Credit Secrets & Tips

Unexpected rate hikes. Over-limit fees. Double-cycle billing. Those are just a few of the credit-card practices that have trapped millions of consumers into a life of constant worry over mounting debt.

In less than a week, these practices will be history.

On Feb. 22, 2010, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) takes effect.

It puts forth new rules for credit-card issuers that are arguably the most consumer-protective in the history of credit cards.

If you’re the type of person who reads every piece of mail sent by your credit-card companies, then chances are you already have a fair idea of the changes coming. (Credit issuers have been mailing out change-of-terms notifications that explain the details in recent weeks.)

Then again, credit-card rules are hardly ever simple — and the CARD Act is no exception.
Below are the key changes that the new law puts forth, along with some notable exceptions that could still allow consumers to get in trouble with their credit cards

Finance Charges, Interest-Rate Hikes and Notifications

• No rate increases for the first 12 months after opening an account.
• Rate increases can only be applied to new charges.
• Annual and application fees cannot exceed 25% of your initial credit line.
• No more double-cycle billing.
• A six-month minimum promotional-rate period.
• No more over-limit fees, unless the card holder opts in.
• No fees to make credit-card payments online or over the phone, unless you make a payment on your due date.
• Must give 45-day notice of pending rate or fee hikes or any other significant changes to credit-card terms.

Billing Statements, Payments and Disclosures

• Billing statements must be sent 21 days before the due date.
• Your due date should be the same date each month.
• Payments are considered on time when received by 5 p.m. on the due date or the next business day after a holiday or weekend.
• Payments above the minimum must be applied to the highest-rate balance first.
• Each monthly statement must include information on how long it would take you to pay off your balance if you make minimum payments only and the total you’ll pay, including interest and principal; and how much you need to pay each month in order to pay off your balance in 36 months and the total you’ll pay, including interest and principal.
• Statements must also include a warning that by making only minimum payments you will pay more interest and it will take you longer to pay off your debt, as well as a toll-free number to call if you want to be referred to a credit-counseling service.

College Students and Young Adults

• No credit cards for college students unless co-signed by a parent or they can demonstrate “ability to pay.”
• No credit-limit increases if you are under 21 and have a co-signer without that co-signer’s permission.
• No credit-card marketing and freebies on college campuses.

The holiday shopping season is in full swing. Whether you’re shopping online, by phone or at the mall, chances are you’ll use a credit card for some of your purchases.

Here’s some tips to keep in mind when you shop:
 
1. Keep track of all your spending
 
Incidental and impulse purchases add up. Remember credit cards are just like loans -you have to pay what you owe.

Owing more than you can repay can damage your credit rating. That can make it hard to finance a car, rent an apartment, get insurance, a job - even send flowers.
 
Pay your bill on time, and in full, if possible. If you don’t, you’ll have to pay finance charges on the unpaid balance - and it takes forever to get caught up if you just pay the minimum. 

2. Keep an eye on your credit card and account number
 
* Never lend your credit card to anyone.

You’re responsible for paying the bill. Any problems with the bill can damage your credit rating.

* Don’t sign a blank charge slip.

Draw a line through blank spaces on charge slips above the total so the amount cannot be changed.
 
* Never put your account number on the outside of an envelope or a postcard.
 
* Be cautious about disclosing your account number over the phone unless you know you are dealing with a reputable company.
 
* Carry only the cards you anticipate using to help prevent loss or theft.
 
* Report your lost or stolen credit card or ATM card to the card issuers as quickly as possible.

Many companies have toll-free numbers and 24-hour service to deal with such emergencies.

Follow up with a letter, including your account number, when you noticed the card was missing, and the date you first reported the loss.

3. Keep good records
 
Save your receipts. Compare them with your monthly bill. Promptly report problems to the company that issued the card. Usually, your statement will provide instructions for
disputing a charge. 

If you order by mail, phone or online, keep copies or printouts with details about the transaction, including any warranties, or return and refund policies if you’re not satisfied.

You should have the company’s name, address, phone number, the date of your order, a copy of the order form you sent to the company or a list of the items ordered and their stock codes, the order confirmation codes and the ad or catalog from which
you ordered. 

You maybe carry at least 3 or more credit cards. Do you know what these digits in your credit card number mean?

Well, I can give you an idea. Although phone, gas and department stores have their own numbering systems, “ANSI Standard X4.13-1983″ is the system used by most national credit-card systems.

Here are what some of the numbers stand for:

The first digit identifies the type of card. For example,

- 3 is T&E cards
- 4 is Visa Card
- 5 is MasterCard
- 6 is Discover Card.

The structure of the card number varies by credit card system:

American Express - Digits three and four are type and currency, digits five through 11 are the account number, digits 12 through 14 are the card number within the account and digit 15 is a check digit.

Visa - Digits two through six are the bank number, digits seven through 12 or seven through 15 are the account number and digit 13 or 16 is a check digit.

MasterCard - Digits two and three, two through four, two through five or two through six are the bank number (depending on whether digit two is a 1, 2, 3 or other).

The digits after the bank number up through digit 15 are the account number, and digit 16 is a check digit.

 

 

Now, pull out one of your credit card, see if your can decode your credit card number.    

The best protections against card fraud, of course, are to know where your cards are at all times and to keep them secure.

The following suggestions can help you protect your credit card accounts:

1. Sign your card — as soon as you receive it! Always keep in a safe place a record of your card numbers, expiration dates, and the telephone numbers of each credit-card company for the emergency of reporting losses.

2. Never give your credit card number over the telephone unless you initiated the call.

3. Never put your account number on the outside of an envelope or on a postcard.

4. Draw a line through blank spaces on charge slips above the total so the amount cannot be changed.

5. Don’t leave your PIN and account number from a discarded receipt could make you vulnerable to credit card fraud.

6. Don’t throw out your credit card statement, receipts or carbons without first shredding them!

7. Rip up carbons from the charge slip and save your receipts to check against your monthly billing statements.

If there are any mistakes or differences, report them as soon as possible to the special address listed on the billing statement for “billing inquiries.” Under the Fair Credit Billing Act (FCBA), the card issuer must investigate billing errors if you report them within 60 days of the date your card issuer mailed you the statement.

Pre-approved cards are the result of one bank who now has you as a customer, and sells your name to another bank or a series of banks so they can offer you their credit cards.

Here’s how it usually works:

Many smaller banks want to be credit card issuers but, because of limited facilities for credit card processing, it is sometimes difficult for a smaller bank to cash in on the credit card boom.

What’s been developed is an interconnect system where large banks will process credit card applications and issue the credit cards for the little banks.

For example, let’s say that Mini Savings & Loan wants to get in on the Plastic Pursuit.

However, Mini does not have the facility or the staff to process credit card applications and issue credit cards. What Mini has to do is contract the service with Maxim Bank.

Since Maxi has several banks that they provide this service to, Mini Savings & Loan is just a welcome addition to their roster of client banks for whom they process and issue credit cards.

When you apply for a credit card at Mini Savings & Loan, your application is actually forwarded to Maxim Bank who runs a credit check and, granting you have good credit, issues you your choice of VISA or MasterCard with Mini Savings & Loan’s name on it.

However, since Maxim is the issuing bank and it has your credit on their file, they can very well send you an application for their own credit card. They can also sell your name to their other client-banks who can offer you their credit cards on a pre-approved
basis.

Another source that sells your name is the credit bureau. Because they can program their computers to search for names of existing credit card holders with clean and healthy files, they can provide issuing banks with a premium mailing list of people to whom the banks can send pre-approved credit card applications.

The following tips are basic principles about obtaining and using credit cards that can save you some serious cash and keep you out of debt.

6. Always Shop Around

Don’t apply for the first “pre-approved” offer you receive in the mail or any for that matter. Do the research for yourself. There are plenty of sites such as bankrate.com that allow you to compare hundreds of credit card offers with a simple search. You’ll get the best deal by shopping around.

5. Read the Fine Print

The terms and conditions are the equivalent of the disclaimer you hear on car lot commercials. It cuts through the hype and reveals the true terms of the credit card such as what happens when you miss a payment and what you’re really getting from the rewards. Most terms are not that long, usually around one full page, it’s worth your time to read them.

4. Ask for a Better Rate 

Once you have been a credit card customer for a few months call them and ask for a better rate. They won’t laugh at you, they get hundreds of these calls every day and if you’ve been a good customer it usually will work. Credit card companies work hard to obtain you as a customer and they will work hard to retain you.

3. Pay Off Full Balance Every Month 

All credit cards have high interest rates compared to other types of loans. You should never plan to carry a balance on a credit card. If you must make a large purchase that you do not have the money for at the time, obtain a loan or a revolving line of credit from your bank. You will save a bundle on interest rates.

2. Do not get a Cash Advance 

This is the second worse thing you can do with a credit card, short of missing a payment is getting a cash advance. The cash advances usually come with a very high interest rate.

What makes it worse is the fact that with most companies this higher rate credit will not get paid off first, or even in the order that you took it out. They will apply your payments towards all the lower rate purchases and will only begin paying off your high interest cash advance will all other items on that credit card have been paid off.

1. Never, EVER Miss a Payment 

This is the absolute worse thing you can do with a credit card. Not only will you incur a late fee, but your interest rate will also skyrocket. In addition it will be a negative blemish on your credit report which can cause the rate on any other loans or credit cards you have to increase as well as insurance rates. It also makes you less likely to get approved for future credit.

1. Use them carefully 

Credit cards offer great benefits, especially the ability to buy now and pay later. But you’ve got to keep the debt levels manageable. If you don’t, the costs in terms of fees and interest, or the damage to your credit record, could be significant.

2. Choose them carefully

Don’t choose a credit card just to get freebies (T-shirts or sports items) or because there’s no annual fee. Look for a card that’s best for your borrowing habits.

Example: If you expect to carry a balance on your card from month to month, which means you’ll be charged interest, it’s more important to look for a card with a low interest rate or a generous “grace period” (more time before your payments are due).

3. Pay as much as you can to avoid or minimize interest charges.

If possible, pay your bill in full each month. Remember, paying only the minimum due each month means you’ll be paying a lot of  interest for many years, and those costs could far exceed the amount of your original purchase.

4. Always pay your bill on time

You’ll avoid a late fee of about $29 or more. But more importantly, continued late payments on your credit card may be reported to the major credit bureaus as a sign that you have problems handling your finances.

And if your credit rating gets downgraded, your card company could raise the interest rate on your credit card, reduce your credit limit (the maximum amount you can borrow) or even cancel your card.

Late payment on your credit card also can be a mark against you the next time you apply for an apartment or a job.

5. Protect your credit card numbers from thieves

Never provide your credit card numbers - both the account numbers and expiration date on the front and the security code on the back - in response to an unsolicited phone call, e-mail or other communication you didn’t originate.

When using your credit card online make sure you’re dealing with a legitimate Web site and that your information will be encrypted (scrambled for security purposes) during transmission.  Click here for more tips about how to protect yourself when you shop online.

Major credit card companies also are offering more protection by providing “zero-liability” programs that protect consumers from the unauthorized use of their card.

In general, only give your credit card or card numbers to reputable merchants or other organizations purchase.

The lenders often look for 4 basic things when you apply for the credit:

1.  Good payment record

If you pay your bills on time, you’ll score major points with lenders.

If you have a lot of late payments, this can hurt your chances of getting a card, and, if the lender decides to issue you a card, it’s probably going to have a higher interest rate.

2.  Signs of stability, responsibility

Lenders perceive things such longevity in your home and job (at least two years) as signs of stability. Having a respected profession doesn’t hurt either.
 
3.  Control of debt load

Lenders generally want to see that you are a good credit risk and that you aren’t living beyond your means.

Experts say non-mortgage credit payments each month should not exceed more than 20 or 25 percent of your take-home pay.

4. Reduce credit inquiries

Whenever you apply for a credit card, the lender will pull your credit report from one or more of the major bureaus as part of the approval process.

Each time a report is pulled, it’s marked as an inquiry and stays on your credit bureau report for two years.

Lenders perceive several inquiries on your report as indications that you’re scrambling for loans and may consider you a poor credit risk.

Bt following above 4 points, your chance to get approved for the credit is much improved.