Credit Column

Whether you love it, hate it, or love hating it, credit is a part of our capitalist experience and one that is a double edged sword. Use it responsibly and you’ll discover that the leverage it provides can enrich your life considerably. Use it irresponsibly and you’ll discover that the leverage it provides can put you in a deep hole of debt that can take years to recover from.


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Credit Card Signup Bonus Hunting Hurts Credit Score

Citi HSBC AMEX Credit CardsIf you were in the market for a credit card before the Great Recession, you probably remember the rich rewards companies were offering for you to use their card. Credit was flowing freely and unless you were being paid a $100 gift card to sign up for a card, it probably wasn’t even worth your time! The 25,000 mile or $200 gift card promotions were there for the taking, especially if you had a good credit score. When the economic slowdown hit, those offers dried up. Credit card companies started closing accounts and it was rare to see a good offer unless you had a fantastic credit score. Credit card companies were playing defense.

Well, I don’t know if it’s a recovery based on the economic statistics, but the credit card companies must thinks so because the offers have been coming back in the last year or so. While you won’t see as many $200 or 25,000 frequent flyer mile promotions, they are certainly out there and it may be tempted to go on a signup spree to get all that free cash. I don’t think anyone, except the credit card companies, would begrudge you if you did!

It’s important to know what applying for credit cards, whether it’s one card or eight, will have a negative impact on your score.

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American Express Prepaid Card $25 Promotion

American Express® Prepaid CardAmerican Express is really amping up their promotions for their prepaid cards. Last month, they were offering a $10 bonus when you opened and loaded a card with $50. This month, they’re bumping it up to a $25 complimentary gift card when you load a card with $200 or more. The complimentary gift card is nominally higher ($25 instead of $10) but the amount you have to deposit is more. Instead of getting 20% of your loaded amount as a gift card, you’re only getting 12.5%. Still, it’s a return that trumps anything you can get elsewhere so if you have $200 and a desire to jump through a hoop or two, this could be a nice promotion for you.

I didn’t look that closely to the card the last time I wrote about the promotion but it’s has a few features I didn’t know prepaid cards offered. First off, the fact that there are no monthly/annual fees and purchase fees is something you won’t see from prepaid offers from some shadier places. Next, and this is the rare part, you get purchase protection, fraud protection, and even roadside assistance.

Promotion ends August 31st.

Terms & Conditions:
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How Does a Balance Transfer Work?

A balance transfer is when you transfer your balance from one credit card to another, presumably to take advantage of lower rates. Some credit cards will write you a check for the amount, rather than having you jump through the hoops of paying another credit card company.

Why do credit cards offer balance transfers? Credit cards are in a constant battle to get a “share of your wallet.” They want to get into your wallet so that you’ll be more likely to use them when you make purchases, so all the cash back offers and reward programs exist to gain a piece of that share. They earn a percentage off each transaction, so having a large share is crucial to their business.

They have balance transfer offers because they know the longer you have the card, the more likely you are to use it. If you have a balance on your card, they’re playing the odds and thinking that you probably won’t be paying off that balance for a few months. Those are precious months they can sit in your wallet.

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Credit Sesame’s New iPhone App Review

By now, you are probably aware of how important your credit score is to your financial future. Knowing your credit score, and keeping up with your credit situation can help you save money in the long run, especially as you take steps to improve your situation.

One of the ways you can keep tabs on your general creditworthiness is by signing up for a web site like Credit Sesame. Credit Sesame offers you access to a general idea of your credit score — at least the Experian version of it — and provides you with information about how you can save money with different credit offers. Recently, Credit Sesame launched an online app designed to let you take advantage of Credit Sesame on the go.

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Pros and Cons of Credit Cards

Credit cards are the prevalent form of payment in our country. However, in spite of their convenience, there are some drawbacks to credit cards. While some contend that credit cards are pure evil, the truth is that they are tools. Whether or not they are tools that are likely to work for you depends on your financial goals and you situation.

Before you make a decision about whether or not to get a credit card, it helps to consider your own financial situation, and decide which card is mostly likely to help you meet your goals (if any card can do that). Here are some of the pros and cons of credit cards:

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CARD Act: Fewer 0% Balance Transfer Offers

Oh, the good ol’ days. You might remember the days of old when life was simple, credit wasn’t feared like it is today, and if you found yourself in over your head you could move your credit card balance to a card that offered a 0% introductory rate. Then, when the rate was about to expire, you moved it again. Balance transfer offers were plentiful.

It was a great plan that could be used over and over but one thing that never disappeared during the card hopping process was the actual debt and the card companies knew that. If a person had charged up a large credit card balance, why would they suddenly change their habits after they changed cards? Sure, just like we make New year’s Resolutions to lose weight, when we’re given 12 months to pay off our credit card without any interest, we make the resolution to pay it off but the card companies knew that in 12 months, you would likely still hold a balance and they could start making money off of you.

And that money came in the form of some hefty late fees, a high interest rate that was raised even higher, and over the limit fees. They didn’t lose any money by offering you a 0% interest rate for 12 months. They had you right where they wanted you because they knew that most people would not change their spending habits.

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How Accurate is the Credit Sesame Credit Score?

Credit SesameGetting a free credit score without jumping through the hoops of trials is nice, but nearly impossible. Services like Credit Sesame and Credit Karma are great for getting a credit score, even if it’s not the celebrated FICO credit score. The one knock against those scores is that, while free, they aren’t “FICO” so they aren’t useful. I have to disagree.

Personally, I think that closely monitoring your FICO score for no reason is a waste of time. If you plan on buying a car or home in the near future, knowing your score is very important. If you aren’t, getting your Experian score (Credit Sesame) or your TransUnion score (Credit Karma) is going to be good enough.

That said, I wondered how close those scores were to FICO and it turns out they’re pretty close, according to an informal survey done by the members of CreditBoards.com. Credit Sesame offers Experian’s National Equivalency Score, which is the same score they sell to lenders, and everyone was asked to self-report their FICO scores compared to their Experian NES.

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Five Things You Won’t Find On Your Credit Report

CREDIT SCOREOften, we think of credit reports as containing everything about us. And, while your credit report likely contains detailed information about your loans, and about bills you haven’t paid (or paid late), and even your rent payments in some cases, there are some items that are left off of your credit report.

As you consider what others see of your situation, realize that not everything is available to potential lenders and others who see your credit report. Here are 5 items you won’t find listed on your credit report:

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