Saturday, August 8, 2009

Should I Close My Unused Credit Card Accounts?

Consider this example: You have 5 credit cards total. Four of those cards have been active for 5 to 8 years. Your fifth card is a new card that you just received with 0% on balance transfers and purchases for 15 months. You are excited upon receiving your new card, and feel that you should close the other four accounts in your name, since you no longer want to use them.

FICO-wise, this is not a good decision. When FICO computes your score, it now sees only a two-month credit history, rather than your 5 to 8 year history, and consequently, your FICO score will suffer.

You are better off leaving the other four cards open with a zero balance and placing them somewhere that you are not likely to access or use them. The 5 to 8 year history that you worked hard to build will continue to work in your favor only if the accounts remain open.

Keeping those four other cards open also lowers your available credit ratio, which is very important from a creditor's viewpoint. Suppose you do close the other 4 credit card accounts and only use your new card. If you reach the maximum credit limit on the new card, then your debt ratio is now 100%. Why? Your other accounts are now closed!

Furthermore, leaving unused accounts open is a good idea simply because credit card companies will often apply special offers and low or 0% interest rates to dormant accounts. Credit card companies want dormant accounts to be used, as it is cheaper for them to entice holders of dormant accounts to begin using them again, than it is for them to obtain new account holders.

why Blue Hippo is a giant SCAM

Problem 1: you need to buy a new computer, but you don't have a credit card to be able to buy one. Even better, you want that shiny new Dell or Gateway laptop computer, but it is beyond your reach.

Problem 2: you signed up with Blue Hippo to get a new computer, and they haven't sent it, even though you have already made the necessary payments.

Plain and simple, Blue Hippo is a scam. The total number of payments that you make to get your Blue Hippo computer far exceed the true value of computer and all of the "free" stuff they send along with the computer.

Search google and you will find plenty of complaints about Blue Hippo. They are predatory lending at its best. See some comments here at this page: http://www.standardsandgrudges.com/2006/07/12/the-blue-hippo-scam

Okay, now I have you convinced that Blue Hippo is a scam, but you still can't get a computer because you don't have a credit card, or a checking account with a debit card.

Here is the solution: Go to http://www.yocredit.com/cards.php?catid=13 and get a stored value prepaid cash card. This is not one of those secured credit cards, but rather a rechargable prepaid Visa or MasterCard that works just like a checking account with a debit card.

Take the $40/WEEK payment that you would have been paying Blue Hippo, and instead, load it onto your new stored value cash card.

In 3 months, your new stored value cash card has a balance of $480, which is plenty enough for a new computer from Dell. The best thing is that you bought it yourself, and without paying too much for it!

Even better yet, some of the stored value cash cards report to your credit report, so you build good credit just by using the card!

Check out the stored value Visa and MasterCard products at http://www.yocredit.com/ today!

How to raise your FICO score

The rewards of raising your FICO score directly impact your wallet: You will qualify for more loans and will be offered better interest rates. Here are a few things you can do to raise your FICO score, which in turn, saves you money on your interest rates on loans:

Correct blatant mistakes. Review your reports from all three credit bureaus for accuracy once a year as well as several months before applying for a loan. Report any inaccuracies to the credit bureaus so that they may be corrected or removed. Changing a mistake on your report takes time. Get your federally mandated, free credit report at http://annualcreditreport.com and start the process on removing any inaccurate data.

Pay your bills on time. This makes up a whopping 35% of how your FICO score is calculated.

Reduce your credit card balances. A heavily weighted factor in your FICO score is how much money you owe on your credit cards relative to your total credit limit.

Raise your credit limit. A large portion of your credit score is determined by calculating how big your monthly bill is compared to the maximum amount of credit you can use. To make this debt-to-credit-limit ratio look even better, call up your credit card issuer and ask for the limit on your card to be increased. If you have been paying your bills on time, they will gladly do this for you.

Do you need a new 0% interest credit card? If so, then go to http://www.zeropercentcards.com

Visa Black Card

Are you looking for the ultimate credit card to put in your wallet? Always looking for something exclusive? Then look no further than the Visa Black Card!

For those who demand only the best of what life has to offer, the exclusive Visa Black Card is for you. The Black Card is not just another piece of plastic. Made with carbon, it is the ultimate buying tool.

The Black Card is not for everyone. In fact, it is available to only 1% of U.S. Residents to ensure the highest caliber of personal service is provided to every Cardmember.

Become a Black Card member today and enjoy our 24-hour world class Concierge Service ready to assist you with all your business, travel and leisure needs.

Multi-Purpose Credit Cards

May Reasons for people to carry a wallet filled with different credit cards. You know, credit cards are way better than carrying money, jut imagine if there are no credit cards at all how would people's pockets look like ? particularly how would people's arses who put their wallets in the back pocket would look like !!

Back to the reasons behiJustify Fullnd having more than one credit card. Reasons might be:

* Some people like me are addicted to shopping from everywhere, stores nearby or even from Internet. So to avoid sending money by post and waiting zillion days for your shopping to come home it's easier for them to pay through the credit card, seconds of waiting time and bingo.

* Some people fear carrying money because of the crimes related to wallets robbery. If a thief is willing to steal my wallet for the credit cards it might have then I say go for it. You can easily call your bank and stop all the credit cards in a moment, but you can't call the bank to stop the money of being used, can you ?

* Others love to show off. Seriously, I once met this guy who while we were talking he opened his wallet to show me how many credit cards he got !!!

* One of the main reasons of having many credit cards is to separate powder quotes. What powder ? Heroin and Cocaine. Yes you read that. I once woke up in the morning and entered the toilet to find out that there is a credit card next to the mirror. This card was washed and it was badly used from one side only. I grabbed this card and looked at it closely and here we go, inside the tint numbers and letters from back of the card there was powder. I am not expert with this kind of powder nor even tried it before, however I knew it was the "Misery" powder. What else could it be ? I don't think the guy was using it to open a baby powder bottle, or even to make bread from scratch.

I might discover other reasons of carrying credit cards in the future, until then I will take my credit cards and go for shopping.

Should Credit Card Rates Freeze?

While President Obama met with executives from the leading credit card companies yesterday two senators have called on the Federal Reserve to immediately implement an emergency freeze on interest rates tied to existing balances on credit cards.
The Federal Reserve plans to put a new set of rules in effect for credit card lending beginning July 2010 but that’s an entire year from now.
In the meantime Senators Chris Dodd (D-CT) and Chuck Schumer (D-NY) wrote a letter to the Federal Reserve Chairman Ben Bernanke and other regulators saying that companies are increasing interest rates now before the new rules go into effect so Americans need help now.
“Consumers describe situations to our offices in which the interest rates on their accounts have doubled or tripled overnight, without any misconduct on their part,” the letter says. “This kind of practice clearly violates the spirit and intention of the rules, even if the delayed implementation date has the effect of making such behavior legal.”
Congress is currently developing legislation that will rearrange and organize the Fed’s new rules but they still have a way to go.
After meeting with 14 executives from companies like Bank of America, Wells Fargo and Visa, President Obama said that his administration would work with Congress to evaluate proposals for reform.
“We’re at a time where issues of credit and how businesses and families are able to finance everything from a car loan to a student loan to just paying their bills every day is on a lot of people’s minds,” President Obama said. “We want to preserve the credit card market, but we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with.”

The card executives at agreed to work with the Obama administration to address the President’s concerns according to the American Bankers Association, and are currently working to implement the Federal Reserves’ new rules.

The Situation of College Debt

Business Week recently published an excellent collection of articles (by Jessica Silver-Greenberg) examining the increasing use of credit cards by college students. The series sheds light on some of the situational sources of the escalating debt loads of college graduates, one component of a wider debt and and bankruptcy epidemic. Over the next several weeks, The Situationist will offer a series of posts excerpting portions of the Business Week collection. This post begins with “Majoring in Credit Card Debt.”

Some 75% of college students have credit cards now, up from 67% in 1998. Just a generation earlier, a credit card on campus was a great rarity. For many of the students now, the cards they get will simply be an easier way to pay for groceries or books, with no long-term negative consequences. But for . . . a growing number like him, easy access to credit will lead to spending beyond their means and debts that will compromise their futures. . . .

Critics say that as the companies compete for this important growth market, they offer credit lines far out of proportion to students’ financial means, reaching $10,000 or more for youngsters without jobs. The cards often come with little or no financial education, leaving some unsophisticated students with no idea what their obligations will be. Then when students build up balances on their cards, they find themselves trapped in a maze of jargon and baffling fees, with annual interest rates shooting up to more than 30%.

The major credit-card companies take great issue with the criticisms. Bank of America (BAC), Citibank (C), JPMorgan Chase (JPM), American Express (AXP), and others say they are providing a valuable service to students and they work hard to ensure that their credit cards are used responsibly.

college-orientation.jpgThe banks also make the point that students have to be responsible for their own actions. They are the ones, after all, who sign up for cards and then choose to use them.

* * *

In most cases, an unemployed person would have a hard time getting a credit card, especially one with a five-figure credit line. Consumer advocates say that banks have modified their practices for college students, because they’re vulnerable and their parents will usually bail them out.

[B]anks often change the rates they charge cardholders as their credit scores change. Students’ credit scores can plunge particularly quickly, with one or two missed payments, because their track records are so short. One common practice is called “universal default.” Under universal default, a student who has two credit cards and faithfully makes timely payments on one, but misses a payment on the other, can find that the interest rate he’s being charged has been raised to 30% on both cards. . . .

All of this is disclosed in cardholder policies. But students, like many other people, don’t read the fine print. . . . The average credit-card contract can be 30 pages long, and it’s littered with legal jargon in tiny type. “You tell me how any college student can understand the terms of a card, and make rational choices when the agreements themselves are unreadable,” says Elizabeth Warren, a law professor at Harvard University. “It’s like selling toasters and handing a consumer wiring diagrams.”

[M]any college students have no fear about credit cards to temper their spending. They tend to be optimistic about the future, anticipating that once theycards.jpg get out of school they’ll have a good job and plenty of money. Credit-card ads often echo this optimism with some showing students smiling into the distance as if glimpsing the blissful days ahead.

Students also live in a culture of debt. Many of them are borrowing tens of thousands of dollars to go to school, tapping low-interest loans to pay tuition. “The primary way we help students pay for college is by telling them to take on more and more student loan debt,” says Tamara Draut, director of the Economic Opportunity Program at Demos. The message is clear, she says: “Debt is O.K., and you are going to have lots of it.” In that context, Woodworth and other students think little of charging another $50 for dinner or groceries.

from The Student PIRGSCredit-card companies say that they put a heavy emphasis on financial literacy. They distribute materials and make information available online to help students become savvy consumers, while helping them to build a good credit score in the long term. “Each one of our new student account holders receives our Student Financial Handbook, an easy-to-use guide for understanding the basics of managing their finances, including how to balance a checkbook, how a credit card works, and so on,” said Bruce Hammond, president of card services for Bank of America . . . .

. . . . “Education alone isn’t going to solve the problem,” says [Travis] Plunkett, of the Consumer Federation of America. “Credit-card companies are subtly shifting the burden to students when they talk about credit education programs. The companies should not be targeting a population who are not in a position to handle credit wisely.”

The learning curve with credit cards is steep, and there is little room for trial and error. Mistakes made in college can haunt students long after graduation. Their credit scores can have an impact whether they get their job of choice, whether they qualify for an apartment, and even whether they have to pay more to get their utilities turned on.

For superb blogging on credit, bankruptcy, college expenses, and related challenges to middle-class Americans, be sure to visit Warren Reports. For previous Situationist posts on the popularity, but inefficacy, of much information-based regulation, check out “The Situation of Ethical Consumption,” and “FDA Wants Informed Choice.” For other posts discussing the role of “optimism bias,” read “Some (Interior) Situational Sources of War – Part II” and “Self-Serving Biases.”

More credit card worries

Further to last week’s post about credit card debt, here’s an interesting nugget from the British Psychological Society’s research digest.

Hundreds of participants were given a credit-card bill with an outstanding balance of £435.76 and asked how much they could afford to pay off, given their real-life finances. Crucially, half the participants were shown what the minimum compulsory payment was and half weren’t.

The presence or not of information about a minimum payment didn’t affect the proportion of participants who said they’d pay the balance off in full. However, among those 45 per cent of participants who said they’d pay only some of the bill, the presence of information about the minimum required payment had a dramatic effect on how much they said they’d pay.

Among the partial payers, those who saw information on the minimum required payment (which was £5.42) said they’d pay off 70 per cent less than those who didn’t see information on the minimum payment.

It also turns out that people who pay more than the minimum but less than the total every month are unconsciously influenced by the minimum require payment – the higher it is, the more they will pay, and vice-versa. The reason has to do with anchoring, a cognitive bias much studied by behavioural economists.

It’s well known that credit card companies make a lot of money from people who maintain outstanding balances but keep up-to-date with their minimum monthly payments, so I don’t suppose they will be too unhappy about this particular finding. By advertising a low minimum payment they can pull off the happy trick of appearing benevolent and making more money. But for the many people who rely on credit cards, these are not trivial results – the study’s author estimates that in practice people could end up paying double the amount of interest they need to, simply as a result of this biasing effect.

This is a nice illustration of how behavioural economics can shed light on issues of practical importance – rather as the authors of this year must-read, Nudge, have been arguing. (Needless to say, nef was ahead of the curve on this particular trend.)

Credit Card Payment

Credit card payment is a payment mode wherein the credit card holder buys goods and services with the promise to pay it later to the credit card company. With this idea, the use of credit cards all over the world has been widespread. Credit cards are easy and convenient solutions for shoppers since it allows purchase of products without having to shed money immediately.

Most people buy with credit cards to avail some perks such as paying through installment plans with 0% interest. This is really appealing to customers since they can purchase products without having to pay the price in bulk. Some shops and credit card companies even offer freebies and gift items when a customer buys using credit card. Other companies offer reward points every time a customer uses credit cards. Points earned depend on the amount of the purchase made and the accumulated points can be converted to different gift items like the latest gadgets and gizmos or a vacation trip out of the country.

Since the use of credit card is now prevalent; stores, shops and restaurants feel the urge to accept credit cards as a mode of payment from their customers. Also, even some hospitals are accepting credit cards these days.

Providing crucial financial protections for many Americans, including minority businesses

Last week the U.S. House of Representatives passed the Credit Cardholders’ Bill of Rights - a common sense financial system reform and consumer protection. This bill provides tough new protections for consumers facing excessive credit card fees, sky high interest rates and unfair agreements that credit card companies revise at will.

This bill is important to the establishment and growth of minority businesses because a greater proportion of minority-owned firms are started or acquired by using credit cards (10 percent of firms) among other sources of capital, compared to non-minority firms (9 percent of firms), according to MBDA’s “Characteristics of Minority Businesses and Entrepreneurs.” (March 2008)

This finding suggests minority entrepreneurs are more likely to finance long-term liabilities with short-term debt that often carries higher interest rates.

Of all the minority-owned respondent businesses, Native Hawaiian and Other Pacific Islanders and American Indian and Alaska Natives had the largest proportion (13 percent and 12 percent respectively) that used credit cards for the same purpose compared to non-minority firms.

MBDA’s Access to Capital Initiative is focused on increasing the availability of credit and investments in minority businesses. The current tightened credit market threatens to halt the growth and expansion of minority-owned firms in neighborhoods and communities throughout the United States – impacting both job and wealth creation.