Cash Smart USA

In the wake of the subprime meltdown, credit card issuers are decreasing credit limits. Even those credit card users with good credit scores and very solid credit histories are getting caught up in the fray.

American Bankers Association says even people with credit scores of at least 720 are not immune. The lending standards of 65% of domestic banks have tightened on credit card loans. There is a sense of fear among credit card issuers, who are questioning the viability of the large financial institutions in America.

American Express has reduced the credit lines of at least 50% of its credit card holders.  Before the subprime meltdown, approximately 20% of their customers experienced cuts during their periodic reviews.

Lower credit card limits will shrink a consumer’s ability to spend.  Medical issues or temporary unemployment will leave consumers with less credit to cover these kinds of costs and consumers who carry credit card balances will, most likely, see their credit score drop, since 1/3 of a FICO credit score is influenced by how close you are to your credit card limit.

A sound suggestion is to do everything you can to lower your credit card debt.  Carrying credit card debt is not a good thing to do, especially these days.  A credit card company who is looking to reduce credit lines looks at those consumers with big balances and worry that you may not be able to pay your tab.

Some things to consider:

1. Watch the mail you receive

· Look for 0% balance transfer offers that come and take advantage of them

· Credit card issuers must notify you before they lower your credit limit

· Review monthly statements for any changes (i.e. a lower credit limit, any interest rate spikes or any new penalties)

2. Check your credit report

· Credit card issuers will review consumers’ credit reports for any ‘red flags’ (i.e. late payments to other credit card companies, sudden build-up of high credit utilization rates, or sudden build-up of debt)

· Check your 3-in-1 credit report for free at www.cashsmartusa.com – if there are any errors, report them to the three major credit bureaus: Equifax, Experian, and TransUnion

3. Sign up for online alerts

· To help prevent over-the-limit fees on your credit card, ask your credit card issuer if they offer an ‘on-line alert’ that will notify you as a cardholder that you are nearing your credit limit

4. Shop around

· If your credit limit is decreased, do not cancel your credit card as this will decrease your credit score

· Shop around for other credit card offers that are more attractive with lower or no interest rate – one website where you, as a consumer, can compare credit card offers is www.cashmartusa.com/credit cards

“I don’t have any credit cards because I don’t want to get into debt.” “Financing a home is the worst thing you can do!” It just blows my mind when I hear people say such things! Now don’t get me wrong, I agree with these statements if they are made by someone who may have a legitimate addiction to buying things on credit or have no business buying a home because of their unstable income. I’m talking about grown adults who think renting is the safest way to live, or those who think that anyone with a credit card is irresponsible when it comes to money.

The need for good credit is everywhere. Whether you’re looking to buy or rent a car, finance a home, or even get a new job, everyone is looking at your credit to determine if you’re a good “risk” to loan to. And for those who think renting is the safest way to live, I compare it to driving a car without insurance. A man in my aunt’s apartment complex was recently diagnosed with cancer. He was going to need to spend months in a hospital and then move to a rehab facility. With the mounting medical costs and not needing to live at the apartment anymore, he requested to break the lease without penalty. The apartment complex denied his request and sent him a bill for nearly $10,000 to break the lease.

Now don’t read into this and think I’m saying this is his fault for not buying a home, but after hearing this story (and numerous other like it for that matter), why wouldn’t someone finance a home? If something similar happened to someone who financed a home with mortgage insurance, they would be released of their obligation to make their payments and, in most situations, have additional funds available to help pay the medical fees.

“But I can’t afford a home,” you may be saying. I can understand that, but have you looked? In the current state of this economy, home ownership is more affordable than it used to be. In many cases, the mortgage payment is lower than a payment on a monthly lease in the same neighborhood (sorry to burst your bubbles landlords). And with the equity it builds and tax breaks that are offered, many times it makes MORE financial sense to own a home. Although it does require some savings up front, if someone doesn’t have enough for a down payment, how are they going to pay for any unforeseen emergencies? They need to start finding where they can cut corners and save now!

Now, to the whole premise of this article: “But how do I achieve the good credit I need in order to get approved for such things?!” Well, with a little time and hard work, practically anyone can get the good credit they deserve.

I promised you a list, so here’s the list:

1. Start with one card. - Make a small purchase of something with an amount you know you can pay-in-full when you receive the bill in the mail. Pay the bill immediately upon receipt.

2. Go Secured - A secured credit card is a great way to get a credit card if you’re just starting out and can’t get approved for a regular card. How it works is you put down a deposit with a bank equal to your credit limit and the money acts as collateral. If you pay each bill on-time, the bank will begin increasing your credit limit. If you don’t pay your bills, the bank keeps your money and the account will be listed as another derogatory on your credit report.

3. No minimums! - Pay as much as you can beyond the minimum that your credit card requires you to pay.

4. Balance your credit card - View your credit card as an extension of your actual checking account. That way, you be less likely to get into more debt than you can handle.

5. Avoid the interest - Do not ever charge anything to a credit card unless you know you will have the money in thirty days to cover that charge. If there is a balance left after the monthly payment is made, you will have to begin paying interest charges as well.

6. Stay well under the limit - Whatever you do don’t max out a credit card. Doing so can actually hurt the good credit you are trying to establish. You will earn a much stronger credit score if you show restraint in using your credit card and keep your balance below 30% of your credit limit. Remember you are building your good credit slowly and deliberately.

7. Be careful during emergencies - If you do need to carry a balance on a credit card because of an emergency that has happened, do it right. Make at least the minimum payment, if not more, each month and just keep in mind that it will take longer to rid yourself of that debt and will cost you more money in interest charges the longer it isn’t paid off.

8. Consider before you close - If you have had a credit card for some time but do not use it - take caution if you’re considering closing the account. Closing the account can actually lower your credit score. When lenders look at your accounts, they look at the average age of those accounts. It’s better to keep the account open, but cut up the credit card.

The key to your financial well-being is knowing how to use your credit wisely and responsibly. And building a good credit history for yourself will save you money for the rest of your life.

Credit cards after bankruptcy are possible to obtain as some banks advertise to those with credit problems. Some lenders prefer that the bankruptcy is not recent and may not extend credit if it is. If an applicant has some good recent credit history then there is a better chance for him or her to be approved after bankruptcy. Some lenders only approve credit cards after bankruptcy for consumers who agree to a secure account. The consumer deposits money into an account to cover any charges made. This provides some security to the lender and helps the consumer to rebuild his or her credit.
One of the main reasons that a consumer might want to apply for credit cards after bankruptcy is to rebuild credit. However, this may not be wise for the person who can not be disciplined with finances. Lenders that approve people with poor credit for a charge account often do so with extremely high interest rates and other high fees. For the consumer who can not be disciplined with finances there are financial counselors who can help. A consumer would be wise to learn how to live on a budget so that financial problems are not repeated.
For those consumers who can be disciplined with credit cards after bankruptcy obtaining one account might help to rebuild credit. The main goal is to obtain one that has a very low limit and does not have a bundle of fees. Pay off the balance in full each month to avoid having to pay the high interest charges and do so within the terms of the contract to avoid penalties. Use the account only for emergencies and do not be tempted to raise the credit limit. Making the payments on time every month and keeping the limit low will raise the consumer’s credit scores.
Credit cards after bankruptcy can make it easy to make purchases online. A card is much easier to keep up with than carrying cash around and it is easy to see where the money is going when the statement comes each month. Most banks today offer debit cards that can be used as credit cards and the availability of funds is based upon the balance in the checking account. The only thing is that these are not reported to the credit bureaus so they do not help to rebuild credit. For the consumer who is interested in applying for credit cards after bankruptcy more information can be found online by doing a search.

A credit card introductory rate that is considered desirable will include a low fixed rate preferably with zero percent for the first six to twelve months and the option of transferring high interest balances from other accounts. Sometimes these types of offers come with rewards and special features that make them even more appealing. Some include cash back rewards, frequent flyer reward points, rental car insurance, travel insurance, and extended warranties on some purchases. The banks that offer points allow the customer to gain points on certain purchases and then redeem them on airfare, hotel, cruise offers, and rental car expenses. To qualify for an account that has no annual fee and low interest the applicant will need to have a good to high credit score.

An important consideration for choosing the right credit card offer should include how the interest rate is affected with cash advances. The credit card introductory rate may not apply to cash advances since a higher rate is often used to calculate interest charges. A consumer would do well to ask questions and read the conditions of the agreement before applying for a charge account. Finding out how the finance charges are calculated can save the consumer from suffering with regret later on. A consumer should also find out when late fees apply and if being late with a payment could mean higher interest. Some banks automatically raise the interest rate even if the customer is one day late with a payment. Payments are usually due every 25 days.

The best way to avoid interest charges is to pay the balance on the charge account every month. Paying the minimum monthly payment will automatically cause interest to be figured on the remaining balance with very little of the payment being applied to the principle. A person should not be tempted to charge each month more than he or she can pay off. Keeping the limit maxed out and only making the minimum monthly payment could mean delays in paying off the purchases for years.

Some revolving charge accounts have many fees associated with them. These include cash advance fees, balance transfer fees, over the credit line fees, late fees, maintenance fees, annual fees, and even administrative fees. A credit card introductory rate may include zero interest for 6 months but there may be other charges and fees associated with it that make the offer unattractive. Individuals shopping for a credit card account would do well to talk to an account representative about possible fees associated with the account.

Three types of accounts associated with revolving charges include premium, regular, and secured. A premium account normally includes a high credit limit, lower interest, cash rewards on certain types of purchases, travel insurance, and other benefits. Premium accounts may offer a credit card introductory rate of zero percent for up to 12 months. A secured account is usually set up for the benefit of the creditor to ensure payment for high risk individuals who have low credit scores. This involves the customer opening up a security deposit account. The amount in the account is how much the customer can charge. A regular account does not usually require a security deposit but has higher interest and lower charging limits compared to a premium card.

Consumers who have difficulty exercising restraint with credit cards should consider carefully before acquiring one. Even one with a low credit card introductory rate may not be a good idea because eventually the interest will go up and the monthly payments will have to be made on time or late fees, higher interest, and over the credit line fees will apply. A person needs to learn to exercise discipline and restraint in the present so his or her future will not mean a path of indebtedness and possibly lead to bankruptcy court. Use some wisdom about acquiring credit and remember that though it may be fun buying things on credit the end result is anything but fun and instead can be a heavy burden to bear.