Credit Card ’s Talk

You know those credit cards bills that softly come in asking politely to be paid each month? You may find that they are screaming that they are overdue or overlimit. They want to be paid now.

Credit card debt is never a good idea. With interest rates on the rise, it’s an especially bad idea right now. Your options of getting rid of it are shrinking as it grows.

How?

You may have received notices that your minimum monthly payment amounts are increasing. You were probably paying minimum payments ranging from 2% to 2.5% of your balance. This leads to years and years of debt. If you owe $10,000 on a card with an 18% interest rate, you could pay it for 32 years at a 2.5% minimum payment. That results in $14,600 in interest.

Raising your minimum monthly payment is a good thing for you. It allows you to pay off your credit card debt quicker, if you don’t continue to borrow. But it could be bad for your monthly budget.

With everything from gas to groceries costing more, you may find that your budget doesn’t have much slack. In fact, many minimum payments could double. Ouch.

And then throw in rising interest rates. And it’s not just your credit cards that have rising interest charges. If you have a home equity line of credit, your rates are on the rise. If your interest goes up by two points on a $30,000 home equity line of credit, you could be paying over $600 more a year in interest.

The Federal Reserve Board is expected to continue to boost short-term rates, so look for your rates to go even higher.

But what can you do?

The first and most important things is to not fall behind. It will kill you if your interest rates are increased and you are subjected to late fees.

You can stay ahead of the game by calling your credit card company and letting them know you are having troubles. Try to negotiate a lower interest rate. If that doesn’t work, look into transfering your balance to a lower rate card. Watch out for balance transfer fees and teaser rates that skyrocket after a few months.

Look into your home equity for help. Even with rates going up, home equity lines of credit are still lower than the rates on most credit cards. You may even be able to deduct the interest on your income taxes.

I would suggest taking out a home equity loan, instead of a home equity line of credit. You will receive a lump sum and make fixed payments for a fixed period of time. And the best advantage is that the rate is fixed. It may be a little higher than with a line of credit, but it will not go up.

Take a close look at changing your spending habits. Diverting your debt to another place does not get rid of it. If you keep using your cards, you will just be getting further in debt. Pay them off, cut them off and go on with your life.

Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today

Whether you have no credit or damaged credit, secured credit cards are a good tool for building a good credit history.

Several months ago Tom, a member of CreditBoards.com, filed for a Chapter 7 Bankruptcy. Now he is in the process of rebuilding his credit history. It?s a task that is not easy, but with patient persistence he is seeing progress already. Daily he checks his credit score and is slowly seeing improvement.

1 - In addition to correcting every mistake, even the smallest ones, on his credit report, he is using a secured credit card.

2 - This secured card is an important tool in the overall process of building or rebuilding credit.

Who should consider a secured credit card?

Someone who has no credit history.

Someone with a damaged credit history.

What is a secured credit card?

Secured cards are credit cards opened with a deposit into a savings account, money market or certificate of deposit. The amount of deposit required varies from card to card, but generally minimum amounts range from $250 - $500. These funds are considered your security and will even earn a little interest since they are being held in a savings account. Your credit limit is determined by the amount you deposit into the savings account. Sometimes the limit will be for the full amount of the deposit; other times it will be a percentage of the total.

It is important to keep in mind that a secured card is a credit card, not a debit card. If full payments are not made each month, then interest is charged on the outstanding balance. And the lending institution uses the security money to pay off the debt only as a last resort. Even though the card is secured, it is still possible to damage credit.

What are the benefits of a secured credit card?

Establishing credit. If you have never had a credit card, a good first step in establishing good credit is applying for a secured credit card. Assistant Professor of Economics at Austin Peay State University in Clarksville, TN, Jerry Plummer says, ?A secured card is most useful for the person starting out on their credit history, since it says that the person is willing to take the extra step to establish credit.?

Reestablishing credit. If your credit history is damaged, you may only be able to qualify for a secured credit card. Using this secured card appropriately and within the set parameters will help rebuild your credit and qualify you for an unsecured card. If you have had to file for bankruptcy, however, you may not qualify until it has been discharged.

Preset limit cannot be exceeded. If poor spending habits were part of the cause for bad credit, then a secured credit card will help keep spending in check.

Useful for transactions that require a credit card. Hotels and car rentals require the use of a credit card. If you don?t qualify for an unsecured card but you do for a secured card, then you are still able to make the transaction.

What should I look for or avoid when shopping for a secured credit card?

Fees. This is the area you will really want to research when shopping for a secured credit card. Some cards will come with fees that run into the hundreds of dollars, eating away much of the credit you secured with the savings account. Professor Plummer says a card with no fee is the best, but a small one-time fee can be okay. Annual fees for attractive secured cards typically range from $20-$35. Be sure to watch out for hidden fees such as ?registration charges? and ?setup fees.?

Interest Rate. Just because you have no or poor credit doesn?t mean you have to settle for the highest interest rate. Interest rates for attractive secured cards should not exceed 19%. Shop around and get the most competitive rate available.

Read the fine print. Linda Tucker, Director of Education for Consumer Credit Counseling Service for Arkansas and Memphis, TN, stresses the importance of reading the fine print. Doing so will let you know your exact obligations to the issuing company: for example, the grace period, what happens if you don?t make a full payment, and what fees are attached if you don?t make the full payment. Understanding these details will help make sure you are not further damaging your credit.

Fraudulent Offers. As with unsecured cards you need to watch out for fraudulent offers.The Federal Trade Commission gives the following advice to protect yourself from credit card fraud:

• Offers of easy credit. No one can guarantee to get you credit. Before deciding whether to give you a credit card, legitimate credit providers examine your credit report.

• A call to a ‘900′ number for a credit card. You pay for calls with a ‘900′ prefix — and you may never receive a credit card.

• Credit cards offered by credit repair companies or credit clinics. These businesses also may offer to clean up your credit history for a fee. However, you can correct genuine mistakes or outdated information yourself by contacting credit bureaus directly. Remember that only time and good credit habits will restore your credit worthiness.

When will I qualify for an unsecured credit card?

It can take several months to see an improvement in your credit history. Bankrate says it?s a good indicator when you start receiving flyers in the mail for unsecured cards that your credit is improving. However, it?s a good idea to continue taking things slowly. Using a secured card will help you learn healthy habits so that when you do get an unsecured credit card you remain in control of your spending and credit.

Where can I find a secured credit card?

Most companies don?t advertise secured cards. But you can visit the Card Reports section of http://www.CardRatings.com to find out where and how to apply. Click on the link entitled ?Cards for Consumers with Poor or No Credit?.

Other tips

Tom recommends sticking with only one or two cards and keeping spending to a minimum. The goal is to pay the card off each month.

Tucker emphasizes the importance of paying the amount due each month; otherwise late fees can be charged, interest rates raised, privileges lost, and credit history negatively affected.

Make sure you are getting a credit card as opposed to a gas card or a department store card.

Make sure a reputable bank or credit union, even a local one, is issuing the card. And, don?t automatically assume a bank is issuing the card.

Not all issuers report to the three major credit agencies (Experian, Equifax, and TransUnion). It?s important to get a card that does report to all three agencies; otherwise you will be wasting your time. Fortunately, secured cards normally report to the credit agencies just like unsecured cards (you should verify this before applying).

If you have filed for bankruptcy, you may need to wait until it has been discharged before qualifying for a secured card.

Get one only if you cannot get credit, since you have no credit record; or if you have poor credit. Plummer says, ?Many companies will not even count them as credit, such as automobile F&I (Finance and Insurance) people, although they will not admit it.? So, if you don?t really need a secured card, you will be doing more harm than good.

Finally, whatever situation you are in, no credit or poor credit, the best way to build good credit is to set up a budget and then stick with it.

1 You can pay membership fees to any one of the three credit bureaus ? Experian, TransUnion, and Equifax- to be able to check your credit score online daily. Visit our Credit Information section for more details. Tom recommends purchasing Microsoft Money 2004, which comes with a one-year membership to Experian (value of $99.00).

2 To find out more about correcting errors on your credit report, read our article How to Correct Mixed or Split Credit Reports.

About The Author

Amy Cooper-Arnold is a staff writer for http://www.CardRatings.com. Amy has been employed in various accounting-related positions. She will graduate this December from Austin Peay State University with a degree in English.

It?s no big surprise that major credit card companies are aiming their marketing campaigns towards our countries up and coming generation. To credit card companies, no consumer is more profitable than today?s college students.

Students are big business to them, and for good reasons. Why? Simple, teens like to spend money they don?t have! Were you poor when you left the house and took your first shot at the big University? Yeah, so was I. In fact the majority of today?s college students live off of loans and a minimum wage job, leaving them very little to spend on merchandise. This is where the credit card companies make their killing. Instead of saving up for that cute pink shirt on the clearance rack, or that shiny new watch, students can charge it to the new ?low? APR student card they just received in the mail. In fact, by opening up credit card booths Nationwide, credit card companies are making it easier than ever for students to get their feet wet.

So in answer to the topic question: yes, students are most definitely getting in over their head when it comes to credit and debt management. If your part of the younger generation you may recall getting your very first shiny gold/platinum card in the mail. Do you remember skipping all the fine print mumbo jumbo? Well, most students today are in the same boat. The only thing we cared about is that little line at the bottom that tells us how much we can spend: our line of credit. The fact is, Most ?Student? credit cards come with a ridiculously high APR and crippling late fee charges, which in most cases, cause the APR to soar even higher!

This may seem a little redundant and obvious to you and I, but to students the phrases ?APR?, ?late fees? and ?interest rates? aren?t an established part of their vocabulary yet. This is where things get sticky. The statistics don?t lie, and research has it that nearly 11 percent of people who seek credit counseling are under the age of 24. According to Colorado Public Interest Research Group, 49 percent of Colorado’s college students have more than one credit card, which is higher than the national average of 37%!

The solution should be obvious. Students should be taught about credit and debt management. In fact, most students don?t even know that free nonprofit credit counseling agencies are at their disposal, nationwide. Counseling can help make budgets or stop students from sinking further in debt. They also re-teach young students the ?value? of the dollar bill, a concept slowly diminishing in our day and age. It?s obvious credit card companies care very little about this. The more we don?t know, the more they make.

Adam Boulton is currently enrolled as a full-time student and has seen first hand the damages student credit cards can cause. If you would like more info about the pros and cons of student credit cards please visit his website at StudentResourceCenter.com

You may have not really noticed how the bills have been getting higher and higher. Then one day, you open your credit card bills and wonder how you’ll even make your minimum payments. Congratulations. This is where change happens.

You’ve reached your breaking point. The point where you have to change how you manage your money. It can seem like an awful time. You don’t know exactly how to get out of this mess. But don’t worry, all you can do now is go up — you’ve hit the bottom already.

Let’s look at some credit card truths. All credit cards are not bad. Credit cards can be very nice in some situations. What is bad is charging to your cards and not immediately paying it off. Here is the truth about credit cards:

Truth #1: Not paying off your credit card each month will cost you.

You have to pay off the card each month or you will be charged interest on your purchases. It may not seem like a lot at first, but that three dollar breakfast at the fast food place could cost you $30 before you are finished paying for it.

Truth #2: Minimum payments cost you maximum money.

If you only make the minimum payments, you could pay for years and years without seeing the bottom. Minimum payments are only two to three percent of your balance. You are paying interest and just the slightest amount to the balance. Check it out. Compare the finance charge with your minimum payment. There will only be a slight difference in the amounts. If you are paying $10 and being charged $9.50 in interest, your balance isn’t going down very fast.

Truth #3: You don’t need more than two credit cards.

Some people will even argue that you don’t need more than one. If you have more than two, it can become difficult to keep track of each account — checking for errors and keeping track of spending. You need to read each account statement every month.

Truth #4: Credit cards call up your interest rate at any time.

Some credit card companies can increase your interest rate without any notification. You are comfortably paying a nice 10% credit card, then one month, before your eyes, it changes to 29%. It happens. And there isn’t a thing you can do, except pay the card off and close it.

Truth #5: Getting out of credit card debt isn’t easy.

Paying off your debt takes time and a lot of money. Money that you didn’t have in the first place, or you wouldn’t have used your credit card. But it is possible. And it is worth it. There is no better feeling than knowing you only owe your student loans and your mortgage. There is no better feeling than having all that money you used to pay to your debts back in your pockets.

Simply start with taking a good hard look at your finances. Create a budget and stick to it. Pay off one card at a time, if necessary. It may take years, but it will save you years of payments. Remember, it’s a long process, but worth it. Oh — and cut up all the cards right now. You don’t need them anymore.

Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today.

Credit cards seem to be a way of life. While most advisors say that you need to eliminate all credit card debt, I recognize that most people aren’t listening to this advice. While, personally, I don’t believe credit cards are a wise decision, I do recognize that if you have them, you should manage them wisely.

Start by making good decisions when it comes to your credit. Pay your bill on time every time. This is the most important thing you can do. Your credit rating will be protected and your interest rate will remain low. If you miss a payment, it will go on your credit report. And you should expect that default interest rate to be close to 30%. That isn’t managing your credit wisely — it is heading for a train wreck.

If at all possible, you should pay off your balance in full each month. If you can’t, make as large a payment as possible. The more you pay, the more you save on interest charges. I know a few people who purchase large items and pay them off over say three months. Hey, they pay them off, make payments on time and make wise purchasing decisions. If you have the will power, then it may be worth the cost to you. Three months of interest is a lot less than seven years.

If you aren’t able to pay your balance in full, take the card out of your wallet. It’s time to simply pay it off. When you pay it off, you can use it again. But for now, you need to concentrate on getting that debt down.

Don’t simply toss the statement into a pile without carefully reviewing it. Read over thoroughly. Check each credit and charge. Double check the interest rate and other details. You want to make sure everything is correct. Once you pay it, you are accepting what the statement says.

If you have two or more credit cards with outstanding balances, you may want to consider moving the balances to a card with a lower interest rate. But if you’ve had one of the cards for a long time, you might want to keep it open to keep your credit history long. But don’t go out and charge on it. It goes in a safe deposit box where you can’t use it.

If you have a good credit history, you should call your credit card company for rate decreases. Do this fairly frequently. It never hurts to ask. I just did it for the first time, and the company was so friendly and helpful. We significantly lowerd my interest rate on my emergency credit card. If I have to use it, I won’t feel so bad now.

Credit cards are used by many people. You have to be careful. Most people find that credit card debt gets out of hand way too easily. If you are able to manage your credit cards, then good for you. Just remember, if you didn’t have them, you wouldn’t need to manage them at all. Make paying off the debt your main goal, and it will save you money.

Martin Lukac represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com, a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!

One of the most important financial factors in our society is whether a person has good credit. Credit cards are not always easy to acquire when you have no credit history, many lenders will shy away from a person that has never had credit due to the fact that they don?t know if you are responsible enough to pay off a credit card bill. The case is true as well for people that have had very bad credit in the past and now are finally done with their debts. Many people need credit cards to start growing their credit card rating again, but most banks don?t want to take a chance. What can people do in these situations? The answer is simple- secured credit cards.

The overwhelming majority of credit cards are unsecured, this is why the banks charge lots of interest and default rates are very high. When a bank gives you a credit card for a certain amount, they do not request collateral. Unlike mortgages that keep homes as collateral or a car loan in which your car can be repossessed, credit card loans have limited recourse if you default on your debt. One of the ways to break through the barrier of getting a credit card is to secure your loan with the credit card issuer.

A secured credit card is a bank account that you set up with the credit card issuer. The bank then sends you a credit card. The bank will usually give you a credit limit amount of which you have deposited into your bank account with them. For instance, if you would like a $500 line of credit, deposit $500 in the account. This way, if you don?t pay, they have your money and don?t lose anything.

Secured credit cards make their money by having you pay certain fees each month or year and still collect interest from your purchases. While fees vary, remember you are paying a premium to either start off your credit history or begin a new chapter on your credit rating.

Connie Barker is the owner of several financial websites including those which deal with Secured Credit Cards

I heard someone say that if the credit card didn’t think they could afford their credit limit, they wouldn’t give them such a high one. That person has a lot to learn.

And I’m sure he will.

Credit cards are really costly. It’s not a big secret. They are in the business of making money. Really. They don’t care if you can make your payment or not, they are going to charge you anyway.

It may seem really great that you can spend $2000 on your credit card and only pay $40 a month. Forget that it’s a 18% interest rate, you can afford $40 a month and still have what you want.

Sit and do the math and you will see just how credit card companies stay in business. Have you ever thought about how long it will take you to pay off your credit cards if you only make the minimum payment every month? Get ready to be shocked.

Most credit cards only charge a minimum monthly payment of about 2%-4% of your total balance and interest charges.

Let’s assume that you have a really low monthly payment of only 2%. Your $2,000 at 18% interest has a $40 a month payment. Only $10 of that payment is going towards your principal with the remaining $30 going towards interest.

If you only pay your minimum balance each month, you will pay for your $2,000 spending spree for the next 30 years. Whatever you bought probably won’t last that long. Over time, you will pay about $5,000 in interest. That $2,000 of shopping really cost you almost $7,000.

Okay, you may still say that it’s only $40 a month and you bought something necessary. Let’s look at where your money could have been working for you, instead of for the credit card company.

If you had placed the $40 in an investment earning 8%, such as an IRA for example, every month for 30 years, you would have over $60,000. You earned almost $46,000 in interest on your investment.

It’s funny how interest can work for you, not just against you.

I understand how easy it is to look at a credit card offer and think of all the things you could buy. The interest may not seem like that much, and you may receive cash back or frequent flier rewards. But unless you really know how the math works, you won’t see what they really cost you. There are many calculators online that will show you how much interest you will pay if you only make the minimum payment. You can even see how long it will take you to pay off your credit cards.

Then take the shock and make it work for you. Make the commitment to make interest work for you.

And for your future.

Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today.

Your credit card may currently include several different interest rates. You may have one rate for new purchases, one for balance transfers, one for cash advances and still another introductory rate.

It is very important to know what rates you currently have, because the credit card companies will pay off the lowest interest rate first! This is not in the consumer?s best interest. Assume you have a $10,000 balance transfer on a card at 0% and make one $9.99 charge at 14%. That $9.99 will stay on your card compounding interest every month, until you pay off the $10,000 balance transfer. The $9.99 purchase now costs you hundreds of dollars.

Of course it may not even be that simple. Again we are assuming a $10,000 balance transfer at 0% and we do not make any purchases, but the card has a $69 annual fee. Guess what that fee is just like make a purchase and will continue to compound until the 0% balance is paid off. Then payments will go towards the next lowest interest rate. Any fees, such as late fees, over the limit fees, etc. will all charged to your card as a purchase.

How can this be avoided? You should have one card for balance transfers and another for purchases. If you card has a low introductory or balance transfer rate, make sure you determine what other fees are associated with the card. Finally, if you must make a purchase on a card that has a balance at a low rate, it may be in your interest to balance transfer to another card. The purchase plus current balance transfer will all go to the new card at the same rate. Be careful not to continually roll balances from one card to another as this can affect your credit score.

Choose your credit cards wisely and monitor the rate you are being charged.