Credit Card ’s Talk

Need a credit card? No problem! And that’s exactly the problem. In a nation where instant gratification is touted as a virtue, credit is available to anyone no matter what their credit history. This is causing personal and financial problems for many consumers who abuse the easy availability of credit and find themselves unable to pay back their loans.

There was a time in history when extensive credit was available only to the aristocracy, and debt carried a social stigma for anyone else. The poor and middle class were carefully scrutinized when they applied for loans, and debtor’s prison awaited those who did not repay their debts.

Americans are more indebted than ever in the nation’s history. The amount owed on loans for cars, homes and credit cards adds up to nearly 100% of annual after-tax income, according to a report in Business Week magazine. Yet, according to the Consumer Fedaration of America, this alarming level of indebtedness has not deterred the moneylenders: credit card companies have more tha $3 trillion of unused credit lines up for grabs, approximately $30,000 per American family.

According to Fair, Isaac and Co. (FICO), the average consumer has access to $12,190 on all credit cards combined. Not everone is a spendthrift: more than half of cardholders use less than 30% of their total credit limit. However, one in eight is using 80% or more of their credit limit, and 1 in 10 have a total debt greater than $10,000. Cardweb.com estimates that 20% of American credit cards are maxed out.

There are specialized credit cards being offered to all kinds of borrowers, from students to small business owners. Each demographic group is targetted with a specific sales pitch.

People with good credit ratings can easily access lines of credit at an interest rate of 5% or less over the current prime rate, and such applicants are also qualified for Platinum credit cards. However, about half of cards in circulation are Gold cards, which require just $10,000 in annual income for qualification.

The credit industry uses credit scores to divide potential customers into prime and subprime markets, referring to the prime interest rate set by banks. Elite borrowers can obtain a line of credit on a Platinum card at an interest rate around 12%. A Gold card carries an average interest rate of 15%, while a standard credit card charges rates around 17%. Then there’s the subprime market, which first emerged in the 1990s, dealing with consumers whose credit scores are 500 or less, little or no credit history, those emerging from bankruptcy and anyone with an inconsistent performance in managing credit. These people are often low income earners and/or poor money managers, but the credit card industry finds a way to profit from these most needy of borrowers.

Unlike secured credit cards, cards offered to subprime borrowers require no security deposit. Credit limits start out very low — initially in the $100 to $500 range. However, fees can be hundreds of dollars and interest rates can easily soar to usurous rates of 30% or more.

The industry also offers secured credit cards to offer high-risk customers. Borrowers are required to pay an up-front security deposit from $99 to $5,000 to serve as collateral in case of default.

Many social and business commentators have denounced the subprime lending business for exploiting the poor, comparing the industry’s problems to depression-era banking scandals. Lenders take on poor and desparate customers at their own risk, writing off losses in the 15% to 17% range, versus the average industry loss rate of 6.5%, according to CardWeb. The delinquency rate among subprime card issuers is 10%, twice as high as the industry average. Some credit card companies, such as NextCard, have been unable to recoup their losses and have closed up shop.

According to many pundits, the American economy has been thriving in the past 5 years, with a steady growth in the GDP. However, 90% of this growth has been due to the housing bubble; real wages have declined by 4% since 2000 while health costs have risen by 40%. Middle and lower class Americans are becoming increasingly financially squeezed and unable to pay their debts.

A record number of 1.3 million cardholders filed for bankruptcy in 2004. In response, the credit industry lobbied successfully for stricter bankruptcy laws. However, according to the Consumer Federation of America, the increasing incidence of loan defaults did not spur the card companies to become more discriminating in their choice of customers. In fact, they actually boosted their promotional campaigns to a record 5 billion solicitations ( approximately 50 per American household) compared to 3.5 billion the previous year, many of these ads targeting the sub-prime market.

Now consider the debit card: it is decorated with the Visa or Mastercard emblem, and has all the functions of a credit card in that can be used at a cash register and for internet and telephone purchases. However, it takes money directly out of the cardholder’s bank account and allows no more spending once the account is empty. A debit card has no monthly fees and no interest charges, and no chance of getting into debt. Perhaps this is the best consumer solution to a credit-mad economy.

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There are not many of us who do not have a credit card these days. But, not all of us are as wise in the area of understanding how they work and how they make money. There are many types available to the young and old. Student credit cards even begin to get teenagers into the world of credit cards. Secured credit cards, cards that usually can’t be written off, are even misleading in their name. So, what does that discover credit card in your wallet actually do for you?

Even young adults are being lured into the world of credit cards. Student credit cards are widely available. Some link the parent to the card, others are geared towards college students who most of the time don’t even have jobs to pay for them. They seem like a great way to pay for college expenses, but the fees can be outrageous.

A big trap is secured credit cards. While there are always options out there that are legit, there are many others that are not. Often times, people with little or no credit or even bad credit can get a secured credit card. These are credit cards that are linked to savings accounts which require a minimum balance to be kept. While this seems easy enough, if you default on it, they can claim their money through that savings account. Another aspect of these types of credit cards are the fees associated with them. They often require set up fees, sometimes in the hundreds of dollars. They may have monthly and yearly fees as well. They may seem like a great way to establish or reestablish credit, but you will need to read the fine print for the secured credit card.

The goal of any credit card company is to make money. They do this by charging you an interest rate. The rate varies greatly from one company to the next depending on your credit status and credit history. But, your goal is to find the low interest credit cards. Many times, if you are in good standing with a credit card company, you can call them and request that they consider you for an interest rate cut.

Next to paying off your entire credit card bill each month, finding the lowest rates is often very important in order to save money. With the Internet as a tool, you can search for different types of credit cards and learn which companies offer the lowest rates. Many companies are equipped to take and accept credit card applications online within minutes. But, be wise and read the fine print to avoid falling into traps and outrageous fees.

About The Author

Mike Yeager, Publisher

http://www.a1-loans-4u.com/

mjy610@hotmail.com

There are thousands of Americans out there who may not be aware that there is such a thing as a prepaid credit card. If you are one of these people, don?t worry. Yes, there is such a thing and if you read on, you?ll quickly learn of its advantages of a prepaid credit card.

It?s important to possess a credit card ? even if you don?t plan on using it. Why ? because it establishes a credit rating and everyone single person has a rating. A credit rating is designed to let banks know what your financial situation is like, and your ability to repay debt. Nowadays, more and more people are shopping online. Have you ever tried purchasing something without a credit card? This scenario is probably unlikely. If you want to purchase something big, like a car or a home, it is next to nearly impossible to do it without some form of credit. For those of you who have had credit problems in the past, there is hope. That hope comes in the form of prepaid cards, which allow you to open an account (like a bank account) and load the card as you wish. The process is similar to using debit cards, except with this form of credit card, you are helping your credit rating to improve rather than to deteriorate more.

If you have no credit, chances are, it?s because you are young and starting out in today?s society. It is also possible that you have less than perfect credit, forcing you to start re-establishing your credit history, once again. Since it is important to establish a good credit history, owning a credit card is a good start, but only under certain conditions. Regardless of what anyone might say, if you have bad credit, you?ll need to take immediate steps of action to erase the debt that?s causing your credit to go from poor to bad. It goes without saying ? building good credit is so important today, especially for young adults wanting to buy a house or a car one day. Most young adults don?t have the cash upfront to afford a home. That is where having good credit comes in handy. If you have good credit, a bank will be more likely to approve you for a mortgage on a house or a lease on a car. If you have bad credit, you may be stuck in no man?s land.

You can?t erase bad credit, but there are things you can do to change it for the better. As previously mentioned, getting a credit card to help with bad credit is a wise move. Every month, your credit card company will send credit reports to credit bureaus, which are designed to help you re-build credit. It is important to note that once you receive a credit card, the responsibility is on you. You?ll need to make sure that you?re paying off your monthly balances in full. It may also be helpful to get a secured credit card ? that way, you?ll have to maintain a certain amount of money in your account at all times. It?s also good to obtain a copy of your credit report to track positive (and negative) changes being made.

There are many advantages to using a credit card, such as these. First of all, they work like regular credit cards. This means you can use them worldwide. You?ll also get superior customer service and protection as you use your card. Prepaid cards are also easy to get. You can pick them up anywhere ? whether it?s online or at the local retail store. There are also no interest charges. That?s because you?re not borrowing anyone?s money. You?re using your own. This also means that you won?t go into debt by using your prepaid card. It?s simple to use and effective in today?s world where it?s easy to spend too much when you may not have the cash to pay for it later on. Be smart and consider a prepaid card.

?Copyright 2005. Caitlin Crosain is a successful writer and publisher of resource websites on how to Repair Bad Credit and qualify for Secured Credit Cards and Personal Loans

There are no quick fixes in credit. Only time and prompt payment of credit obligations repairs a poor credit history. Yes, it takes time to undo credit damage, but here are a few suggestions on how to speed up the process and improve and rebuild your credit:

Start with a credit card that has a low credit line, or use a secured credit card that is backed by your own personal savings. Many people start rebuilding their credit this way.

Credit unions and local hometown banks are probably the best two sources for these. Make sure that the results are reported by credit bureaus as a revolving account like any other card. You want to get your credit report cleaned up, and you also want to start adding new, positive credit info as soon as possible, and a low-limit or a secured credit card is an excellent choice to do just that.

Know what your new card’s credit limits are, and keep balances way below 50 percent of this, as this practice — plus prompt payment of all your bills — will help raise your FICO credit score in the long run.

The term secured credit card is what it sounds like: you will be securing your line of credit with your own money. The card issuer’s risk is minimal, they are pretty much guaranteed to get their money.

Mark you credit card payment due dates on your calendar, and pay your bills at least one week before they are due. This means writing a check, putting it into an envelope, licking a stamp and applying it to the envelope, and dropping it into a mailbox TWO FULL WEEKS prior to your due date. Get in this habit, and eventually, you will write the check and mail it the day after you receive your bill. You will get one full month ahead on your payments, and you’ll never have another late fee, nor will your credit suffer from delayed the check is in the mail crisis.

Experts point to the fact that new accounts with regular on-time payments even for only a matter of months, tends to really put a shine one a credit report score.

A bank passbook loan is yet another way to improve your credit. You borrow from a bank and pledge your own savings account monies as the collateral behind it. Yes, you will lose interest on your savings, and you will pay interest on the amount of money you are now borrowing, but the ultimate goal is to rebuild your credit. It’s worth the cost.

To get started, you’ll need to have the savings to cover this sort of loan, and you might need to turn to a family member or close friend to help seed you the money to do this; the good news, again, is these accounts are reported and paid as installment loans, so your credit report will start to improve.

Having a mix of credit cards (low-limit or secured) and personal, installment loans, is important to maintain, since one factor in a good credit score is having different types of credit. If all you’ve ever borrowed and paid back are car loans, lenders reason, you might not do very well with a business loan or a mortgage loan.

Before you take out a loan through your local hometown bank or your local credit union, one of your most important questions to the loan officer is to ensure they report accounts to all three major credit bureaus. You don’t want to go through all this trouble and not be able to rebuild your bad credit.

Retail-store credit cards are yet another option to consider, as they can be easy to acquire, they get reported to credit bureaus, and they carry low lines of credit. This will take some real discipline. Only pull out and use these types of charge cards only when you already have saved up the money to pay for what you’ve bought.

We’d recommend that you pay your monthly balance in full. But if you carry a balance, remember that you’ll need to keep it below 50 percent of your available credit. Make timely payments are agreed, pay the bills early to avoid late fees from slow moving mail delivery, and check your credit report every 4-6 months to see that positive information is being added to your credit files.

Steve Johnson is the publisher of http://www.FindHow2.com — a growing collection of free how-to articles focusing on credit, debt and personal finance. He can be contacted at fixyourcreditreport@gmail.com.

Credit cards allow anyone to have access to 30 days interest free financing. Pay off your balance every month and you have access to OPM, Other People?s Money. Actually, even if you don?t pay it off, you have the access, but along with added challenges, which we aren?t discussing here!

They say that using OPM is the way of the big investors, the wealthy. And you have the same opportunity on a small scale. If you can find opportunities that produce a return in a short period of time or require short-term ?bridge financing?; you have that option of interest-free, with credit cards.

Do not allow yourself to rely on the monies for any extended period of time. This is short-term financing only. If you require funds for longer periods, other forms of financing must be secured.

The value of having cash in hand allows you to leverage this money to invest, purchase real estate or grow a business. Even start a business.

They say you need money to make money. Well, here?s a source of money. Be careful with it. Use it wisely and even cautiously. In some ways it may be too easy to access.

Have a clear picture of how you will spend the money. What level of risk you are taking and most importantly, your exit strategy. What will you do if something goes wrong, what is your contingency plan?

All that to say, you do have access to 30 days of interest-free money. Know the dates and work wisely around them.

Stephanie Mundle is the managing editor of http://www.MoneyMasteryForum.com an informational forum site for the average investor. Take a look. Information on forex, debt, money management, investing and business.

Come check out the forum at http://www.MoneyMasteryForum.com/forum.html country.html

If you find that your credit card purchases have exceeded your budget, you may be in need for some emergency credit counseling! Instead of throwing out all of your cards, consider assembling a strong hand of between 3 and 5 cards that will allow you to have a powerhouse wallet or purse!

First, consider the interest rate on your credit cards. Shop around to see if there are cards that offer lower interest rates. You may save a lot of money by switching over. And if they are balance transfer cards, they may offer even lower rates of interest! Once you have a low interest rate card, get rid of your higher interest rate cards. They’re just not worth it!

Second, you should think about getting a reward card. Unlike regular credit cards reward cards offer the same purchasing ability as regular credit cards but also allow you to enjoy rewards from points earned or immediate discounts on purchases at select retailers. The secret to finding the best reward card for you is to get a card that offers rewards from a vendor you normally shop at anyway. For example, if you buy a lot of petrol, get a card from a vendor that gives you points for filling up your car with petrol. There’s a lot of cards out there that have partnered with various vendors so find one or two from vendors you normally shop at.

Once you have found some credit cards that offer low interest rates as well as rewards on purchases you are ready to face the world again with a high-powered wallet. Even though you have increased the money you’ll keep (because of lower interest and the discounts available on purchases) you may have carried over some debt that you would like to get rid of.

One option to do this is with debt consolidation loans. A debt consolidation loan is one where you gather together all of the debts you have and put them under one umbrella. By gathering many small loans at varying interest rates and due at varying times of the month, and putting them under one roof, you are effectively lowering your average interest rate and consolidating your payments into one fixed payment once a month. And, because you are gathering your debts from many vendors and giving it to one vendor, you may be able to get a lower interest rate.

Congratulations! You will have just taken your powerhouse wallet from good? to great!

Mark Lambie is the founder of Loan Source, a website for UK residents seeking secured loans. Visit our website today for a free Secured Loans quote and find out how much we can save you.