Credit Card Ideas Answers Your Most Frequently Asked Questions (FAQs)
Question of the week
How Can I Transfer Reward Points? When Is It Worth It To Transfer?
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How and when to transfer points depends on the nature of the reward points you have accumulated. Some cards transfer the reward points automatically into your account (i.e., airline cards Chase, United Citi, AA, Amex,Delta, Chase, British). Other Reward points must be transferred to the air line that you wish. When you have an interest in a specific airline,simply call the credit card company and ask them to transfer to your frequent flyer account to that specific airline. But if possible leave your reward points with your credit card company account until you’re ready to transfer to a specific airline.
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There are two primary aspects to be aware of before you get a credit card:1.Concerning the credit card company,it is important to use your credit cards in a predictable manner and within a pattern that conforms to your income. Do not suddenly make any uncharacteristic purchases or changes to your spending pattern. For example, if your credit line limit is $5,000 don’t immediately charge $4,000. Such radical charges will send up a red flag and the chances are that the credit card company will suddenly place a hold on your card and either ask for proof of your income or permanently terminate your card. The wise thing to do is to use the card carefully and gradually build up your credit with the company. It is advisable that if you foresee an unusually high transaction or plan on traveling to call ahead and advise the company of this in advance. 2.Another area of concern with a new card relates to your credit report. A third of your credit score depends on the open balance of the last statement! This means if a person has, for example, the best credit,which is a Score of 800,but his balance is high, it will most likely result in reduction of his credit score by a third.Such a reduction translates to a score of 560 –which is considered a very low a score;few companies will approve any additional credit with this score. In fact, there is a strong likelihood they may close your accounts altogether. A high balance means that one spends more than 30% of her credit limit. If the balance is lower than 30% it will not result in an unfavorable rating. This 30% translates to$300 of every $1,000. If, for example, your credit limit is $5,000 don’t allow the balance to exceed $1,500. If you must use more than 30% make sure not to apply for any additional credit that month to avoid causing a further drop in your score. Even with the best card credit score plays a major role in whether the company decides to lower your limit or close your card.
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With a card that has no limit (i.e. a card that requires full payment each month and has no Limit, as is common with American Express cards) the rule of 30% does not apply. The credit reporting bureaus don’t include the usage of these cards in the FICO score equation. However it is not advisable to use these cards excessively, as it characterizes you as a careless spender. In addition, it can be easy to over spend and then have trouble paying the debt off at the end of the month.
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When it comes to even the best card credit is not the only consideration, you want to look at interest as well. A late payment can cost you credit score points, but also fees and extra interest.Make sure that your payment arrives before the due date every month. If payment is done by mail, send it a few days in advance. If you make a payment by phone or online you may be able to pay on the due date, but this varies from company to company. Make sure to pay by phone or online before the cut-off time (each bank has a different cut-off time). Cut-off times as of late 2014 were:Discover -5: 00pm ET, Barclays -7: 00 ET, Citi - 11:59 PM ET, American Express 10:00 PM ET, Chase 8:00 PM ET [Automated, 11:59 by representative], Bank of America 11:59 ET. Also, if your credit card company has a branch in your area, walk in payment is also an option. Again, you need to consider the cut-off time, but usually it falls within bank hours. Most credit card companies calculate interest by day, so there is some advantage of paying before the due date. In addition, if you wait too late you run the risk of forgetting or having an unforeseen situation prevent your payment. A good suggestion would be to pay the minimum payment due immediately when the bill arrives, and the full balance before the due date.So even if you forget to pay on the due date it won’t affect your credit and you won’t be charged late fees.Remember, if you pay off a balance during the grace period you usually pay no interest.
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Never lend your credit card to others. Unfortunately,people perceive borrowed credit card charges less responsibly than a regular loan.However,an excuse that someone else used your card will not be accepted by the credit card company. The card holder is solely responsible for the charges.
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Each card is different. It is always worth the time to call and request to waive the annual fee. Many times the company will waive the fees. Usually, if you are persistent you can succeed, but there’s no guarantee. Some credit card companies will waive the fee if a certain amount is transacted within the full year.Some credit card companies offer to utilize the reward points for the annual fee payment.
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If the minimum payment is not received on time your credit will usually not be affected right away, but interest will continue to accrue, and will show on the next month statement. You may also be charged a late payment fee, which ranges from $25.00 – $35.00. Also, interest rate will most likely increase as the APR increases. All these charges can add up fast. It is worth it to note that if you have sometimes missed making a payment on the due date all is not lost! To the contrary - pay ASAP! Firstly, because if payment is received before 30 days after the due date your late payment will not appear on your credit report.Secondly, if you call your credit card company with a valid excuse they may waive the late payment fee (usually this is a one-time only consideration).
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The interest Rate is interest that the bank charges for borrowed money. Usually, credit cards have a grace period, that is the time before the due date of the bill, during which if the entire balance is paid there will be no interest charges.But on the part that is not paid interest is assessed. Calculation of interest is as following: A card that has, for example,a 14.99% APR, means that on every hundred dollar balance you carry on the card you will pay an extra 15 dollars a year (One thousand dollars = $150.00, and so on). This is divided per day and is accrued daily then added to the monthly statement.Each month will have a different interest charge as there are different numbers of days in each month. It is worth it to note that if the goal of your credit cards is to accumulate reward points, interest may wipe out any value of the reward points. A bit of advice: Open a credit card account only if you know that you’ll pay the full monthly balance on time.
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The best way to accumulate rewards points depends how often you use your cards. The larger the amounts you spend the more reward points you will earn. But if you don’t have too many expenses that you can pay with credit cards, the best method is to take advantage of credit card company offers for bonus reward points for opening new cards. Sensibly opening new credit card accounts, with the right offers, can earn maximum reward points with minimal spending. However, it is not advisable to open more that 4-5 accounts per year; therefore discretion is advised and you should always apply wisely for the best offers only.
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A closed card adversely affects your credit. Therefore, a card that with no annual fee isn’t worth closing. A card with an annual fee may also be downgraded;do call your bank and ask for options to downgrade your card. For example, if you have a “Chase Sapphire Preferred” which has an annual fee,but you are not using the card, request that Chase"change" the card to a simple Chase Sapphire (not Preferred), which has no fee. By doing so it will not be considered a closed card or adversely affects your credit. Or, as mentioned above, you can request the credit card company waive the annual fee. Do not make a pattern of closing cards; doing so in order to reapply for the same offer again is not worth it.Regarding credit score, it does depend on how many cards are open,but bear in mind that the age of a card contributes much to the credit score. You should therefore keep your oldest card that doesn’t have an annual fee open, even if it does not offer any reward points. In addition, when a card is closed it minimizes your credit limit and as a result your balance to available credit ratio increases, which results in a decrease in your credit rating. However, if you have enough open cards and you close a card from time to time it will not harm your credit score. Therefore, it is advisable to close unnecessary cards that carry annual fees.
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A foreign transaction fee is a separate fee charged for using your credit card abroad. For example, if you used the card in a European country, and the dollar is at 0.75 euro (for every hundred dollars you receive 75 Euros), and you purchased items for 75 Euros, the credit card transaction maybe $100 plus a 3% ($3.00) Foreign Transaction Fee. Many cards nowadays don’t charge a Foreign Transaction Fee, and experts predict for those charges to be eliminated completely as the world becomes more global.
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Yes, it matters how much you spend and what you spend it one. Different cards give you points in different ways, some giving a mile per dollar, others a fraction of a mile for dollar. Many credit card companies offer double or triple reward points on different categories(2-3 reward points for a dollar and up to 5). Sometimes, you need to sign up for these offers, so call your specific card company for detailed information.
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A cash advance is using an ATM to withdraw cash from your credit card account. It is never advisable! Fees are applied,and the interest is assessed immediately unlike purchases which start to accrue interest only beginning the next billing cycle, if not paid in full. If you have an emergency and need to withdraw you will usually need a PIN number. But sometimes you can go inside the bank and take a cash advance without a PIN, as long as you have identification.
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A charge card is a card that is required to be paid in full at each month. It usually carries a larger credit line. It is primarily geared towards business purchases, but American Express does offer a charge card for Personal use.
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A Business credit card is designed specifically for commercial use.Companies use these cards to pay for large ticket items as well as steady purchases and payable. The best business credit cards will allow you to accumulate personal frequent flyer miles while spending company money; just check with your company to ensure this is allowed. It is important to clarify two reward points regarding a business card: 1) The approval of credit and the liability of such cards is on the person applying for the card not the entity utilizing the card. 2) The card does not show on your credit report as long as payment is timely, and the balance vs. limit ratio does not apply.
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Businesses pay a processing fee to the credit card company for each transaction. American Express (Amex)is perceived as having the highest fees; therefore, some businesses refuse to accept Amex. Another reason may be that Amex has stringent policies for approving merchants to accept Amex charges, thus not all merchants qualify to accept Amex cards.
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In general, the larger online shopping outlets have strong assurances and encryption (that scramble your credit card numbers) in place that protect you from identity theft. However, with smaller outlets it is better not to divulge your credit card number, especially not over the phone. Other than this, there is not a lot that you can do. It is very important to review your bills from fraudulent or suspicious activity. If you see any charge you don’t recognize call your credit card company to report it immediately. If you call in a timely manner you will not be held liable for these charges. Also banks now have systems in place that intercept suspicious activity and contact the cardholder.
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It may not be that important or imperative to have a credit card, but it is a very convenient tool. If want you once buy a house and you want to apply for a mortgage you need good credit and three credit card accounts for at least three years.If you want to lease or purchase a car on loan, apply for a business loan, etc. you need good credit. Having credit cards, and using them responsibly, helps you to build credit. In addition, renting a car and hotel room is easier with a credit card. Aside from that, the reward points accumulated can add up to several thousand dollars a year! If you have a million dollars in savings then perhaps you don’t need credit.
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As explained above, having a good credit and ample credit card limits has its advantages. You can make thousands in reward points when you accumulate wisely. However, a person who knows that he may miss payments and only ruin his credit should shy away from credit cards and opt for a debit instead.
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There are three steps you can take to improve your credit standing. 1. Open credit cards with banks that offer small credit limits of $300-500 for people with no credit history and gradually build your credit by using and paying in accordance with the above-mentioned guidelines. 2. Open a secured card. Secured cards can help you manage your credit and spending limits, however they do require a cash collateral deposit which then becomes the credit line for that account. The good news is that your monthly payments will be reported to the major consumer reporting agencies, ensuring that your account history is reported to your credit profile. 3. Become an Authorized User. Getting added as an authorized user on a friend's or family member's account may seem like a no-lose situation. Credit is extended freely, and payment is someone else's responsibility. In some cases, authorized users with limited or bad credit are able to use that status to build their own credit, as the credit history of the account owner can be reported on the authorized user's credit report. (If you're an authorized user, check with the credit bureaus to be sure the card is being reported on your credit report.)
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What to look for before applying for a card depends on the potential usage and the objective of the card. As a rule of thumb look for the card that offers the best bonus reward points and the least fees. Check out our credit card guide for more information.
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In a nut shell, here are the five most important factors that go into figuring how a credit card will affect credit scores: 1) Payment history - if you pay on time (This makes up about 35% of your score). 2) Balance vs. Limit ratio – if your balances are less that 30% of your overall credit limit (This makes up about 30% of your score). 3) Credit History - How long you have sustained your favorable credit history (This makes up about 15% of your score). 4) Newly obtained credit - how much of your total credit is recent. It may show that your financial health is not at its best (This makes up about 10% of your score – along with inquiries). 5) Types of credit - credit cards, car loan, mortgage; the greater the variety the better for your credit (This makes up about 10% of your score).
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A good credit score is generally considered to be 760 or higher. Lenders, however, can each have different standards for what they consider to be a good credit score, so it‘s important to keep building your score to receive the most favorable interest rates and highest rates of credit approval.
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The optimum credit score, your FICO, is not available for free. You can only get it from your financial institution; sometimes when applying for credit you will get a reply with acceptance or decline and with the explanation there is may be your credit score. However, you are entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Order online from annualcreditreport.com, the only authorized website for free credit reports, or call 1-877-322-8228. You will need to provide your name, address, social security number, and date of birth to verify your identity. You may buy your FICO score at MyFico.com.
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A hard pull is triggered when you actually apply for credit. Hard pulls, or “hard inquiries,” do affect your credit score (This is part of the 10% of your overall credit score). Soft pulls, or “soft inquiries”, often occur without you even knowing about them and they do not adversely affect your credit score.It is usually the credit card company itself reviewing your credit and determining whether to offer you any additional credit card offers.
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It is a Federal Crime to overstate your income on a credit card application. You can face decades in prison, millions of dollars in fines and your credit will be blemished for a life time.
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This depends on how strong your credit is. New credit and credit inquiries affect credit scores. Each time you apply for a credit card, the card issuer pulls a copy of your credit report, and this inquiry ends up on your credit report and temporarily dampens your credit score. As stated above,new credit and inquiries accounts for 10 percent of your score. A single inquiry every few years will not hurt your score, but it's better to avoid inquiries for credit you don't really need. Opening too many accounts within a short period of time is generally viewed as a sign that the person may desperately need credit, and that's considered a big negative. As a general rule do not apply for more than three cards within a six month time frame.
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Credit card companies offer lucrative reward points to its cardholders to entice you, the consumer, to use their card for your purchases. Credit card companies profit by betting on the consumer to leave open balances and then charging them interest. They also profit by charging a few percent to the merchant when the card is used.
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Miles and rewards points are basically the same thing. They are just two aspects of the same concept. Miles are a type of rewards points specific to airlines. Rewards points include any kind of point account system given by companies as a reward for doing business with them. This includes hotels, rental car companies, department stores, etc. For the consumer, the key is to keep track of what you have with whom and to know which points can be turned into miles.
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For the same reason that certain shirts, cars and electronics are worth more than others. Each type of reward point is worth what you can get for it. And some programs offer better deals than others.
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You can use them for airline tickets or other purchases, or you can sell them for cash. You will find nothing in the legal code at any level that prohibits the sale of rewards points or miles. The airlines, however, outright forbid the sale of miles and if they find out you have sold them they may close your accounts.
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