Whether you plan to travel now or in a year, you should take steps to protect yourself from identity theft and credit card fraud while you’re on vacation. Tourists are often victims of theft, including passport and credit card theft—both of which can compromise personal information. Thieves can gain data by physically taking belongings the old-fashioned way or by hacking into your phone or computer.
By following these six tips before and after you travel, you could save yourself years or even a lifetime of credit and financial nightmares.
1.Notify Your Creditors of Your Travel Plans
Before you travel anywhere, call your credit card companies and your banks to let them know where you will be and when you plan to travel. Many banks and credit card companies keep track of your spending habits, so any purchases out of the norm may prompt them to lock down your account—this could be especially frustrating if you are out of the country and have no way of reaching your bank or credit card company.
If you do end up going overseas, find out the best way to get in touch with your creditors should your credit card or bank card get lost or stolen while you are away. Keep this information and all creditor phone numbers in a safe place that is separate from your cards—then you’ll have it on hand no matter what happens to your wallet or purse.
2. Set Up Email or Text Alerts
As you prepare to travel, subscribe to mobile email or text alerts. By doing so, you will be notified of all activity on your accounts. Receiving email or text alerts on your phone can stop credit card fraud in its tracks, since transaction information is sent to you almost instantaneously. This timely warning can help you resolve unauthorized purchases on the spot.
Whenever you travel, make photocopies of both the front and back of your credit cards. Give the copies to a trusted family member or friend at home. In the unfortunate event that your credit card is lost or stolen, you can quickly obtain all the information you need to cancel your credit card.
If you prefer to store copies digitally, you can scan and upload your copies to a secure cloud storage site, such as Google Docs or Dropbox. Should you access your documents while traveling, make sure you are connected to a secure network and not to an open Wi-Fi connection where hackers can steal your passwords and get into your accounts.
Whatever you do, do not keep copies in your luggage. Should your luggage get lost or stolen, you are putting yourself at risk for credit card fraud as your credit card numbers can be used to make fraudulent purchases.
4.Check Your Credit Card and Bank Accounts Often
If you haven’t done so already, sign up for online access to your bank accounts and credit card statements. Consider downloading the mobile apps for your bank and credit cards for easy and convenient access to your accounts. With these apps, you can not only view your bank balances and credit limits but also see all current transactions.
As soon as you see anything suspicious, immediately contact your bank or credit card company to report the questionable charge. Once you’re home, review the transactions from your trip to ensure you didn’t miss any unusual activity that should be reported.
5.Update Your Account Passwords and PINs
If you can’t remember the last time you updated your password or account PIN, it’s probably a good idea to do so now. Create passwords that are long and unique to each credit card and bank account. Updating your passwords and PINs may be a cumbersome task, but the time you take to do so will be well worth the extra protection and security.
6.Stay Alert at All Times
With the recent Equifax data breach, many are on high alert and constantly looking out for suspicious activity. But with time, people may grow lax and check their accounts less often—and this is when a credit card thief’s strike will hurt the most.
Some thieves may sit on your information in hopes of catching you unaware. So it’s important to continually monitor your credit and keep your files and important documents in safe and secure locations where thieves may not think to look.
If you’re thinking of taking a trip, use these tips to avoid credit card theft and protect your financial standing. Credit card fraud can be damaging if not handled properly, so don’t be afraid to check your accounts frequently or err on the side of caution. You can never be too careful.
Now that the Holidays are over, you might need a break from shopping. But, just in case you still have a touch of the shopping bug or you have to visit a store or two to return things any way, this month happens to be a strong month to save while you shop. Retailers bring in a lot of merchandise in anticipation of the holiday rush, and they will be anxious to clear space for spring merchandise if they have excess stock. While there will be sales on and off all month, the experts at deal site Slickdeals.net, found the majority of the deals peaking around mid-January during Martin Luther King weekend. Here’s what we know right now.
We expect the most robust sale category to be men’s apparel. Last year, more than 30% of the top deals at Slickdeals were in this category, from retailers like Nike, J. Crew Factory, Macy’s and Walmart.
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If you’re ready to start thinking about tax time this early in the year, it could be to your advantage. There are typically an abundance of tax prep and tax software deals from retailers like Staples, Amazon and Costco.
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Since the late 1800s, January has been the month of “white sales”, when all manner of linens go on sale. Many retailers participate, which means you can find bed and bath items slashed up to 60% off from stores like Kohl’s, Target, and Macy’s.
Macy’s:25% off winter weekend sale with code STYLE 1/18-1/21
It sounds cliché, but this is the time of year that we think about taking better care of ourselves. Last years’ resolutions may have fallen by the wayside throughout the year, and the snacks, drinks and sweets at all those holiday parties compounded the issue. It’s the perfect time to get back up on that horse!
Toys were hot during the holidays, but you probably won’t see many worthwhile toy deals this month. The good news is your little ones are probably set for a while with all of their holiday gifts.
Great deals on mattresses occur in February, when Presidents Day sales bring discounts. For instance, in 2017, Mattress Firm offered up to $500 off storewide. This year, Presidents Day is Feb. 19, so wait another month if you’re in the market for a new mattress.
If February is too soon for your budget, mattress deals will return in May, over Memorial Day weekend, and in September, over Labor Day weekend.
Your phone rings — and rings, and rings some more. You know who’s calling. You know what the caller wants, too, but you can’t afford to give the money you owe on your credit cards. So, you let the debt collector leave a voicemail you have no intention of returning.
That’s the wrong way to deal with delinquent credit card debt, says Michaela Harper, debt counselor and director of the Community Education for Credit Advisors Foundation in Omaha, Neb.
“Don’t be afraid to talk to your creditor,” says Harper. “Avoiding them makes the problem worse because it sends it onto the next division” and brings your debt closer to being charged-off, which Harper says consumers with past-due debt should do their best to avoid. (More on that later.)
Credit card debts — or most debts for that matter — become delinquent the moment you miss a first payment. The events that follow the missed payment depend on how long the past-due debt goes unpaid. It begins with friendly reminder calls from the bank to pay your credit card bill, and can culminate in losing up to 25 percent of your annual income to wage garnishment.
The portion of consumers missing credit card payments has been on the rise since the lowest levels of delinquent credit card debt ever recorded were reached two years ago. About 2.47 percent of credit card loans made by commercial banks were delinquent in the second quarter of 2017, according to Aug. 23 figures from the Federal Reserve Economic Database.
Below is a timeline chronicling what happens when you miss a credit card payment, as well as tips from debt management experts on what you can do to mitigate the situation at each point. (You can jump to a specific time period by clicking on the milestones below.)
Zero to 30 days past due: Missed a payment
After you miss your first payment, your debt is delinquent and the clock starts ticking. Your bank should begin to contact you to remind you to make a payment. You are also likely to incur a late fee.
The first 30 days will sound more like courtesy calls, says Randy Williams, president and CEO of A Debt Coach. In reality, the bank is trying to verify your address and personal information to update the system in case your debt becomes more delinquent. (Williams used to work as a bill collector before switching over to debt consulting.)
What you can do
At this point, the bank’s agents may be more willing to provide customer service, so you can ask for an extension or create a payment arrangement to address the past-due debt before the missed payment begins to impact your credit report, which can be as early as 30 days past due. You may also try your luck at asking if the bank could waive any late fees already incurred, although the creditor is not obligated to extend this courtesy.
There’s only so much leeway a bank will give you, says Gordon Oliver, a certified debt management professional at Cambridge Credit Counseling. If you’ve asked for a late payment or interest charge to be waived in the past, you won’t have much leverage.
“There will be different reasons why a creditor may not extend those benefits at the time, but usually those terms are for borrowers who are in better standing,” Oliver adds.
30 to 90 days past due: Collection calls begin
Over the 30- to 60-day delinquency period, the bank will attempt to reach you to collect the past-due amount on your credit card bill.
“This is when they are trying to figure out what’s wrong. They are trying to collect the money,” says Williams.
“At this point it’s starting to affect your credit,” says Williams. He says the robo-collection calls may come as often as every 15 minutes. Borrowers with higher credit scores are likely to see a bigger drop than borrowers with lower scores. According to FICO data, for example, a 30-day late payment could bring a 680 credit score down 10 to 30 points and a 780 score down 25 to 45 points.
In addition to seeing your credit score drop, you will be charged late fees on the past-due account. After you have owed debt for two payment cycles, the CARD Act allows creditors to flag you in their system as a “high-risk” borrower, which means the interest you currently pay will rise to whatever the bank charges for customers at a high-risk status. That number varies from bank to bank but in some cases can get as high as 29.99 percent. The rate will stay that high at least until you have made six consecutive on-time payments, at which point the bank is required by law to reset the rate.
However, “the law doesn’t say they have to do it on their own,” says Harper. So, you will likely need to request a reset. You can find the APR charged to high-risk borrowers in your credit card terms.
What you can do
Harper says if you respond at this point, the bank may ask you to negotiate a payment arrangement.
“Never make a promise to pay that you can’t keep just to get someone off the phone,” says Harper. “If you are silent, you agree to the payment.”
Missing promised payments also gives the bank more leverage if the bill eventually goes to court, says Harper. “If they walk into court and they can point to all of the promised payments, it undermines your credibility.”
Harper advises debtors to be very clear if they cannot meet the bank’s proposed payment arrangements. You need to specifically tell them you cannot make the payments. If possible, take a look at your budget. If you find you are able to send them a small amount every month, tell them.
“That’s a valuable thing because it goes back to when the account charges off. You can slow down your progression toward charge-off by making the partial payments,” says Harper.
A charge-off happens when a creditor believes there is no chance of collecting your past-due debt, so the debt’s considered a loss. The debt gets written off the creditor’s financial statements as a bad debt and sold or transferred to a third-party collection agency or a debt buyer.
“If they feel like it’s a tough situation [you] are going through they will refer [you] to a credit counselor” around the 60- to 90-day mark, says Williams. Again, that benefit may not be extended to all consumers facing financial hardship.
90 to 120 days past due: Bank requests balance in full
After your bill is 90 days overdue, the bank will turn collection over to its internal recovery department to engage in more aggressive collection attempts. Williams says the bank will now be calling for the balance in full, not only the past-due amount.
The bank’s collectors will continue to call, but they may also send you multiple letters every day, or may attempt to reach you via social media, emails or emergency contacts.
Harper says the account may stay with the bank’s internal collections for another 90 days (180 days past due), but it’s important to note that at the 120-day past-due mark, your debt is at risk of getting charged off and being sold to a third-party collection agency.
That’s because the CARD Act states the past-due amount needs to be the equivalent of six months’ worth of your credit card’s minimum payment in order for the debt to be charged off. Including late fees and the amount added in higher interest payments, consumers may reach that figure in as little as four calendar months.
What you can do
If you can’t give them the entire past-due amount or balance in full, take a serious look at your budget. See if there is any room to make even a small payment. If you can find a few dollars, you may be able to enter a repayment plan with the bank, which will at least pause the collection calls. Don’t forget to leverage the collector’s insider knowledge. Explain your situation and ask if you can negotiate a solution with the bank.
“You want to pay off the debt, they want to pay off the debt. They may have solutions they can offer you that you don’t know about,” says Harper.
Once you’ve got an active repayment plan in place, the bank will pull you out of the collection list, Harper says.
120 to 150 days past due: Hardcore collection attempts
Watch your credit report carefully after your account becomes 120 days past due, as it may be charged off at any point. At this point, the collectors will continue to try every channel available to them to get in touch with you and collect on the debt. The attempts may get closer together and collectors may try more aggressive tactics to scare you into paying up.
“One hundred and twenty to 150 days, it is hardcore. Now they are going to offer you a settlement. They will do whatever they want to try and get to you to pay the debt off. It’s basically motivation to get you to pay now,” says Williams.
Debt collectors at this point may also take time to remind you of your rights under the CARD Act and Fair Debt Collection Practices Act as well as their right to collect on the past-due debt.
The bank’s collectors may not directly say they will proceed with legal action or wage garnishment if they do not intend to, as that is illegal under the FDCPA, but they may remind you of those possibilities if you do not pay and emphasize the bank’s right to collect on the debt owed to them, Williams says.
Williams adds, “They never say they are going to sue you; they say, ‘We have the right to protect our asset.’”
What you can do
Williams says at this point the debtor essentially has three options. Bring the account current by paying the entire past-due amount, arrange a debt settlement plan with the bank or try going to a credit counselor to create a debt consolidation plan.
“Near 120 days past due, they need to get some form of help to remedy the account before it goes to a charge off,” says Oliver, who adds that the timing the charge off will be difficult to predict.
For those who may be behind on several bills, Oliver also recommends getting some form of financial counseling to create a plan that addresses all your financial issues.
150 to 180 days past due: Last chance
At 150 days, collections efforts will remain aggressive and may even increase in frequency as the bank is now concerned about losing the debt to a charge-off.
Once your credit card payment is 150 days past due, you may start to hear the bank’s agents’ tactics shift as they may make a last-ditch effort to recover the debt, according to Williams.
What you can do
You will still have the options to pay the balance in full or reach a settlement with the bank, but you may have an additional option: Re-age your debt.
When your account is past due and you enter a re-age program, the late payments and collection activity are removed from your account. As a result, “your credit score may improve by 10 to 15 points if not growing every month from there,” according to Williams.
You will generally be asked to make at least three on-time payments on the debt before your account is re-aged. For example, the bank could ask you to pay $100 each month for three months before bringing your account back up to a current standing, but the bank will add the interest and fees you’ve already incurred to the total amount you owe. After the account is re-aged, you’ll go back to making minimum payments on the total amount of debt outstanding. Re-aging the account may also remove the “high-risk” stain from the account so your interest rate drops to to whatever it was before.
Williams says a re-age can be seen as a win-win for both parties: You are able to catch up on your delinquent debt and — in some cases — have its impact removed from your credit report, and the bank is able to recover the interest and fees that have accumulated since your account became delinquent.
Of course, the credit card company doesn’t have to allow you to re-age the debt and may not offer the option to you, but there is a possibility it will do so if you ask. Keep in mind you are only allowed to re-age an account once in 12 months and twice within five years, per federal policy, and re-aging is only an option on accounts that have been open for nine months or longer. Credit card issuers are allowed to set more strict re-aging rules for its accounts, as well.
After 180 days: Charged off to a third party
When you are about six months past due, it is extremely likely the bank will charge off your account and sell the debt to a third-party collection agency. If the bank does not charge off your account, it may take the matter to court.
If it goes to collection, third-party debt collectors may employ some of the same tactics the bank’s collectors did. Most collection agencies will push hard for the first 90 days, then at the end of that point in time they may decide to sue you, Harper says. Or they may sell your debt to another collections agency.
The third-party collectors will attempt to contact you using every channel available to them for the next 90 days or so, before they must decide to either charge off the debt or sue you. The collectors will likely demand you pay the full balance or ask you pay the balance in thirds, says Harper. If they can’t get a hold of you or get you to arrange a payment plan in that time, they may decide to turn it over to an attorney.
What you can do
You should try the same tactics that you would have used with the bank’s internal collections agency with the third-party agency, negotiating the price down and reaching a settlement with the third-party collector. If you don’t respond to the collection requests, you may be sued.
You may not be sued for some time. Companies can only sue you for unpaid debts within a certain period of time, called a statute of limitations — anywhere within three to 10 years, according to your state’s law. Your debt may be sold and resold several times before that happens. Check with the office of consumer protection at your state’s attorney general to find out what the rules are in your state.
If you are served with a lawsuit, you should check the letterhead to make sure the attorney or company filing the suit on behalf of the collections agency is licensed to practice law in your jurisdiction, says Harper, as you cannot legally be sued for credit card debt by an attorney outside your jurisdiction.
You should also be sure to respond to the lawsuit. If you don’t, you’ll likely lose. The court can automatically side with the lender if you don’t show up in court, also known as a default judgment. That may result in getting your wages or federal benefits garnished to pay the debt, not to mention the credit damage a judgment causes. Federal law states a creditor can garnish no more than 25 percent of your disposable income, or the amount that your income exceeds 30 times the federal minimum wage, whichever is less.
If you can’t afford to settle
If, given your current financial situation, the debt is unmanageable for you and you are not able to settle the account, you may want to consider bankruptcy. But you will have to file before a judgment is entered against you in court, which may be tricky to time, Harper says.
Given the difficulty in timing when the creditor will take your account to suit, you shouldn’t wait if you think bankruptcy is an option for you. Read here for more information on how and when to file for bankruptcy.
Are you trying to rebuild your credit? Fingerhut, an online mail-order retailer, says it wants to help you with its FreshStart program. It’s a new twist on the catalog card or magazine offers of yesteryear.
The program, which involves a special credit card used to shop from Fingerhut’s online product catalog, is designed for customers who don’t have the best credit. If that’s you, FreshStart could give you a second shot at proving your creditworthiness and qualifying for a regular credit card.
But does FreshStart deliver on its claims? First, here’s an overview of the program:
Good credit isn’t required. Do you have poor credit? With lenient application requirements, FreshStart could be a way to regain some credit traction.
You pay low payments and no annual fee. Unlike many credit cards, FreshStart has no annual fee and the payments tend to be low.
You may pay a high interest rate and other costs. If you don’t make your payments on time or don’t pay off the balance in full, you could be subject to FreshStart’s 25.90% annual percentage rate and other costs.
Your shopping power is limited. FreshStart lets you shop from Fingerhut’s catalog of products only; you can’t use it anywhere else. And you may be approved for only a small credit limit.
It’s not a traditional credit account. Although FreshStart lets you “graduate” to a traditional credit account after you pay off your balance, you don’t build credit with the major reporting agencies while you’re in the program.
How the FreshStart Program Works
How does FreshStart work, exactly? Fingerhut splits the program into three steps: order, pay off, and graduate. Once you’re approved for FreshStart, you place an order from the Fingerhut catalog for an item that costs at least $50 and at most your approved credit limit. You also have to make a $30 down payment. Once Fingerhut processes the order, your item is shipped.
For the next few months (the exact time depends on your program approval), you make payments toward the total balance on your account. Miss any payments and you risk paying late fees (up to $38 per incident) and interest—and you may not be eligible for a regular credit account.
If you adhere to FreshStart rules and pay off your balance, you’ll graduate to a traditional credit card account with WebBank/Fingerhut Advantage. This account lets you shop more often, build credit with the major monitoring agencies, and potentially qualify for credit line increases and other perks.
FreshStart resembles a more legitimate version of “catalog card” programs that are marketed as credit cards for rebuilding credit but can only be used to shop from the issuer’s catalogs. With those offers, the merchandise is often severely overpriced, and customers usually don’t benefit from these programs much because their credit scores scarcely change.
Fingerhut, on the other hand, has a popular catalog dating back to 1952. The catalog currently comprises over 700,000 items, including big brands like Sony, Dell, and KitchenAid. With its focus on issuing small credit limits to buy products, Fingerhut’s FreshStart program is often great for customers who have been turned down for the company’s Fingerhut Advantage credit card. From the company’s standpoint, it’s a brilliant move—shoppers with poor credit aren’t immediately turned away and Fingerhut gains a paying customer.
The Downsides of the FreshStart Program
Now for the costs. We’re concerned that some customers may focus on only the small down payment and monthly payments and lose track of how much they’ve spent in the long run. If you don’t pay off the balance within the set limits, you could pay high interest amounts. You’ll also pay up to $38 for late or returned payments.
Instead of saving money by purchasing an on-sale item, you could end up paying more than the item’s value by the time you pay off the balance. And with a 25.90% APR—which, honestly, is not unusual for a retail card or credit card if your credit is on the lower side—the potential costs could be higher than cards with the average rate of about 13% to 14%.
What’s more, you may not be able to get out of paying at least some interest on purchases. While Fingerhut says you can pay off your balance faster, the terms and conditions include this warning:
However, if you elect to pay your entire balance due at the same time as your down payment, then this will cancel your Loan and you may not be eligible to be considered for a WebBank/Fingerhut Advantage Credit Account. You may not be eligible to be considered for a WebBank/Fingerhut Advantage Credit Account if you die, file for bankruptcy, enter a consumer credit counseling service program, make any past due payments, or have any payments returned unpaid, or if you enter any other negative credit status.
Also, if you don’t read the offer carefully, you might miss the fact that you don’t build credit with any institution other than Fingerhut when using the FreshStart program. You must pay off purchases on time under this program before (possibly) graduating to a regular credit card. FreshStart isn’t designed as a way to build your credit with the major credit reporting agencies but as a way to build credibility with Fingerhut.
FreshStart Program Reviews
What do customers think about the Fingerhut FreshStart program? Unfortunately, when we searched for customer reviews, Fingerhut didn’t return stellar ratings. The FreshStart program has plenty of detractors online. We found several reviews that matched the tone of this one:
I opened a fresh start account. My credit increased due to opening a new account. Great! After paying off my items with every payment being 10 days early they closed and reopened a new fresh start account. Closing accounts decreased my credit by more points than the opening of a new account in the first place.
And this one:
Husband and I both have accounts, I pay at same time with one check and both payment stubs enclosed in envelope. They call me every time I use one check to make payment and say I didn’t make my payment, then charge late charge. Clearly it is marked on the check and both payment stubs are included. I do not always have the extra check that month to send, but regardless it is paid every month, I can’t wait till all accounts are paid and I will be DONE with this company!
Fingerhut also got into some trouble for its habit of using robocalls to solicit customers. A 2014 class action lawsuit against the company claimed that Fingerhut “negligently places multiple calls to consumers’ cell phones using autodialed robocalls, without prior express consent.”
So what’s our final take? If you love the idea of shopping from Fingerhut’s catalog and you can’t qualify for a traditional credit card, you may want to try the Fingerhut FreshStart program as a way to start building credit. It’s a good idea to limit yourself to a small purchase—perhaps something you’d buy anyway—and pay off the balance exactly on the program’s terms. Then Fingerhut may offer you its Advantage credit card that will help you build your credit with the major reporting companies.
If you’re shopping around for your next credit card, chances are you might come across a charge card. It can sometimes be difficult to know the difference unless you know the telltale signs. And if you choose the wrong kind and don’t use it correctly, you could end up in a world of financial trouble.
Charge cards aren’t too much different from credit cards, but there are a few key things you need to know.
What is a charge card?
As with a credit card, you use a charge card to make purchases and pay the balance off later. Here’s the biggest difference: Unlike credit cards, which let you keep a revolving balance from month to month, a charge card requires you to pay off the balance in full by your bill’s due date. You cannot make a big purchase and pay it off over time.
Charge cards also have no preset spending limit. This doesn’t mean that it has no spending limit. Rather, your actual spending limit can change quite often depending on how much you’re using the card, if you have any late payments on your record, etc.
At MagnifyMoney, we recommend you always pay off your credit card statement balance in full each month. If that’s something you already do, you’d find using a charge card is pretty much the same as using a credit card. However, there are a few differences that might make you want to choose one type of card over the other.
Pros and cons of using a charge card
Pro: You’re required to pay off the balance in full
One of the biggest advantages of a charge card is that you are required to pay it off in full each month. If you’re the type of person who has a hard time maintaining the discipline to do this normally, using a charge card might force you to develop this good habit. And because you will pay off the balance in full each month, you’ll never pay any interest charges and you won’t rack up any debt.
Con: You’re required to pay off the balance in full
Paying off your bill in full each month is a huge advantage, but it can also be a disadvantage. Yes, it’ll keep you out of debt, and you won’t have to pay interest charges, but if you’re relying on the card as a source of emergency funds, you’ll be better served with a credit card that’ll let you carry a balance from month to month if a very expensive emergency pops up.
Pro: Many charge cards come with a smokin’ hot rewards program
For example, as of this writing, the Platinum Card® from American Express gives you $15 in Uber credits each month (plus a $20 bonus in December), a $200 airline credit each calendar year, and a 60,000-point sign-up bonus if you spend $5,000 within the first three months, among numerous other perks. There are, of course, credit cards that offer similarly attractive rewards.
Con: Charge cards often carry high fees
Again, we’ll use the Platinum Card® from American Express as an example: It carries a $550 annual fee. The cheapest card from Amex is the American Express® Green Card that has a $95 annual fee, though Amex waives it the first year. And if you make a late payment or fail to pay your bill in full? You could be slapped with a late fee of (up to $38 on the aforementioned Platinum Card), and it’ll go down as a negative mark on your credit report.
Charge cards can also help you build credit, and you don’t need to go into debt to do it. As long as you pay on time, the account will be listed on your credit report as an example of your positive payment history — the most important aspect of your credit score. And for newer scoring models, charge cards won’t affect your credit utilization ratio — the second most important factor in determining your credit score. That’s because American Express reports its charge cards as “open” lines of credit, as opposed to a revolving line of credit, and FICO does not factor open lines of credit into its credit utilization calculation.
But that’s not always the case. Rod Griffin, the director of public education at Experian (one of the major credit reporting agencies), said some credit scores treat open credit lines like revolving accounts. “Newer scoring systems are more likely to differentiate between the two than older credit scoring systems,” he said. “Your credit report almost certainly will not show a zero balance for the charge card if you use it and could affect your utilization rate.”
With newer scoring models that don’t factor open credit lines into your credit utilization ratio, that means making a big purchase (and paying it off at the end of the month) won’t have any effect on your credit score, nor will it lower your credit utilization ratio if you have other credit card debt. (A credit card also helps you build credit, but you may find yourself tempted to carry a balance.) Checking your credit score regularly will help you understand how your charge card use affects your credit standing.
Con: A changing spending limit can be bothersome
If you want to make a big purchase or it’s getting toward the end of the month, the only way to know for sure if you have any credit left is to log in to your account and check. Still, you shouldn’t be using your charge card willy-nilly to buy Learjets and mansions anyway, so as long as you keep your spending under control, it’s unlikely you’ll go over your limit.
The bottom line
Charge cards do have their quirks. But as long as you keep your spending within a reasonable range for your lifestyle and pay off your bill in full each month (as you should do with a normal credit card anyway), a charge card can be a useful tool in your financial arsenal.
Do you have a credit card in your wallet? Chances are, you do. And if you’re one of these plastic carriers, you probably want to be using that card the best possible way, right? Well, you may be making some mistakes without even realizing it. To help, we’ve rounded up eight common mistakes to help you discover if you have one of these habits and ultimately correct it.
1. Paying Your Bills Late
“What can do you the most harm is paying late, or not paying at all,” credit score expert Barry Paperno said.
Late payments affect your credit score, plus the late fees and interest quickly add up. Besides all of the effects that hit you right away, Paperno said it can take years to recover from numerous late payments. And if you let it go too long, you could be hit with a charge-off (the point, usually after six months without payment, at which the lender writes your account off as a loss), which stays on your credit report for seven years.
2. Closing a Card You Don’t Really Use
Despite the fact that you never use a particular credit card, closing that card isn’t necessarily the answer. When you close cards, you affect your credit history, usually negatively.
“Don’t make the mistake of closing cards,” Paperno said. “Especially if you think it will help your score, because that will never raise your score.”
When you decrease the amount of credit available to you, you end up increasing your credit utilization ratio, which can hurt your credit. Instead of closing a card, consider simply using it every so often and keep the account active. There are times when closing the card may make sense, like if it carries an annual fee that is hurting your budget, but you’ll want to think about it carefully before making a decision.
3. Not Requesting Changes to Your Terms
While card issuers might seem intimidating, you could be making a mistake by not attempting to change your terms. You could potentially negotiate a lower interest rate or annual fee, helping out your budget in the process. If you’re trying to rid yourself of a balance quickly, call your credit card company. They may help you get a lower interest rate if you just ask.
4. Spending Money Just to Get Rewards
If you find yourself using your credit card unnecessarily to earn rewards, it could be costing you. Rewards are fantastic, but altering your spending habits just to get free stuff isn’t going to be as beneficial as it may sound. If you overspend and carry a balance, you’ll likely lose all those rewards to interest charges.
5. Not Knowing Your Credit Score
If you don’t check your credit score regularly, you’re not educating yourself as much as you could be. Your credit is considered in a lot of situations, from when you apply for a mortgage or car loan to a version of your credit reports being reviewed by a potential employer as part of the application process. Haven’t checked yours in a while? You can see your free credit report snapshot on Credit.com.
6. Only Paying the Minimum Balance
If you only pay your minimum balance each month, you’ll likely end up having to pay more interest down the line. While it might seem like a quick fix to save your money and pay the minimum, in reality you’re dragging out how long it’ll take to pay your entire balance. Keep avoiding those late fees, but if you can, you’ll want to pay more than the minimum.
7. Applying for Out-of-Reach Credit Cards
“Another common credit card mistake is probably applying for too many cards, the wrong cards, or both,” Paperno said.
By applying for a card you aren’t qualified for, you end up without a card and with a “hard inquiry on your report for the next two years,” he added.
While your credit score isn’t directly affected by being denied credit, the more hard inquiries on your credit report, the more dings you’ll see to your scores. Make sure you are a good candidate before applying for any type of credit card.
8. Spending More Money Than You Actually Have
Having a credit card often allows people to make the mistake of overspending. It’s a mistake to charge your credit cards close to their limit, Paperno said. Just as closing a card will raise your credit utilization, so will coming close to your credit limit. Either move can hurt your credit score.
Making Positive Credit Choices
To avoid these eight mistakes from the start, make sure you educate yourself. You don’t have to know everything, but you should be aware of how to be responsible with your credit cards. When a car, house or student loan is on the line, you should be knowledgeable and ready, not hurting from your previous credit card mistakes.
“If you pay on time, keep your balances low and apply for new credit only when you need it,” you’ll be in good shape, Paperno said.
If you’re looking at a new credit card, you may have noticed that there are a lot of rules and restrictions that come with these pieces of plastic. Of course, there are some things that have to remain that way, but you may be surprised to know there are also some items you may not be beholden to if you simply ask. If you want to negotiate, however, you can’t expect your credit card company to come to you. You’ll need to bring your requests to the issuer along with reasons they should work with you on the matter.
Here are four things you may be able to negotiate with your credit card company.
1. Payment Date
Your payment due date is typically set when you first receive your card. But if you need to change this date along the way, many credit card providers will be happy to do so. When you go to the issuer, it’s a good idea to have a date in mind you’d like to change to. For example, if you know you get paid on certain days of the month, you may want to change the due date to being around one of these times so you’ll be more likely to have the funds to make your payment.
Remember: Having a strong payment history will not only make you appear as a better customer to your issuer, but also help improve your credit scores (which may even make you eligible for better interest rates). Which brings us to our next point …
2. Interest Rates
If you’ve had your credit card for a few years and have spent that time improving your credit and managing your card responsibly, you may be able to negotiate a lower interest rate. Credit card companies want to keep you as an active customer, so they might renegotiate your interest rate if you mention your upstanding history … and some better offers you’ve found elsewhere.
3. Late Fees
If you typically make timely payments but missed one, your credit card company might waive the fee if you promptly make the payment and call to request the fee be waived. While they have no obligation to do so, it doesn’t hurt to ask. Some cards even come with one-time or recurring late fee forgiveness, so be sure to check if that’s a feature with your card.
4. Credit Limit
Raising your credit limit increases your available card balance and can improve your credit scores because it improves your credit utilization rate. So even if you don’t plan to use the increased credit limit, it’s worth a request. (Just be aware, sometimes a request for a higher credit limit results in a credit pull and a credit inquiry on your credit report.)
Note: Just because you have a higher limit doesn’t mean you should be increasing your spending. Experts recommend keeping your debt levels at 30%, ideally 10%, of your credit limit. You can see how your credit card usage may be affecting your credit by viewing two of your credit scores for free, updated every 14 days, on Credit.com.
The holiday shopping season isn’t just a favorite time for retailers, but also for scammers who are hoping to take advantage of all that extra spending you’re doing.
That’s why I want to urge you to use caution this year. It’s easy to be focused on trying to find everything on your list and miss some of the risky behaviors you might be engaging in.
Here are some things you can do to protect yourself this holiday season.
1. Carry just one credit card with you and leave the rest at home. That way, you’ll minimize the risk if your wallet or purse is stolen.
2. Only shop at well-known stores. “Pop-up” stores are becoming increasingly popular, especially in major urban centers, but these stores may not always be legitimate, or they may not have the best payment security.
3. Cover your PIN when paying with your card so others can’t see it.
4. If shopping online, make sure the website is secure and provides a level of security and authenticity for your purchases.
5. Don’t lend your credit card to a family or friend. You may trust them, but you lose control of your card and if it’s stolen, it will be YOUR credit that could be affected.
6. Review charges while still in a store. It’s so easy to accidentally turn a $10.00 charge into a $100.00 charge.
7. Be cautious when filling out forms, such as those for home delivery, extended warranties, rain checks, etc. These forms contain a lot of personal information that can easily be used by a scammer or identity thief. Ensure that the form is received by a store employee.
8. Keep all receipts for every purchase you make. When your credit card statement arrives, sit down and go line by line through each purchase, comparing the purchase on the statement with your receipts. This seemingly daunting task will not take as long as you think it will, and your credit will benefit, since too much debt can hurt your credit scores.
9. Never spend more than you can immediately pay back. Even if the deal is really good, you’ll lose the benefit of the discount if you can’t pay off your credit card before you are charged interest, so set a budget.
The holidays can be a lot of fun and a good opportunity to get some deals, but make sure to follow these tips so you come out ahead and your credit is protected.
[Editor’s note: Regularly checking your credit scores can help you recognize quickly if you’ve been a victim of fraud. That’s because your scores can be vulnerable to major spending changes. You can get your two free credit scores, updated every 14 days, on Credit.com.]
If you can believe, the holiday shopping season is officially under way and with seasonal decorations appearing in some stores as early as October, we all feel like it starts earlier ever year. Equifax was curious to know just when the holiday season starts and decided to look at four years of data around consumer debt to understand consumer behaviors during the holiday season.
So what did they learn? First, consumers are continuing to focus their shopping around the days before and after Black Friday, although the day after Thanksgiving does continue to be a highly active. In fact, for the past four years, the Sundays before and after Black Friday have seen a fairly consistent 50 percent increase in the opening of retail credit card accounts over an average day in November or December. New retail credit card openings peak on Black Friday, when consumers on the average have continued to open nearly 3 times more retail credit card accounts.
They also found learned that since 2012, on the average, in November and December, furniture stores have been the top issuer of store credit ($851M), followed by department stores ($790M), jewelry ($451M), electronics ($365M) and clothing ($241M).
Gunnar Blix, Equifax Deputy Chief Economist, says that furniture stores tend to have high-value incentives linked to store credit which drive purchases and this likely accounts for their leading position in terms of credit issuance in the retail credit space.
He also points out that even with compelling incentives across all the shopping categories, since 2012 Equifax has been noticing a modest trend toward consumers showing more restraint in credit card usage.
If you’ve put a lot of work into establishing good credit habits—you’ve been making sure to pay every bill on time and you’ve been paying down your credit card debt—you might be wondering just how long it’ll be before you see these actions reflected in your credit score. The time between when you exhibit positive credit behavior and when credit for that behavior shows up on your report depends on many factors.
While there are some basic timelines for certain items on your credit report, every consumer’s experience is different. What follows are some things to think about if you’re wondering how long it might take to see your actions impact your credit score, and how long certain items might remain on your report.
Understanding your credit behavior
“Establishing a timeline will be unique to each consumer and dependent on what shape their credit report is in,” says Jo Kerstetter, spokesperson for Money Management International.
The reason behind this individual variation lies with your lenders—the credit card companies, banks, and mortgage companies who report your data to the CRAs. Lenders track and share your payment history, including a record of whether your payments were made in full and on time, but there is no universal date for when they share this information with the CRAs. Additionally, while some lenders may report behavior to all of the CRAs, others will report to only one CRA or to none at all, which accounts for the variations seen between your three credit scores.
Tom Coates, director of Consumer Credit of Des Moines, agrees. “Nothing significant is going to help you overnight,” he says, but adds that positive behaviors may add up over time.
Regularly reviewing your credit report may help you gain a better understanding of your past and current behavior and how your payment history may already be impacting your score. You are entitled to one annual free copy of your credit report from each of the three major CRAs. To request a copy of your report, visit Annualcreditreport.com.
Healthy credit habits
Your credit score may change daily, weekly, or only a few times throughout the month depending on how often your lenders report data to the CRAs. The important thing is to make sure you have been consistent in meeting payments.
“The key is to pay your bills on time every month,” says Kerstetter. Your payment history accounts for around 35 percent of your credit and is the largest factor in determining your score. While there are many factors that determine your score, one of the most important things to consider is to pay your bills on time, everytime.
“Positive information usually stays on your record as long as the accounts are open and in good standing,” Kerstetter says.
The next biggest contributing factor to determining your score is the amount owed across each of your accounts. Amounts owed account for about 30 percent of your score, which means that paying down a debt or carrying a lower total balance on your various lines of credit may also impact your score.
Late payments or bankruptcy
Negative information, such as late payments or a bankruptcy, may impact your score just as often as positive items, but where positive behavior is unlikely to fall off of your credit history, negative credit behavior has the opportunity to disappear—but only after varying lengths of time:
Hard inquiries. Hard inquiries typically fall off of your report after two years, but it may impact your score for even less time.
Late payments or similar negative behaviors are likely to remain on your credit report for up to seven years. An account left in collections can stay on for even longer, usually seven years and 180 days from the start of the payment delinquency, and unpaid tax liens can remain on you report for up to fifteen years.
Bankruptcy, generally remains on your credit history for up to 10 years however the exact amount of time will depend on the type of bankruptcy.
While it can be difficult to pinpoint exactly how long it may take for certain behaviors to impact your score, by establishing positive credit habits and maintaining them consistently, you may be in a better position to better understand your entire personal financial picture.
“Sometimes people get so lost on trying to get a better score, they don’t have their basic finances and their budget where they ought to,” Coates says.