8 Things To Do If Your Wallet is Stolen

(This is a guest article by David*)

There are few things that might churn your stomach and make you break into a sweat quicker than the loss of a wallet. The sad part about it is, in the overall scheme of things, it probably isn't the cash inside that you've lost that concerns you. It's likely the loss of all those little plastic cards with numbers printed across them that terrifies you the most -- that, and not knowing into whose hands they've fallen.

Recently I had my wallet stolen from the beach. The thieves didn't even get one dollar of cash and didn't manage to use any of my cards thanks to prompt canceling of cards. The police are never that hopeful of finding the thieves or recovering a wallet and so all they can do is give you an incident number to use with your banks, phone company etc.

If you've simply lost your wallet it could be a good samaritan who has discovered your wallet on the street. Unfortunately, you can't necessarily assume a well-intentioned citizen has hold of your wallet and is contacting the proper authorities. While in some cases you might luck out and have your personal affects returned to you, in most scenarios you'll have to assume the worst and get started on doing everything in your power to ensure the forces of evil aren't making the most of your misfortune. Here are a few tips to help you do so.

1. Make a Thorough Search

While you want to be quick about reporting a stolen wallet, you may not want to jump the gun before you've made a thorough search of the spots you visited last or at least make a quick phone call or two. Had you been eating at a restaurant, visiting a hotel, stopping in at a friend's, or frequenting another place at which you may have lost your wallet, it could be a long shot, but you might want to contact that business or person just to see if your wallet was turned in. However, even if someone did return your property, it doesn't mean that all its contents are there or weren't somehow compromised, so it might still be a good idea to consider or carry out the following steps.

2. Contact Authorities

Probably, one of the first things you'll want to do if your wallet has been stolen is contact the local authorities and file a report. This can be an important step, not only in the event that they can locate your wallet, but a police report can be important documentation should your personal or financial information be compromised and you must take action to recover your identity through various businesses or agencies.

3. Make a List

If you don't have one already, you should try to make a list of every item in your wallet. This may not be easy, but try to remember any and every item that could have been lost, especially those that had pertinent personal or financial information contained upon them.

4. Contact Credit Card Companies/Bank

Putting a halt to thieves using your credit or debit cards will likely be one of the first things on your to-do list after your wallet has been stolen. Hopefully, you have those numbers from the back of your cards to report them lost or stolen, but if not, you will probably have to contact the credit card company or bank and speak to a customer service representative who can guide you through the process of what to do. Take note, because it might have to be a process you have to repeat multiple times. If you had other pertinent information such as checking or savings account numbers in your wallet, you will want to notify your bank or financial institution of that as well.

5. Contact Credit Agencies

Beyond your credit and debit cards, you will probably want to contact each of the major credit agencies to place a fraud alert on your credit report. These three agencies consist of Experian, Equifax, and Trans Union, and it can be critical to the health and safety of your credit that you notify them as soon as possible after the theft of your wallet.

6. Notify Friends and Family

You may be carrying contact information of friends or family within your wallet. Phone numbers, email addresses, and similar information in the wrong hands could lead to those you care about being scammed by con artists or thieves. Therefore, it can be important to their safety to let them know what has occurred so they can take proper precautions.

7. Be on the Lookout

So now that your wallet is gone and you've notified the pertinent and proper businesses and persons, it's time to start keeping a good eye on your personal information and financial accounts. Even though you may have notified your financial institutions and placed fraud alerts on your accounts, it is still a good idea to be on the lookout for changes or odd activity related to your accounts. And if you had home and work information in your wallet as well, it may not only be the security of your accounts you have to watch out for, but work and home security as well.

8. Start the Rebuilding Process

The rebuilding process, replacing the things that you lost when your wallet was stolen, is probably going to be a royal pain in the neck, and there may be more items to replace than you initially realize. Besides contacting critical agencies like credit card companies and banks, you'll likely have other places to contact and you'll probably have to get a variety of new cards. Here are a few of the other cards you might have to replace or places you might have to notify regarding your loss:

• Driver's license


• Library card


• Auto insurance company


• Health insurance company


• Employer

Time is often of the essence when you've had a wallet stolen. And it can be critical to the protection of your financial security, and possibly your personal security as well, to cover as many bases as you can think of after such a loss. Even if you don't see any activity on your accounts initially, it's important to remember to keep a watchful eye on such areas. Although much of the time such activity might occur almost immediately, it doesn't necessarily mean your information might not be used in ways that could come back to haunt you down the road.

*About the author: This is a guest article by David. David writes about personal finance for CreditCardCompare.com.au where you can find the best credit cards for Australians, including a range of low rate credit cards that help cut costs.

*Image Credit: Photograph by Andrman [via Flickr Creative Commons]

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10 Quick Fixes for Your Credit Score

(This is a guest article by Bailey Harris*)

Paying your bills on time is the best way to obtain and maintain a high credit score. However, there are a few other things that you can do to boost your credit score before applying for loans and other types of credit. Here are 10 quick fixes to try today:

1. Correct Major Errors

Some errors, such as incorrect address information or name misspellings, have very little (if any) effect on your credit score. However, there are some errors--negative items that aren't yours, paid accounts listed as unpaid, etc.--that can drag your score down considerably. One of the very first things you should do is check your credit report for errors, and if necessary, make an effort to correct bad information with all three credit bureaus.

2. Pay Down Credit Card Debt

Paying down revolving accounts is easily the quickest way to boost your credit score. If you can manage to pay down or pay off credit cards over a two month period, you will see substantial results. You should start with cards that are closest to their limits versus cards with the highest interest rates. If possible, get balances down to 30 percent or less of each card's limit.

3. Transfer Credit Card Balances

If paying down debt is not an option, try transferring the credit card balance from a card that is nearly maxed out to one or more cards that have few or no charges on them. Spreading out your debt in this way is the second best way to fix credit fast. If possible, get the balance on every card down to 30 percent or less.

4. Update Your Credit Limit Information

Your credit score may not be accurate if there are problems with the credit limits being reported by the companies who issued your credit cards. Credit card limits often change--maybe you requested more credit or maybe your limit was extended by your creditor. Whatever the case may be, make sure the credit card limits being displayed on your credit report are correct. If they are not, ask the company who issued the credit card in question to update the three bureaus with your most recent credit limit information. Most companies will update this information upon request.

5. Change Your Payment Dates

Every credit card company reports information to credit bureaus on different days. These days rarely line up with your billing cycle. So, if you make charges and pay your credit card off every month, the credit bureaus may still think you have a balance on your card--even when you don't. You can remedy this problem by checking your credit report to see which day of the month your creditors send updates on payments to the credit bureaus and then making your payments several days before this reporting date. You could also request that the company give you a new due date. These strategies will have a minimal effect on your credit score, but they are worth trying if you want to massage the system in every way possible.

6. Piggyback on Someone Else's Good Credit

If you have a spouse, parent, or another close friend or relative with good credit, you may want to consider having your name added to one of their credit cards. This method of piggybacking can have a positive impact on your score because it allows you to get credit for every charge they make and pay off by the due date.

7. Dispute Old Negatives

If you have an old negative on your account that has been sent to a collection agency, such as an unpaid cable bill, you could dispute the account with all three credit bureaus. You should mark the account as "not mine" versus "unjust" to increase your chances of winning the dispute. If the amount is small, the collection agency may not even take the time to bother with it when the credit bureaus investigate the situation.

8. Ask for a Goodwill Adjustment

A goodwill adjustment occurs when a creditor or lender agrees to erase a late payment from your credit history. You will have to request this adjustment personally--either in writing or over the phone. If you have a long-standing or positive history with a creditor, you have a better chance of getting this adjustment, but it never hurts to ask in any case.

9. Get a Rapid Rescore

Rapid rescoring services can help you quickly and efficiently correct errors or pay down balances. With the help of a service, you could see a higher score in as little as 72 hours. The cost for rapid rescoring varies depending on the service you hire, but typically runs somewhere around $50 per account.

10. Simulate Various Scenarios

If you want to see what impact these strategies (and others) may have on your credit score, you could try punching your information into a credit score simulator. Most simulators will show you how paying off balances, making a late payment, or removing negative information from your credit report will affect your credit score. The official FICO site offers a great simulator to people who have purchased a copy of their credit score. There are also a number of free simulators that can be found online.

*About the author: This guest post was contributed by Bailey Harris, who writes for CreditScore.net.

*Image Credit: Photograph by meddygarnet [via Flickr Creative Commons]

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Smart Ways for College Grads to Minimize Debt

(This is a guest article by Omar Adams*)

If there’s one thing that most college students are graduating with these days, it’s a mountain of debt. And even though they know this situation is bound to arise when they take out a student loan to cover their tuition costs, they don’t realize that it is compounded several times because of the way they use their credit cards and rack up other unnecessary expenses. It’s not that hard to graduate debt-free or at least with a relatively low amount of debt; the only hitch is that collegians have to plan and execute even before they start their four years on campus. If you’re a high school student hoping to minimize your debt when you graduate from college even as you enjoy most of what college has to offer, here are a few tips that are sure to help:

1. Choose your college with care. Remember, a prestigious name is not going to help you when you’re faced with a mountain of debt on graduation. So unless you want to spend the better part of your adult life slogging away to pay your student loans, think carefully before you make the choice. While you don’t have to go to the other extreme and choose a community college, opt for a university that’s close to home or where you have friends you can stay with. This way, you cut back on accommodation costs. If that’s not possible, choose a degree at a college that’s reasonably affordable and which doesn’t demand that you pay through your nose.


2. Work while you study. College is not all about fun and games, parties and sororities. You need to adopt a more serious attitude if you want to graduate without a care in the world. When you assume responsibility for your debt right from your first year by getting a job that allows you to pay for your extraneous expenses and also settle some of your student debt, you not only prevent your debt from accumulating, you also reduce the interest on the amount that’s outstanding.


3. Use credit cards judiciously. I’m sure every college student has been given this piece of advice; even so, it falls by the wayside more often than not. While I’m not saying you must avoid credit cards altogether, it’s best to use them wisely – charge all your expenses to them if needed, but ensure that you have enough money to cover the entire payment every month on or before the due date. The best way to avoid racking up huge credit card debts is to get a secured card, one where you’ve paid a sum in advance and which is your spending limit. Also, if you have a savings account, tie it up to your credit card and set up an automatic debit facility the day your bill is due. This way, you don’t have to worry about going overboard or racking up a huge interest because you’ve forgotten to pay your bill, and even if you don’t have money to take care of your bill, the amount you paid upfront is enough to take care of it.

*About the author: This guest post is contributed by Omar Adams, he writes on the topic of online accounting degree programs. He welcomes your comments at his email id: omaradams47@gmail.com.

*Image Credit: Photograph by upsuportsmouth [via Flickr Creative Commons]

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Is Investing in Stocks a Good Option for the Youth?

(This is a guest article by Sharon Smith*)

Investing in stock... sounds scary? Many of us do not have much idea about stocks at all. Especially the youngsters who are just starting out, often inquire about how to start investing. Let’s start out with simple answers to the basic questions.

What is a stock?

A stock is, mostly simply termed, the partial ownership of a company. A lot of companies issue stocks when they plan growth. They sell stocks with the purpose of not falling into the clutches of debts. As stocks are equivalent to ownership of the company, the company is not liable to pay back the stock holders.

Why should you invest in stocks?

The simple reason is, once the company earnings increase, the value of stocks increase as well. Some of the companies pay dividends to their stock holders. Every quarter, companies calculate their profit percentage. Then, they reinvest certain profit amount into the business and pay out the rest of the amount as dividends to the stock holders. For example, if you buy $10,000 worth of stocks, each costing you $10, then you are buying 1000 shares of the company. Now, if the company earns a profit of 25% in that quarter of the year, it might reinvest 20% of the profit back into the business and decide to pay the rest 5% amount as dividends to its stock holders. Thus, you are earning $50. This is a legitimate income that you are earning and it is taxed.

There are usually two kinds of stocks - common stocks and preferred stocks.

Common stock is the ownership of the company in general. The companies offer common stocks through public offerings and tenders. The only obvious risk with common stock is that the price of the stocks fluctuates often. However, the investors can only lose their initial investment in case the stock prices fall.

The preferred stock is less risky than the common stock. Thus, the returns on the investment are also less. However, preferred stocks guarantee regular dividends for a fixed time period. Should the company default on dividend payments, and declare bankruptcy, the priority is given to the preferred stock holders regarding the assets entitlement. Preferred stock generates income for the investors, while raising the capitals for the company.

Start investing now

According to a mutual fund company, T. Rowe Price associates, if you wish to accumulate $1 million by the age of 65, you should begin investing at 25. Starting from this age, if you invest around $3900 annually, by the time you are 65 years old, you will be able to earn a return of 8% per year.

Here are four very important tips that you should keep in mind while considering investments.

1. Investment is not a gamble. It is true that a lot of investors gain and lose huge money in pretty short time. However, you should understand that investing in small amount consistently will fetch you better result by ensuring financial security. Investing is a long term process and you need to leave your money for circulation in the financial market for at least 10 years.


2. Do not consider investment, if you are in debt. Credit card debt is a big barrier towards financial stability. In case of debt, consolidate the outstanding amount and pay off. Do not incur any further debt on your card. It sounds difficult, but once you do that, it would be the best financial decisions that you would ever make.


3. Get insurance first. Insurance is something that most young people do not give much thought to. However, that is a huge mistake. You must have proper insurance before investing your hard earned money. You may never need it, but in case you ever do, you will be glad to have it in place.


4. Have an emergency fund. Emergencies can happen any time and under any circumstances. The biggest benefit of having an emergency fund is it prevents you to withdraw from your retirement accounts. In some types of emergencies like fire, illness etc, waiting periods for receiving insurance benefits might take more than two weeks. If you set yourself an emergency fund, that will keep you going during such crisis periods.

Once you have considered the above points, start investing. Just remember, investing in stocks would combat the risk of living beyond your means.

*About the author: Sharon Smith is a financial writer. She is associated with the Oak View Law Group. She offers advice on various debt management programs.

*Image Credit: Photograph by wonderwebby[via Flickr Creative Commons]

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Are Prepaid Cards the Right Option for You?

(This is a guest article by David Pratt*)

Recent college graduates and students still in school will now find it much harder to get their first credit card under new Federal credit card rules that went into effect in March. The Credit Card Accountability, Responsibility, and Disclosure Act is meant to protect consumers from unfair credit card billing practices. The law includes rules to help protect people under 21 from going into deep credit card debt at the start of their work career.

The good news is that for many young people, a reloadable prepaid card is a safe and convenient alternative to using a credit card, cash or checks for making purchases and paying bills. Prepaid cards are widely available online or at retailers such as drug stores and grocery stores.

"Increasingly, prepaid cards serve as a powerful tool to encourage financial responsibility for college students," said Kirsten Trusko, President and Executive Director of the Network Branded Prepaid Card Association (NBPCA), a non-profit trade association. "Prepaid cards provide all the flexibility and security benefits of a branded payment card without the risk of running up debt and overdraft charges."

Harder to Get a Credit Card

Under the new rules, people under the age of 21 now have to prove that their income is high enough to make monthly credit card payments. Or, they need a co-signer, such as a parent. What’s more, if you are under 21 and have a co-signer on your account, you will need the written permission of that co-signer to let the bank to raise your credit limit.

In addition, card companies are no longer allowed to market on college campuses. The days of handing out t-shirts, sodas, and posters on the quad in exchange for obtaining filled out credit card applications from students are over.

It’s still possible to get a credit card without a co-signer if you are under 21, but you will have to have a high enough paying job as well as something of a credit history already—through bill payments or a track record of paying a card loan—certainly possible, but out of bounds for plenty of grads, at least in the initial time after graduation.

How Prepaid Cards work

Provided you are 18 and can pass a simple identity check required under the U.S. Patriot Act (which means providing your name, address, birth date, and social security number) it is easy to get a prepaid card. A prepaid card is plastic card that looks like a credit card or checking account debit card. It is issued by a bank and has an account number embossed on the front and embedded in a magnetic strip on the back. It typically is tied to either the MasterCard or Visa debit network. These cards are widely accepted by hundreds of thousands of merchants nationwide and around the globe for transactions such as buying groceries, clothes, gasoline, and eating at restaurants. They can be used in person or online with a signature transaction or by using a PIN number.

But instead of making purchases on credit, you "prepay" for those purchases by putting your own money into the card account ahead of time. Thus, you are drawing upon your own funds rather than borrowing money or paying interest charges. You can add money at a Western Union agent by handing cash to the agent who then for a small fee, deposits that cash into your card’s account. Similarly, you can buy a Green Dot Money Pak for $4.95 and transfer the money from the Green Dot Money Pak into your card account. You can also take advantage of direct deposit to have all or part of your payroll check deposited directly to your prepaid card account. In this way, you can reload your card with funds and continue to use it indefinitely.

When shopping for a prepaid card program, check that your funds are insured under the FDIC program. Under MasterCard and Visa policies you should be protected if your card is lost our stolen. If reported within 48 hours your liability will be limited to $50 under those policies and capped at $500 if you somehow failed to report the lost or stolen card as late as 60 days out. But if you waited longer than that, you could be out whatever amount you had on the card.

Advantage for Budgeting

Prepaid cards do have some fees, which vary from card to card. These typically include an activation fee, a monthly account fee, and per transaction fee. Still, compared to alternatives such as check cashing fees, overdraft fees, and interest payments, prepaid cards can prove cost effective for many people.

A prepaid card can help you track your spending and live within a budget. Like paying for things with cash, you have to have enough money on your card to cover your purchases. You can check your balance and review your transaction history online, via ATM machines, by calling a customer service number, or even through mobile text messaging, with most prepaid card programs.

In today’s economy, more people are limiting their use of credit cards and just getting one credit card with lower credit limits, or favoring debit cards—either check cards or prepaid cards.

*About the author: This guest post is contributed by David Pratt, marketing director for MiCash.net who writes on the topic of prepaid debit cards. You can reach David at dpratt (at) micashcard . com.

*Image Credit: Photograph by jepoirrier [via Flickr Creative Commons]

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5 Ways To Avoid Getting Stuck In The Credit Card Debt Trap

(This is a guest article by Kris Bickell*)

If you've ever used a credit card, you know how easy it is for the balance to grow REALLY big, REALLY fast. And like a ball rolling down a hill, once it starts rolling ... well, once it starts rolling it's a lot easier to wait until it stops rather than chasing it down the hill.

So, think of credit cards like the ball.

And hold onto them tightly. Because once you start building debt, it's a lot like the rolling ball.

I know, that's much easier said than done. For most people, by the time you figure out you've got a debt problem, you've got a HUGE debt problem!

Trust me, huge debt problems don't go away quickly. Or easily. So do yourself a really big favor. And don't get stuck in the "debt trap" in the first place. One of my friends used to say "Money doesn't come with instructions". Which is so true. And even more true with credit cards. You get all the fine print about terms, rights, penalties, privacy policies. But nothing that tells you "don't charge more than you can pay off when the bill comes!"

I got my first credit card when I was in college. Imagine that!

I had no income. No credit. And no idea how to use it.

Yet American Express thought it was a good idea to give me a card anyway. Why? So they could make money off me, of course. Fortunately, American Express cards must be paid off each month. But the cycle of debt was started when I was only 20.

I remember my friends went on a day trip to Atlantic City and called me to tell me how much they missed me, because there were machines that took credit cards and gave you cash (of course, they didn't really miss me - they just wanted my fancy new AMEX card to use to get cash!)

The moral of the story is that the whole business of credit cards is nothing more than a money machine - for the banks!

So here are those instructions mom and dad never gave you. And American Express never gave you (or CitiBank or Chase or Capitol One, etc.) Here are 5 ways to avoid getting stuck in the credit card debt trap:

1) Don't fall for the lure of rewards cards (unless you can pay off the debt every month):

Rewards cards sound great. And if you can pay off the balances, they are. But if not, you'll probably end up paying a LOT more in interest than you gain in store discounts, frequent flyer miles, or other rewards.

2) Don't keep transferring balance & getting more cards:

Sure, credit card "surfing" is very common - constantly shifting your debt to low interest promotional offers. But in the long run, it's easy just to dig yourself a deeper hole, as you keep getting more and more credit. Want to use this as a temporary "quick fix"? OK. But as a long term strategy, this is like throwing the ball down the hill.

3) If you have more than one card, hide it:

It is tempting to use a retail card to save an extra 5% or 10% on purchases. Or use the new fancy looking card you just got in the mail. Or use the one with the lowest interest rate. And if you can pay it off when the bill comes, OK - then feel free to use them. But if you do fall victim to the temptation often enough, before you know it your credit card ball will start rolling down the hill!

4) Take yourself off the offers list:

The best way to keep yourself from getting caught up in the credit card trap is to keep yourself from getting all the tempting offers in the first place. So go to www.optoutprescreen.com and www.dmachoice.org to get your name off the most common mailing lists!

5) Don't use your credit cards as a spending account:

Make sure to set up a savings account to use for emergencies. Then, when you need some immediate cash, you can use this money instead of a credit card.

So there you have it. Sounds so simple, doesn't it? Sure, it takes some discipline. And many of your friends and family won't understand why you don't rely on credit cards to pay for everything. But if you follow them, these five steps will keep you out of the credit card debt trap!


*About the author: This is a guest article by Kris Bickell. If you would like to learn more about avoiding the credit card debt trap, visit www.Debt-Tips.com. You'll learn how the author, Kris Bickell, paid off all of his credit card debt and the various debt relief options you can use to improve your financial problems.


*Image Credit: Photograph by Leonid V. Kruzhkov [via Flickr Creative Commons]

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10 Simple Steps to Improving Your Credit Score

(This is a guest article by Mike Acheson*)

Most financial institutions use credit scores to help decide whether to lend you money or not. It is very important to have a good credit score if you are looking to apply for a personal loan, credit card, or a mortgage. It can be the single determining factor for many banks and credit card companies.

In the US, the average credit score is somewhere around 650-675 but most banks consider anything above 700 to be a good score. Luckily, there are a few simple steps you can take to improve your credit score.

The first step is to search the Internet to find a free credit report - there are a number of websites that offer this service such as Equifax and Experian.

After you have your report, follow these 10 easy steps to improve your credit score:

1. Learn how to read your report – It’s important to know how to read the report and to ensure you have accurate information about your starting score. After you have a clear idea of where you’re starting from, you can improve your score from there. Some people already have a good score and don’t need to make any improvements.



2. Find errors – While reviewing your report, make sure to take note of all your applications for credit and to ensure they are accurate. If there is information that doesn’t belong to you or if there are any other errors make note of this.



3. Addressing the errors – Once you identify a problem you will want to notify the major credit report companies immediately to get them to amend your report. By law, they are required to look into your claims within a month. If the information you provided is correct they will change your report to address any concerns you had.



4. Pay any overdue bills – It is important to pay all your missed loan repayments or any bills you may have from an overdrawn credit card. This is crucial. After these bills have been paid, not only will your credit report improve but also you will have the satisfaction of having paid these outstanding bills.



5. Communicate with your creditors – Contact your creditors after sending your payments so that they can update your information immediately – otherwise it can take a few weeks.



6. Stop relying on credit – Taking on credit is a dangerous path for most people – your debts can spiral out of control quite easily. If you’re trying to improve your credit score then don’t take out any more credit. It’s as simple as that. Credit cards and loans will only make the problem worse.



7. Ask about payment plans – Many creditors accept payment plans with their debtors. The main purpose is to allow you to catch up on your remaining bills but it also helps you gain control of your finances and to create good spending practices. Living within a budget can be a rewarding challenge.



8. Adjusting the frequency of your payments – When paying back debts, divide your monthly payments into weekly or twice-weekly payments. This will make your bank records show that you have made extra voluntary payments. The computers will register extra payments, which can increase your credit score significantly. This method of repayment also helps you not fall behind on your payments in the future. If you pay off all your debt then you wont have to worry about any of this.



9. Self-Debt Management – It’s likely that a debt management company will take a lot of your money but you can often set up your own plan to help pay back your debt. Search the Internet for do-it-yourself debt management strategies and start budgeting. With a little hard work you can pay off your debt in no time and have a sparkling credit report. It’s not easy but it can be done.



10. Don’t be tricked – A lot of companies and websites promise instant credit repairs and improvements but they are often trying to take advantage of you.

The best thing you can do is work on your credit score at a pace that works for you. You might not be able to make all your payments right away but chip away at your payments and you will see your credit score improve – all it takes is hard work and a little foresight. Good luck.

*About the author: This post was written by Mike Acheson, who writes about debt and life cover in Canada.

*Image Credit: Photograph by kevinzhengli [via Flickr Creative Commons]

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7 Don’ts for Fiscal Freshmen

(This is a guest article by Jack Busch*)

As a student, your financial picture is a bit unique. You have few assets and few hours to devote to a job, thus little income. You have little credit history (good or bad) but some limited access to revolving credit and other loans. Because of this, the years between matriculation and graduation are somewhat of a testing ground for your creditworthiness. Lenders give students just enough rope to hang themselves – and during those crucial four or so years, you can either establish a firm foothold on your way up to excellent lifelong credit or scar your credit rating for life with poor decisions. But by being an early adopter of responsible spending habits, you can save yourself from a lifetime of debt and sorrow. Your continued fiscal auspiciousness should be dictated by a series of don’ts. For example:

Don’t carry a balance.

If you have to use that emergency credit card, make sure you get it paid off ASAP. If that means no pizza or beer for a week, then so be it. If it means borrowing $50 from your pop, then do it. Believe me – it’s worth it to miss out on that one wild night in order to avoid the never-ending downward spiral of credit card debt. As long as you don’t flunk out, there’ll be plenty more wild nights to come. But that credit card debt will last far longer than a hangover if you let it get out of hand.

Don’t open multiple accounts.

If you’ve gone ahead and ignored the first don’t and maxed out your credit card, then don’t make things worse by getting another credit card. Instead, focus on paying down your current debt or, as a last resort, transfer your balance to a 0% interest card, such as the Discover More Card (but watch out for those fees!). I’m actually a bit hesitant to recommend the latter route, since two cards are always tougher to pay off than one, and you likely won’t qualify for a favorable credit with high debt to credit ratio. Opening another credit card count when cash is tight is akin to drilling a hole in a sinking boat to let the water out. It just doesn’t make sense.

If things are truly dire, you may want to consider credit counseling or a debt consolidation loan. But both of these open routes open an entirely different can of worms – do so with caution.

Don’t spend your salary before you’ve got it.

Yes, I know, you think you’re going to be a wheelin’ dealin’ lawyer or a snazzy corporate consultant when you graduate. But don’t bank on that bestselling novel or big banker’s bonus to pay for your credit card debt in college. First of all, your lucrative career is going to be four years down the road (or more, if the job market stinks) which gives all that debt plenty of time to accumulate interest. Plus, you’ll have an entirely new set of expenses once you’re living the urban professional lifestyle. Going into the post-grad world with a bunch of undergrad debt is like going straight from being a student to being a parent. Except that lousy ungrateful kid you’re paying for is yourself.

Don’t use your credit card to its full extent.

Ever notice how your car’s speedometer goes up to something like 140 miles per hour? Ever notice how driving that fast will get you killed or arrested? Your credit card is the same way. There are lots of neat features that come with your credit card, such as cash advance, convenience checks and deferred interest. But don’t use them and don’t use up all of your credit line. Cash advance (i.e. getting cash from an ATM using your credit card) comes with an astronomically higher interest rate and can’t be paid off until the rest of your balance is paid off. That means that $60 you pulled out can actually end up costing you twice that much in the long run. Use your credit card only for emergencies or only to rack up points, cashback and rewards and then pay it off in full each month.

Don’t forget to check your statement.

You’re already checking Facebook every 24 minutes, why not bookmark your bank’s website while you’re at it? Knowing what you’re spending and how much you’ve got to spend will save you from overdraft charges, over-the-limit fees, late fees and other unpleasant surprises. If that’s too boring for you, there are plenty of flashy tools that you can use to track your finances, such as Mint, Thrive and Wesabe.

Don’t let your parents write the check.

To get the full gravity of how much everything is costing you, arrange your finances so that the money for tuition, room and board, etc. comes out of your account. This can be necessary for tax purposes but it also instills a sense of how much everything is costing and how money should be budgeted.

When I was in college, my grandparents paid for much of my expenses. But instead of cutting the school a check whenever money was due, they just plunked all the money I was going to get from them into my checking account on day one. It was a daunting sum of cash to see on my bank statement, but I knew that if I blew it all, it’d be the end of my education. I was in charge of writing my rent check each month and arranging payments with the school’s registrar to make sure I was still signed up each semester and it taught me a lot about handling vital finances.

Of course, you don’t have to go it alone completely. It’s not a bad idea to become an authorized user on one of their credit cards strictly for emergencies. Especially since the credit cards for college students offered (for a limited time) on campus can often be riddled with pitfalls and traps designed to extract money from the uninitiated.

Don’t let your spending outstrip your income.

This is a pretty simple one. If you have no job, then you have no income. This should make budgeting easy. If all you have is some money you received as a gift for your high school graduation and a check for your birthday and Christmas, then it should be pretty easy to calculate how much you can spend before you’re broke. If this kind of lifestyle feels restricting, then get a part time job. Donate plasma. Wash dishes in the cafeteria or get a work-study position through the school. You can party all you want as long as you subsidize the expenses.

This last don’t is important , and if you can’t remember anything else from this article, remember this: don’t live beyond your means. Follow that one rule and you’ll be fine.

Let college be the time in your life when you forge a healthy relationship with credit. Because once you get out and payments on your student and federal loans become due and it comes time to finance a house, a car and a family, the rules will stay the same but stakes get much higher. Master these guidelines today and thank yourself for sidestepping crippling debt tomorrow.

*About the author: Jack blogs about personal finance, credit cards and debt management at Master Your Card and DebtLoans.com.au.

*Image Credit: Photograph by RBerteig [via Flickr Creative Commons]

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Credit Card Debt Among College Students

(This is a guest article by Clark Chambers*)

College students are increasingly relying on student credit cards to make ends meet. According to student lending giant Sallie Mae (SLM), average credit card debts carried by graduating college seniors jumped $1,200 between 2004 and 2008. The same study also shows that only a shocking 15% of college students do not carry any credit cards.

The number of credit card-toting college students should change however now that the “Credit Card Holders’ Bill of Rights” act was signed into law. The bill requires credit card companies to lay off the high-pressure pitches to college students unless the students have proof of independent income or complete a financial literacy course. Otherwise, the credit card companies need Mom and Dad's consent to market credit cards to college-age students until they reach the age of 21. So, what does the passing of this new bill mean for students? No more stacks of credit card offers piled up in their mailboxes right after their eighteenth birthday, shucks!

The provisions in the "Credit Card Holders' Bill of Rights” act also outline new protections for college students in the form of credit line limits and requirements that card issuers may ask for. Card companies must receive proof of income and credit history, or a co-signer before issuing a card to borrowers still in college.

Reasons for the card increase amongst college students

According to some research analysts, college students make easy targets because they have little independent income and a significant need for ready cash, and Mom or Dad will often step in if a college student gets into trouble with a credit card. But, the main issues right now are the lack of college financial aid and personal savings, combined with skyrocketing college costs create the perfect storm for college students to go looking for additional funds.

Another cause for student’s increasing their needs of credit cards is the lack of private student loan funding available for school. Do to the current credit crisis and the changes the Government made to the student loan industry, students are finding it more and more difficult to find private student loans. So, the next best thing students are turning to is student credit cards to pay for living expenses, books, fees, supplies, and in some cases, college tuition itself. Often, with the constant hounding of the credit card companies on and off campus, students eventually find themselves holding on to four credit cards, complete with balances, by the time they graduate school.

Ways to avoid a credit card disaster

• Only buy what you can afford. May sound like common sense, but this is where a lot of people get into trouble. That new Macbook Pro or HDTV you’d never have the cash to pay for may seem like a good idea when you’ve got plastic. If you are unable to afford to pay with cash or a check, don’t charge it.


• Do not replace student loans for credit cards. Federal college loans have low, fixed interest rates, as well as borrower benefits that will allow you to postpone making your payments if you’re ever experiencing a financial hardship. This is something credit card companies will not keep in mind. Take advantage of your federal aid, scholarships and private student loan options first to cover all your school expenses before turning to credit cards.


• Get digital. Most major card companies offer automatic e-mail or text alerts that can notify you about your current balance and payment due dates. If you’re prone to forgetting payment dates, use these alerts. It will make remembering those bills so much easier and save you money.


• Pay off that balance. Don’t settle into the habit of paying only the minimum due, pay off the entire card balance each month to prevent years of payments.


• Put it on ice. If all else fails, stick those credit cards in a large bowl, fill it with water, and stick it in the freezer. The next time you’re tempted with an impulse buy you’ll be giving yourself time to think. Thawing or breaking apart that block of ice will give you the needed time to collect your thoughts and really think about that purchase you are about to make.

*About the author: This guest post was provided by Clark Chambers, a freelance writer who covers topics on college finances including; financial aid, private student loans, student credit cards, and debt consolidation.

*Image Credit: Photograph by Andrman [via Flickr Creative Commons]

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10 Ways to Dramatically Improve Your Credit Score

(This is a guest article by Karen Schweitzer*)

Everyone knows that paying bills on time will have a positive impact on credit scores. What many people don’t realize is that there are lots of other ways to improve your score--no matter how low it is. Here are 10 tips to keep in mind:

Check your report for errors. A low credit score can sometimes be a byproduct of errors on your credit report. Since an estimated four out of five reports have errors on them, there is a very good chance that yours does as well. If you do find an error, you can dispute it with creditors and the three credit bureaus before any more harm is done to your score.

Add as much info as you can. Depending on what is already included, adding information to your credit report can sometimes increase your credit score. Things to add include: birth date, address, telephone numbers, bank account numbers, and employer.

Get a credit card. Getting a credit card is a good way to establish credit history. The longer your credit history is, the better it is for your score. And when you use credit and pay it back responsibly, it impacts your score in other positive ways.

Piggyback on someone else's card. When you add your name to someone else's credit card account, you can piggyback on their good credit. Every time they make a charge and pay it off, it helps your credit score. One warning--only do this if you are absolutely sure that the person with the account is responsible and able to make the required payments. Late payments or slow payments on the card can have a negative impact on your score.

Request higher limits. When coupled with low balances, high credit card limits can boost your credit score. Most credit card companies will up your credit limit if you make the request. If you're a good customer, you can request and get higher limits several times throughout the year.

Negotiate better terms. Having better terms (lower interest rates) on your credit cards can make them easier to pay on time. And as everyone knows, paying on time is the best way to steadily improve your credit score.

Re-open closed accounts - Closing an account is never a good idea. Even if you don’t want to use a particular card anymore, you should still keep the account open. Long credit histories are always better than short credit histories. If you recently closed an account, call the creditor and request to re-open the SAME account. Within a few weeks, you'll probably see a double-digit increase in your score.

Get a loan. Getting and paying regularly on car loans, personal loans, student loans, home equity loans, and other types of credit typically issued by banks can lead to double-digit improvements in your credit score in just a few months time. Be careful not to make any late payments through. Just one late payment on a loan can undo months of dedication and hard work.

Lower your debt. This is usually easier said than done, but it is a good way to improve your credit score. Having a low debt-to-income ratio makes it easier to get a loan. It also makes it easier to pump your score up in a few months time.

Pay off old debts. Old debts and past due accounts can be a huge drain on your score. Even small bills of less than $100 will drag your score down. Paying off these old debts will not create an immediate boost in your score, but it will prevent the debts from working against you as you try to employ other score-hoisting tactics.

*About the author: This is a guest post by education writer Karen Schweitzer. Karen is the About.com Guide to Business School. She also writes about online courses for OnlineCourses.org.

*Image Credit: Photograph by khalid almasoud [via Flickr Creative Commons]

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What to Look Out for Before Transferring Balance to a Credit Card

A balance transfer offer from a credit card is a great way to either save some money or to make some money. For example if you have $1000 in debt with 18.99% APR interest rate, and you estimate that it will take you a year to pay off that debt, then over the course of the year you will pay $105.82 in interest (using this calculator). By transferring that balance to a credit card with a low rate (more details about this in a bit) say 3.99%, over the course of the same one year, you will end up paying only $21.74 in interest. In which case you save $84 in terms of interest paid. If your debt amount is higher, the savings can be higher as well.

If you are debt free and want to leverage the credit card offers, then you could accept a credit card offer with 0% APR and transfer the money to a high-yield online savings account and make some money. Last year, I made around $2,000 from credit card arbitrage, so this can be quite lucrative if you follow the rules of the game. Anyway, irrespective of whether you plan to pay off your debt or make money using credit card arbitrage, here are some things to look out for before jumping on that balance transfer offer.

What is the interest rate?
Obviously the first thing to look for is the interest rate. If your intention is to do credit card arbitrage, then you want a card that offers 0% APR. There is no argument about that. If on the other hand, you are looking to do a balance transfer to reduce the interest you are paying on your debt, then you must go for an offer that provides the lowest possible interest rate, even though it may not be zero. If you do not have any offers in the mail yet, you might be able to call one of the credit card companies for the cards you already own and request for an “introductory” low rate for transferring balances. Make sure that the credit card you are transferring balances to does not already have a balance since the payment you make each month will always apply to the balance with the lowest interest rate.

What is the balance transfer fee?
Most credit card companies today charge a balance transfer fee. In some cases they may waive the fee for the first balance transfer, which is great. More often than not though the fees are around 3% of the amount transferred with a maximum cap of ~$50 to $75. You need to watch out for these fees carefully since they can completely obliterate any benefits you were expecting from making the balance transfer. For example, if you plan on doing a credit card arbitrage, paying 3% in fees while earning 5% in interest may just not be worth it! If you are planning to pay off debt, if your original debt was at 18.99% APR, but the new offer is for 16.99% with a balance transfer fee of 3%, you may actually end up paying more! So, pay close attention to the balance transfer fees.

How long is the introductory rate valid?
Most introductory rates are valid from 3 months to 18 months. If it is 3 months, it is probably not worth it to pay the fees and transfer balance. The 18 month balance transfers are a very rare breed. 9 to 12 months is more of the norm. So if you have an offer in mail for a 3 – 6 month introductory period, I would suggest passing it up and continue to pay your balances on all your cards. Sooner or later, you will start to receive juicier offers with longer introductory period.

What is the interest rate after the introductory period runs out?
If you are looking for a credit card arbitrage, then this should not matter since you will either pay off the balance or roll over the amount when the introductory period ends. But if you are looking to use a balance transfer to pay off debt you need to pay particular attention to it. Again, let us use the same example as earlier – a debt of $1000 with 18.99% APR, but assume that it will take you 2 years to pay off that debt. Now with all numbers rounded up, you will end up paying around $209.69 in interest over the course of the two years (again, using this calculator). Now, suppose you transfer the balance to a card with 9.99% APR for 9 months and 26.99% APR after that. Also, let us assume that the balance transfer fee is 3%. In that case, over the course of 2 years you end up paying around $215 which is more than what you would pay without the balance transfer!

What is the minimum payment?
Ideally, it is better for your credit score if you can always pay a little more than the minimum payment. So, irrespective of whether it is a credit card arbitrage or whether you are paying off debt, you need to be able to make a little more than the minimum payment. In the worst case, even if you can't make additional payments, you should always make at least the minimum payment before the due date in order to ensure than you introductory rate stays valid. Different credit card companies charge have different percentages for calculating the minimum payment usually in the range of 2 – 4%. So if you are transferring the balance from a company that computed the minimum payment as 2% of the balance to a company that computes the minimum payment as 4% of the balance, your monthly required payment doubles. If you have a very tight budget, make sure you have taken this into consideration.

Is there any requirement to qualify for the introductory rate?
There have been some credit card companies that offer an exceptional low APR with low balance transfer fees for a long term etc, but they come with a trap. You are usually required to make at least one purchase (sometimes three) using that card each month. The catch here is that, purchases are charged a higher interest rate than the balance transfer, and any time you make a payment, it will apply first to the amount at lowest interest rate (in this case the balance transfer offer). The trap here is that, if you forget and make a large purchase, you will end up paying a huge amount of interest on that purchase. Or, if you forget to make any purchases, your introductory APR is no longer valid and your interest jumps up quite dramatically. I personally stay away from such trap cards, but know of several people who have played the arbitrage game with such cards for years. So, it is up to you to decide if this is a biggie or not.

What are the default policies?
There are two things you need to be aware of here – the default rate, and the universal default policy. Default rate is the rate that applies if you do not meet the conditions for the introductory offer (eg. missed making the minimum payment before the due date). Universal default policy means that the credit card company can jack up the rates, even if you missed a payment on some other credit card, by an entirely different company! If you are doing a credit card arbitrage, then hopefully you have the money tucked away in a safe online account with relatively easy access. In that case, the default rate does not matter so much, but you may still want to avoid a card with the universal default clause, if your credit card arbitrage involves more than one card. If you are paying back debt, then you should pick a card with the lowest default rate that does not have the universal default clause.

If used properly, balance transfers are a great way to save or make some money. But the credit card companies have devised a ton of traps to make sure they can stay in business. If you plan to use the balance transfers to get out of debt faster or to make some money via arbitrage, make sure you know all the terms and be prepared for gotchas. Watching out for the items on the list above should be your first step. But do not stop at that. Keep reading on this topic and be prepared for whatever the credit card companies throw at you next!

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Should You Get a Store Credit Card?

(This is a guest post by Jim Corbett.)

Sometimes it seems that, wherever you go, someone’s trying to issue you a credit card. This is especially true of discount and department stores, which tempt potential cardholders with promises of hefty up-front savings.

But what is the long-term value of these cards? How can you tell if they’re right for you?

Store credit cards have pros and cons. Experts agree that you should avoid them if you’re likely to carry a balance, if you already have several credit cards, or if your credit score can’t afford a twenty point bruise simply from obtaining a store card!

Interest rates are definitely something to consider before you get one of these cards. Store credit cards have interest rates that are, on average, six to ten percent higher than those of bank credit cards. This isn’t such a big deal if you pay off your balance in full each month. But cardholders who maintain a balance will quickly find that their initial savings are being lost to interest charges. This defeats the purpose of a store credit card, which is to help you pay less for your store purchases.

But there are some good reasons for getting store cards. If you have a favorite store where you’re likely to use the card on a regular basis, getting a credit card from them could be beneficial. Some stores offer substantial discounts to cardholders, in the form of specials, coupons, bonus points, advance notice for upcoming sales, and discounted goods and services. These savings can add up. They also tend to be easier to obtain than a bank issued credit card and can be good for those wishing to build their credit history.

It has been estimated that 500 million store credit cards are in circulation at any given time, and most of them were issued during the holiday season. When you’re frazzled from gift shopping and alarmed by your dwindling bank account, the ten or fifteen percent savings you could get by opening a store card might sound like a good deal. And it can be – provided you pay off the balance before you accrue interest.

Always read the fine print before filling out any credit card application.

Also remember, if you sign up for a store card, you might be signing away your privacy. Some stores are notorious for selling your contact information to third parties, who will then use the information to bombard you with marketing material. Once you are placed on a marketer’s list, you might find it difficult to get off again – and you might regret selling your privacy for that ten percent discount.

Jim Corbett is the CIO of Credit Web which offers Student Credit Cards as well as offering an in-depth supply of credit related information.

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How Much Credit Can a Student Get?

Turns out almost $130,000 based on what this high credit IQ student has managed to do!

First for some background information. As you might know I am a huge fan of credit card arbitrage. There are two ways to do this. (a) Build up your credit slowly and accept an offer every now and then (my preferred approach) or (b) an App-O-Rama. For those of you who are unfamiliar with it, an App-O-Rama, is a word coined on the Fat Wallet Finance Forums (as far as I know) and involves applying for many credit cards in a short period of time, mostly within a day or two. Since the credit enquiries will take at least a day to percolate back into your credit history, this gives you the best chance to get approved for multiple credit cards before your credit score takes a hit. This is the approach taken by Paul, the student mentioned above to obtain almost $130,000 in credit!

Now, maybe Paul knows what he is doing. In which case, I would like to say to him, congratulations and good luck. He has plans of parking the cash in a high yield savings account and earning $600 in interest per month. That is great! But for every student like Paul who makes $600 from credit card companies, there must be a hundred or maybe thousand more that pile up $600 in credit card debt. That bothers me!

Let’s take a closer look at the credit lines Paul was approved for. The highest credit line Paul received was $25K! There were 2 more cards with credit limits higher than $15K and 6 more with credit limit in the range of $8K - $10K. Agreed that not many students are going to attempt an App-O-Rama and gain access to a large amount of cash like Paul did but each of those individual credit lines, in the wrong hands is enough to ruin lives! It might be legal for credit card companies to grant such large lines of credit to cash strapped students. But is it moral?

Sometime back Golbguru at Money, Matter and More Musings had written a (sarcastic) article saying there must be a test to qualify people for credit. I had a good laugh at it then, but now I think I agree. Here is an example of a student that Golbguru mentioned –

“I had Visa, Visa MasterCard, First Financial Bank, Visa, Gap, Target” says college senior Sara Magee. She was lured at 18 by the promise of a free Frisbee. A dozen credit cards later, she’s working three jobs to pay down $6,000 in charges, fees and interest.

“I didn’t understand interest and what a high APR was — I really just didn’t understand the concept, and it seemed like a good idea — like (I) can’t afford it now, but I will pay it off later,” she says.

Now imagine if Sara was approved for credit cards with limits more than $10K!

So what can we do? Well, the qualifier test Golbguru suggested would be a good idea, even though it might be a difficult to determine who exactly offers those tests. Here are a few other ideas -

• Parents should proactively teach children the intricacies of credit cards so they are prepared for and educated about it when it comes for them to get credit cards.


• Colleges and universities should take proactive steps to ban credit card companies from luring kids to apply for credit on college campuses.


• People should be required to use a debit card for a certain number of years before being allowed to apply for a credit card.


• People should have small *combined* credit limits for a while and prove they can make payments on time and not carry balances before being approved for larger credit lines. These days credit card companies do check whether you should be allowed credit based on your credit history, but instead of declining you credit, many just offer you more credit with higher interest rates. That to me feels predatory!

Offering $25K individual credit lines to college seniors (and $130K in combined credit lines) sends out wrong signals - that it doesn’t matter how long it will take you to pay it back or even if it will ever be possible, but here you go, enjoy it now! How long before some "party animal" college students find out about the App-O-Rama and start abusing it? Here is a excerpt from Paul's introductory post -

I wanted to be able to have an online diary where I will be updating my progress every couple of days as I try to make thousands of dollars per year just like many others have successfully done so before me. I will share the good the bad and the ugly as I take on this new project and hopefully it will help everyone out there trying to make a few extra bucks whether it’s to help pay for their college, car, hour, or an expensive coke habit :)

(emphasis on the last part of that quote by me).

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Free Round Trip Airline Ticket + $100 Gift Card to Apply for a Credit Card

As of last month, I have $55,000 in credit card arbitrage. I started to get worried that I am getting addicted to this game and getting too greedy. So I resolved not to apply for any more cards until the offers on the current cards expire and I need to move the money. But then I came across the offer mentioned below and could not resist the temptation. I fought hard for a week and finally gave in. Now I put the ball in your court :)

Details of the deal -

The card: AMEX Gold Business Card. (Don’t shy away from the term “business” just yet).

The offer: 25,000 Membership Rewards bonus points (redeemable for one round-trip airline ticket or $250 Home depot gift card or $125 Amex gift card etc.) + $100 tigerdirect.com gift card. Annual fee waived for first year.

The icing on the cake: Easy online application process with instant approval.

The URL: Apply here (not an affiliate link)

Acknowledgments: The credit for this deal goes to Leeskey711 at Fatwallet who posted this offer in this thread. There is tons of information in that thread to answer most of your questions.

The FAQ: Questions below summarize some of concerns related to this particular offer.

I do not own a business. Can I apply for a business card?

If you have a blog, sold something online or offered any paid services (eg. lawn mowing) that can be verified, then legally you qualify to be a sole proprietorship. When you apply for the business card, use your full name as the business name and the SSN as the tax id.

What about the annual fee?

With this offer, the annual fee for the first year is waived. From the second year, the fee will be $125. I think Amex will offer you another 10,000 points for continuing to use the card beyond the first year of fee-free service. So it is up to you whether you want to continue to use the card beyond the first year or to cancel it.

How will this affect my credit score?

From my understanding of this thread, (and someone please correct me if I am wrong), the business credit is kept separate from personal credit. Your personal credit history will still be pulled (hard pull) before you are approved for the offer. However, the criteria used for personal credit such as utilization do not come into play while being approved for business credit. I have read in the above FWF threads that for the particular AMEX offer mentioned above, approval is fairly easy. I am not sure how the credit score will get affected if you cancel the card before the one year of fee-free service is up though. Frankly, in our case, we don’t plan to apply for any major loans in the near future and so if we don’t use our good credit scores to take advantage of offers like these, I don’t know what good a high credit score is for. If you have a different situation (eg. plan to buy a house or a car in the next year or so), I would highly recommend that you do more research into this and see if it is still worth it for you.

Do you believe everything that you read in the Fatwallet Finance forums?

Honestly? Yes :) But that’s just me. If you don’t, then you should look around of more information until you come around too :) Initially, I didn’t believe much of what I read, and spent hours browsing on the web to verify anything that I read on FWF. Now I am not so suspicious. And ever since I switched to the “finance” forums from the “hot deals” forums, I have managed to make quite a bit of money (mainly from CC arbitrage), instead of blowing it on junk just because it was on sale. There are a few guys out there whose opinions I really respect. And the community as such is obsessed with these games, and makes sure that they point out when someone makes a mistake. Overall, I think it’s a more reliable source for information (especially for credit related stuff) than random browsing on Google.

OK. I am done gushing now :)

Coming back to the offer, both the better half and I have applied for a card each and received the instant approval. We have also received an acknowledgment mail from tigerdirect.com to verify our email address. Now I am off to dream about what to do with 50,000 reward points and $200 gift cards :)

PS: If you are curious to find out more about the “business card” related issues, I highly recommend reading this thread the credit for which goes to MikeR397 at Fatwallet.

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Campaign Against Financial Myths: Part 5 - Credit Cards & Credit Score

(This article is a part of the series aimed at dispelling some of the popular financial myths. Please refer to the full index for myths related to other financial topics. Oh, and a quick disclaimer: I am not a financial advisor. I have made every effort to research the facts before presenting them here. But, if you have a reason to believe any of the statements are incorrect, please feel free to correct me.)

1. Myth: “I need to carry a balance on my credit card to build credit history”

If I received a dime for every time I heard this, I would likely be a rich person by now! A lot of people believe in this myth and make the credit card companies rich. You do not have to carry a balance and fork over money in the form of interest to build your credit history. As long as you own a credit card, even if you pay your balance in full each month, you will still build credit history.


2. Myth: “I will be liable for all the charges if someone steals my card and runs up a huge bill”

Almost all credit cards today come with theft liability protection. If you report the loss before your credit cards are used, the Fair Credit Billing Act (FCBA) says the card issuer cannot hold you responsible for any unauthorized charges. If a thief uses your cards before you report them missing, the most you will owe for unauthorized charges is $50 per card. Also, if the loss involves your credit card number, but not the card itself, you have no liability for unauthorized use. You can find more information about this here.


3. Myth: “Checking my credit report will reduce my credit score.”

When you check your own credit report it is termed as “soft pull”. When other companies pull your credit report, for instance when you apply for a loan or new credit card, then it is termed as “hard pull”. Soft pulls do not result in reduction of credit score. In order to protect yourself against identity theft it is recommended that you check your credit report periodically. By law, each of the three credit reporting agencies are required you to let you check your credit report for free once per year. You can order your free report by going to annualcreditreport.com or by calling 1-877-322-8228.


4. Myth: “I should cancel some of my cards since I have too many.”

According to this article on the myFICO.com website, 15% of the credit score is based on the length of credit history. By closing down some of your older credit cards, you could reduce the average length of your credit history and hence reduce your credit score! In addition, 30% of your credit score is dependent on the amount owed. One of the ways this is quantized is to consider the proportion of balance owed to the total credit line. By closing one (or more) of your accounts, you will reduce the total credit line. If you have any debt on your credit cards, this will result in causing the utilization (as a proportion of the total) to increase, causing your credit score to go down.


5. Myth: “I have fixed APR on my card – that means I have locked in the rate for life.”

No, “fixed” APR only means that your APR is fixed until the next time the card company changes your contract. Usually the changes to the APR on a “fixed” APR card do not happen too often, but still there are no guarantees that the rate is locked in for life.


6. Myth: “Once I payoff a collections account or an account included in bankruptcy, the negative record will be erased from my credit history.”

According to this Experian FAQ, any account included in a bankruptcy remains on your personal credit report for a maximum of 7 years from the date the bankruptcy was filed. The bankruptcy itself, listed in the public record information section of a credit report, remains for either 7 years from the filing date if it was a Chapter 13, or 10 years from the filing date if it was a Chapter 7, 11 or 12. According to this article, when your collections account is paid off, it will be marked “paid collection” on the credit report. Charged-off accounts remain seven years from the date of the initial missed payment that led to the charge off (the original delinquency date), even if payments are later made on the charged-off account.


7. Myth: “I only need to pay the minimum payments each month.”

This is a surefire recipe for disaster. If you pay only the minimum payments, it will take you a long time to clear your initial balance, during which time you pay an enormous amount in interest. Here is a bankrate.com calculator for calculating the true cost of paying the minimum payments only. For example, if your starting balance is $5,000 and your interest rate is 18%, if you pay only the minimum payment of say 2.5% of the balance, then it would take you 26 years to pay off your balance, during which you would have paid $7,115.42 in interest. If you have larger balance you can see how this could lead you to lifetime of being in debt and gigantic amounts paid in interest. So, if you have credit card debt start by paying as much as possible beyond the minimum payments to become debt-free sooner.


8. Myth: “I cannot keep up with my credit card payments – so I will consolidate all of them using a HELOC.”

If your HELOC has a much lower interest rate than your credit card payments and you know for a fact that you will be able to keep up with the payments, this idea may work. On the other hand, if you clean your slate of credit card debt with a HELOC and then start piling on more debt on your credit card, this could be disastrous. Eventually, when you cannot keep up with the payments on your HELOC since you have used your home as collateral you could end up losing your home!


9. Myth: “Having a rewards card will save me money.”

Not if you don’t pay off your balance in full each month! Rewards cards tend to have a higher interest rate than those with no cash-back or miles or rewards. So, if you do not pay off your balance in full, then the interest you pay might offset the benefits of any rewards.


10. Myth: “Credit cards are necessary for online shopping.”

Not quite. These days many, if not most, online merchants accept alternate payments such as debit cards, pay pal or e-checks. So it is not necessary that you must have a credit card account to be able to shop online.


11. Myth: “My divorce agreement states that my spouse is responsible for the debt on our joint credit accounts. If he defaults, I will not be responsible.”

A joint credit account that your share with your spouse is a responsibility of *both* of you. The law may have granted you a divorce and stipulated that your spouse should pay off the balance, but if he/she defaults, it will show up on your credit report as well, as the account is still jointly held from the creditor’s perspective. A divorce does not automatically break up joint accounts, and if you share joint account with your ex, it is advisable to call the creditor and either cancel the account or convert it to individual account. This article provides more information about divorce and credit.


12. Myth: “If you are only an authorized user and not a joint owner or co-signer, then your credit report will not be affected if the primary holder defaults.”

According to this bankrate.com article, if you are an authorized user you are not contractually obligated to pay the debt if the primary holder of the account defaults. However, the credit agencies consider you “guilty by association” and any activity on the accounts that you are an authorized user of will appear on your credit report. If it is negative activity, it will not have much bearing that you are only an authorized user, and your credit score can go down. By calling the creditor you can have your name removed as the authorized user, but it may take several weeks before this is updated on the credit report and the activity on the that account stops showing on your credit report (Note that earlier activity still remains).


13. Myth: “If I marry someone with a bad credit score, then my credit score will go down.”

Just as a divorce does not have any bearings on your credit report, a marriage does not automatically combine your individual credit reports either. However, after marriage if you open joint accounts and your spouse is irresponsible with it and causes negative marks, it will show up on both your credit reports.


14. Myth: “Credit repair agencies can help fix my bad credit history.”

If you have a negative record on your credit history due to a mistake on the part of the credit reporting agency, then the credit repair agencies may be able to help. On the other hand if there are legitimate reasons for your bad credit, then by law they will not really be able to help. What they can do is question the validity of some of the charges shown on your credit report. If the credit reporting agency can show the proof for these charges, then the credit repair agencies will not be able to erase them.



15. Myth: “Accepting pre-approved cards does not affect my score, since well, the offers are already pre-approved.”

As mentioned earlier, there are two type of credit pulls on your credit report – the soft pull that is not recorded and does not affect your credit score, and a hard pull that does. In order to determine candidate for receiving the pre-approved offers, marketing companies utilize soft pulls. However, if you apply for one of those offers, the company issuing you a credit card will do a hard pull on your credit history to confirm your credit worthiness. This can reduce your credit score slightly.

Those are some of the popular myths and misconceptions about credit related matters. Over the next few weeks, I will cover more about the common myths in other finance-related topics - so stay tuned. Once the series is complete, you should be able to access the full list of myths via this index.

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10 Ways to Save Money While Using a Credit Card

(This is a guest post by Greg Mischio via mortgageloan.com. Greg has been writing financial articles for over 15 years. Based just outside of Madison, WI, he has written for several online financial news sources, including the CUNA Mutual Group, Parson Consulting, and MortgageLoan.com.)

Looking for surefire ways to eliminate some credit card expenses? Here are 10 tips that will prevent cash from jumping out of your pocket and into your balance.

1. You better shop around. It sounds simple enough, but for some reason, people go with the first company that grants them a credit card. Be patient, shop around, and find out who’s offering the lowest rate.


2. Use a balance transfer. If you’ve currently got a balance with a card that charges a high interest rate, consider transferring the money to another card. Many companies will give you an extremely low rate on your transferred balance.


3. Eliminate the annual fee. It used to be that annual fees provided the lion’s share of a credit company’s profits. Now that the market has grown so competitive, many companies no longer charge an annual fee for the card. Seek them out.


4. Cleverly handle multiple balances. If you carry multiple cards, pay off the balance of the card that charges the highest interest rate. Then, cut up the cards that charge the most.


5. Divide by two. Instead of carrying multiple cards, carry only two. Use one to take advantage of rewards programs offered by the credit card companies. The second can be used for emergency situations.


6. Don’t carry a balance. Credit cards aren’t the cheapest lending tool on the market. Interest rates are almost always higher than that of a home equity loan. As a result, avoid carrying a balance on your card. If you find you’re unable to pay off the balance at the end of every month, reduce your spending, increase your income, or better yet, do both.


7. Ask and ye shall receive a better rate. Don’t underestimate how important you are to a credit card company. Make them an offer: Tell them that if they can’t give you a better interest rate, you’ll be forced to take your business elsewhere. You’ll be surprised at how many companies will provide you with a lower rate.


8. Avoid the cash advance. Every time you receive one of those cash advance checks from the credit card company, deposit them in the recycling bin. The rates charged for a cash advance are much higher than the rate you pay on your balance.


9. Consolidate with a home equity loan. If you can’t make your monthly credit cards payments, perhaps you need to wipe the slate clean. Take out a home equity loan to consolidate your debts, and then reestablish a spending budget commensurate with your income.


10. Make your payments on time. There’s nothing more damaging to your credit score than making a late payment. If you’re late, your credit score will feel the impact, and your buying power will be limited down the road.

By following these tips, you’ll be able to keep more of your cash in your pocket. And that should reduce your dependency on plastic.

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Make These Small Changes in Everyday Habits to Reduce the Risk of Identity Theft

It may never be possible to entirely eliminate the risk of identity theft. But you can make it harder for the thief to get to your identity. Hopefully, hard enough that he goes looking for some other easy victim and leaves you alone. At the very least, make sure you don’t serve up your identity to the thief on a silver platter. Here is a checklist of some of the small changes in every day habits that can reduce the risk of identity theft significantly.

Shred any documents containing personal information before throwing them away.

You can get paper shredders for as low as $7.40. And yet, I am surprised how many of my friends don’t use them! The mail you throw away everyday is a gold mine of information for an identity thief. Your bills and statements can provide a lot of personal information. If you have any pre-approved credit-card applications, the thief can easily open a new account with his/her address and you may never even find out about it until you apply for a loan and get rejected! If you can afford it, get a cross-cut (or confetti) shredder. If not, at least buy a cheap strip-cut shredder and make it a habit to run any papers with personal information through the shredder.

Be conscious about the places where you leave your personal information lying around unconsciously.

Most of us do not leave personal information lying around consciously. Its times when we are not consciously aware that can come and bite us in the back later. For instance, I had a bill that needed to be taken care of during business hours, a time when I am usually at work. So I took the bill with me to work but after paying it off, I put it in my desk drawer. Usually my desk drawer only has a bunch of office supplies and so I never really lock it. Over a period of time, several bills stacked up there. Recently, when I was cleaning my desk, I realized my mistake and brought it back home with me to be shredded. I don’t know how many people had access to that drawer in the mean time, and I sure hope to god, none of them bothered to open the drawer and look for forgotten bills! Watch out for such unconscious mistakes. Other common mistakes – leaving your wallet in insecure lockers at the gym, leaving your papers in your car where they can be read or stolen easily, leaving mail with your personal information in an unwatched “out” tray for pickup, leaving your computer unlocked when you step away from the desk, etc.

Do not carry more than 2 to 3 credit or debit cards in your wallet.

According to the myFICO website an average consumer has a total of 13 credit obligations on record at a credit bureau, of which 9 are likely to be credit cards. If you are an average Joe with 9 cards, I would recommend leaving 7 of your cards at home in a safe place. That way if your wallet is stolen, it will be a lot easier for you to contact your credit card companies in a timely fashion and put a hold on your accounts.

Check if the credit card receipt before discarding it away.

We have a small local deli near out office. The food is good and it is quite convenient to go there for lunch. After paying for my food, out of habit I routinely checked my credit card receipt before throwing it away. To my surprise, my *whole* credit card number was printed on it! Not many people realize that some older credit card machines still do this. And since the bill is usually for a small amount, they just throw away the receipt without paying too much attention. How much easier can it get for a thief looking for a credit card number?

Check your bills carefully.

This is in general a good practice – not just for preventing identity theft but even from a personal finance perspective. When you receive your monthly bills, make sure you look through all the charges. For an ID theft perspective, make sure that it was you that actually made those charges. A charge that you did not make could be the first sign of victimization. By taking immediate action, you may be able to nip it in the bud.

Be careful about information given on the phone.

First off, never give out any information unless *you* initiated the call. Second, before giving out the information, check what it is for. Especially, if the request is for your SSN, check if you can use some alternate number, and unless it is absolutely necessary do not give away your SSN. Third, make sure you are not within someone else’s earshot when you call out your SSN, credit card number, your mother’s maiden name, etc on the phone. Finally, do not have the person repeat back the information to you, since you don’t know who is within the earshot of that person.

Be careful while using debit cards at ATM's, grocery checkout counters, gas stations etc.

Watch out for "shoulder surfers" who can memorize your card number and the pin and have easy access to your money. Do not hold out your debit card in a position that it may be easy for someone to read the numbers. Shield the keypad with your body while you enter your pin. Do not hesitate or be shy to tell a person to back off if they stand too close to you wile your enter your information.

Utilize the security options provided by your credit card!

As soon as you get a new credit card, sign the back of it. I don’t know how much this helps though. A quick detour for a short story: Both my friend and I used to have a similar credit card. At a restaurant we both paid using our credit cards. When we put it away though, somehow the cards got exchanged. We used the other person’s card for two full days without either of us, or any of the cashiers noticing it. When the monthly statements came we checked to see if the credit card company had realized that the bills were signed by an entirely different person, but there was no notification. So, yes, the signature is out there to protect you. But no, it does not always do so. So if possible try and get a card with your picture on it. And when possible set up security questions for which the answers are hard to guess.

Freeze your credit report if possible.

Some states allow the credit report to be frozen. Here is a list to check if your state offers this. If so, consider freezing your credit report. What this does is, it prevents anyone from accessing your credit files unless you give explicit permission by unfreezing your account for a short period or by providing access to a particular credit. This can prevent a thief with your personal information from opening an account with your SSN and running up a huge debt.

Obtain your credit report from each of the three major credit bureaus once every year and review them thoroughly.

By law, you can get a free copy of your credit report each year from each of the credit reporting agencies. Since there are three credit agencies, once every 4 months, request for a copy from one of the bureaus. If you are unfortunate enough to be a victim, at least make it a little easier on yourself to recover by catching on as early as possible.

Do not use unlocked mailboxes.

Which one do you prefer? An ornate and pretty old-fashioned mail box in front of the house or the ugly post office installed box at the end of the street? Ugly it may be, and a lot farther from your home – but a post office installed mail box can be a lot safer than an old-fashioned box in front of your house. If you have to use a mail box in front for the house, make sure you install a locked box which is harder to tamper with. Also, before going away on long trips make sure you have your mail held at the post office.

Protect your computer

Set up firewalls. Install and regularly update your anti-virus software. Protect any files with sensitive information either with a password or encrypting them. Have a separate “guest” account for use by guests. Disconnect Internet connection when not using it. With so much of information available on your computer (not just the files you save, but cookies and other information that is saved without your knowledge also), think of protecting your computer in the same terms as protecting your home. Would you leave a door or window open? What kind of locks and keys would you use? Who would you let in? Did you realize that when you downloaded that freeware, the thieves may have installed a back door?

Be careful while creating and managing passwords (and PIN numbers).

Make it a habit to choose passwords and PIN numbers that you can remember without writing it down, but at the same time it is hard for someone to guess. Do not use birth dates, anniversaries, SSN(!), mother’s maiden name etc in your password or PIN. An easy way to make a password that is difficult for someone else to guess but easy for you to remember is to use a combination of small and capital letters along with numbers and symbols (@ instead of a, or $ instead of S, etc). Avoid dictionary words. As part of a computer security class I had taken in school, we chose to evaluate the security of one of the servers as our term project. One of our tasks was to try and crack passwords. I was amazed at how many passwords could be cracked by simple open source software while we enjoyed a cup of coffee and looked on!

Make sure you don’t write down your password. Especially avoid having post-it notes with your password or pin lying around on your table, in your drawer, stuck on the computer monitor, saved in the wallet ( yes, some people do that!!) etc. Whenever I create a new account, I usually mail myself very cryptic clue that will help me remember what password I used, but never actually save the password itself.

Avoid having a shared drive on a personal computer that also has personal information

When I was in school it was very common for everyone to have some sort of peer-to-peer file sharing software on their computer. Many of these software set up a shared drive on your machine. This can easily expose your computer to crooks and hackers. One does not even have to be too sophisticated these days to hack into a computer. Exploits for any computer with any configuration are easily available for download, if you just know where to look (ever heard of script kiddies?). Oh, and flash news – if you have a teenage child at home, you will likely have some of these peer-to-peer software already installed on you computer!

Do not click the links in an email to access you bank, credit card, brokerage account etc.

When you receive mails from your bank, credit card account, brokerage account etc, make it a habit NOT to click on a direct link in the mail. Most financial institutions these days have a policy that they will not send a link to you embedded in an e-mail. So the mail could very well be an attempt at Phishing. So, to be on the safer side, always type in the address directly, or use your stored bookmarks.

Finally, be careful while disposing or selling your personal computer.

This is not something you will probably do everyday, but when you do it, be very wary. I would recommend removing the hard drive before selling or disposing your personal computer. Also make sure you use a scrubbing utility to clean out the hard disk first. Here is a great article with details about scrubbing your hard drive to avoid data theft.

Small changes can go a long way in protecting against identity theft. In the US alone, every year millions are victimized. Take care not to become a part of that statistic!

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