The End of All Your Credit Card Confusion

Don’t exactly know what APR means? Soon you will.

Charge it! It’s a phrase you’ve committed to memory — and an action you take perhaps without thinking much about it. Credit cards are often easy to get, hard to manage, and even harder to pay off. But you need them to help establish a credit history, which is essential for doing things like renting an apartment, buying a car, or sometimes even landing a job. Understanding how credit cards work can make or break your financial future.

Alexa von Tobel, founder and CEO of LearnVest.com and the author of Financially Fearless, walks us through the basics of interest rates, late payments, credit scores, and everything else you need to know about how credit cards affect your life.

Should I have a credit card?
Generally speaking, yes. Building your credit history via a credit card can be an effective way to help your credit score. Think about it: Who are you more likely to trust — your best friend from elementary school or a stranger you just met on the street? Financial institutions generally view a long, positive credit history as a sign of trustworthiness and may reward you with lower interest rates as a result.

If credit cards are used wisely — you pay them off in full each month and never miss a bill — they can also be a tool to help you save. Depending on the type you have, there are lots of perks you may be able to take advantage of. For example, if you’re a traveler who loves to explore internationally, you can try a credit card that waves the foreign transaction fee — which is normally 2 to 3 percent.

How many cards should I have?
I believe a good benchmark is to have two cards from different credit card processors — for example, Visa and American Express — in case vendors do not accept all types. I often recommend keeping a backup card at home in a safe place in case your wallet is ever lost or stolen. The more cards you have, the more you will need to keep track of, so having just a few can help you simplify your overall credit card management.

What’s the best “starter” credit card, if that exists?
This depends on a number of factors including who you prefer to bank with and what your needs are. If you’re a student, consider checking with your bank to see if they offer a credit card specifically for students. If you have not yet started establishing a credit history, check out secured credit card options.

What is a secured credit card?

A secured credit card has been referred to as a “credit card on training wheels” because you have to deposit a set amount into a savings account as collateral for the amount you borrow, so it’s like using your own money. If you have a poor credit score, a secured credit score could be your best option to rebuild your credit. The downsides of secured credit card are that they tend to have annual fees, application fees, late-payment penalties, high interest rates, and over-the-limit charges. I only recommend getting a secured credit card if you have a poor credit history and need a vehicle to rebuild it. These typically require a deposit as a way of guaranteeing that you will be able to pay off your balance.

If I apply for a credit card, what are some reasons I’d be turned down? Is there anything I can do about that?
The biggest reason is that your credit history is either insufficient or poor. If you have little or no credit, ask your bank about the best starter card option. If you have a poor credit history, start to reverse the trend by making an effort to pay off your debt in full if you are able to. Also, check to make sure you have no outstanding medical bills or parking tickets, which are two of the biggest credit-score tankers outside of credit card debt.

Do I need a credit card to build good credit?

Not necessarily. There are a variety of ways that you can potentially prove to a lender that you are creditworthy: Pay your student loan monthly balance in full and on time, never miss payments on everyday bills, make a steady income, and open a checking account with the bank where you will apply for a credit card, loan, or mortgage.

Can you establish credit with a debit card?
No, but debit cards can help you establish a relationship with the bank where your account is. If you are in good standing and have been a bank’s client for some time, you may be more likely to be considered for a loan or credit card.

When I first open a card, what should my limit be? As I get older, how much should it increase to?

Your credit limit depends on a number of factors, but one of the most important ones is usually your credit history. Many providers have student credit card options designed specifically for students who have little to no credit. Generally, these cards will have a limit ranging from $300 to $1,000, depending on the card issuer. Once you have consistently proven to pay your bills on time, you can consider applying for a credit line increase.

How often should I look at my online account?
Every day! It’s important to check your credit card activity to make sure all transactions are accurate and to keep an eye out for any fraud. If you use a tool like LearnVest’s Money Center, you can link all of your accounts and take a look at everything at once. I recommend taking a daily “money minute” — time set aside everyday to get a snapshot of your money.

What happens if I don’t pay my bill? Is it a huge problem if I miss one payment?
I recommend that you always pay your bills on time (and in full, if possible). If you miss a payment, it will show up on your credit report and likely dock your credit score significantly. Your credit card provider might also increase your card’s interest rate. Bottom line: If possible, don’t miss a payment.

Can I use my credit card to get cash from the ATM? Should I?

While you can use your credit card to get cash from the ATM, this cash advance is really just taking a loan from your credit card issuer and this tends to come with a very steep price. Any money you take out as a cash advance is charged a higher interest rate than the rest of your credit card balance, plus an additional transaction fee. It’s typically much more affordable to get cash with your debit card, so you can help avoid fees and interest on the amount you withdraw.

Should I get a store credit card if they’re offering me a discount on my purchase?
I do not recommend store credit cards, as they tend to come with high interest rates and fees. Not to mention, they give you another card to track. Because you probably won’t use a store credit card frequently, you’re probably more likely to forget it exists — and forget to pay it off.

What does APR mean?
Annual percentage rate, or the interest rate you’ll be charged on your credit card debt each year. This number only matters if you are carrying month-to-month debt, which you should avoid. APR is the rate that determines the interest you incur monthly, and it can change before the end of the year. Watch out for an APR switch-up a couple of months after you have a credit card. Many credit card issuers will offer a 0 percent APR for the first couple of months of use, and then raise it after that initial term.

What is actually a good rate for a credit card? What is a bad one?
The average low interest credit card will have an APR between 6.99 and 9.99 percent. Typically, this APR is offered to customers with excellent credit and a strong credit history. The average variable APR rate — that is, one that changes rather than stays “fixed” at one rate — is just over 15 percent, so be wary of anything higher than average.

Is there such a thing as a card that has 0 percent APR and stays that way?
It’s not uncommon for credit cards to have a 0 percent introductory APR. Depending on the type of card and the provider, this intro amount can be available for up to 18 months. However, after the intro period is up, most credit cards will return to the regular APR — likely between 10 and 20 percent. Be careful to not carry a balance over month-to-month if possible, otherwise you may be charged interest on it once your introductory period runs out.

Are there other hidden fees (late fees, periodic interest rate adjustments, taxes) that I should know about?
If your payment is over 30 days late, you will likely be charged a late fee, in addition to a raise in interest rate. If you travel abroad, expect to get hit with a foreign transaction fee every time you use a credit card or debit card, unless you specifically have a card that waives it.

What’s a periodic interest rate?
Your daily periodic interest rate is your APR divided by 365 or 360, depending on your credit card provider. It’s important to remember that credit card debt accrues daily — not monthly — based on your periodic interest rate. What this means is that on day two of carrying a credit card balance, you will be charged interest on both the balance and the previous day’s interest. The daily periodic interest rate is important to know if you’re trying to calculate how interest on your debt adds up each day, and how much you can save by paying off your credit card debt immediately. If you always pay off your balance in full and don’t carry month-to-month debt, you won’t have to pay any interest on purchases, regardless of your APR or periodic interest rate.

Some cards charge an annual fee. Are the benefits worth it?
This depends on what you’re looking for. Generally, there are a lot of great no-fee cards out there, so you can certainly avoid paying an annual fee. However, if there are certain benefits you’re looking for, weigh the potential value against the cost. For example, maybe the $100 fee on a card with good travel benefits will be insignificant to you if they always waive the $25 checked bag fee. How many trips will you take to make that worthwhile?

What kinds of benefits should I look for in a credit card — miles, cash back, no fees, etc.?
This really depends on your lifestyle. If you love to travel or have to travel often for work, consider a credit card with miles. If you spend the bulk of your lifestyle budget on everyday purchases like groceries and gas, look out for cash-back benefits. Can’t decide on which you’d prefer? Some credit cards also offer a flat-rate cash back, giving you a certain percentage of cash back on all purchases, regardless of category.

Is it worth it to put everything on my credit card to earn the points, or does it look bad to have a huge balance even if I pay it off every month?
This depends on your credit utilization rate, which shows what percentage of your available credit you’re using. You should aim to use less than 30 percent of your utilization to help show that you’re a low-risk lender. So if your credit card has a limit of $3,000, aim to charge no more than $1,000 at any given time, even if you pay your bill in full each month. If you exceed 30 percent, it may ultimately ding your credit score — potentially a much more expensive move in the long run.

Is it a bad idea to use credit cards for small purchases like coffee? Should I be discerning about what I use my cards for?
Short answer: No. As long as you pay off your monthly balance in full and keep your credit utilization rate under 30 percent, using a credit card can be a smart way to spend. There are often lots of great cash-back rewards credit cards, which allow you to get a discount on everyday purchases, such as grocery bills and gas.

How do you actually check on and ultimately redeem your credit card points for rewards, miles, etc.?

More than 41 percent of reward cardholders fail to even cash in on their rewards — essentially leaving freebies on the table. To check on and redeem your rewards, log on to your credit card provider’s site and head to the landing page with your credit card’s balance. There will likely be additional information about your rewards and how you can redeem them. This is site-specific though, so if you’re still unclear how to redeem rewards after exploring the site, contact your credit card provider’s customer service department.

Is it easiest to call the company directly or do it online?
First, do it online. Most companies will have a live chat help feature, so even if you get stuck, you can talk to a customer service representative via instant messaging. If you’re still frustrated, call the company.

Is setting up auto payments on your credit card a bad idea? (It seems convenient, but is there a risk of fraudulent charges?)
If you want to make sure to never miss a payment, auto payments can definitely help. That said, it is still critical that you verify all the charges. This is especially important given recent large-scale security breaches at major retailers, but even your everyday transactions could be incorrectly charged. This is why I recommend checking on your money daily — not just when it comes time to pay your credit card bill.

How do I know if there are fraudulent charges? Will the credit card company notify me if something looks off?

Although your credit card issuer may contact you if there was either a recent security breach or if there are suspicious charges on your card, it is ultimately up to you to recognize if there are fraudulent charges. You’re probably much more likely to notice incorrect transactions — say, if a restaurant changed your tip from $5 to $50, causing your bill to increase without you knowing — if you check your money daily.

What do I do if there are fraudulent charges? How do I get them removed?
Contact your credit card company immediately to report the potential fraud. They will likely cancel the card and issue you a new one within a couple of days. Most credit card issuers will waive fraudulent charges, so long as they are reported within a specified period of time.

What should I do if my credit card is lost or stolen?
Immediately call your credit card issuer. Some companies will also allow you to report your card as lost or stolen online. They will typically cancel the card and waive any charges that occur after the card is reported. Under federal law, even if a credit card theft used your card prior to when it was reported, you will only be liable for up to $50 because the charges were unauthorized.

I use the iPhone app for my credit card and basically pay off whatever balance I have whenever I’m bored, so more than once a month. I imagine this is good because I never carry a balance, but can you make payments too frequently?
There’s no harm in paying your bill early, but I do recommend making payments on a schedule to ensure that you remember to pay off your balances in full each month. But if you have credit card debt, work on paying off that debt as quickly as possible, since interest compounds daily, not just when your monthly bill shows up.

Is it OK to just pay the minimum monthly payment?
I always recommend that whenever possible, you pay off your balances in full. Just paying the minimum means you’re racking up significant credit card debt, which is designed to snowball. I always joke that there are two things in life that are easy to gain but incredibly tough to lose — weight and credit card debt. If you’ve been carrying a month-to-month balance, don’t feel bad: A whopping 39 percent of Americans carry credit card debt month-to-month. That said, start taking action now, and pay down that debt as quickly as you can afford to.

Does asking to extend my credit limit hurt my credit score?
Although a credit limit extension may temporarily put a small dent in your credit score, in the long run, increasing your credit limit will likely improve your credit score. Nearly one-third of your credit score is based on your credit utilization rate, and if that rate drops, your credit score should increase.

Why did the credit card company set my limit? How can I change that?
Credit card issuers set your limit based on your credit score, past loan repayment history, income, and debt levels. If you had little or no credit, it’s likely that your credit limit will be low. Once you develop a strong credit history, you can ask to extend your credit limit.

What if the credit card company increases my limit but I’m worried about spending too much? Can I ask them to decrease it? Is it a good idea?
Generally, it’s not a good idea to decrease your limit because it can increase your credit utilization rate. If you are worried you will spend too much, set a specific budget for yourself for each spending category.

If my identity gets stolen, what steps should I take? How does this affect my credit?
First, contact every financial institution that you have a relationship with, including the major credit reporting companies. This will put a fraud alert on both your accounts and your credit report. Next, order your credit reports from all three reporting companies to check for errors (you can do so atAnnualCreditReport.com). Because you placed a fraud alert, you are legally entitled to a free credit report from each bureau. Lastly, create an identity theft report and submit it to the Federal Trade Commission. Make sure to keep thorough records of all of your communication and reporting.

Does checking your credit rating repeatedly hurt your credit? How often should I be checking my credit rating, and how do I do that?
No, this is one of the biggest myths surrounding credit scores. It can hurt your credit score if there are “hard inquiries” — external inquires into your credit score, since it may look like you’re desperate for credit. But you can personally check your score as much as you’d like at sites like CreditKarma.com. We also recommend checking your credit report annually. You’re entitled to one free credit report every year from each of the three major credit bureaus, so aim to check your credit report once every four months by going to a site such asAnnualCreditReport.com. Since this is easy to forget, set calendar alerts to remember.

What are the consequences of having a credit rating that isn’t excellent? For example, how good does my credit rating need to be if I want to rent an apartment? If I want to buy a car? A house? Take out an educational loan?
While there is no standard credit score minimum to qualify for a loan or credit card, having a poor credit score can have brutal long-term costs. Because credit scores can influence interest rates, extra interest will cost you as you take on numerous credit cards, car loans, and mortgages over the course of your lifetime.

Is it a good idea or bad idea to have a joint account, like with my spouse or my parents?
This is up to you and your situation. If you have a joint credit card account, both you and the other party are equally liable to repay the debt. Your credit histories will also be affected in the same way. As a rule of thumb, you should only apply for a joint credit card account if both you and the other party are reliable lenders. If you haven’t built credit but your parents have a great credit history, consider becoming an authorized user. You will be able to start establishing credit without the responsibility of debt.

4 Reasons College Kids Need a Credit Card

4 Reasons Why College Kids Need a Credit Card

The thought of your baby going off to college is scary enough. Now picture him or her armed with a credit card!

As a parent, your instinct might be to shelter your young adults from the complicated world of credit (and its potential debt downside) as long as possible. But at some point, they will need to learn the ropes if they ever hope to buy a car, rent an apartment or own a home.

The key for new card users is to learn how to wield plastic responsibly and build a strong foundation for their financial future. “So many graduate college with their diploma in one hand, and credit card debt and student loans bills in the other,” says Gail Cunningham, vice president of public relations of the National Foundation for Credit Counseling.

That’s why parents need to help develop their child’s financial maturity by introducing them to credit sometime during the college years. “With proper guidance and the right sort of planning and budgeting, opening that first credit card can be useful for young people to spend and budget responsibility,” says Randy Hopper, vice president of credit cards at Navy Federal Credit Union.

One thing to note is that the Credit CARD Act of 2009 prohibits people under 21 from having their own credit card unless they earn income or have a co-signer on the card (usually Mom or Dad). If your teen does not work, keep in mind that going the co-signer route will put your credit on the hook for any debt that goes unpaid. As an alternative, you could add your child as an authorized user on one of your cards so you can closely supervise his or her spending. This could be a good practice step since you retain control of the account, and can choose to remove the authorized user at any time.

That being said, here are some reasons why college could be the perfect time for your child to give credit cards a try.

1. Building credit early has its advantages. Landlords, prospective employers and even cell phone providers may pull your credit report as part of a background check, but there won’t be anything to see if someone has never managed a line of credit.

“Graduating with enough credit to compute a score will help in the young adult’s favor,” says Cunningham. “Every graduate wants to get rid of that old clunker and upgrade from their dorm room experience into an apartment at some point. Those adult actions are going to require a credit history.” Responsible students should be working toward an end game — moving out, buying their own car — and all of that is going to take a positive credit file.

Entrepreneurial-minded young adults who might one day seek a small business loan will also need to have an established credit history. But just having a credit card isn’t enough — you have to use it and make payments on time in order to have evidence of responsible borrowing and repayment reflected on your credit report, says Hopper. “Start out small, by perhaps charging gas on the credit card, and then paying off the balance in full at the end of the month,” he suggests.

2. A first credit card can be a teaching tool. Going over monthly statements can be a powerful way for parents to help their students monitor spending, says Cunningham. “You may start by holding their hands, but then move to looking over their shoulders, until finally they are responsible for their own credit actions,” she says.

What you want to avoid is becoming an enabler by paying off bills if they rack up too much debt. Instead, you can minimize the amount of debt your teen can accumulate by starting off with a small credit line, say around $300-$500. “There’s nothing wrong with asking the issuer to cut down the credit limit,” says Hopper.

3. A credit card can offer peace of mind. Having a line of credit available can offer a layer of financial security should the student run into an emergency situation while far from home, says Cunningham. Whether it’s a car breakdown, an unexpected medical visit or even having to spend more on books than was budgeted, parents can rest easy knowing their teen has credit at their disposal.

Of course, it’s on the individual to know what constitutes a real emergency, warns Ornella Grosz, author of “Moneylicious: A Financial Clue for Generation Y.” “It’s easy to swipe the card and use the emergency excuse, but an all-inclusive trip with your friends, for instance, doesn’t count,” she says. In other words, talk to your child and go over some examples of when using credit in a pinch is OK so there are no misunderstandings or excuses.

4. Responsible credit use can come with rewards. If your college student is going to get a card, he or she should take advantage of cash back or other rewards programs, suggests Grosz. Note that these programs are best for those who pay off their balances in full each month.

Hopper suggests focusing on simple products when shopping around for a credit card. Start with those that have good rates and no fees, and if possible, then look into cards that offer cash rewards as an added bonus. Earning airline miles and other travel rewards might sound ideal for students who fly home a couple of times per year, he says, but it usually takes a significant amount of credit spending to earn enough points for a flight, and airline cards typically carry hefty annual fees.

By leveraging credit appropriately, says Grosz, college students can begin building a clean credit report and practicing smart financial habits that will help them achieve their future financial goals.

Tips to Rebuild Credit

How to Upgrade Your Secured Credit Card

 

When people are struggling to rebuild their credit, a secured card can offer them the opportunity to qualify for a credit card and establish a positive credit history. Unfortunately, secured cards also have several drawbacks compared with standard credit cards. For example, secured cards always require a refundable deposit that is held by the card issuer, and nearly all secured cards charge an annual fee. In fact, there are many secured cards that charge a monthly fee. Also, secured cards tend to offer fewer benefits such as purchase protection policies and travel perks.

Eventually, secured card users are going to want to graduate to standard, non-secured credit cards to enjoy some of features they have been missing. If you are a secured credit card user, here is how you can get there:

1. Make sure you pay all of your bills on time. The only way to rebuild your credit and move up to a standard credit card is to establish a strong payment history. The benefit of most secured cards is that they report your payment history to the major consumer credit bureaus, but that will be a drawback if you make your payments late or miss them altogether. Further, you should be extra careful to pay all of your bills on time, not just your credit cards.

2. Pay off your balance. Making on-time payments is only part of your journey to a good credit score; you also need to stay out of debt. Even though a secured card will require a deposit, any balance you carry on your secured card will appear as debt on your credit report. Paying your balance in full each month will help your credit score and allow you to avoid interest charges.

3. Track your progress. Any goal you want to achieve will be easier if you can see the results of your effort. You can use Credit.com’s free credit tracking tool to watch your credit improve over time. In addition, many credit card issuers are now including a free FICO score online and on cardholders’ monthly statements.

4. Wait a year. In most cases, secured credit card users will need a year’s worth of payment history in order to improve their credit scores enough to qualify for a standard credit card. So when your secured card comes up for renewal, and the annual fee is due, this is an excellent time to start looking for a standard credit card to apply for.

5. Contact your secured card issuer. If the bank that issued your secured card also issues standard credit cards, this can be a great place to start. This bank will already be familiar with your payment history and will likely want to keep you as a customer. Give your bank a call, and let them know that you are interested in moving up to a standard credit card, and see what their representatives recommend.

6. Speak with your retail bank. If you have a checking or savings account at a bank other than the one that issued your secured card, this is another institution that is more likely to offer you a standard credit card. Give them a call, or stop by and speak to someone about your credit history and your desire for a standard credit card.

7. Apply for cards offered to those with “fair” or “average” credit. When you are looking to move up from a secured card to a standard credit card, the last thing you want is a rejection. So stay away from the high-end travel reward cards that are only for those with the highest credit scores, and look for products specifically offered to those in the middle of the credit score range. For example, Capital One offers several credit cards for those with average credit, which it views as those with a limited credit history and those who have defaulted on loans within the past five years.

Credit Card Smarts

Are you committing these 10 deadly credit card sins?

Not using the magic plastic properly and responsibly can be ruinous to your credit rating and financial health.

This post comes from Allison Martin at partner site Money Talks News.

Credit cards are like a double-edged sword. They can be quite beneficial if used wisely, or wreak havoc on your finances and your credit if handled irresponsibly.  To help prevent the latter from happening, here are some credit card sins you definitely want to avoid:

 

1. Ignoring your credit profile

When was the last time you accessed your credit profile and took the time to review the information in it?  It’s easy to assume that your report is stellar because your past reviews indicated so. However, all it takes is one bad move on your part — or that of a fraudster who has stolen your identity — to lower your credit score.  Your credit report could also contain errors, which are commonplace these days, according to a Federal Trade Commission report released last year. As we previously told you:

The study involved working with 1,001 randomly selected consumers who in most cases reviewed three credit reports each — from Experian, TransUnion and Equifax. Twenty-six percent of participants reported a “material error” — something that affected the credit score, not a typo in the address or something inconsequential — on at least one of their reports.  Worse, for 5 percent of the participants, the mistake put them in a greater credit risk tier than they belonged, meaning they were probably paying higher interest rates than they should have been, and may have had smaller lines of credit or more denials than expected.

2. Taking cash advances

“There are some things money can’t buy. For everything else, there’s MasterCard.” Whenever I see this commercial on television, I cringe at the thought of the countless people who’ve come to believe it’s OK to rely on a credit card when they can’t afford to buy things.  This includes cash advances. Many people are unaware that cash advances come with extra costs and are not like simply swiping the magic plastic. You can expect to pay a transaction fee of anywhere from 2 to 5 percent, plus an ATM fee. Also, bear in mind that the amount advanced won’t be eligible for a grace period, and the interest typically begins accumulating as soon as the transaction is processed and hits your account.  Also note: The interest rate on cash advances is higher than the rate charged on regular credit card purchases that you don’t pay off each month.

3. Not paying bills on time

You’ve been struggling to make ends meet. So instead of calling your creditors to see if any payment arrangements are available, you ignore the accounts. A few months go by, and you receive an alert from a credit score monitoring service telling you that your credit score has plummeted.  Unfortunately, one late payment, even if it’s only 30 days late, can tank your credit by as much as 100 points, depending on how high your score was before the delinquency. The better the score, the more severe the hit.  Then there’s the late fee you’ll likely be charged, and the higher penalty interest rate you’ll be stuck with for six months.

4. Exceeding your credit limit

You’re probably well aware that once you reach your card’s credit limit, denials at the point of sale are to be expected.  However, if you’ve opted in to your issuer’s program that allows your credit card to be accepted even for over-the-limit purchases, your credit card company may charge an over-limit fee (although many have stopped that practice).  Do expect a hit to your credit score, because your credit utilization ratio accounts for 30 percent of your FICO score.

5. Applying for too many cards

Applying for lots of cards? Don’t. Too many applications for credit signal desperation and trouble in paradise to lenders. Excessive “hard” inquiries, noted in your credit files when you apply for credit, can lower your FICO score, particularly if you’re new to the credit world.

6. Being enticed by credit card offers in the mail

The bonus points or miles or cash back offered to new customers of rewards credit cards may seem too good to pass up. But understand that preapproved offers don’t guarantee that you’ll be approved, or that you need the card, or that it’s a good fit for you. If you rarely leave town, you probably don’t need a frequent-flier card.  Fail to heed my warning, and you may find yourself tempted to spend to earn bonus rewards and bogged down with debt.

7. Abruptly shutting down accounts

You may be tempted to close your credit card accounts because they are no longer useful to you, but beware of the impact this could have on your credit utilization ratio.  And if you’re thinking that closing accounts will release you from your responsibility, think again. Not only will you still be liable for the outstanding balances, but the accounts will remain on your credit report for seven to 10 years.

8. Ignoring statements

Human error and credit card fraud are often responsible for invalid transactions and statement errors. But if you don’t look at your statement every month, how can they be detected? It’s not a bad idea to examine account activity on a weekly basis to catch a problem.  You’re not liable for fraudulent transactions on your credit card unless you wait longer than 60 days to report them to your card company. So it’s your job to keep your eye on your accounts.

9. Applying solely based on a promotional offer

It never fails. Every time I’m in a department store and go to the register to pay, a clerk always finds a way to squeeze in the sales pitch about the irresistible store credit card offer that I have to take advantage of.  I politely decline, but I’m definitely thinking: “Receiving a measly 15 percent off my purchase does not make up for all of the high interest and fees that come with these cards.” In other words, the costs can outweigh the benefits.  I’m not suggesting that you refrain from signing up for a card that will actually be of major benefit to your family (i.e., free travel and cash back). Just be sure that the annual fee won’t swallow up all the perks. And if you carry a balance on a rewards card, the higher interest rates these cards generally have will nullify the benefits.

10. Failing to read the fine print

When you apply for a credit card, you are agreeing to take full responsibility for any legitimate charges made with the card. So you definitely can’t afford to ignore the disclosures.  Fortunately, even if you make a few mistakes along the way, credit can always be repaired over time. But it’s best to avoid these 10 credit card sins.

 

General Electric spins off credit card unit in IPO

General Electric spins off credit card unit in IPO

 By Danielle Douglas July 31  

Synchrony Financial, the credit card unit of General Electric, made its debut Thursday as a public company, raising $2.9 billion in the year’s largest initial public offering.

The offering brings GE a step closer to reducing its footprint in financial services, a line of business that nearly kneecapped the company during the 2008 financial crisis. GE officials have said the company will return to its industrial manufacturing roots and focus on making products such as power generators and jet engines.

Synchrony hit the market at $23 per share, the low end of the $23-to-$26-per-share range listed in its offering. That values the company at $19.1 billion. The shares were unchanged on its first day of trading, closing at $23.

GE sold 125 million shares of the company, or 15 percent, with plans to distribute the remaining shares to GE stockholders in a tax-free transaction in late 2015.

“The IPO also furthers our goal to position GE Capital as a smaller, safer specialty finance leader,” Jeff Immelt, GE chairman and chief executive, said in a statement.

 Immelt said he wants the company’s industrials business to constitute 75 percent of profits by 2016, up from 55 percent last year. To that end, the company agreed in June to pay $13.5 billion for the power and grid businesses of Alstom, a French company that holds interests in electricity generation and rail transport markets.

In its most recent quarterly earnings, GE reported that revenue from its industrial businesses climbed 7 percent, while revenue at its financing unit, GE Capital, declined 6 percent. Total revenue at the company crept up 3 percent to $36.2 billion in the second quarter, up from $35.1 billion for the same period a year ago.

“With a strong, competitively advantaged set of industrial businesses and a valuable, commercially focused financial services business, we believe our portfolio will deliver valuable growth for shareholders for years to come,” Immelt said.

In the lead-up to the financial crisis, GE’s financing operations generated more than half of the company’s earnings. When credit markets froze, the company struggled to access cheap funding and turned to a government debt guarantee program for help.

In the aftermath of the crisis, an interagency group of regulators, known as the Financial Stability Oversight Council, designated GE Capital as a systemically important financial institution. It is unknown whether GE’s efforts to consolidate its financing arm will affect that designation.

Synchrony provides private-label credit cards for retailers, including Amazon, Wal-Mart, Gap and J.C. Penney. Such private-label cards usually carry higher interest rates and lower credit lines than other types of plastic. The company reported $9.4 billion in revenue last year.

Last month, the Justice Department reached a $169 million settlement with Synchrony for allegedly excluding tens of thousands of Spanish-speaking credit card customers from a debt-reduction program it ran for two years. The agreement called for the firm to provide compensation to 108,000 Hispanic card holders in the form of cash or reductions of their credit card balances.

Synchrony is listed on the New York Stock Exchange under the ticker symbol SYF. Proceeds from the offering will be used to repay debt as well as invest in liquid assets, according to the company.

Credit Card Skimming Again

Police Warn Fontana Residents Of Gas Station Credit Card Skimmer

July 29, 2014 3:52 PM

FONTANA (CBSLA.com) — Police Tuesday warned residents to remain vigilant against credit card skimming fraud that was recently discovered at a Fontana gas station.

According to the Fontana Police Department, officers responded Monday to the 16900 block of Foothill Boulevard for report of a credit card skimming device that was located inside of a pump at a Circle K gas station.

The manager called police shortly after noticing the device inside of pump No. 12, which is the furthest from the cashier, officials said.

Police said the suspect used a master key to open the gasoline pump and install the skimmer device inside.

According to police, there is no way to tell how long the particular device was in place as it did not appear to transmit information to the suspect, meaning that it was stored for retrieval at a later date.

Skimming devices read the magnetic strip off of credit cards and transmit the stolen information to suspects who use it for fraudulent purchases.

The Circle K gas station is now taking preventative measures by adding extra security features to each gasoline pump.

The Fontana Police Department offered the following tips to keep in mind for the next time you get ready to pay at the pump:

If possible, have a credit card with only a small limit meant for purchases like gasoline.  That way, if your card is compromised it wont be directly linked to your money.
Consider paying cash for gasoline purchases instead of using your credit or debit card.
Try to pay the cashier directly or use a pump that is clearly visible to a cashier.  Pumps that are further away are usually the ones used by crooks to install the card skimmers.
Check your account balances daily and immediately report any unauthorized charges or cash withdrawals.
This type of fraud is a growing concern across the U.S. at ATMs and gas pumps.

If you believe that your credit card information has been compromised, police encourage you to call your banking institutions or creditor immediately.

Cashiers skimming credit cards- Really?

Cashier linked to credit card skimming scam, police say

By Dawn Denny Published: Updated: 

ROUND ROCK, Texas (KXAN) — A cashier at a Sunset Valley restaurant was arrested after surveillance video showed the worker swiping customers credit cards on a small device in her hand, police said.

In video released by the Round Rock police department, you can see the cashier take a customer’s card, swipe it near a small device in her left hand, and then hand it back to the customer. Authorities declined to name the store.

The movement is so slight, and so quick, it’s not surprising many customers are completely unaware their information has been stolen.

“It happened to me a few months ago,” Jason McGaugh said as he swiped his card at a gas station. “I’m still using my cards, but I’m more careful now.”

McGaugh was in Texas when he got a call from his bank saying his credit card had just been used to charge several hundred dollars in South Carolina. “I told them that wasn’t me!” His bank paid him back, but he still doesn’t know how they got his information.

Nationwide, investigators say within minutes a person’s stolen numbers can be used and then sold on underground websites.

Round Rock police said they have arrested three others and more arrests are expected as the investigation continues. Authorities said the cashier was “recruited” and promised payment for each swipe.

Here is the message from the Round Rock police Facebook page:

Round Rock Police Department has been investigating a credit card skimming criminal ring since May 2013.

The scheme of skimming is someone taking a second swipe of you credit card information with a small hand held device. The skimmer captures the magnetically encoded information from your credit card, or linked ATM card, and stores it into its internal memory. It could be a restaurant waiter, bartender, fast food drive up window worker, or anywhere else you have used you credit card to pay. The devices can hold thousands of credit card numbers that hold your personal account information.

Round Rock investigators recently interviewed a suspect arrested for being in possession of a skimming device at a central area restaurant. Detectives observed the suspect take several “second swipes” of a credit card using the covert hand held device in her left hand then concealed the device in her pants pocket. Those victims were immediately notified on scene by police detectives. The suspect was “recruited,” on the promise of being paid per credit card information obtained, which may have totaled several thousand dollars in payment due to the number of skims that were captured inside the skimmer. Investigation revealed the business was not involved. Rather, the involved employee took advantage of their position and direct contact with the customers providing payment.

Customers are reminded to pay close attention when providing their credit/debit cards as payment to avoid being victimized. When possible, customers are encouraged to personally use point of sale devices when conducting credit transactions.

If you believe your financial accounts have been compromised, you are encouraged to notify your bank immediately to stop any additional fraudulent transactions. A police report for identity theft may be filed at the police department where the fraudulent charges occurred. It is not always known where the transactions occurred at the initial time of discovery. An identity theft report can also be filed at the law enforcement agency where the victim resides or works.

 

** Correction: An earlier version of this story reported the cashier worked at a Round Rock restaurant based on information provided to KXAN by the Round Rock Police Department. The cashier actually worked at a restaurant in Sunset Valley, according to an arrest affidavit. RRPD was working the investigation because one of the men suspected in the case was arrested in Round Rock.

Credit card skimming ring

Credit card skimming ring stretched from Sunset Valley to Round Rock

By Eric JanzenPublished: Updated: 
 

ROUND ROCK, Texas (KXAN) – A woman working at a Sunset Valley restaurant used a credit card skimmer to steal information from more than 500 customers, according to an arrest affidavit.

Catalina Jaimes-Ferrara, 23, was arrested Friday in Travis County on new charges of fraudulently using and possessing identifying information. The man she was allegedly selling the information to, 22-year-old Miguel Naranjo-Villadoniga, was also arrested on the same charges in Williamson County.

Naranjo-Villadoniga was first arrested in April after Round Rock police found him using stolen credit card information to purchase gas, an arrest affidavit said. Police said he used gift cards with the stolen information to purchase more than $5,000 worth of gas from stores in Austin and Round Rock.

After police contacted Chase Bank about the charges, they were able to find all of the victims had used their card in late March at a Chipotle restaurant on Brodie Lane in Sunset Valley. Round Rock police usedsurveillance video to identify Jaimes-Ferrara as the employee swiping the cards using a handheld device.

During an undercover operation, police said they witnessed Jaimes-Ferrara use the device three times in an eight minute span. After confronting her, the cashier told police she was to receive $10 for each credit card number she provided to Naranjo-Villadoniga.

Police said the skimmer contained 527 credit card numbers.

Authorities said the Chipotle store fully cooperated with police during the investigation and fired Jaimes-Ferrara as soon as they became aware of the crime.

Parents need to know for Soon to be College Students


What Parents of Soon-to-Be College Students Need to Know About Credit Cards

Students will likely have college debt after graduation, but should they have both credit card and student loan debt? I interviewed Beverly Harzog, author of  Confessions of  a Credit Junkie, about all things college students and credit cards.

Did legislation really stop college students from getting credit cards?

It did put some needed restrictions on offering credit cards to students. For young adults under the age of 21, they have to show sufficient income before they can be approved unless they have a cosigner. The CARD Act also banned gift giving to entice college students to sign up for credit cards. No more free T-shirts to sign up for a credit card. And the CARD Act also prevents card issuers from sending pre-approved offers to anyone under 21 without the individual’s consent.

2013 survey by the Consumer Financial Protection Bureau showed that credit card agreements with college has decreased since 2009, the year the CARD Act was signed into law. Most of the provisions became effective in 2010.

 Is using a credit card an alternative way to student loans to paying for college in part or in whole?

I do not recommend using credit cards to pay for college. It’s fine to use them to get rewards, but only if you can pay the bill in full by the due date. Student loan debt is stressful, but at least it’s an investment in your future. Credit card debt is “bad debt” and it’s a waste of your money. It would be terrible to graduate with student loan debt and with credit card debt. You don’t want to start your adult life out that way.

What are the dangers for parents cosigning credit cards?

When a parent cosigns for a credit card, they take legal responsibility for the debt. So if the student racks up debt and can’t pay for it, the parent is responsible. The parent can also suffer damage to their credit score if the student uses the card irresponsibly.

What kind of talk/guidelines should parents have with their students before letting them have a credit card? How crucial is this?

Hopefully, parents have been talking to their kids about money management long before they leave for college. It’s very important to talk about credit cards, in particular, because they can be dangerous in the wrong hands. I wrote Confessions of a Credit Junkie to show how irresponsible credit card use can wreak havoc on your life. Even if a parent doesn’t believe in credit card use, they need to educate their kids so they know how to use credit cards responsibly if they choose to apply for a card. When young adults are out on their own, parents won’t be there when they get those offers. So it’s essential to arm your kids with information.

 Is it a good idea for parents to use the last month of summer to evaluate their child’s spending habits before handing them the card?

I recommend starting out with a debit card. When your child has that first job in high school, open a checking account and teach your kid how to monitor their checking account and use a debit card. This teaches them how to budget their money and handle plastic. There’s an emotional disconnect when you use plastic because it feels like you’re not really spending money.

You can’t evaluate a child’s spending habits in just one month. Hopefully, you’ll spend their senior year watching them handle a debit card. If you do think they’re ready for a credit card when they go to college, start by making them an authorized user on one of your accounts or getting your child a secured card.

How are credit cards most often used by college students and their families?

I’ve seen folks cosign and one of two things usually happen. It’s either a success or a disaster! I prefer either the authorized user route, a secured card, or a student card. Your choice depends on the maturity level of your child and how savvy they’ve been with their money. At the end of the day, the parent is truly the expert when it comes to making decisions about credit cards and their college-student kids.

GameStop to start issuing credit cards

Report: GameStop to start issuing credit cards

Consumers get high 27% APR in exchange for Power Up Rewards points.

by  – July 28 2014, 11:30am PDT

GameStop has always been barely a single step up from a pawn shop with its practice of buying used games at low prices and selling them at ridiculous markups. Now, reports suggest that the massive brick-and-mortar game retailer is planning to enter another shady financial area by offering store-linked credit cards to customers at its thousands of locations.

Destructoid reports that it has “obtained photographs” of a purported brochure advertising a credit card tied to the retailer’s existing PowerUp Rewards program. Signing up for the card nets customers anywhere from 5,000 to 15,000 PowerUp Rewards Points (worth roughly $5 to $15 in value), according to the images, as well as benefits like “special financing offers.” We’d expect that having a GameStop credit card would also provide Rewards Points for everyday purchases, but there’s no mention of such a benefit in the report.

Destructoid’s images show a healthy 26.99 percent APR for the card. That’s well above the nationwide average of 13 to 16 percent, and it’s also above the higher-than-normal rates charged by many other store-linked credit cards, which hover around the 22 percent range. And while Destructoid’s sources say that “all PowerUp Rewards members are already pre-approved for the card,” the materials themselves say that the card issuance is “subject to credit approval.” Not that we suspect many people will be turned down for a card with such exorbitant interest charges.

If having your credit managed by a video game retailer isn’t enough for you, note that it’s theoretically possible to hack GameStop’s pre-order system to serve as your own personal savings bank.

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