Articles Posted in Credit Card

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Yahoo! Finance has posted an article about common habits that really damage your credit score. Credit scores range from 300 to 850 and the higher your score the better.

One of the easiest ways to destroy your credit score is not to pay your bills. It seems obvious, but one of the most important parts to your credit report is your repayment history. If you don’t pay your bills, even the minimum monthly payment, then eventually all the bills you haven’t paid in 90+ days will go into collections, dragging your score down even more. Eventually, if you don’t pay any credit card bills or mortgage payments, you could get so behind that you have to declare bankruptcy which damages your credit for both the short and long term.

Maxing out all your credit cards, or spending past the limit, also ruins your score. Applying for new cards also affects it. Ten percent of your credit score is based on how many new accounts you’ve applied for recently. Applying for every credit card you hear about or see will definitely help destroy your credit.

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The Wall Street Journal has posted an article about the unexpected dangers of “professional” credit cards, which are typically used by small businesses or corporations. It’s a little known fact that professional cards aren’t covered under the Credit Card Accountability and Responsibility and Disclosure Act of 2009. The Card Act bars billing practices such as the raising of interest rates at random, inactivity fees and shortened billing cycles.

Professional cards used to only be used by corporate executives and small business owners, but then the Card Act passed in March 2009. Since then, credit card companies have been sending professional card offers and applications to normal consumers. The research firm Synovate found that there was a 256% increase, about 47 million, in professional card offers that were sent out in the first quarter of this year. The Card Act has drastically cut banks’ profits and they are attempting to regain some of that loss by bribing consumers with professional cards, and thus bypassing the regulations of the Card Act.

While the Card Act bars issuers from raising rates on existing balances unless a cardholder is at least 60 days late with a payment, there isn’t any such prohibition on the Ink From Chase card, one of several business cards offered by the bank. The card agreement says Chase is free to implement a default rate of 29.99% if a customer is late by just one day on a payment.

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USA Today has posted an article that discusses how you can help your college-age child to build a healthy credit score. Thanks to a new law that was put into effect last year, credit card companies are barred from issuing cards to people under 21 unless they can prove they are able to make the monthly payment. This is designed to prevent college students from going so far into debt that they won’t be able to pay it back and will be penalized by having difficulty with things like getting an apartment or qualifying for a car loan…and even getting a job.

Even if your child is under 21, you as a parent can still help them build a positive credit history. Here are some of the ideas Sandra Block, the author of the article, mentions:

-You add your child to your current credit card as an authorized user.

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The Wall Street Journal has posted an article that discusses how some credit card companies are attempting to bypass The Credit Card Accountability and Responsibility Disclosure Act of 2009 (also called the Card Act). The Card Act forced credit card companies to to give customers more notice about changes in interest rates and restricts “certain controversial billing practices such as inactivity fees.”

To make up for loss in revenue the Card Act has caused, some of the biggest credit card companies in the US have started to go around the new rules to slap customers with other types of fees. It’s estimated that the Card Act will eliminate about $390 million in fee revenue per year. Banks are having to get more aggressive to combat such a huge loss.

According to a July 22 report from Pew Charitable Trusts, a nonpartisan research group, the industry’s median annual fee on bank credit cards jumped 18% to $59 between July 2009 and March 2010. At credit unions, annual fees soared 67% to $25. During the same period, the median cash-advance and balance-transfer fees jumped by 33%.

All of these increases are perfectly legal, of course. Banks and other issuers would have a difficult time extending credit to consumers, even at high interest rates, if they couldn’t augment those revenues with fee income. “We’re coming out of a deep recession that issuers are still working through,” says Peter Garuccio, a spokesman for the American Bankers Association.

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The New York Times has posted an article about the end of a 30 year decline in the cost of borrowing. This is due to a combination of inflation due to the recession and the nation’s “ballooning debt.” Interest rates are currently as low as they’ll be for quite a while.

The higher interest rates will probably be noticed first in the housing market. Each raised percentage in interest rates adds 19% to the cost of a home. The rate for a 30 year fixed rate mortgage has risen half a point since December, hitting 5.31%…which is the highest it’s been since last summer.

“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School. “It’s a really big risk.”

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PaymentsSource.com has posted an article about how credit card charge-offs should reverse declining and increase to peak at 12%-13% about mid-year in 2010 if delinquencies continue to rise.

Earlier this week, Moody’s reported that U.S. credit card charge-off levels eased in October for a second straight month from a record in August, while delinquencies rose for a third consecutive month. Payment rates also improved after two months of declines.

Delinquencies give the credit card companies an estimate of how much they should set aside in reserves to counteract potential losses. The rate was 6.12% in last October, up from 5.79% in August. The total percentage of six to nine month delinquencies is up 11% from September 2008.

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PBS has posted an article that discusses new credit card regulations and their immediate affects. A new credit card act was passed last year and the rules took effect in February of this year. Some of the new regulations that protect consumers include:

• no retroactive rate hikes;

• statements must be mailed 21 days before payment due date;

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Our friend Denise Richardson, of givemebackmycredit.com, has posted an article about new regulations placed on credit card companies. However, creditors aren’t willing to back down so easily and are finding creative ways to bypass losses of revenue that the new rules, that came into effect on February 22 of this year, might cause.

The new regulations include:

Unfair rate increases and the universal default clause have been eliminated. This means that if you are late on one bill, a different creditor cannot use that to justify an increase in your interest rate. It also means that creditors cannot hike up the interest rate on a whim.

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Our friend Denise Richardson, of givemebackmycredit.com, has posted an article with five common mistakes that consumers make when transferring debt. Transferring your debt from a high interest credit card to a new card with lower interest should raise red flags. Following these five tips will help prevent you from having to pay more money and going further in debt as well as saving your credit score.

1. Closing the Original Account:

After transferring the balance to a new card, you should refrain from completely cancelling the account. 15% of your credit score is made up of the length of time you keep accounts. Cancelling accounts will lower your credit score and change the way it’s calculated.

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MSN Money has posted an article about “secret” ways that lenders keep track of your credit score and gauge what kind of customer you would be. Credit scores aren’t the only things that companies look at.

“You’re being judged by the type of transactions you make, how you pay your bills, how much profit you generate for your lenders and a host of other factors.”

This type of information is used to determine things like:

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