credit, your credit score will suffer. Missed or late payments will also continue to damage your credit, so you must make sure all payments are made prior to the due date.

Fees for secured credit cards vary wildly. Some cards carry fairly nominal fees, while others carry so many fees that they carve up half of your available credit before you make your first charge. It is important to avoid so-called fee harvester cards, since they cost too much to justify their benefit. Fee harvester cards tend to carry lower credit limits, annual fees, monthly fees and high interest rates. A secured card with a limit of only $200 is not going to be much use to you and it likely carries predatory fees.

Choosing a Secured Card

Make sure that you compare all of the offers available before you apply. Some cards have low interest rates but high annual fees. Some charge an application fee. Those that carry a monthly fee should generally be avoided.

Also, consider how well known the card issuer is. Some shady financial institutions specialize in marketing to lower income and less educated consumers who may unwittingly apply for cards with bad terms. Look for nationally recognized products that are widely accepted.

Finally, ask what opportunities there are for conversion of your secured card into an unsecured credit card. Some card issuers will do this automatically after proper usage for one to two years. This can be a great benefit, since you could eventually obtain an unsecured credit card without a separate application and receive your original deposit back! Choose wisely and protect your credit once you receive your card.

Every day, you are probably bombarded with unsolicited credit card offers.  Whether they say that you are preapproved or could be instantly approved, they seem like the easy answer to money problems.  The fact is that unsecured credit cards can cause you more financial trouble than what you began with.

The term “unsecured credit card” may seem unfamiliar, but it is actually the most common type of credit card.  Just like an unsecured loan, it is not based on any collateral.  Also like an unsecured loan, this means the interest rates can be high.  Credit cards are notorious for their high interest rates, reaching into the 20s.  In fact, this is the major problem with credit cards.  If you fail to pay your bill by the end of the month, you are charged high amounts of interest for what you have purchased using the card.  This is not even including the late fees credit card companies can charge you.

The main reason credit cards are generally viewed as a bad idea is because they can trick you into spending more money than you have.  Once they do and you have spent that money, then the fees and interest rates kick in on the things you could not really afford to begin with.

While these may seem like obvious drawbacks to having a credit card, you may not know that there is an alternative.  Just like you can get an unsecured loan or a secured loan you can apply for an unsecured credit card or a secured credit card.

There can be some advantages to this path over the unsecured one.  Depending on the program you choose, the interest rate may be lower.  Also, it could fix the problem of thinking you have more money than you think you do, as there are some programs that establish your credit line as being equal to your initial deposit.  On the other hand, some allow for a credit line slightly higher than your deposit which reintroduces the problem.  This method does not eliminate the fees.  In fact, some people have run into the problem that their deposit was eaten up by fees before they could even use the card.  Just like with unsecured cards, you should shop around for the best rates and you should always read the fine print.

In general, credit cards can be a bad idea.  If you are still determined to get one, you should look into all of your options and research your choices before making a decision.

What do you do if you have poor credit or you don’t have a bank account? These items are needed for many important transactions, such as making hotel reservations or online purchases. If you have poor credit, you will be turned down quite often for loans, and any loan you receive will have a high interest rate. In a world where money transactions are primarily done electronically, it is crucial to have some sort of plastic. If you’re trying plastic for the first time, you may try getting a prepaid credit card.

A prepaid credit card is much safer than a regular unsecured credit card. You might have heard the term “secured credit card,” and, while the two names are often used interchangeably, they are not the same. They both entail actual money placed in a prepaid credit card account. To get one, you deposit an amount of money, and you can then use the card to make similar transactions as a regular credit card. On a prepaid credit card, there are no interest charges or late fees, and you will also get a monthly statement, but not a bill; therefore, a prepaid credit card is more closely related to a debit card linked to a checking account. With a secured credit card, however, you will have monthly payments, as well as interest charged on any outstanding balance.

Most prepaid credit cards will come with a small set-up fee, and some may also have transaction fees when you make purchases. There may also be fees of a couple dollars each if you use your prepaid credit card at an ATM or when you deposit more money onto the account. One specific card, the “Mango MasterCard” prepaid card, will waive its monthly fee if you deposit at least $500 per month. Some other cards, like the Green Dot MasterCard, will waive fees if you make a specific number of purchases per month. You may be able to find some cards without these fees, so shop around before getting one.

Anyone can get a prepaid credit card, but it will not actually help to improve your credit rating. A secured credit card will do the trick, so if you’re trying to get better scores from Equifax, Experian, and TransUnion, go after a secured credit card. A prepaid credit card appears to be a combination of a debit card and a credit card. It simply acts as an alternative during certain purchases where a debit card might not be accepted, like hotel or flight bookings. While a prepaid credit card may not be able to improve your credit score, it may be a way for you to learn how to manage your funds electronically, and it can be a good introduction into the hybrid world of cash and plastic.

It’s that time of year again. A summer full of partying, baking in the sun, and maybe even a job (heaven forbid) is coming to a close for hundreds of thousands of college-bound Millennials.

Retail companies love them because they are prepping for the big move by spending, or convincing their parents to spend, millions on MacBooks, iPods, iPhones, furniture, and the latest in trendy clothes. It’s no secret that credit card companies love them too. On-campus events are filled with local banks and credit card issuers giving away free subway sandwiches, glow-in-the-dark pens, and floating keychains just to attract their business.

You may wonder why credit card companies are so interested in targeting a demographic that statistically has minimal income and a lot of debt while in school? The main reason is these consumers are generally lifelong customers who will keep spending and spending, even when they have nothing to spend. It’s a proven fact that the first card in a student’s wallet will stay there for a very long time, and even if they do default, parents are often willing to step up and bail them out.

56% percent of undergraduates get their first credit card at the age of 18, and 91% of students have at least one card by their senior year. The average outstanding balance on undergraduate credit cards was $4,169 in 2010, and that number continues to increase at a dramatic rate each year. Add the credit card debt on top of students loans and Millennial students are beginning their lives in the “real world” in a real deep hole of debt.

The problem is most college students get their first credit card at the young age of 18, but many have never been taught how to properly manage credit and establish a solid credit score. It’s not taught in High school classes, and parents often fail to teach their children the importance of credit and its role in their financial future. There certainly aren’t any step-by-step directions in the credit card application either. As a result, tens of thousands of college graduates enter the workforce each year with a lot of debt, poor credit scores, and a rude awakening when they apply for a loan on their first car, condo, or home.

If you are a college-bound Millennial, or a parent of one, keep the following five tips in mind as you head off to freshman orientation this year. They will not only save you from headaches later on, but they will also save you a lot of money.

1. Beware of freebies with strings attached

Nothing is better than free stuff. But if you have to fill out a card with personal information before they give it to you, you’re better off moving onto the next booth. Don’t fall prey to a free sandwich that will reward you with an unexpected credit card in the mail two weeks later. You’re smarter than that.

2. Don’t sign up on the spot – Do your research online!

There are many reputable companies providing excellent cards for students at on-campus events; however, signing up on the spot is generally not a good idea. Take the informational pamphlets home with you, and then do a little online research to find the best possible card. The online credit card marketplace provides consumers with more power than ever to compare and contrast the best offers in the industry and apply securely online in about 60 seconds.

3. One card is enough

Once you have found the perfect student card, keep life simple. One credit card is enough for a college student. Set up your account online, keep your credit utilization under 30% of the credit limit, and pay off your balance each month. If your limit is too low at first, use cash or a debit card to pay for anything that would take you above the 30% threshold. When you are prepared to responsibly manage a higher credit limit, call your credit card issuer and they will likely be happy to increase your limit.

4. Imagine you never heard of a Cash Advance

If you ever need quick cash, your credit card is generally not a good option. Forget about it. Interest rates for cash advances could be up to 30%, which is highway robbery. Sell old textbooks back for cash, throw something you never use on craigslist at discounted price, or call good-ole Mom and Dad to give them the sob story. Anything is better than paying 30% on a cash advance.

5. Educate Yourself

An integral part of every college student’s education should be developing an in-depth understanding of consumer credit and how it will affect their personal financial future. Take 15 minutes to browse the net and provide yourself with an important education you won’t receive from even the best Ivy League schools.

Negative information on your credit report can destroy your credit. Charge-offs, settlements, and foreclosures can stay on your report for seven years, hurting your chances of getting a low interest rate on any new loans you might get. As your settlements and charge-offs get older, their negative impact on your report shrinks. You might be able to ask the credit bureaus to remove the bad stuff, but this typically happens only when the information is incorrect. There is an alternative way to recover from poor credit other than pleading with the credit bureaus.

It might not seem logical, but opening a new credit account can boost your score. If you’re looking for a way to dig yourself out of a poor credit morass, consider a secured credit card. A secured credit card can be obtained with a deposit account. (A deposit account is an account you have at a bank, from which money can be deposited or withdrawn. Your savings and checking accounts are examples.) To get a secured credit card, you must deposit between 100% and 200% of the amount of credit for which you are asking. This deposit is held in a special savings account, which is controlled by the credit card issuer.

The good news is you don’t have to put up any piece of property, such as your vehicle or house, as collateral. The deposit you make to obtain the card is the actual collateral, so if you default on your secured credit card, the deposit will be used to recompense the creditor.

Using a secured credit card is a great way to rebuild credit because most companies report regularly to the three major credit bureaus. You want to be rewarded for handling money properly, and if the bureaus don’t get the information, then they can’t reward you. Of course, you can’t be using the card to grow a new debt. Start off with small purchases, and make sure you can pay them back in full to gain some positive history. If you maintain good credit on this card for an extended period of time, you could even gain interest on the original deposit.

There are some fees to be aware of when getting a secured credit card. There will be a one-time application fee, as well as a once-a-year annual fee, and a processing fee. If you can make timely payments over the course of a year, your creditor may give you the option of transitioning to an unsecured account, which would eliminate these extra fees.

If you have enough funds to make a deposit, and you have the ability to keep under the credit limit, a secured credit card can counteract with the negative information on your credit report. Having the patience to maintain this type of credit is a great start to rebuilding your credit history.

While talking about the retirement plan, financial advisers mostly focus on how much you need to save. But you should know, that to cut your debt is not any less important, especially your mortgage and credit cards. And in order to get out of debt you need to:

1. Evaluate Your Debt
The first thing you should start with is figuring out how much debt you have to deal with. So, take a piece of paper, and put down all of your debts. This includes credit cards, charge cards, mortgages, home equity loans, car loans, personal loans, medical bills and any other debts that you’ve got. Beside each debt, include in this list the associated interest rate and minimum monthly payment. Now, count up all of your entries, and you see a true picture of your current debt load.

2. Make a Budget
A carefully thought out budget will help you to get out and stay out of debt. Be honest with yourself about your spending habits and you’ll receive a much more realistic picture. Make a list of your usual monthly expenses (do not forget about fun things, hobbies and entertainment) and calculate how much you make per month including all forms of your income. And then create a budget that will minimize the usage of credit cards, cash-only is your goal.

3. Reduce Your Spending
In order to get money for debt repayment you will have to cut your spending. Look for some ways to lower your phone and electronic bills, auto and homeowner’s insurance and all your other bills. In such way, you’ll able to use your savings directly for your debts and enjoy the fact, that you’re on the right way to a debt-free life.

4. Begin Saving
While getting out of debt, the avoiding new debt is important as well as paying off debt. So, it’s very important for you to be prepared for some unexpected expenses – such as medical bills or car repairs – that could make you start spending with your credit card again. Assess how much it may cost you and put that sum aside. You should understand that fact that building up your emergency fund may take a lot of time. So, even $20 a month will help, just do not worry if that’s all you can afford.

5. Struggle With Your Debt
Now, when you have finished with all of the previous steps, it is the right time to start struggling with your debt. Apply the money you’ve saved with your new budget to your debt. Keep this way until all your debts will gone. Of course, it may take a while, but if you adhere to this plan you’ll become a happier, stronger and debt-free person.

 

Credit card distributors always advertise handsome promotional rates just to allure potential cardholders. If you want to become a new cardholder, you must watch out for credit card fees. Although they offer the lowest of interest rates, the credit card company will definitely be getting back at you by embedding extra fees. How to avoid paying them more than what you owe?

Many people just rush into applying to get a credit card without even being aware of all of the accumulated costs. Almost all credit cards come with some hidden fees and unknown charges; and you should always pay extra attention to them before applying.

Almost all cases, all of these fees and extra charges will not even be noticed until it is too late. And you easily end up paying thousands in the end without even realizing it.

Here are some tips to help guide you in avoiding excess credit card fees:

Pay the bill ahead of time

Never wait until you’re the due date arrives before settling payment. Pay off all the necessary charges as soon as you got cash to do it. It is required that all credit card issuers provide at least 28 days grace period.

Try to sign up for an automatic payment facility especially if you are prone to forgetting monthly due dates. This very ideal for people who have multiple credit cards and those who are managing many types of credit lines like car loans, mortgage, and personal loans.

Request for waive

In some cases, wherein an emergency could not be avoided, at the same time you will not be able to make your payment on time, try to call the credit card company immediately and request them to waive some late payment fees and promise to make your next month’s payment on time. In addition, if your records prove that you have become a very reliable client, chances are, you may be granted that wish, thus avoiding additional credit card fees.

Do not go over the credit limit

It is obvious that exceeding your credit limit will automatically cost you extra fees on your bill. Always check your credit account to assure that all the charges are accurate. Before making a large purchase using a credit card, be sure that you have enough credit left. And always keep your credit card spending to just a minimal portion.

Don’t borrow cash from your card

All credit cards offer cash advance features. This provides the cardholder an option to get from their account by withdrawing cash thru the ATM. Although it seems like a good provision, especially in times of emergency, these are charged with very high interest rate. And cash advances are not automatically covered by the grace period; you will incur extra credit card fees every time you make cash withdrawal.