Credit Cards Tips for You

With provisions of the new credit card laws due to go into effect on February 22, 2010, credit card companies are adjusting their offers accordingly.  Long term interest rates have already increased across the board and 0% credit card rates are likely to increase, and thus disappear.

With congress passing and President Obama signing the CARD act of 2009, provisions of which have been enacted already with the remainder to be implemented in 2010, credit card issuers are preparing for the most sweeping changes to hit the industry in decades. This, along with the uncertainty around consumers’ ability to pay their debts, has credit card companies closely examining their rates and incentives.

During the previous decade, 0% credit card rates were a way to entice customers to open a new credit card and move any higher interest balances to this card. The card companies knew that most consumers would not pay off their balance by the time the initial 0% rate expired, usually not more than 12 months. When the 0% interest rate expired, the credit card issuer would have a customer that was paying a much higher rate on a hefty balance. Als

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If you were born after 1980 you probably take the existence of credit cards for granted. You’ve been seeing them in use your entire life. But in the larger scheme of things, they really are a recent development.

Credit cards were first issued by oil companies and department stores in the early 1900′s – to be used only at their own establishments. Rather than offers of long-term credit, these cardboard or metal cards were a convenience for customers who then paid the entire bill at month’s end. Thus they were really “charge cards” rather than “credit cards.”

1946 saw the first bank-issued charge card, restricted only to customers of John Biggin’s bank in Brooklyn, and good only at local business establishments. In 1951, New York’s Franklin National Bank issued a similar card for account holders only.

Diner’s Club was introduced in 1950, as a convenience for frequent travelers and entertainers. The first cards were issued to 200 select customers who could use it at 27 New York restaurants.

By the next year, cardholders numbered 20,000 and the card was more widely accepted. Diner’s Club claims the title of the first credit card in widespread use. Read more…

Rewards credit cards come in several varieties, in addition to cash back. They are generally offered only to individuals whose credit is rated “excellent” or “very good.”

Some have no annual fee, while others, with more generous rewards, carry an annual fee of up to $450.

The rewards card you choose should reflect your lifestyle and the way you use your credit card.

Two of the most popular are “miles” and “points.”

Miles, of course, refers to airline miles. Some cards are specific to one airline and some are universal. Some give miles for all purchases, and some only for travel-related purchases. Some offer 2 miles per dollar for travel purchases and 1 point for all others.

Often the card offering the most miles per dollar also comes with a higher interest rate, so it pays to compare all the features. Unless you pay your balance in full each month, the rewards can quickly be eaten up by the higher interest rate.

Points are awarded in a similar fashion, with some cards offering points for every purchase, and some for only specific purchases. Read more…

Nearly everyone is interested in saving money these days, and many are tempted by the ease of saving through spend-to-save credit cards. But are they really the path to financial prosperity?

Probably not, say financial advisors. In fact, this plan can actually encourage higher spending and more debt.

These plans, such as Bank of America’s “Keep the Change” and Wachovia’s “Way2Save” simply round up purchases to the next dollar and deposit the difference into a savings account.

It sounds good, and it could be good for consumers who pay their balance in full each month. But since savings accounts are now paying less than 1% interest annually, and credit cards charge an average which is now around 12%, or 1% per month, it’s a very bad plan for consumers who carry a balance.

It doesn’t make sense to pay 12% per year on money that will earn less than 1%. You’re going backwards.

But the story gets even worse, because these credit card plans have hidden fees. Read more…