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American Express to Discontinue IN:LA, IN:Chicago and IN: NY cards

By: Mr Credit Card
08/03/2008

American Express is going to discontinue their IN:NY, IN:Chicago and IN:LA cards. These cards were originally targeted at a younger segment of the market.

These cards had a different program from the Membership Rewards Program. The program had partners that were local to the cards. For example, New York cardholders had different partners in their program compared to other cardholders from LA or Chicago. From November 1st, these three cards will be discontinued.

This episode reminds me of the the Classic Coke versus the New Coke experiment a while back. American Express wanted to reach out to the younger segment as their traditional client base has been wealthier and older individuals. But I guess looking back, the reason they had an older consumer base is because their charge cards required cardholders to pay in full every month. American Express has over the years got into the regular credit card segment by coming up with a series of no annual fee credit cards.

But with the recent credit crisis, and rise in delinquency rates, I guess it wasn’t a surprise that they are closing unprofitable credit cards. The true lesson is that while American Express’ traditional high end clients may not be growing as fast as one would like, they are still a better segment because they will be less affected by the economy than us regular folks.

But at the end of the day, these cards were discontinued simply because there was not enough demand. The design of the card looked really nice. But there just weren’t enough cardholders to make them viable. Existing cardholders will have their cards replaced by the Blue Card – which frankly has a much better reward program. Gone is the slick black design and in is the clear card design that the Blue series has.

Best of the Web: Debt and Savings Edition

By: Christina
08/02/2008

Happy Saturday everyone!

Gas and food prices are on the rise, lenders are cracking down, and the stock market may be starting to see a slight upswing, but we aren’t out of the woods yet.

With all these things in mind, I decided that I wanted to link to some of the very best articles on the web this week – the ones that dealt with real-world, everyday issues.

The articles below cover paying down your debt, setting up your emergency savings funds, and managing your everyday financial challenges. All good advice in any economy, but very relevant given the current state of the nation. Enjoy!

We were featured in several carnivals last week. Thanks to these sites:

That’s it for this weekend’s Best of the Web Roundup. Wishing you peace, prosperity, and a well balanced portfolio. Have a good weekend!

How Does Paying Off A Credit Card Affect Your Credit Score?

By: Brooke Kaelin
08/01/2008

You may also be looking for this:

Can you Raise Your Credit Score by 100 points in 6 Months

Executive Summary – Paying off a credit card has positive impact. But there are a couple of issues that may not result in a significant improvement in one’s credit score. In this post, we will explain why paying off your credit card debt has a positive impact. We will also highlight mistakes consumers make after paying off their credit card debt that offsets the positives.

Postive Impact Because of Credit Utilization Ratio – According to Experian (one of the three major credit bureaus), paying off your credit card debt is always a positive thing. The reason why paying off your credit card debt is positive for your credit score is because not only because credit bureaus look at an individual’s credit card debt, but also because their credit utilization ratio will improve when credit card is paid off as measured against availability of credit1. MyFICO also advises consumers to have as little credit card debt as possible2.

Brief Explanation of Credit Utilization Ratio – According to MyFico3, amounts owed represent 30% of the component that goes into your credit score. Under amounts owed, credit utilization is a factor. It is simply the amount of balance you carry against the amount of credit lines that is available. There is no magical number as to what an ideal credit utilization ratio number is. Lots of sites throw up a number like 30% is a good ratio. But in reality, the credit bureaus and MyFICO all say that the lower the ratio is, the better. Their statistical models have shown that people with higher credit utilization ratio are more likely to have a late payment than a person with low ratio.

Mistake 1: Closing Your Credit Card After Paying It Off – Very often, consumers decide to close the credit card that they have just paid off because they just want to have nothing to do with that card again.

Both MyFICO2 and Experian1 advice against closing a credit card to raise your score and say it will most likely have a negative impact. The reason is because by closing your credit card, you will be reducing the amount of credit lines available and hence, your credit utilization score will increase (which is frowned upon by credit bureaus).

Here is a simple example. You have two credit cards. Both have $5,000 credit limits, which makes your total credit limit of $10,000. Let’s say you have $3,000 balance on each card (total of $6,000). That means you credit utilization ratio is 60%. If you pay off $3,000 from one card, you would have reduced your debt by $3,000 and bring your credit utilization rate down to 30%. But if you closed the card you just paid off, your ratio would still be at 60%.

Reader’s Question – One of our readers, Sergio, sent us this question:

Hello,
I have a credit card with a limit of $3,000.00, my balance as of today is $2,100.00, I also have a line of credit of $9,000.00. As of yesterday my balance in my line of credit was $6,935.70, what I did today was pay the $6,935.70 out of my own pocket (without getting another loan) and zeroed out the line of credit without closing it. The balance is now $0.00. Give or take, how will it affect my credit in terms of points and how long do you think it will take for my credit score to raise. My credit score is about 650 (not the greatest) and am working on getting it better.
Thanks for the advice and help,
Sergio

Thanks for your question Sergio!

Congratulations! Paying off that card was a huge accomplishment – and it put you under 20% of your total available credit.

The credit bureaus (and FICO) do not publish the exact formulas that they use to compute your score. Because of that, I can’t tell you exactly how much it will raise your score, but I can tell you that it will definitely raise it. The amount you owe makes up 30% of your credit score.

Before you paid off your balance, the amount of debt you had was $9,035.75 ($2,100 + $6,935.70). Set against your available credit of $12,000 ($3,000 on your card + $9,000), your credit utilization ratio is 75.30%

Now that you have paid off your line of credit, your credit utilization ratio is now 17.5% ($2,100 divided by $12,000). This is a massive improvement. Nobody can say for sure how much your credit score will go up, but I suspect there will be a significant improvement. Getting your credit utilization ratio from 75% to 17.5% is a huge leap.

You will be able to check your new improved score the month following the payoff. If you keep the balance low on that card, pay on time, and continue paying down the card with the $2,100 balance, you will see your score continue to go up, and up, and up.

You are right to keep the paid off account open – don’t close that one whatever you do or you will see your score drop instead.

You should probably pick up a cheap credit monitoring service for a little while. Once you see your scores hit over 700 try applying for a new credit card. Don’t charge on that one either. Just put it back for emergencies. Better yet, if you can get a rewards card, you could use it just for gas and utilities, and then pay it off at the end of every month.

The important thing to understand is that you are making all the right moves, taking all the right steps, to repair your credit. As long as you keep on doing what you are doing you could well see your score in the high 700s within the next couple of years. Probably even sooner than that if you open a third card.

Be aware that when you do open that third card your score will temporarily drop a few points (because of the inquiry.) As long as you keep your balance under about 20% of your total available credit your score will go right back up even faster than before.

Also, when you monitor your reports, look at them carefully. If your score is at 650 now it’s probably safe to assume you may have had some late payments, or gone over the limit a couple of times. See if there is anything on your existing reports you can challenge. Any negative information that you can remove will raise your score that much quicker.

One warning: Don’t challenge too many things at once or you will get your score frozen until the disputes are resolved. It does not hurt your score if that happens, but you will not be able to get a loan or a new credit card as long as it is going on.

Thanks for your question!

Another Reader Question – Here is another reader question we typically get.

I have a 606 credit score, and I need to get to a 640 in order to qualify for a home loan. I just paid off my credit cards and 8 creditors. Will my score go up?

I don’t have stellar credit. I have just paid off the balances on ALL [6] of my credit cards [Totaling $6733.00]. How far will this action go in improving my credit score and lowering my average interest rate, which is currently near 23-28%?

Mr Keith Wilson

In both cases above, we should see an improvement in credit. We cannot say how much for sure. What is not clear is what were their credit limits prior to them paying off their credit card debt. If their balance was close to their credit limit and they not close any cards, then both might see very good improvements.

Reference

1. The Effect On Credit Scores of Paying Off and Closing Credit Cards

2. Will Closing A Credit Card Help My FICO Score

3. What’s In Your Credit Score?

Does Having Too Many Credit Cards Hurt Your Score?

By: Brooke Kaelin
07/31/2008

Having too many credit cards can penalize your credit score, but not for the reasons you might think. In truth, the only time that having lots of credit cards will hurt you is if you perpetually carry a balance on your cards. In that case, yes, it can be very damaging. If you do not typically carry a balance then it does not normally matter how many credit cards you have. (Read: How your credit score is calculated)

We get a lot of questions regarding having multiple credit accounts. Let’s take a look at one of these situations, and then break it down.

One of our readers, A. Brown, sent us this question:

Hello – I recently requested and received my credit report and score from Equifax. I was happy that it came back at 792. However, it stated that I have too many open accounts and too many recently opened accounts. Over the years I have had my fair share of credit cards, car loans, lines of credit. But I have always had a plan, and currently I have a $0 balance on most all of these open lines of credit. I do have one credit card with 6k on it, plus I have two mortgages. Will simply waiting until the accounts are no longer considered “new/recently opened” help me? I know my score is good, but I want it up over 800. Thanks.

A. Brown, Thanks for your question!

Let’s cover the basics first: The credit score you received might not actually be your FICO score. Check your report carefully to verify this.

Equifax itself might penalize your “score” for having too many open accounts, that does not mean that FICO does. Also, when you decide to borrow money each lender has a different set of qualifications you have to meet. Some lenders will reject you on the basis of having too many open accounts, but it is not a majority.

Lenders are usually far more concerned with how you are using the accounts you have open. When you apply for a line of credit, most lenders will check your FICO score, and not the scores from the individual bureaus. That is why it’s so important to make sure that the score you received was actually your FICO score, and not a score based off of another model.

Experian in particular is bad about this, but I have had it happen at TransUnion too. I am not assuming that Equifax is above passing off a FAKO score either. Just be sure to read your fine print before you make any decisions about what to do with your credit cards.

As far as Equifax goes, yes they do penalize your score based upon the number of accounts you have open. However, the reality is that closing those accounts out will penalize your FICO score more than having too many of them open. If you absolutely, positively feel you must close some of them out, then close your youngest cards, and not more than one account every three to six months.

You mentioned that you wanted to get your credit score up over 800. The best way to do that is actually to leave these accounts open and not borrow against them. You are exactly right to just let them age.

Statistically speaking, people with credit scores over 800 only use about 7% of their available credit. Start by figuring up the amount you have available to borrow vs. the amount you owe. If you can get that figure under ten percent then your scores will go up regardless of the number of accounts you have open.

Believe it or not there are some people out there carrying as many as 50 different credit cards. Yes, how many accounts you have matters and can slightly lower your score. How well you manage those accounts, and how much you owe on them matters far, far more.

If you give your accounts time to age, get your total debt to under 10 percent of your available credit, and you still do not see an improvement in your score, then I would wait a few months and try closing a low-limit, younger account out. Those with the smallest credit lines, and the shortest history should be the only ones you cut.

Have a question for us? Leave a comment below!

Ultimate Collection of Credit Card Posts

By: Mr Credit Card
07/30/2008

Once again, I want to thank all the bloggers who participated in the credit card survey. My natural response as a fellow pf blogger is to link back to them. However, they were 40+ of them and simply listing them on a post would add no value. It would be like a carnival without post!

So in the spirit of this credit card survey, I decided to highlight the participants, and also highlight their best post about credit cards on their blogs (my opinion of what is best off course). Hence, I would say this is a thank you post but also a collection of really great credit card articles from the pf bloggers. I would like to consider this the Mother of all Credit Card Carnivals!. Bear in mind that some of the bloggers that participated in the survey did not really have any credit card posts on their sites. In those cases, I justed highlighted their blogs. So without wasting any more time, let’s begin (in no particular order of preference or any criteria) :

SVB from The Digerati Life is my good friend and probably has the blog with the best pictures and captions. You will love her rant about money, life, work and other stuff on her blog. Plus the great pictures too. One of my favorite post on her blog about credit is 4 methods she has used to reduce credit card debt

JD from Get Rich Slowly is arguably the granddaddy of all PF blogs with over 50,000 rss subscribers! And JD has just been around for over a year. JD has written quite a bit on credit cards and one of the better posts that I liked was a quick trick for tracking credit card expenses in Quicken

Trent from The Simple Dollar is another big hitter in the pf space. Trent has written quite a few post on credit cards. The one I like best is his take on seven nifty tactics credit card companies use to get into your pocket.

Cathy from Chief Family Officer is an attorney and mother of two. She is also (obviously) the CFO of her household. This is one of the more personal finance blog that I enjoy reading (it’s not often you get an attorney who blogs about finances!). She recently wrote a credit card post explaining that merchants cannot set a minimum or maximum on the amount where they will or will not accept credit cards. Definitely check out this post.

You should check out the about us page to find out why Aryn from Sound Money Matters started her blog. She has a very interesting credit card post on how the purchase protection feature in credit cards saved her friend $800.

Tricia from Blogging Away Debt – When I started reading Tricia’s blog, she had over $30,000 in credit card debt. That figure is now slightly over $8,000. If you are struggling with your credit card debt, Tricia will be an inspiration to you. Tricia wrote about the one charge that started her journey to racking up $37,000 in credit card debt.

Free From Broke is married with 2 kids, both himself and his wife work full time in NY and finds it challenging to save (hey what do expect if you live in NY!). He has written a very interesting experience about lowering his credit card interest rate. I won’t reveal the ending, but you’ve got to read this one.

Poorer Than You is a blog written by a student. I saw a few credit card posts that I really enjoyed reading. One of them is about her application hell when applying for a student credit card.

Kimberly from Alpha Consumer is actually one of the blogs of US News. She is one of the “corporate bloggers” who has taken the time to get involve in our “mom and pop” finance world. One of her recent credit card post that caught my attention was about the latest credit card scam. You should definitely be aware of this.

Lynae from Being Frugal will tell you ways to save money and be frugal that you would never dream of. You will learn how to save money by reading what she has to say. Check out her credit card story.

Mrs Micah is only 22, just got married (starting early?), has student loan debt and is documenting her journey to financial freedom. She is pretty entrepreneurial as well, having started Finwikian, a finance wiki. Way to go Mrs Micah. By the way, she has just got her very first credit card.

Single Ma of Fabulous Financials Fabulous Financials belongs to ‘single ma’ who is a 30 something with a little ‘Diva” (kid) as she calls it. Earlier this year, she reviewed her annual credit card limits.

David from Money Ning has a Masters in Computer Engineering and has had lots of interesting jobs and also a very interesting background. He just got married also. His blog is interesting as he has a couple of calculators . Check out his post about credit card payments in self service kiosk

Saving Advice is a blog about savings and frugality. It has several authors and the person who responded to my survey was Jeffrey Strain. There were over 90+ credit card posts on their blog. After going through the whole lot, I decided to highlight this post which is about one of the authors (not Jeffrey) true experience of having 7 unauthorized credit cards opened in his name. What a massive identity theft.

Emily Gerson writes for Taking Charge of Credit Cards. Her post (as with most of her colleagues) are mainly news, announcements oriented. I’ve picked this post because I’ve never seen this advice given anywhere. It is about how our soldiers who work or fight abroad can take measures to protect themselves from identity theft.

Paid Twice gave the title of his blog “I’ve paid for this twice already”, because he or she (can’t assume can you?) figured that he probably paid twice for everything that was charged to the credit card when you factor in the interest rate! This is another blog journey from debt to hopefully (more wealth – financial freedom is getting a little stale!). One of the credit card posts l like is him telling us about his son wanting a BlueSky Amex!.

Blunt Money is a remarried mom who has been through quite a bit (given what she wrote in her about me page). Presently, she only has her mortgage as her debt. Her blog is very personal as she documents her financial and other life. Recently, she has written a post on why putting your credit cards on ice is not the way to go.

RC from Think Your Way to Wealth is married with 2 kids. I though that his post about creating an aggressive credit card debt elimination plan was worth highlighting here.

Trees Full of Money is a blog by Benjamin and he has actually quite a few very good credit card posts. He once had over $90,000 in credit card debt and he paid them off after a couple of years following a plan. In my opinion, one of his best post is The complete guide to protecting your identity, which is one of the best post that I’ve seen written on this topic.

Kevin from No Debt Plan is a blog about debt free life. He has a great advice: Only appreciating assets on credit. Can’t agree more – that means pay in full for your car and electronic gadgets. (perhaps maybe even for a home right now?)

Nina Smith and Andrea Cecile from Queer Cents are two of many authors from Queer Cents that participated in this survey. There are quite a few credit card posts on that blog. I’ve picked this one from Nina to highlight here : How to prevent identity theft?

David from Money under 30 used to write for SmartMoney even though (in his own words) ” I was still as dumb about my own money as could be. Each day, however, I interviewed somebody who was, in fact, smart with money, and lessons I learned about 401ks and bonds and insurance and mutual funds I filed away for a rainy afternoon.”! I want to highlight a post on his blog where he gave an advice of also considering a personal loan as an alternative to a credit card.

Debt Free Revolution is an Army wife, an Iraq veteran, a college student, a mom, family CFO, and a Domino’s pizza delivery driver to get her family out of the chain of debt! In February this year, she was debt free except for her house. She has written a thought provoking post on kids and credit cards and wonders who is to blame

Madison Dupaix from My Dollar Plan helps start and participate in investment clubs. She also “loosely manages” money for 4 relatives! Her post on 7 ways to pay off credit card debt is one of her more popular post on her site.

Andy from Money Walks is a 20 something year old student from Maryland whose goal is not only to retire early but to retire rich enough to where money is no longer a burden. He loves credit cards and in this post, he gives his reasons why

Melissa from A Penny Closer loves to cook! (well, that was what she said in her about me page). She also has a business degree and has worked in the technology and consulting business. She wrote a post a while back on how she chose her credit card.

Mr DebtBeater from Debt Beater has six kids! His blog is a about his journey to be debt free. In fact, DebtBeater is not a fan of credit cards and has even cut up his credit cards.

Clever Dude says he both makes and spends money (do’t we all) and wrote a post about credit card skimming at Redbox Stations that is worth reading.

All Financial Matters is a personal finance blog by JLP. His about me page is one of the longest I’ve seen (really personal – so check it out when you head over to his site). My post pick from his blog is about consolidating credit cards.

James & Miel from Dinks Finance have a really cool blog which is very personal indeed. I wanted to highlight this post about how to be savvy about the way you use your credit card

Ryan from Debt Reduction Formula had one of his readers write a post about whether credit cards were good or bad. Age old topic – it’s like fire – it has good uses but can be abused or cause damage when not used with care.

Finance Girl from Finance Gets Personal is twenty something and is looking to get out of debt in a few years (as claimed in her about me page). She and her husband bought their home in 2005 (at the highs?), but has since reduced $50,000 in debt (way to go). Well, she recently finally got out of her credit card debt and is now debt free. For those who still have credit card debt, this should serve as an inspiration.

John from the Mighty Bargain Hunter – John has a great blog with lots of money saving tips and lots of deals on his home page! John also started the Carnival of Debt Reduction. John clearly loves his credit card but hates credit card debt, and in this post, he clarifies that you can makes use of he perks of credit cards and yet not get into debt.

Millionaire Money Habits is a blog by Ryan Taylor and though there aren’t any credit card related posts, I found his blog pretty interesting. It is more about becoming a millionaire (as the blog implies).

Frugal Trader from Million Dollar Journey is from Canada and it is interesting to read about finance in Canada and from their perspective.

Living off Dividends is a blog more about investing. The author recently made the trip to Berkshire Hathaway’s annual meeting (which tells me that he or she is a real student in investing).

Father Sez is a father of 4 girls and a boy. He blogs about personal finance and hopes to pass on some of his wisdom.

Investor Blogger is more of an investor blog that focuses on investing. There aren’t really any credit card related posts on the blog.

Dan from Everyday Finance is more of an investing blog. He even lists his personal holdings and measures himself versus the S&P 500.

Not The Jetset is a fan of Dave Ramsey and thinks Suze Orman is a shill. Actually, I don’t disagree with him. I can’t seem to find any credit card post here but it has some creative posts.

Four Pillars is a Canadian PF blog written by Mike and Mr Cheap. It’s really Canadian focused and it does not really have any credit card topics.

The Great Loan Blog is run by Mr Mortgage and though there are no credit card posts on the blog, it actually has great posts on the economy and mortgages (which I think are relevant to many of us these days).

Bryce from Save and Conquer started his blog because his friends requested that he posts his thoughts on a blog. So he started one! He hardly has any credit card post (except for a couple written by guests).

Personal Finance Bloggers Credit Card Survey

By: Mr Credit Card
07/29/2008

Having been writing about credit cards and blogging for a while, I was very interested to find out how other personal finance bloggers have been using credit cards. So back in March, I came up with a list of questions that I decided to ask other bloggers.

I started contacting people for a couple of months and finally am able to put the finishing touches to this. In total I sent out about 150 emails to various personal finance bloggers. I have tried to reach out to as many bloggers as I can, but I am sure I have missed a few of you. If I have, please send me an email through my contact form.

Methodology

First, a brief word on how I contacted the all my fellow peer bloggers. I first started with bloggers who were on my yahoo rss feeds. I started with the Money Blog Network which was started by 8 very high profile bloggers who I must say were pioneers in the personal finance space. I then followed, the blogrolls from the various bloggers. I also checked out recent participants of the Carnival of Personal Finance, the Carnival of Debt Reduction, and the Festival of Frugality.

What gives this survey credibility is the fact that many prominent pf bloggers have responded to my survey questions, folks like JD Roth from Get Rich Slowly, Trent from The Simple Dollar. In total, 45 bloggers responded though not all answered every question.



Questions

1. How many credit cards do you have?
2. Which credit cards do you have?
3. Do you have any credit card debt? If yes, how much?
4. What rate are you paying on your credit card?
5. What is your credit score?
6. Have you got any credit cards solely for balance transfers?
7. If yes, what are the balance transfer credit cards you chose?
8. Do you charge your utilities, cable bills and internet bills etc to your credit card?
9. Is your credit card bills set up such that it is automatically paid every month?
10. Do you use your credit cards at gas stations and supermarkets?
11. Which is your favorite credit card? (be specific, not visa or mastercard as an answer pls)
12. Which is your favorite credit card issuer? (banks, not visa or mastercard)

But before I go on, here is an executive summary for those who just want to get some conclusions out of this survey.

Executive Summary
The main conclusion from this survey is that most pf bloggers make good use of their credit cards and could teach us a thing or two about credit cards.

Firstly, most (50%) only carry two or three credit cards and do not go crazy over having many credit cards. The majority of pf bloggers do not have credit card debt and also have credit scores over 700 (which is good). They also make use of their credit cards to get rebates or earn reward points by using them at places like gas stations.

Most PF bloggers who carry a balance and have credit card debt take advantage of 0% APR teaser deals to help them lower their interest cost.

Most carry credit cards from well establish credit card issuers and cite Citibank and American Express as their two favorite credit card issuers.

Below are the analysis and answers to the questions that I asked in the credit card survey.

How Many Credit Cards do you have?

The first question I asked was how many credit cards you do have? Before I present my findings, here is my answer. I have 4 credit cards, the Blue Cash (mainly for my personal spending), Amex Platinum Card (out of my ego and to see how great this card really is and for our business), the Chase Flexible Rewards Card (because Chase does not publish their reward program on their site!) and most recently the Merrill Lynch Plus Visa (once again to check out the reward program).

One caveat is that I asked “how many credit cards do you have?” to my participants. Some had many but only used (for example) two of them. For the purpose of this question, I took the number of credit cards they had and not how many were they actually using. (Perhaps, in future, it would be better to ask how many credit cards one has and how many do they actively use)

So here are the key findings. 34% of those who took part in the survey carried 2 credit cards . 16% had 3 credit cards. 14% had 4 credit cards. What is more interesting is that 7% had 10 or more credit cards! There were 2 bloggers who did not carry any credit cards.





The Pie Chart Below gives a different view.




Which Credit Cards Do You Have?

When I first thought about the questions that I thought I should ask, I obviously thought about asking which credit cards do people have. Well, most listed all the credit cards they have, some did not and some were vague (like Amex or Visa). Then, when I listed all the credit cards that bloggers told me they had, I realized that it was just not feasible to list every card. So instead, I have decided to list the cards that most of the survey participants had (compiling this list was a nightmare to say the least!).

1. Discover More Card
2. Bank of America Visa or Mastercard
3. AT&T Universal Credit Card
4. USAA Platinum Card
5. WAMU Mastercard
6. Amazon.com Visa
7. Amex Blue Credit Card
8. Amex Blue Cash
9. Citibank Visa
10. Gold Delta Skymiles Credit Card




Do you have any credit card debt? If yes, how much?

41 bloggers responded to this question. 31 do not carry any debt (that’s a whopping 76%). 1 blogger have credit card debt that was less than $5,000. 7 bloggers had credit card debt between $5,000 and $9,999. One blogger had credit card debt between $10,000 and $20,000.

To be honest, I’m not sure that this is exactly indicative of the universe of personal finance bloggers since not every person that I sent an email to responded. But nevertheless, I think it is great news that the majority of the bloggers that responded do not have any credit card debt.




What Rate Are You Paying On Your Card?

For this question, I have decided to list the APR of those who actually carry a balance (ie have credit card debt).

7 bloggers are presently now paying 0% APR on their credit card/s or at least on one of their cards. 4 bloggers were paying single digit APR. 4 bloggers were paying rates above 10%.




What is Your Credit Score?

Of the bloggers that responded to the survey, 4 had credit scores of 800 and above. 12 had scores between 750 and 799. 14 had scores between 700 and 749. 3 had scores between 600 and 700. 5 did not know their credit scores! 5 bloggers were either overseas bloggers (or who had lived outside the US for a long time that they either do not have or have not checked their credit scores).

It is good to know that at least three-quarters of the those surveyed had credit scores of 700 and above.




6. Have you got any credit cards solely for balance transfer?

15 of the out 40 bloggers had got credit cards solely for balance transfer purposes while 29 have not got any credit cards solely for balance transfer deal.

Of the 15 that had actually got balance transfer credit cards, 10 carried a credit card balance (to put it another way, have credit card debt). The other 5 who took out 0% balance transfer deals paid in full (and hence simply took advantage of such offers)







Balance Transfer Credit Cards that were chosen

Here are the list of credit cards that these bloggers used for their balance transfer.

AT&T Universal Credit Card
Bank of America Visa
WAMU Visa
Citi&#174 Professional Card
Chase Visa
Citi Visa

Note : with many issuers now lifting the cap on balance transfer fees, most of the above cards are not the best cards to get a 0% deal. You can check our section on for our recommended balance transfer credit cards



8. Do you charge your utilities, cable bills and internet bills etc to your credit card?

For this question, I got 45 responses. And it was evenly split. 22 bloggers did not pay their utilities, cable bills or internet bills with their credit card, while 23 actually did use their credit cards to pay all of the above or at least some items like cell phone bills etc.




9. Is your credit card bills set up such that it is automatically paid every month?

Only 10 bloggers who participated in the survey have their credit card bills set up such that their bills are automatically paid every month from their bank account. 32 bloggers do not have their credit card bill payment automatically set up with their bank account. One blogger (who obviously carries more than one credit card) has some but not all credit cards set up for automatic payment.

The most common reason given was that they would personally like to check their statements and make sure it is correct (can’t argue with that one).




10. Do you use your credit cards at gas stations and supermarkets?

30 bloggers responded yes to this question (which I expected). Of the 30 that said yes, 3 said they specifically used it for gasoline purchases. 13 bloggers responded no to this question and do not use their credit cards at the gas station and supermarket.

2 bloggers said they used their debit cards for gasoline and supermarket purchases. I am inclined to classify that as a “No” simply because the purpose of this question was to see if people took advantage of using credit cards to earn rewards or rebates since credit card issuers tend to give more rewards or rebates when you use your cards for gas or grocery shopping.




11. Which is your favorite credit card? (be specific, not visa or mastercard as an answer
pls)

Not everyone answered this question. There were also no clear favorites here. This is understandable given that we have so many credit card choices. Below are some cards mentioned as favorites.

1. Blue from Amex
2. Blue Cash from Amex
3. Discover More Card
4. USAA Platinum
5. Citi Drivers Edge




12. Which is your favorite credit card issuer? (banks, not visa or mastercard)

Here is the list of bloggers most favored credit card issuer ranked according to the number of votes. Some did not answer this question (either have no opinion or hate credit cards?).

1. Citicards – We have 8 votes for Citibank which makes it the most popular among the pf bloggers that participated in this survey.

2. American Express – Second was Amex with 6 votes

3. USAA – This one caught me by surprise, but with 4 votes, USAA takes 3rd place.

4. Chase – 4th was Chase with 4 votes.

5. Discover – in 5th place is Discover with 2 votes also.

6. Bank of America (FIA) – with 2 votes.

I’ve left the rest out the ones with only one vote.




13. When did you get your first credit card? What was the card?

On hindsight, I should not have asked this question because most of the bloggers cannot really remember. Most got them in college (they think) and cannot remember the exact card. So I will not actually tally up the answers here (bad question on my part! – but how I am to know in advance?).

Saturday Link Love: Tales From The Web Edition

By: Christina
07/26/2008

Happy Saturday Everyone! Here’s hoping you are spending it with a tall cool drink, and plenty of sun, friends and family. If you get a chance to take a break this weekend, then relax a bit and check out some of the personal finance articles we enjoyed this week:

Moolanomy wonders if you should Start an Emergency Fund or Pay Off Your Debt? I vote for both at the same time.

The Dough Roller examines credit card fees and fine print and wonders, “What’s In Your Wallet?”

Mrs. Micah gives us the lowdown on How Lemon Laws Protect You.

Fit Wallet wishes “Death to Credit Cards!” *Gasp!* Can you hear us falling over?

The Happy Rock wonders if those of us who are irresponsible with our credit are funding the rewards for those who manage their credit.

20’s Money shows us how to Take Our Personal Finances to the Next Level.

Milk Your Money takes at look at the pros and cons of Renting vs. Buying your home.

Carnivals that I participated in

Carnival of Personal Finance #162 – Baseball Edition

Carnival of Debt Reduction – Secret to Life Edition

Money Hacks Carnival #21

Finance Fiesta #8 – Austin Edition

Carnival of Tips

Carnival of Financial Planning – Cute Kitten Edition

Carnival of Credit Report Stories

Thanks for reading! We’ll see you back on Monday with all new reader questions!

Have a question for us? Leave a comment below!

Does Paying Your Credit Card Bill Before the Statement Raise Your Credit Score?

By: Brooke Kaelin
07/25/2008

Q: Does paying your credit card bill before the statement raise your credit score?

A: Paying your bill before the current month’s statement is issued can help your credit score. Why? It has to do with how your credit score is calculated. 30% of your credit score depends on how much debt you carry. At the close of your statement each month, your lender will cut you a bill, and report the amount that you charged for the month to the credit bureaus. Since you have only just been issued a bill, and have not yet had time to pay it, the amount you charged for the month is considered unpaid debt where your credit score is concerned.

If you keep track of how much you charge, and pay your bill before an official statement is issued, then your credit card company will report that you have no outstanding debt when the regular statement date rolls around.

Important Considerations:

The above is an ideal situation. It doesn’t always work that way. Before you start paying your bill before a statement is issued, let’s take a look at some special considerations:

1) Your credit card does not report to all (or any) of the credit bureaus – There are three credit bureaus. Whether or not your lender reports to them is up to the lender alone. There is no legislation that says lenders must report payments, amounts, or anything else to the credit bureaus. Each lender chooses how they will report, and which bureaus they will report to. Occasionally lenders will only report negative information or late payments, rather than positive information. The only way to find out is to check your own credit reports. You can do that for free at AnnualCreditReport.com.

2) You have a credit card with no-preset spending limit. Credit cards with no pre-set spending limit (like American Express cards) generally report as maxed out each month no matter how much you charge on them. That can definitely affect your credit score, and in a situation like that this tactic is going to help your score overall. Generally though, if your credit score is high enough that you carry cards with no pre-set limit, then you may not need to worry about how it is reporting. It’s only 30% of your score. Clearly you are doing something right with the other 70% or you would not have the card to begin with.

 3) Your credit card company reports what you charged, not what you owe – It’s not a perfect system, and much of this depends on your lender’s policies. If you really want to capitalize on this opportunity, I would suggest calling your credit card company and asking what they report each month. Alternately, you could monitor your credit for a few months and see what each of your lenders is reporting to the credit bureaus.

We had a reader ask us a similar question about paying your bill prior to the statement date:

Which is better for my credit score; paying off my balance before the end of the month (meaning I get a bill with a zero balance), or paying off my balance each month after I receive the bill (and all the months charges are posted).

NOTE: I’m on a special student card that gives me 0% ARP for balances under $250 with a $750 limit, so staying under $250 keeps me under 30%. What I’m saying is I pay the same amount whether I pay before the bill or after, so I just want to know which is best for my building my score.

In our opinion, it is usually best to get a bill with zero balance. However, given the other factors involved, you should check on your lender’s reporting policy. There may be no difference in what they report to the credit bureaus each month, or it may matter greatly. You won’t know until you check with your lender, and then follow up by checking your credit reports.

 

How Will Closing Multiple Credit Accounts Affect My Credit Score?

By: Brooke Kaelin
07/23/2008

How will closing out multiple credit accounts affect your credit score? Any time you close an account, your credit score will drop. How much it drops depends on your entire credit profile. Things like, how many lines of credit you have, how long those accounts have been open, and whether or not you are carrying a balance on any of your credit cards. (See: How your credit score is calculated)

Let’s take a look at an example situation that was recently sent in to us, and then we’ll dissect it and see what’s going on.

I have a credit card account with a credit line of 20K that I opened with a 0% balance transfer for 15 months. I just paid off the card with another balance transfer offer with similar terms and will be paying off the loan by the time the 0% interest ends. I have an excellent credit and have a couple of other credit cards with no preset spending limit that I use regularly but never carry a balance.

My questions:

1.) Should I close my first balance transfer account which now has no balance?
2.) Should I close my second account once the balance has been paid off?
3.) I have a couple of Visa/MasterCard type of charge cards that have very small credit lines and do not intend on ever using them. Should I close them out?
4.) I have several store cards that I opened only to take advantage of their initial purchase discounts (i.e. JC Penney, Old Navy, etc.) and do not typically use them–I want to close the accounts so I can take advantage of discounts by opening new accounts after 6 months if I choose to. Should I close out the accounts?

Thank you in advance for your reply.
Ben

Thanks for your questions Ben!

Honestly, I would not close out any of your accounts until that balance transfer is paid down. However, since your credit is so good, you can probably get away with it to a point.

The basic rule for closing out accounts is to close out the youngest accounts with the lowest limits first.

Try temporarily picking up a credit monitoring service. You should monitor all three of your credit reports and scores, not just one. This way you can see exactly how closing each account affects your score, and you can be sure that the closed accounts get reported correctly to all three bureaus the following month. It would be worth the (average) $15 – $30 a month monitoring fee to prevent your credit scores from tanking.

Once you are monitoring your reports, close out those store cards first. I would close out at most one account per month, and only as long as your score doesn’t start falling.

When you start getting into accounts with larger balances I would only close out one every three to four months.

Unfortunately, nether FICO nor the three credit bureaus are willing to reveal exactly what’s in the secret sauce that makes up your credit score – so the best we can do is make an educated guess.

That is why I say you should monitor your scores. If you close out your first two to three store accounts and see no drop in your scores, then move on to the low-limit Visa and MasterCards. If you see a small drop after that, I would wait three to six months before closing anything else out.

There are two exceptions to this advice:

If you have a card with a high annual fee, and you want to avoid paying it, then close it out first, wait several months, and then start closing the other accounts out.

Also, I am assuming that you are not carrying revolving debt on any of these accounts (other than your new balance transfer.)

Whatever you do, make sure that the total amount you owe on that balance transfer does not equal more than about 25% to 30% of the total amount you are able to borrow on all your cards.

Otherwise, you will see your score drop considerably because you will appear to be using far more of your available credit than you were before you closed your accounts out.

Regardless, leave the card you initially transferred the $20k to open. That should let you close out most of those smaller accounts without a problem. Honestly, I would probably keep both of those balance transfer accounts open even after you pay the full balance. At the very least, make closing them your final step.

I say this because there is occasionally a snafu with cards that have no pre-set limit. Some companies report the amount you charge each month as the limit, so those cards could look maxed out no matter what your balance is. If you keep the two balance transfer accounts open then you will not appear to be using too much of your available credit each month.

Basically, just take your time. Getting in too much of a hurry to close out these accounts is what will make your score drop. One or two low-limit accounts every three to six months is the safest way to do it.

Have a question for us? Leave a comment below!

Saturday’s Best of the Web Roundup: July 19th, 2008

By: Christina
07/19/2008

Wow, there we a ton of incredible posts in the financial arena this week, it was really hard to decide who to include!

Here are some of my favorites:

Mrs. Micah wonders How Foreigners Get Credit in the United States? This is a really good question. It’s one I may even have to explore myself in the future!

The Dough Roller has a magic recipe for Turning Gift Cards Into Cash. I could have used this one last Christmas when I was swimming in cards for restaurants I never go to. If you have gift cards from Christmas that are about to expire or have their balance reduced, then be sure to check this one out.

Brip Blap tells us to forget about work / life balance because it isn’t going to happen. I have to admit, I agree. He offers a unique solution though, so it’s worth a read.

Over at Get Rich Slowly J.D. Roth gives us the lowdown Dirty Secrets of Debt Reduction. He fearlessly flies in the face of the common financial advice that instructs us to pay down our high interest debt first.

Trent over at The Simple Dollar gives us a list of 100 Things to Do During A Money Free Weekend. This is a neat concept, and I’m going to try it out with my family next weekend. As long as it doesn’t kill them, it may become a regular thing!

MoneyNing gives us 7 Reasons Why We Need to Start Budget Tracking Now. Tracking your budget is like investing in the stock market. The best time to do it was yesterday. The second best time is today. It’s hard to break the debt cycle if you ignore where your money is going. Trust me on that one! My budget was one of the first places I started when I finally decided to get control of my money.

Student Scrooge extolls the Benefits of an Online Savings Account. This one I absolutely agree with. I use an online savings account and my interest rate is three points higher than all of my friends and family’s rates at their normal banks.

Carnivals that I was involved in

Carnival of Financial Planning

Carnival of Personal Finance #161

Carnival of Debt Reduction – Gazelle Intense Edition

That’s it for this week’s Best of the Web Roundup. Here’s wishing you blue skies and cheaper gas! See you on Monday 🙂

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