In George Orwell’s “1984,” the totalitarian regime often confused the populace by using contradictory phrases such as “war is peace” and “freedom is slavery.” The common credit card term “minimum payment” might contain a similar sort of contradiction, because by making minimum payments, you’ll find yourself shelling out the maximum amount of money.

The reason is that the longer it takes you to pay down a credit card balance, the more interest you will pay on that balance. Thus, making the minimum payment each month will mean racking up more in the way of interest charges. Just how much more may surprise you.

The true cost of minimum payments

Suppose you shell out $1,500 for a home theater system. It’s a big investment, so you put it on your credit card so you can pay it off over time.

For this example, let’s assume your credit card charges a minimum payment equal to the larger of 3 percent of your outstanding balance, or $10. These are fairly typical minimum payment terms.

Under those terms, if you make just the minimum payment every month (and assuming you add nothing else to your balance) it will take you over ten years to pay off that $1,500 purchase. Meanwhile, interest charges, at a fairly typical 15 percent rate, would have totaled $810.41. Thus, you would have increased the total cost of that home theater system by 54 percent, to $2,310.41.

Bringing those interest costs down

Making some simple tweaks to the minimum payment can really bring those interest costs down. For example, suppose you consistently pay 50 percent over the minimum payment. Using this approach would eliminate that $1,500 debt in just under six years, with a total interest cost of $441.90, as opposed to the $810.41 you would pay in interest by making the minimum payments.

Suppose there isn’t enough room in your monthly budget for you to pay 50 percent over the minimum payment. There is another approach which will stress your budget less in the short term, but allow you to pay off your balance faster in the long term.

Under the credit card terms described above, your initial minimum payment would be $45; i.e., 3 percent of $1,500. This minimum payment would then decline slowly as your balance declines. However, assuming you can afford to pay that initial $45 minimum, suppose you keep your monthly payment at that amount in subsequent months. This way, you would keep the payment at a level you can afford, but you would be steadily paying more and more over the minimum as it starts to shrink.

The results of this approach? You would pay off your $1,500 purchase in about three and a half years, incurring just $384.44 in interest charges – less than half the interest you’d pay by sticking to the minimum payment all along.

Other factors that can jack up your credit card costs

Besides making minimum payments, there are other things that can substantially raise your interest expenses:

• Missed payments. On many credit cards, missed payments invoke a double-whammy: a penalty fee, plus a shift to a higher interest rate going forward.
• Poor credit. In general, the worse your credit rating, the higher the interest rate you’ll pay. Remember, you can get a free FICO credit score report to check out any potential problems with your credit rating.
• Balance transfers. Zero percent balance transfer offers sound great, but there may be an upfront fee for each transfer, and the zero percent applies for a limited time only. After that, interest rates on balance transfers are often higher than rates on purchases, so be sure to read the fine print of your credit card agreement.
• Rewards/cash back programs. Make sure these incentives are worth it to you, because these credit cards often carry higher interest rates.

Remember, minimum payments do the opposite of minimizing your credit card costs. Larger payments, good payment and credit histories, and careful attention to credit card terms are the things that will bring those costs down.

Richard Barrington has earned the CFA designation and is a 20-year veteran of the financial industry, including having previously served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. Richard has written extensively on investment and personal finance topics.

Source URL: Credit card debt: The less you pay, the more it costs

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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In recent months Americans in general have been making a determined effort to pay down their credit card debts. Maybe you’ve been part of this, changing your spending habits, and using your paycheck to pay down your credit card debt along with your student loans. That effort will only be helped by new legislation passed last year to combat some of ham-fisted habits of credit card companies.

How do these new regulations affect you?

New financial regulations to limit customer exposure to fees and rate hikes

New restrictions on credit card companies–and credit card users, for that matter–come from a combination of the 2009 Credit Card Accountability Responsibility and Disclosure Act and new Federal Reserve regulations mandated by the law. The Fed’s rules, according to the law, must make sure that late charges and penalties–a major source of taxpayer headache and credit card company income in recent years–are “reasonable and proportional.” The rules apply to many types of credit cards, from high interest credit cards to zero balance transfer cards to even the best cash back credit cards.

Just how effective the new law and regulations will be remains to be seen. But as a consumer, it’s important for you to keep in mind what your rights are.

Credit cards and credit scores

Some of the new regulations are related to not only to credit cards but also to your credit scores. Here’s what you have coming to you:

• Each year you can get a free copy of your credit report from each of the three major credit bureaus–Equifax, Experian and TransUnion–at AnnualCreditReport.com.
• If you get turned down for a mortgage, credit cards, insurance policy or an apartment because of your credit score, or if you’re charged a higher premium, you have the right to ask for a copy, for free, of the credit score that did you in. You can then check it against your free FICO credit score to understand what happened.

A new sheriff in town

Your credit card company–as well as your bank, mortgage lender and student loan company–will have to obey rules set out by the new Consumer Financial Protection Bureau. Your auto dealer, however, won’t report to the bureau. But retailers will have to follow certain rules, such as:

• Merchants who set a minimum amount for credit card purchases now have the freedom to continue to do so, provided the minimum isn’t higher than $10. So learn to carry some cash. The Federal Reserve can raise the minimum if it wants to. Also, the federal government and universities can limit how much you put on your credit card.
• Merchants can provide incentives to people who pay in cash or use a debit card instead of credit cards. Previously, contracts with credit card companies prevented that, even though increasing credit card charges made goods more expensive for everyone. Now when a merchant saves on those credit card charges when you pay with cash, you may get to share in the savings.
• Merchants won’t be able to charge less for people using one type of credit card than people using another. And they can’t give discounts for certain banks that issue debit or credit cards.

Credit card penalties and interest rates

Credit card companies will be on the lookout for new ways to recover the profits they are losing to the new regulations, so you should be on the lookout for them. One example is Alliance Data Systems, which issues private label cards to specialty merchants. Alliance made a lot of money penalizing its customers, so when the new rules went into effect, it announced a $1 monthly surcharge on customers who want to get an account statement by mail.

The start of something big? It’s hard to say. But in the meantime, here’s what your credit card company can and can’t do:

• Credit card companies can’t raise interest rates on your account for at least 12 months after the account is opened. After that, a higher rate only applies to your new changes, not an existing balance.
• People who are late on their credit card payments are still going to face some stiff penalties; card companies can still double or even triple your interest rate if you fall behind on payments by as little as two months. They have to give you 45 days notice, however, before raising your rates.

The new rules also bar companies from issuing cards to minors without establishing their ability to pay or getting the co-signature of an adult.

Late fees can no longer exceed the amount of the payment due and can’t be higher than $25 in one month unless one of previous six payments was late or the company proves your tardiness cost them the amount they’re asking.

Where should you go from here?

If you’re just starting out after college in the midst of these regulatory changes, the best advice out there is to live below your means and pay down your credit card debt. Trust me–this temporary sacrifice will save you lots of financial heartache in the future.

Source URL: How do the new credit card rules affect you?

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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For those just out of college or starting fresh, a break in the form of traveling to another state or country is usually near the top of wish lists. Finding ways to fund traveling however, can be a significant barrier to actually realizing this. If you’re good with credit cards, though, a new promotion from Capitol One may be able to help you with your travel ticket.

Traveling in reach?

Capital One has rolled out a new Venture Rewards credit card promotion with a “Match My Miles” promotion that will match the number of miles you have accumulated on another airline credit card up to 100,000 miles.

You earn the additional 100,000 miles–the equivalent of $1,000–if you put at least $1,000 on the card in the first three months.

The offer is good for new Venture and Venture for Business primary account holders. Current Capital One cardholders who want to upgrade to the Venture Rewards card or swap their existing Capital One card will get the mile match if they get approved, said Sukhi Sahni, a senior communications manager with Capital One.

The company will continue the offer this until they’ve given away a billion miles or until May 13, 2011, whichever comes first–it’s a first-come, first-served proposition.

Miles on top of miles: How does it work?

If you have airline miles on one of 13 airline credit cards currently on the market, Capital One will match those miles for free if you sign up for their new card and use it. What’s more, you get another 10,000 bonus miles just for signing up.

Here are some other appealing features of the Venture Rewards credit card:

• There is no annual fee the first year, and $59 a year after that.
• You earn two miles for every $1 you spend on all purchases
• There is no limit to the number of miles you can acquire and the miles never expire.
• There is no foreign currency fee. That means you can use the card to make purchases abroad or online in another currency without having to fork over the 3 percent charge many card companies add on.

“But what’s neat about this card is how we’ve made the redemption process so much easier than other cards,” Sahni said. “You just book your flight, buy your ticket and call us and say, ‘Hey, swap this out.’ It’s hassle-free.”

What you can buy with your matched miles

The best way to calculate how much your miles are worth with this card is to drop the last two zeros on your miles–that’s the monetary value. For instance, if you’ve accumulated 53,000 miles, you’ve earned a $530 flight.

In addition to airfare, miles can be redeemed for gift cards, merchandise and charitable donations, as well as for any travel-related expense, such as hotels, rental cars and cruises. You can redeem your miles for vacation packages, too, and you can book a flight with any airline. There are no blackout dates and no requirement for advanced booking. You simply redeem your miles online or by phone and you get reimbursed for the money you spent. Cardholders can redeem within 90 days of the purchase posting to their account.

While you’re on the road, you’ll earn $250,000 in travel accident insurance for death of dismemberment if you pay for your tickets with your card. You can also get 24-hour help with passports, visas and immunizations when you’re planning your trip, and if your card gets lost or stolen, you can get an emergency replacement. You can even get medical assistance and legal referrals.

What’s the interest rate?

Your interest rate with the Venture Rewards credit card will depend on your credit score, but the rate will range from 11.9 percent for those with excellent credit scores to 19.9 percent. Of course you only pay interest if you’re carrying a balance on the card.

Although the Venture Rewards card doesn’t offer zero percent APR on balance transfers, it also has no balance transfer fee. So if the Capital One card is giving you a better interest rate than your other cards, that no balance transfer fee feature might look appealing. It’s not the best of the balance transfer offers out there but it might be worth taking a look at if you like the rest of its features.

Another advantage of the card is its free extended warranty and its free purchase protection. If you purchase something that comes with a warranty of three years or less, this feature will double the original warranty up to 12 months. The purchase protection feature, meanwhile, will pay you up to $500 each time an item purchased with the card is stolen or accidentally damaged within the first 90 days of the day you bought it.

The card will even reimburse you up to $3,000 for lost luggage when you pay the full costs of your travel with your card. You’re also covered against accidental damage or theft if you rent a vehicle for less than 15 consecutive days in the U.S. or less than 31 days outside the country–except in a few countries such as Israel, Jamaica, the Republic of Ireland and Northern Ireland.

The fine print

Despite the annual fee and despite the interest rate charges on balances, critics have praised the fast 2-for-$1 mileage return offered. They also like that you can use this card to get special seating at special events, such as games, concerts, films and the like.

Capital One acknowledges that in some cases it’s difficult to separate miles earned by credit card purchases from miles earned from flying; in those cases, Capital One will accept general airline rewards statements for those programs that accrue the card miles into the airline’s general rewards account, Sahni said.

So when is your trip scheduled? With a Venture Rewards credit card, it may be sooner than you think.

Jim Sloan is a freelance writer in Reno, Nev.

Photo: Capital One Financial Corporation

Source URL: Looking to travel? Capital One’s Venture Rewards card might be your ticket

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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When I was starting out, a wallet full of credit cards was a sign of success–if you had five or six cards, you were obviously doing well. Like so many others, I got myself into a bit of a payment crunch; each minimum payment by itself was small, but when I lumped them all together each month, well, it was more than I had! I consolidated as many together as I could, took a second job, and paid, and paid, and paid.

Eventually, I paid everything off and now carry one general credit card and one gas card, although I have another account at a men’s clothing store I use occasionally. In today’s society, you can’t buy anything on-line without one, can’t rent a car without one, and try and find an airline that will let you write a check for a ticket!

It’s easy to get caught up in the excitement of getting a credit card, and not read the terms. Luckily for you, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 makes understanding your credit card easier than ever. Now, credit card companies have to post their disclosures on-line, and they have to be written in “plain English”.

Now that understanding credit cards is made easier for you, here are five terms that you should be sure to understand when evaluating credit card offers:

• Grace period. You have to have at least 21 days from the date the statement is mailed to the date the payment is due, but some card issuers give you a few extra days. If you pay off your balance every month, you will pay no interest charges. But if you leave any unpaid balance from the previous month, interest charges will accrue from the transaction date for the remaining balance, along with all new purchases, effectively eliminating the grace period. Balance transfers and cash advances are not subject to any grace periods.
• Annual Percentage Rate (APR). Of course, the interest rate you are being charged is important, especially if you will carry a balance. Most credit cards use a variable interest rate. The APR you are charged is the prime rate plus an interest rate based on your credit history. There are several APRs listed in most credit card offers- a promo rate, transaction or “go to” rate, cash advance rate, and a default or penalty rate.
• Promotional rate. Companies are constantly offering low-or-no-interest programs to entice you to sign up for their cards. Some offer the special rates on 0 balance transfer offers. With these cards, you can save a ton of money if you can pay off a balance without any interest charges. Late payments can eliminate your promotional rate however, so stay on top of your bill to make the most of the offer. The CARD act of 2009 stipulates that all promotional rate offers have to last at least six months.
• “Go To” rate. Like all good things, introductory offers eventually come to an end. When the offer ends, your interest rate will increase to the “go to” rate. The “go to” rate is disclosed in your cardholder agreement as your regular transaction rate. Credit card companies are not required to notify you when this rate change takes place, so be sure to keep the date on your calendar.
• Penalty APR. Make a late payment, and your interest rate could skyrocket. On top of losing your promotional rate, you can be charged a penalty rate. Be careful to read what the penalty interest rate is on your card, especially if you are the kind of person that occasionally forgets to send a payment in. The law states that your account has to be reviewed every six months to see if you can be returned to your previous rate, but each company has different requirements for getting out of the penalty rate.

Before you choose a credit card, go on-line and read their disclosures. Also, check out MoneyBlueBook’s past credit card reviews–a few minutes of reading can help you find the credit card that best meets your needs.

Ryan Hurlbert lives and works in the Pacific Northwest. As an insurance agent, he produced and presented educational seminars on various topics from insurance basics to strategies for dealing with teen drivers. He has researched and produced marketing materials in the insurance, auto, and financial industries. Ryan majored in business and received his Bachelor of Science degree from Portland State University.

Source URL: 5 key credit card terms you should know

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Zero balance transfer credit cards make sense if you have one or more high-interest credit cards that you’re having trouble whittling down. One of the best offers for balance transfer credit cards is coming from Discover – what makes this offer so special?

Setting the industry standard

Discover’s offers are so good, in fact, that some analysts credit the company with helping bring down average balance fees for the entire credit card industry. The average balance fee dropped from 3.5 percent in December, 2010 to 3.36 percent in January 2011, and balance transfer fees are now 0.5 percent less than they were six months ago. What’s more, the length of most balance transfers is increasing.

Discover Card’s no balance transfer fee offer

The Discover More card with no balance transfer fee allows you to transfer up to four balances into one account, and for a limited time is offering a zero percent rate on balance transfers for 12 months, plus no balance transfer fee. According to the Baltimore Sun, there is also a zero percent interest rate on purchases in the first six months.

For a limited amount of time, Discover is also offering an additional Discover More card with a 24 month promotional balance transfer which carries a 5 percent balance transfer fee for those who might need more than a year to pay down their credit card debt.

Discover’s offer is the first online-marketed, no balance transfer fee offer in two years. And since the offer won’t last much longer, there may never be a better time to consolidate your credit card debt and start putting a dent in it. A zero percent interest rate means all of your payments are going into your principal.

According to the company, the annual percentage rate on your balance transfer card will be 11.99 to 19.99 percent after the first year. Your actual interest rate will be determined by your “creditworthiness,” and the APR will vary with the market according to the Prime Rate. Penalty APRs will be between 16.99 and 24.99 percent.

How does the Discover Card zero interest balance transfer work?

Discover tries to make the zero percent balance transfer as seamless as possible. Your job is to collect the account names, account numbers and the amounts you want transferred and send them to Discover. Discover Card pays your creditors, and the balance transfer is posted to your new Discover account within two weeks.

It’s important, however, to keep making payments to your old creditors until their balances have all been paid off so you don’t incur any late fees or interest charges. You should also contact your old credit card company to make sure they have received the balance transfer.

After that, it’s just a matter of logging in to your Discover Account Center and clicking on “view activity since last statement,” to see how much your balance is and what your payment will be.

Balance transfer offers coming as a surprise

According to the Sun, the deals from Discover and other credit card companies on their balance transfer cards is a bit of a surprise. Citibank and Capital One Platinum Prestige also offer attractive zero percent rates on balance transfer credit cards. Experts expected credit card companies to pull back on rewards, special offers and lower interest rates in the wake of new federal regulations that prevent credit card companies from raising the annual percentage rate during the first year.

Instead, credit card companies have ramped up their offers and marketing efforts. Discover CEO David Nelms told the Sun that marketing efforts at his company have returned to what levels were before the recession and the financial crisis that wreaked havoc on Americans’ personal finances.

For example, there has been a 62 percent increase in the number of credit card solicitations appearing in people’s mailboxes, with more than 2.25 billion being mailed out, the Sun reported. In addition to the zero interest balance transfer offers, there have been a stream of special offers for travel cards, low-interest cards, cash-back cards and rewards cards. However, finding the best credit card rates is easier by comparing them online.

Jim Sloan is a freelance writer in Reno, Nev.

Source URL: Act quickly to take advantage of Discover’s zero percent balance transfer card

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Take care of your credit, and credit card companies will want to take care of you.

Banks have put together some hard-to-find credit card offers to attract consumers with high FICO scores. If you’ve built a strong credit history, you can earn unusually high cash back rebates, travel perks, and low interest rates on balance transfers. According to CardRatings.com, five credit cards rank highest at offering great perks to consumers with excellent credit:

1. Discover More Card–Over the past few years, Discover Card has made some of the boldest moves to attract more consumers with high credit scores. Earn this card, and you can enjoy a zero percent balance transfer for 18 months with just a 4 percent transfer fee. During your first six months with the card, you’ll pay no interest on purchases while earning between 1-5 percent in Cashback Bonus rewards.
2. Simmons Visa Platinum–You’ve probably never heard of Simmons Bank, and they’re probably okay with that. Simmons saves its credit card invitations for consumers with the very highest credit scores. Apply via one of their credit card applications online, and you can surf your other debt to a Visa card with an APR as low as 7.25 percent and no balance transfer fee.
3. Fidelity Investment Rewards American Express Card–One of the best cash back credit cards on the market requires you to maintain a brokerage account at Fidelity Investments. If your FICO score tops 700, you probably already do business with Fidelity, anyway. You’ll need to ask for an invitation to Fidelity’s version of the American Express Card, which will drop 2 percent of everything you spend into a tax-deferred investment account.
4. PenFed Visa Platinum Cashback Rewards Card–Another perennial candidate for best cash back credit card, PenFed designed this Visa card to help military families manage their finances while earning rebates on everyday purchases. If you’re not in the service, that’s fine. Join an associated non-profit organization to show your support for our soldiers, and you’ll qualify for membership in this innovative credit union.
5. Capital One VentureOne Rewards Credit Card–You’ve seen the television ads, but a high FICO score can get you invited to one of Capital One’s best-ever balance transfer offers. With no balance transfer fee, 0 percent APR, no annual fee, and no foreign transaction fees, this special edition of the Venture Visa card gives unprecedented flexibility to travelers who like earning bonuses without being tied to a single hotel chain or airline.

Earning the best credit cards requires strong FICO scores
Because you’ve got to have a high credit score to qualify for any of these credit card offers, follow these tips to improve your financial profile:

• Start small. A department store or gas station card can help you kick start your credit history. Build a solid track record by charging routine transactions, then paying your bill each month.
• Watch your percentages. Pretend your credit limit’s only about 30 percent of what it says on your statement, then keep your balance close to that pretend threshold on every account.
• Restrain yourself at checkout. Retail credit cards can pinch your credit score if you apply for too many, too quickly. To credit bureaus, you could look like someone whose identity has been stolen. Or, you could just look desperate for quick credit.
• Stay loyal to your first credit cards. Cancelling an account can reduce the history of your credit file. A high score often requires hanging on to the oldest card in your wallet.
• Track your scores. While you won’t see much change from day to day, many websites now offer free FICO score reports or similar free credit scores that update every few weeks. Just understand the distinction between a report that’s truly free and one that requires a paid membership to an affiliated service.

Over time, once you’ve earned one or two of the excellent credit cards on this list, you can rebalance your wallet to include just the accounts that give you the best rates and the best perks. Until then, use your credit cards responsibly and regularly to make yourself an attractive future cardholder.

Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

Image: Michelle Meiklejohn / FreeDigitalPhotos.net

Source URL: Top 5 credit cards for consumers with excellent credit

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Dating is like walking on a minefield: You never know what your next step will bring. Now to make it even harder, dating experts are adding a new twist.

It used to be as easy as intuition, dinner and a movie, but now experts say that financial compatibility is an important factor in finding the right person. If turns out that if the man or woman you are dating is a financial mess, they can take you down with them.

If you survived the dating battlefield like me and are now married, you probably have some of your own war stories. But if you are still out there in dating never-never land, you may need a little help. I can give you a few tips on how to figure out if your date is a financial dud.

You just have to read the signs:

1. Overspends like crazy

If your date keeps trying to impress you with how much everything they own costs, you might think twice about your future with them. Wild spending can lead to all kinds of financial problems as witnessed by the record number of mortgage defaults and credit card delinquencies seen in the last couple of years. If your date seems overly impressed by their own spending, it may be that they are forgetting an important fact: Eventually they have to pay for it all.

2. Leases to impress

Although it is not a set rule, in most cases buying a car is a much better financial option than leasing a car. As long as you don’t plan on changing cars often, it’s better to build a little equity as you make your monthly payments. But even worse than leasing, is leasing solely to impress.

If your date is driving a leased the car that seems to be way beyond what they can afford, you are not dating a financial wizard. Chances are pretty good that they are being taken to the cleaners on their lease deal and those costly lease provisions.

3. Loves get-rich schemes

It may not the most exciting thing in the world to hear your date discuss their dollar-cost-averaging approach to retirement savings, but at least your date has a financial vision. Wouldn’t you rather have your date bore you with details about their 401K than hear about how they have figured out how to make a million dollars from online poker?

If your date’s retirement plans seems to be wrapped up in a multi-level marketing or other pyramid scheme designed to double your money in two weeks, then run for the hills.

4. Pays only with prepaid cards

You might think that if your date uses a prepaid credit card that they are showing a certain amount of financial responsibility. After all, they are only spending what has been loaded on the card and they are not building up debt. Unfortunately, it’s not that simple. The problem is that using prepaid credit cards can be a huge warning sign that your date has bad credit and can’t qualify for a normal credit card.

5. Doesn’t believe in saving for a rainy day

Let’s be honest. There is nothing sexy about investing in a certificate of deposit or opening a savings account at a bank. But a little advance planning can go a long way when trying to pay for a wedding, a vacation or your first house. It takes a little discipline and an ability to go against the crowd. If your date thinks keeping a savings account at a bank is uncool, you know they may not be very adept at long term financial planning.

6. Tips too much or too little

You can tell a lot about a person by how they tip. In some ways it can be a microcosm for their overall financial intelligence. A person savvy with money will tip based on the level of service. They don’t stick by hard-and-fast rules, but will adjust on the fly. They don’t tip on the tax and will always check to see if the tip has already been included on the bill.

The financial dud is easy to spot when it comes to tipping. Either they will tip way too much because the waiter or waitress was slightly flirty or they refuse to pay a premium tip of over 15 percent even if the service was excellent. You will also get a bad feeling about your date if he or she asks to borrow pennies and nickels to get the tip just right. Go with your gut. If they can’t handle tipping, they may struggle mightily with the bigger financial decisions coming down the road.

Image: graur razvan ionut / FreeDigitalPhotos.net

Source URL: 6 signs your date is a financial dud

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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If you feel awkward getting asked to open a store credit card when you’re shopping for blue jeans, imagine what happens when you get the same offer in the emergency room.

Medical credit card applications abound at the offices of dentists, doctors, and even veterinarians. While relaxed approval processes make these cards appealing to Americans in need of urgent care, critics of medical credit cards warn that the cure for long term medical debt might be worse than the disease. Do these credit cards deserve their bad rap?

How medical credit cards hit the market

It was unheard of for earlier generations of Americans to let medical bills go unpaid. Our parents and grandparents couldn’t run the risk of bumping into the neighborhood doctor at church or in the supermarket with outstanding invoices hanging over their heads.

Over the years, deductibles and co-insurance ceilings got larger, forcing health care providers to take on greater risk. Practices got bigger, too, enabling more of us to slide our medical bills to the back of the stack without feeling very guilty. Lenders partnered with medical providers to offer easy applications, using many of the same techniques perfected in retail stores.

Shifting medical credit cards from emergency coverage to elective financing

With finance charges and payment options similar to retail credit cards, most consumers found terms reasonable enough to get them through a crisis. However, the medical credit card market kicked into high gear as American culture glamorized elective procedures, ranging from cosmetic dentistry to plastic surgery.

Instead of utilizing medical credit cards as a last resort to spread out unexpected health care costs, patients started using the unsecured loans to budget for voluntary procedures. Just as auto dealers and home improvement centers use favorable credit terms to encourage us to splurge on ourselves, some doctors have marketed financing to patients as an easy way to pay for planned operations and upgraded hospital care.

Pitfalls of medical credit cards

Opening a medical credit card carries the same risks and rewards as any other kind of unsecured loan. Except, according to critics, many consumers may not be totally thinking straight when trying to juggle the thought of a new monthly bill with a major illness or injury.

• Many patients make decisions about opening a medical credit card without considering how long term illness might affect their earning potential.
• Some health care practitioners not only get commissions on new accounts, they use headroom on the credit line to suggest expensive upsells like private hospital suites and enhanced recovery programs.
• Applying for a new medical credit card can affect your credit score. Maxing out your new account can cause some scoring algorithms to think you’re overutilizing your credit.

Just as you’d weigh the pros and cons of opening a traditional credit card account, you should think about whether the benefits of a medical credit card justify the risks.

Keeping control of medical credit cards

Few of us plan to rack up substantial medical bills. However, a little advance planning can prevent medical credit cards from dominating your financial life. Use these tips to minimize your risk when considering a new medical credit card account:

• Open a medical savings account. Even if you don’t qualify for a tax-favored savings plan, a basic online savings account can help you stash an emergency fund to cover co-payments.
• Review your health insurance deductible. A higher deductible can help you retain more of your monthly health care budget. Otherwise, a low deductible insurance plan can help you avoid the need to borrow more than a few hundred dollars per year.
• Explore all options for covering medical costs. Doctors who market medical credit cards often extend short term credit directly to patients who ask.
• Use balance transfer offers to bounce bills from medical credit cards to traditional cards.
• Consider opening a medical credit card account when you’re not under duress. The best medical credit card programs allow you to apply for a line of credit at a time when it’s less likely to impact your credit score.

Just like other unsecured loans, medical credit cards can help you get through unexpected tough times while letting you invest in a better quality of life. Treat a medical credit card account with the same respect as the credit cards in your wallet. Otherwise, you’ll just end up replacing one kind of pain with another.

Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

Image: Ambro / FreeDigitalPhotos.net

Source URL: Like surgery, medical credit cards offer risks and rewards

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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By Peter Andrew

I’m not expecting any sympathy, but it’s not easy writing product reviews. That’s because it’s rarely possible to rank different features in a way that’s meaningful to everyone.

Take televisions as an example. I badly need a new one, and recently started reading TV reviews. All I’ve discovered so far is that there isn’t a perfect model, or certainly not one in my price range. One has a brilliant picture, but slightly lower sound quality, or vice versa. Another is great except for occasional motion blur during action sequences. Yet more are good, but ugly, and don’t fit in with my living room decor. When I eventually come to make a choice, I’ll have to decide which of these factors are most important to me personally.

And it’s the same with credit cards. I can tell you all about the Chase Sapphire? credit card, but whether it’s the best for you will depend on your individual needs and wants. What I can say for sure is that it is a good all-rounder, and that you should almost certainly include it on your list of potential cards.

Not for everyone

But let’s begin by identifying those who should think carefully first before including it on their list of possibilities. If your credit score’s going through a down patch, the chances of your application for a Chase Sapphire card being accepted are remote. This is a premium product that’s reserved for those with great credit.

In fact, it’s a good idea to check your score before you apply for any card–or any other sort of credit. Just submitting an application can drive down that score, so you don’t want to make ones that are bound to fail. You’re entitled to a free copy of your credit report once a year, but there are other ways of obtaining a free FICO credit score.

Rewards that really reward

One of the things that makes Chase Sapphire so attractive is its credit card rewards program. To start with, there’s an introductory offer that awards you 10,000 bonus points (worth $100) just for spending $500 on the card during the first three months after your account’s opened.

But this program keeps giving, especially when it comes to travel. Perhaps most importantly, when you book through Chase’s Ultimate Rewards? travel agency there are no restrictions or blackout dates. And you get double rewards points when you use that service.

But you’re free to make your reservations using the card elsewhere, and then use the Pay Yourself Back service to receive a credit on your statement. And you’re not restricted to travel. You can also redeem your points for cash back, merchandise, gift cards or anything else you want.

Two more things: your points should never expire, and there’s no cap on the number of points you can earn.

Attractive APR

Cards with good rewards programs tend to charge higher APRs. But if you compare Chase Sapphire with other big-name rewards cards, its standard APR is very competitive. At the time of writing (check Chase’s web site for current rates, terms and conditions), it’s 12.24 percent. And the card charges no annual fee.

You should bear in mind two caveats. First, that APR is tied to the prime rate, and is likely to rise if that goes up. Secondly, you must make at least the minimum payment in full and on time each month. If you’re late, the APR is likely to rocket up to 29.99 percent on new purchases and stay there. If you’re unlucky enough to go past 60 days overdue, that high rate could apply to pre-existing balances, though it should return to normal (only on that old debt) if you make on-time payments for six months in a row. These penalties are pretty standard across the industry.

No balance transfer fee offers

Some credit cards offer an introductory zero percent balance transfer APR and/or no balance transfer fee. Chase Sapphire isn’t one of them.

However, that doesn’t necessarily mean that you should rule it out if you have a balance that you want to transfer. You’re going to have to pay a three percent fee (or $5, whichever is the greater), but the rate from day one should be the card’s standard 12.24 percent APR. So if you’re currently on, say, 19.99 percent, you still stand to save money.

Decisions, decisions

So is the Chase Sapphire card right for you? Only you can say. But it’s well worth thinking about.

Peter Andrew has been writing about–and for–business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

Source URL: Chase Sapphire credit card — what’s not to like?

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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Call me old-fashioned (no, really–everyone else does), but I know next to nothing about the Kardashian sisters. However, even with the tiny amount of knowledge I have, I struggle to picture a family breakfast scene in which Kim, licking maple syrup from her perfectly manicured fingers, glances up from her copy of The Wall Street Journal, and remarks to Khloe and Kourtney: “It says here that analysts are forecasting explosive growth for the prepaid card market. I think we should establish an aggressive presence in that sector.”

No, I suspect that some Svengali-like figure on the sisters’ business management team persuaded the family that launching the Kardashian Kard was a good idea. And it might be fairer to blame him or her than the girls for the fact that the Kard is likely to end up entering the record books as one of the shortest-lived products in the history of financial services.

Kard killer

The Kard was withdrawn Nov. 30, just three weeks after its glitzy launch. And its cause of death was the sheer weight of negative publicity that followed a blistering attack on it by Connecticut Attorney General Richard Blumenthal. He’s quoted as referring to the product’s “pernicious and predatory fees,” saying, “Among the prepaid debit cards now on the market, the Kardashian Kard is particularly troubling because of its high fees combined with its appeal to financially unsophisticated young adult Kardashian fans. Keeping up with the Kardashians is impossible using these cards.”

Prepaid cards aren’t all the same

Factually, he was correct. The product was reportedly targeted at those 13 years old and up, although you had to be 18 to apply, so presumably young teenagers would need to wield pester power to get their parents to obtain one for them.

It’s true that the fees were fairly high. Even if you didn’t use the Kard at all, it would have cost you $59.95 during the first six months you held it, and then $7.95 a month after that. Then there was $2.50 for every ATM withdrawal, $1.50 to access help from the call center, and $2 for each bill payment, to name just a few other charges.

Sounds a lot? Not really, at least if you compare those fees to the amounts charged by some of the Kard’s competitors. When the Consumers Union looked at 19 prepaid cards back in September it found that:

• “Activation” fees were levied on 12 cards, and ranged from $3.00 to $39.95
• Sixteen charged monthly fees ranging from $2.95 to $9.95 ($9.95 a month adds up to $119.40 a year, whether you use the card or not)
• ATM withdrawal fees, which were charged by all issuers, started at $0.99, and topped out at $2.50
• Eighteen cards charged between $0.45 and $1.00 for simple ATM balance inquiries

Picking a good prepaid card

That list of fees goes on and on, and the variations between the amounts different cards charged for each ranged from the significant to the enormous. Last year, The New York Times spoke to a Brooklyn man who was given a list of 24 different fees that could be applied to his prepaid card, and to a Florida resident who’d been charged $2.95 for a declined ATM transaction when he mistakenly keyed in the wrong PIN. When the latter contacted the call center to complain, he was stiffed a further $1.95 for the privilege.

The trick when choosing a prepaid debit card is the same as when picking any credit card: think about how you’re likely to use the product, and then select the one with the fee structure that best matches your particular needs. Sorry, but that does involve reading quite a bit of small print, though the amount you save could more than justify the time you spend.

One card that should probably be on your short list is the Walmart MoneyCard, which–while somewhat lacking in Kardashian-style glamour–is widely cited as an exceptionally low-cost product.

Prepaid card use set to explode?

The Federal Reserve published a study Dec. 8 that looked at the different ways in which consumers make payments. And it said: “Prepaid card transactions… represented the fastest growing payment type, increasing 21.5 percent annually from 2006 to 2009.” That growth was, admittedly, from a low starting point, but a couple of days before the Fed’s study became required reading at the Kardashian family breakfast table, The Wall Street Journal revealed that prepaid cards are about to receive a massive boost.

Apparently, recent legislation that could cap the fees banks receive from merchants every time one of their cards is swiped does not apply to prepaid cards. So now many of the big banks are developing their own prepaid products. Don’t hold your breath, but it’s just possible that the new competition these provide could drive down prepaid card fees, and force some of the worst gougers out of the market.

Who knows? Maybe even Kim, Khloe and Kourtney could be tempted to get one.

Peter Andrew has been writing about–and for–business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.

Source URL: Kardashian Kard killed – but prepaid cards set to take off

Copyright Protected © 2011 Money Blue Book: Personal Finance Blog. All Rights Reserved.

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