Discover Debt Freedom!

Are you holding a lot of points or rewards on your reward credit card?  If so, you may want to carefully consider turning in those points or redeeming the rewards that you have earned soon.  With new credit card rules going into effect, the price of redeeming those credit card perks may increase dramatically.

The Reason For The Changes

The reason why the redemption of credit card perks may be changing is partially due to the new credit card rules that are taking effect.  Previously, the banks were raking in lucrative fees from individuals that overdrew their bank accounts, went over their credit limit on their credit card, or neglected to get their credit card payment to the bank on time.  Because of the massive amounts the banks were bringing in with these fees, they could afford to be generous to their loyal and responsible credit card holders by offering them rewards for using the company’s products.

The new credit card laws that are currently taking effect has the potential to severely cripple the bank’s abilities to cash in on the problems of their most troubled borrowers.  The banks can no longer automatically enroll all of their customers in “overdraft protection” that allows the bank to charge a $29 to $39 fee for each instance of going over the balance available for the account and they can no longer raise interest rates at any time for any reason and apply the increase to the entire balance of the account.  Because these lucrative options for making huge amounts of money with little effort have been taken off of the table by the federal government, the banks are now looking for other ways to keep their profits high.

What You May Expect

Many of the changes coming to rewards credit cards that have been talked about in the media lately are things that many cardholders may not have noticed until the change affected them personally.  Increasing the amount of points needed for the redemption of items such as tickets, home appliances, and gift certificates is one way that many banks are planning on changing the redemption rules.  Another method is reducing the amount of time that a person has to earn these points before they expire, allowing the bank to decrease the number of large redemptions that they process while simultaneously eliminating points that they would have eventually had to redeem by allowing them to expire for no credit at all.

Other changes may be noticed much more quickly.  Another change being discussed is increasing the annual fee that is charged to the accounts of people with rewards credit cards.  Many of these credit cards were issued to credit card holders with good credit histories and often have a very small or no annual fee attached to the credit card.  In order to increase their profits, the banks may choose to implement annual fees on all credit cards, including rewards credit cards, to recoup some of the money that they will be losing on overdraft charges.  Although this may seem unfair to the people that have always paid their bills on time and have been good customers of the bank, to the banking industry its just business and they have a responsibility to their shareholders to maximize their profits.

In the last decade, many credit card issuers have found college campuses to be very lucrative to their business.  Many campuses had their students flooded with credit card offers from credit card companies across the nation and large numbers of students applied for credit cards to assist them in paying for everyday purchases and entertainment around town.  When the new credit card rules issued by the federal government went into effect, the methods that credit card companies were allowed to use to market on college campuses and to students changed dramatically.

No Direct Marketing On College Campuses

In the past, students that were signing up for classes or attending orientation could walk past a credit card marketer set up in the hallway of the school dispensing brochures and applications to any student that was interested.  Some companies even used free sandwich coupons and free t-shirts to lure more students to their tables to complete their credit card applications.  A student interested in a credit card could sign up on the spot and expect to receive the credit card in the mail within the next two weeks. 

The ability of credit card companies to market on college campuses has been severely limited in the new rules taking effect.  Credit card marketers can no longer set up shop in the campuses areas frequented by students, such as outside the cafeteria or in front of the student union building, to entice the students on campus to sign up for their credit card products.  The new rules do not restrict the mailing of credit card offers to students living in campus dorms.

Restrictions For Those Under 21

There are also new restrictions in place for the issuing of credit cards to individuals under the age of 21.  In the past, any person over the age of 18 could apply for a credit card simply by filling out the application and returning it to the credit card company.  Now, all applicants for credit cards that are under the age of 21 will have to meet more stringent requirements in order to obtain the credit card.

The first new requirement is that applicants under the age of 21 must have an independent source of income that is verifiable that can be used to pay for the charges made on the credit card.  In the past, the only thing that the credit card companies asked for on the applications was the household income of the person that was applying for the credit card, which may or may not have included the personal income of the person applying for the credit card.

If the student applying for the credit card does not have an independent source of income for paying the credit card, then they must have a parent co-sign for the credit card, which makes the parent equally responsible for ensuring that the credit card payments are made.  If the parent has co-signed for the credit card, then their written permission will be needed for any credit limit increase that is authorized for the credit card.

Over the past year, negotiations have occurred and laws have been passed dictating what would be fair and equitable practices by the credit card issuers and the people that use their products.  Now, some of the changes discussed over those long months are beginning to take effect.  Although the majority of the changes will be phased in at intervals to prevent a dramatic upheaval of the credit card industry, the changes that are taking effect now should help begin leveling the playing field between the credit card issuers and the consumers holding the credit cards.

Interest Rate Limits

One of the changes currently taking effect is the new implementation of a federal law limiting interest rate increases.  In the past, any credit card issuer could raise the interest rate of any customer for any portion of their credit card balance at any time.  This ability was typically spelled out in tiny print in the middle of long, confusing credit card agreements and was generally ignored by the card holders until they found the interest rate for their credit card dramatically raised with no explanation.

Under the new rules in effect, the credit card issuer must now give you 45 days notice of their intent to raise the interest rate on a portion of the balance or the entire balance of your credit card.  If you decide that you will not accept the interest rate increase, you have the right to refuse the increase and pay off the balance of the credit card under the old terms, although you will no longer be allowed to use the credit card for new purchases. 

There are some exceptions to this rule.  The credit card company does not have to give the required 45 day notice if they are raising your interest rate due to a payment default on the credit card.  Many credit card companies have reserved the right to raise the interest rate charged on the balance of the credit card account if the account holder is late with or misses a monthly payment for the credit card.  Other exceptions to this rule include the expiration of an introductory interest rate or if the credit card has a variable interest rate tied to an index.

Interest Rate Increases

The credit card companies are now barred from raising the interest rate on the credit card within the first calendar year of the account holder opening the account (unless it is a variable rate credit card or the card holder is in default of the credit card agreement).  This would prevent the credit card companies from using a low teaser rate to entice customers to sign up for their credit card products then dramatically increase the credit card rate soon after the person begins using the credit card.  If an introductory interest rate is offered, it must be clearly communicated as an introductory rate and must be in place for at least 6 months before the interest rate can be raised to typical market rates.

Interest Rate Application

One change to the interest rate rules that many credit card account holders are applauding is the changes to how an interest rate increase is applied to the balance of the account.  In the past, the credit card companies could significantly increase the interest rate charged to the account and apply that interest rate increase to the entire balance of the account.  Now, any interest rate increases will apply only to the new charges made after the increase has been implemented, with the previous balance of the account paid under the interest rate that was in effect when the charges were made.

Many credit card companies are advertising deals on balance transfers to their cards and some of the deals sound great on the surface, but it can be difficult to tell whether the balance transfer terms that the company is offering is right for you.  There are several different things that you can look at to determine whether the balance transfer would be beneficial for you in the long run for your debt management plan and if the company is truly offering a good deal.

The Interest Rate
The most common reason to transfer a credit card balance from one credit card to another is to take advantage of a lower interest rate.  This can be a tricky process as some credit cards will offer a low interest rate or 0% interest rate on the balance that is transferred, but the interest rate for new purchases is higher than the interest rate for the old credit card.  It is important to read all of the terms and conditions of the new credit card and compare them to the information for the old credit card to ensure that you are getting the best deal.

Fees And Charges
Some credit card companies charge a fee for transferring a balance onto their credit card.  Typically, this fee is around 3% of the amount transferred or $30 for each $1000 transferred to the new credit card.  These fees should also be taken into consideration when attempting to determine whether a balance transfer will be financially beneficial.

Company Reputation
Some individuals make the mistake of transferring large balances to credit cards run by obscure credit card companies because they think that they are getting an amazing deal on the balance transfer.  Credit card companies have a great deal of power over the credit cards that they issue and many include a clause in the terms and conditions that allows the credit card company to change the interest rate for the credit card for any reason at any time.  Less reputable companies are generally more likely to use a low initial interest rate to lure in new customers and then raise the interest rate charged unexpectedly in the future to increase their earnings.

Transferring a credit card balance can be a good way to improve your financial situation and can be very beneficial if done correctly and for the right reasons.  By taking the time to research different offers and compare them to each other, you can ensure that you are getting the best deal possible on a balance transfer.

The popularity of credit cards has risen in recent years and now many individuals carry at least one credit card in their wallet or purse.  These credit cards are issued by banking institutions and come with various rates, terms, and rewards, which are determined by the individual’s credit score and the personal preference of the individual applying for the card.  Because of the numerous types of credit cards available, it is important to look at the features of the card to determine which ones are right for your needs.

Credit Card Varieties

Banks offer a wide variety of credit cards to account holders and card members throughout the United States.  The most frequently obtained type of credit card is the general purpose credit card, which is used by the general public to make common, everyday purchases.  The banks issue both MasterCard and Visa branded general purpose credit cards that can be used anywhere that Visa and MasterCard are accepted.

Another popular type of credit card issued is the reward credit cards that allow individuals to earn points towards travel and merchandise or cash back rewards.  Some credit cards offer a cash back reward that is typically 1% but can be as much as 3% for certain purchases, such as the credit card that gives card members 1% cash back on all purchases, except those made at gas stations which earn a 3% cash back rate.  This cash back can either be reissued to the credit card as a credit to lower the balance of the account or be sent to the card member as a check to be used however the cardholder sees fit. 

Payment Methods

There are generally two ways to make a credit card payment.  The first method is to wait until you receive your credit card statement in the mail and then mail back the payment check or money order along with the account information portion of the credit card statement.  These payments must be mailed days ahead of the payment due date to ensure that the payment is received and logged before the due date to avoid a penalty charge and an interest rate hike.

The other method of payment for the credit cards is to make the payment online at the bank’s website.  If you have a checking or savings account at the bank that issued the credit card, the funds can be taken directly from your account and applied to the balance on the credit card.  This ensures that your payment will not be late due to delays in the mail or mailing the credit card payment out too late.

No matter what your credit needs may be, there are bound to be credit cards that are right for your situation.  Credit cards are accepted almost everywhere and can provide you with the purchasing power that you need in nearly every situation.

In anticipation of stricter regulation of credit card products by the federal government, many credit card issuers are increasing the interest rates, fees, and other charges associated with using the credit cards in order to “beat the clock” on regulation.  While this may help the credit card issuer’s bottom line, it is hurting the large number of individuals that are carrying a balance on their credit cards by snagging a larger portion of their income for paying down the credit card balance.  If you are finding that you are paying far too much in credit card fees, here are some simple ways to bring down the amount.

Minimize Credit Card Use
Although many credit card issuers offer rewards for increased usage of the credit card, using a credit card for routine purchases can be a recipe for disaster.  These rewards can entice individuals to use their accounts to pay for more items more often, creating a higher balance on the account that will be subject to fees and interest payments.  It is smarter for the person to use the credit card as infrequently as they can and to pay cash for small everyday purchases to decrease the amount of the balance of their credit card.

Make Sure Payments Are Timely
Making a payment on the credit card late gives the credit card issuer many different opportunities to impose fees on you.  The first fee charged against the account will be a delinquent payment fee, which could be as high as $39 for each occurrence.  This charge can be added to the account by the credit card issuer even if the payment is only a few hours late or is delayed in the mail.  If the delinquent payment penalty fee increases the account balance to the point where it is over the credit limit, the credit card issuer can justify charging an over-limit fee to the balance of the account, which adds another $39 fee to the total balance.

Avoid Interest Rate Increases
Many credit card issuers use any missed payment to dramatically increase the interest rate for the account to the highest allowable limit, which could be as much as 30%.  To avoid these tactics and extortionate fees, a person should make their payment for the credit card as soon as they receive the bill to make sure that the payment will be received on time.  Many credit companies have an option where you can pay your bill online, which posts the payment to the account by the next day.  When the transaction has been completed, you will receive a receipt indicating that the transaction has been processed and that posts the date that the payment will post to the account.

Every time you go to the check out line at certain retailers, you hear a specific script being read asking you if you would like to save a percentage off of your purchase by signing up for a store credit card.  Employees at these stores are required to ask anyone that is not already paying for their purchases with a store credit card if they would like to spend several minutes applying for a credit card and approval can typically be granted within a matter of minutes.  But are these store credit cards really the deal that they are advertised to be?

The Discount
In most cases, the company will give you 15% to 30% off the total price of your purchases on the day that you are approved for the store credit card.  More generous stores will also send you discount cards and gift certificates throughout the year as an appreciation gift for using the credit card in their store.  The amount received is generally based on the amount that you spend in the store.

Unfortunately, the interest rates that are charged on these store credit card are often much higher than the interest rate charged by banks and the major credit card issuers.  This means that carrying a balance on these credit cards can end up costing you much more than you are saving in discounts from the store.  If you are making a major purchase that will take you several billing cycles to pay off, it may be cheaper to place the purchase on a different credit card and forgo the discounts the store is offering.

Balance Limits
Store credit cards will generally have a much lower balance limit than general purpose credit cards.  This can cause harm to your credit score as the percentage of credit you are using for each of your credit cards factors heavily in the calculation of your credit card.  It is much better for your credit score if you place the purchase on a credit card with a higher limit than maxing out the store credit card.

Convenience
One of the biggest drawbacks to the store credit card is that it can only be used at a specific retailer.  This is good if you tend to do all of your shopping at that store, but people that shop with several different retailers often must get a different credit card for each retailer, which leads to multiple payment dates and an increased chance that you will default on one of the cards to trigger a higher interest rate and late charges.  Many people prefer to obtain one credit card with a higher limit that can be used anywhere rather than multiple store credit cards that can only be used in one place.

There are many factors that can affect your credit card interest rate but there are three that have the largest effect on the interest rates that you are given.  Everyone that uses credit cards or are thinking about obtaining a credit card should have a basic knowledge of how credit card products work and learning what you can do to ensure that your credit card interest rate remains low is the best way to save a great deal of money and maintain an excellent credit score.

Credit History

One of the most important factors in determining an individual’s credit card interest rate is the individual’s credit history.  A person’s credit history creates an account of all the times that the individual has made a late payment on one of their credit accounts or missed it completely.  This is an indication of your level of responsibility to the credit card company and how much of a credit risk you will be.  The higher the risk of lending to you, the higher the interest rate that they will charge you will be.  Late and missed payments show up on your credit report for as many as seven years after the actual incident and the only thing that can erase it is the passage of time. 

Length Of Credit Profile

Another factor that may affect your credit card interest rate is the length of time that you have owned credit cards or other credit accounts.  Credit card companies tend to reward long term customers by lowering the interest rates on their credit cards.  There are two different ways to obtain a lower interest rate based on the length of your credit profile.  In some cases, the credit card company will decide to lower your interest rate because of a routine review of your credit card account, but in other cases the interest rate was lowered because the account holder called the credit card company to request that their interest rate be lowered because of the length of time they have had the credit account and their ability to keep their account current.

Percentage Of Credit Used

The third factor that influences your credit card interest rate is the percentage of available credit that you are using at the time of opening a new credit card account.  A household that uses more than 30% of their available credit is considered a credit risk and will be given a higher interest rate than households that use less of their available credit.  When it comes to getting the best credit card interest rate, understanding credit cards and the way they work is the best way to obtain the interest rate that you want.

For the past year, our representatives in Congress have been working on legislation that will curb some of the worst abuses in the credit card industry and protect consumers from predatory practices a little bit more.  These rules have been proposed before and some were even included in legislation that passed this past May, but Congress wants to enact these rules and add a few more to make sure that their constituents are being protected.

Curbing Unexpected Interest Rates
The new rules would protect consumers from unexpected and unwarranted rises in the interest rates charged to their credit accounts.  The card issuer would be prohibited from increasing the base interest rate charged to the account for the first year after the account has been opened.  They would also be prohibited from increasing the interest rate on an existing card balance, with new interest rate increases applying to only to new charges on the account.

Curbs On Over Limit Charges
The new rules would restrict the practice of enrolling all card holders into the credit card company’s “over-limit protection service” which enables the credit card company to pay for charges that go over the person’s credit limit and charge a hefty transaction fee for each charge they approve.  Under the new rules, the consumer would have to approve each charge that would go over their credit limit and agree to the charge that will be levied against the account.

Curbs On Additional Fees
Many of the subprime credit cards that were issued in the past few years included significant fees that were charged to the credit card before the credit card was sent to the customer.  The new rules would restrict the amount of fees a credit card company could charge to the credit cards of subprime borrowers.

New Age Restrictions
Because of the number of issues occurring with the credit accounts of those between the ages of 18 and 21, new rules would prohibit credit card issuers from opening a credit account for anyone under the age of 21 unless they meet specific criteria.  The person that is applying for the credit account will have to supply supporting documentation that illustrates their ability to make the required payments for the credit card.  If they are unable to provide this documentation, then they must have a parent or other co-signer on the account with them taking responsibility for the account.

Finding the best student credit cards can be difficult if you are not sure where to look.  There are many credit card products available that are marketed to students in order to help them with their expenses while they are away from home.  There are many options available for a person to obtain a student credit card, but finding the best one may take some time.

The Features Of The Credit Card

It is important for the person to compare credit cards to be sure that they are getting the best credit card that they qualify for.  Most credit cards geared towards student have the same features as a traditional credit card and are used to help the student build their credit history before they will need to use credit to make major purchases.  Each credit card will have slightly different features that may make them a better choice for a person with specific needs.

Some credit cards have preset spending limits that will not allow the student to spend more than a predetermined amount while other credit cards are linked to the parent’s credit card to prevent overages and declined transactions.  Some of these credit cards even offer rewards points for the things that students use the cards for the most, such as groceries, movie tickets, and music cd’s.  By reviewing these features carefully, the student can determine which credit card provides the best value and can choose the one that rewards them in their preferred way.

Carefully Review The Terms And Interest Rate

Different types of credit cards will have different interest rates and terms associated with the credit card.  The goal is to get approved for the credit card with the lowest interest rate and the best terms.  A lower interest rate can save the person hundreds of dollars each year, which is significant when considering that these credit cards may be used by the person for many years.

When applying for student credit cards, always take the time to review the terms and conditions of the credit card to be sure that you understand the fees that are associated with the credit card.  Also included in the terms and conditions are the types and amounts of fees that will be charged to the credit card, the interest rate for the credit card, how the interest rate may change, and the fees associated with non-purchase transactions.  To get the best student credit cards, all of these features should be taken into account because these features can affect the way the credit card can be used.