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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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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The Difference Between Visa and MasterCard

Visa and MasterCardWhen we think of credit cards, often we think of the logos that accompany the most commonly used credit cards: Visa and MasterCard. These two companies are often said in the same sentence, and many people think that they are essentially the same company.

However, this isn’t the case. Visa and MasterCard are two distinct companies, even though they are in the same business, and do a lot of the same things. Understanding this can help you make a more informed decision when trying to figure out which credit cards are the best for your situation.

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Credit Card Issuers Raising Rates on New Customers

Interest rate vs money balanceOne of the considerations that many consumers worry about when signing up for a new credit card is the interest rate. The interest rate you end up with can have a great deal of influence on how much you pay over time. The higher the interest rate, the more you pay when you carry a balance. If you are a new customer, though, you can expect to see higher interest rates as you apply for new cards.

According to CNN Money, interest rates are on the rise for new customers. Apparently, interest rates are up three percentage points over the past three years. A lot of the blame is being placed on the Credit CARD Act of 2009. With restrictions that come on raising rates for current consumers, credit card issuers are looking for ways to raise revenue, and new customers can provide a way to start out with a higher interest rate.

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Best Cash Back Credit Cards for April 2012

One of the ways that you can maximize your finances is to make use of cash back credit cards. These are credit cards that provide you with the ability to earn cash back on your purchases. Hundreds of these cash back cards exist, and many of them stop at providing you with 1% cash back on all your purchases. However, there are cards out there that offer better cash back deals — even promotional sign up bonuses.

As you consider which card might be best for your lifestyle, here are a few cash back credit cards offering great deals this month:

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My Citi mtvU Card Was Compromised

Maybe I was tempting fate when I listed the virtual account number on my post about one time use credit card numbers or perhaps my credit card was caught up in the Global Payments breach (which prompted that post) but my Citi mtvU Card, which is slated to be replaced anyway, was compromised this week. I received a text message from Citi about a $10 charge late Tuesday night from nimbuzz.com, a mobile company. If I authorized the charge, I was to text back 1. If I didn’t, text back 2.

I texted back 2 and within seconds (it really was within seconds, I was kind of amazed) I got a phone call. Now, I’m not one to be suckered into a phishing scam but the representative identified themselves as being part of the fraud department, tried to confirm other transactions, and ultimately reissued a card with next day shipping (for free, waiving their usual $15 charge). Normally, I will call the credit card company but in this case they didn’t ask for any identifying information, so I figured I’d save myself some time.

Who knows if this is part of the Global Payments breach, but it seem unlikely since “only” 1.5 million numbers were stolen, but ultimately you can’t really do much. Liability for unauthorized purchases is capped at $50 by federal law and most credit card companies offer zero liability, so no sense losing sleep over it.

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