SavvySugar

How Your Zero-Balance Credit Card Could Cost You

SavvySugar — Thu, 29 Oct 2009 12:00:59 -0700

Think you’re avoiding extra fees by being savvy and paying off your credit cards in full every month? Maybe not any more. Some companies, including Bank of America and Citigroup, may start charging credit card holders for not using their cards enough. Good habits like paying off your balance in full, not using your card for a few months, or even not spending quite enough every month could all earn you extra fees.

Credit card companies have just a few short months before new regulations go into effect, and they appear to be getting desperate. Card holders have seen everything from higher interest rates to new annual fees over the past few months, as companies scramble to stay ahead of the restrictions that'll go into effect in February.

If you start seeing these fees, you do, of course, have options. You can call the company and complain (although there’s no guarantee they’ll listen; remember the Debtor’s Revolt woman?), move to another company that doesn’t charge these fees, or cancel your cards altogether. What do you think of these proposed fees? What will you do if your credit card starts charging them?

YouTube Debtor's Revolt: Too Far or Totally Justified?

SavvySugar — Wed, 30 Sep 2009 09:00:33 -0700

In the wake of the recession, it's become increasingly common for credit card companies to jack up interest rates - in some cases, without due cause. Typically, outraged customers seek an explanation via customer service representative – but one disgruntled card holder took her case to YouTube

In the now viral video, aptly titled Debtor's Revolt Begins Now, B of A customer, Ann Minch launches a heated attack on the bank, claiming that her interest rate was raised from 12.99 percent to a whopping 30 percent, despite diligent and timely payments. Her attempts to negotiate with the branch, where she has been a customer for 14 years, were dismissed - until her now infamous rant gained some serious media attention, and was finally seen by one of the Bank's executives, who re-adjusted her interest to its original rate.

Since it debuted on Sept. 8, Minch's cyber assault has been streamed more than 350,000 times and attracted over 5,000 comments - some praising her as a crusader, others condemning the outspoken debtor. What do you think?

Goodbye Free Stuff, Hello Better Credit Card Practices

SavvySugar — Fri, 25 Sep 2009 04:30:23 -0700

Times have changed since I was in college, and I'm not just referring to the escalating cost of tuition. Banks hawking everything from free t-shirts and water bottles to free pizza used to set up their tables around the university center attempting to attract unknowing students to sign up for credit cards. As of February 22, 2010, those banks won't be allowed to coerce young adults with free stuff in exchange for completing credit card applications.

The uprooting of these tricky tactics is part of a farther reaching credit card reform act, which also includes a clause disallowing those under age 21 to be approved for a card without a co-signer if the applicant doesn't have proof of income. The goal is to reduce the number of students who accumulate consumer debt because they don't understand the implications of using credit irresponsibly.

Did you graduate with credit card debt that could have been prevented if you were better educated about credit?

Money Tip: Use Your Credit Card Rewards or Lose 'Em

SavvySugar — Fri, 20 Mar 2009 07:15:07 -0700

If you've signed up for frequent flyer miles or other reward point programs with your credit card company one expert says you should use your earned rewards now.

Robert McKinley, who is the founder of CardTrak.com, notes that credit card companies are increasing interest rates and fees and cutting credit limits to make up for the losses from cardholders defaulting on their debt. What's next? McKinley says companies will trim their costs by reducing the value of rewards or even eliminating the programs. He told Consumer Reports:

"Rewards programs cut into profits, and issuers can make changes in them faster than they can with other card terms, so you may suddenly get a letter saying that you need more points for airline seats or that the rewards program is over, effective immediately."

I suggest logging on to your account or calling up your credit card company to see how many points you have racked up. It may be time to take a short vacay on your miles instead of cutting into your budget.

Source

New Credit Card Rules Protect Consumers

SavvySugar — Fri, 19 Dec 2008 04:30:53 -0800

We can certainly live without credit cards, but for a very long time we were fooled into thinking that wasn't the case. Credit card companies were able to get away with a lot during that time and weren't always regulated in ways that would protect consumers. Yesterday, the Fed ruled on a set of new regulations that are obviously consumer-oriented, but credit card companies won't have to act accordingly until 2010. According to the AP, carriers will be prohibited from the following under the new rules.

Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay.
Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account.
Unfairly computing balances in a computing tactic known as double-cycle billing.
Unfairly adding security deposits and fees for issuing credit or making it available.
Making deceptive offers of credit.

To see what else credit card companies will be accountable for under the new rules, read more.

Credit card lenders will be required to apply any payment above the minimum to the part of the balance with the highest interest rate.
The so-called subprime cards for people with low credit scores typically have no more than a $500 credit limit but require a large upfront fee.
The rules cap that fee at 50 percent of the credit limit and allow the cardholder to pay off the initial balance over a year, not immediately.

Source

News Flash: Credit Card Reform Bill Gets Nod From the House

SavvySugar — Wed, 24 Sep 2008 04:00:53 -0700

The House passed a bill that would limit surprise interest-rate increases and fees for credit-card users, but it still faces Senate approval and won't be reviewed until the bailout plan has been finalized. - Reuters
Is your head spinning from all of the recent economic news? Here are 15 things you should know about what's gone down. - Kiplinger
How the really wealthy cut back: postponed plastic surgery, cheaper help, and less pretentious parties. - The Wall Street Journal

Source

Belvedere, Babes, and Beats on the Boss's Dollar

SavvySugar — Thu, 10 Apr 2008 04:03:55 -0700

The Government Accountability Office performed an audit on the "business expenses" of federal employees charged to government purchase cards (their version of credit cards) and, shocker, found that about half of the transactions were frivolous and unauthorized. The extent of abuse in spending outside set federal purchasing guidelines is evident in charges for things like lingerie, gambling, iPods, online dating services, and a Postal Service group partied with a $13,000 steak dinner washed down with 40 bottles of wine and fancy liquor.

While these charges, fueled by the taxpayers' dime, are a bit more alarming than non-government employees abusing the company card, I'm sure there are plenty of these patterns in private companies. The cards were given to employees with the intended purpose of improving bureaucratic efficiency - perhaps they thought there wouldn't be an audit on their spending habits, for the sake of efficiency.

Have you ever seen this type of misuse in practice or broken any expense-account type rules yourself?

Ask Savvy: Should I Transfer My Debt Balance to a 0% Card?

SavvySugar — Wed, 22 Jul 2009 06:30:59 -0700

Dear Savvy,

I have two credit cards with high interest. Should I pay them off with my one card that has zero percent interest to reduce paying over $750 annually in finance charges?

Savvy says: I'm assuming by "paying them off" you mean transfer your existing balances to an introductory rate, zero percent card. There are a number of questions you need to address before making this type of decision. To see my advice, read more.

You need to be clear about when the introductory rate ends and the new interest rate kicks in. Is it higher than the interest rates on your current cards? If so, you could end up paying more interest in the end. Zero interest cards do not exist because credit card companies are generous; they are tools for roping in new customers, and the companies hope to make money off you soon enough.

Also, you should only consider doing this if you can put the old credit cards to bed after you've transferred the balances, so that you don't have a huge amount of existing credit to fall back on. You could just end up deeper in debt. Don't actually close the accounts if they've been open for a long time because that could actually harm your credit score, but ignore them unless you're making small purchases a couple times a year to keep the accounts active (and paying off those balances immediately).

If you decide on this plan of action, use the interest-free period to work on paying down your debt. Put the additional $750 that you'll be saving toward the balance and come up with a plan to pay down your debt that includes making payments beyond the minimum. You don't want to get into the habit of continually opening up cards with low introductory rates and just shifting around your debt - that's not going to make you debt-free.

Ask Savvy: Why Was My Credit Card Application Denied? Part I

SavvySugar — Wed, 26 Mar 2008 06:48:19 -0700

Dear Savvy,

I'm new at this credit thing and I'm not sure when or why I should check my credit report. I have never had a credit card (still don't) but I got denied for one a few weeks ago and I don't know why. Does checking my credit report worsen my credit score? Does getting denied for a card? How often should I check my credit report and/or score? What's the difference?! Obviously I am not financially savvy! No one ever explained to me how to manage credit so now I'm trying to get some and I'm completely lost!

To see my answer just read more.

You're on the right track in thinking that your credit report has something to do with why your application was denied, but it's not because you have bad credit. It's that you don't have any credit attached to your name. In order be given access to credit you need a credit history showing how you handled your finances, and that information is used by credit card companies to determine your eligibility.

If you don't already have checking and savings accounts, that's step one. Just because your credit card application was denied it doesn't mean you'll never be able to carry a card of your own. Apply for a secured credit card, which works differently than a regular card- instead of the company giving you a limit, they require that you deposit money and then your credit limit is equal to the deposit.

Check out Bankrate's list of secured credit issuers and pick a card with low fees, will convert to a regular credit card after about a year of punctual payments, and will be reported to the credit bureaus because (otherwise you wouldn't be building a credit history). If you use a credit union, ask them about any secured card before you look at other sources.

Once you do get a regular credit card, make sure that you use it responsibly by charging only what you can afford, never using more than 30 percent of your limit, and paying off your balance each month, and paying your bills on time.

Check back in a bit for my explanation to the other part of your question regarding credit report versus credit score.

Source

Ask Savvy: When Should I Cancel My Credit Card?

SavvySugar — Tue, 09 Sep 2008 12:30:32 -0700

Dear Savvy,

Is it a good idea to cancel a credit card you are paying off instead of waiting until you pay it off entirely?

A: No, you need to keep a card open until the balance has been paid off completely. After your balance is zeroed out, call the issuer and ask for your card to be canceled with a note to the credit bureaus that the account was "closed at customer's request."

Find out more things to consider regarding credit card cancellation when you read more.

Before you make the decision to cancel a card, make sure that canceling it won't negatively affect your credit score. Don't cancel a card that you've had for a long time because you want to maintain the longevity component of your credit history. Also, if it's a card with a high credit limit, you may consider hanging on to it so your credit-to-debt ratio doesn't take a hit. If you're not carrying credit card balances, credit-to-debt ratios are less of an issue, but if you tend to have balances carry from one month to the next you especially need to pay attention to this number.

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