USAA Credit Card Review

By: Mr Credit Card

04/18/2009

usaa Prelude – I did a credit card survey among personal finance bloggers a while back and found out that many of them rate this card pretty highly. Furthermore, I just got an email from a reader requesting a review of this card. Here is the email

How about a review of USAA credit cards. I realize not everyone could get one,
but for those who can get one might find your website helpful, especially if
they did not know they could get one.

Andrew Genovese

So with that out of the way, let’s look at this card in greater detail.

Introduction – The USAA credit card is only available to

Active-duty officers and enlisted personnel.

Children whose eligible parents have or had a USAA auto or property insurance product

National Guard and Selected Reserve officers and enlisted personnel.

Officer candidates in commissioning programs (Academy, ROTC, OCS/OTS)

Former military personnel

The USAA credit card has a cash back version and a rewards version. Furthermore, they have a MasterCard version and an American Express Version. The Mastercard and Amex version are essentially identical. What we’ll look at is the cash back and reward version.

Cash Rebate Formula – Let’s start by looking at the cash back card and it’s rebate formula. Turns out it has a tiered system. For the first $2,000 in spending, you will earn 0.35%, for the next $2,000 in spending, you get 0.75% rebates, for the next $11,000 the rebate is 1%. When your spending is over $15,000, the rebate is 1.25%. Rebate checks will be automatically debited or sent to your address every January.

usaacashrebates

Total Rewards – Rather than choosing cash rebates, you can also choose to earn reward points instead. You can earn one point for every dollar that you spend on the card. You can redeem points for a variety of rewards like airline tickets, merchandise and gift cards.

But how good are the rewards? – That is ultimately what will determine whether this will make a good reward card. Let’s look at the different components.

Airline Travel – The USAA rewards program allows you to exchange points for the value of the airline ticket that you . There are some pros and cons to their method. Firstly you have to book the tickets through their partner agent Traveler’s Advantage Services (the “Airline Rewards”). They reserve the right to exclude an airline for safety or quality purposes. They also do not guaranty the availability of any flight, airline, or seat. Tickets may be booked online at usaa.com or by calling (800) 980-8722.

The good thing about the program is that tickets can be First Class, Business, or Coach, with no restrictions on dates, times, or seating. They can also be one-way, multi-leg, or round-trip in and out of any airports serviced by the airlines included in the Program. The other plus point is that Reward Value includes any taxes, destination fees, September 11th Security Fee, and any airline-imposed surcharges.

If the cost of the airline ticket is less than the Reward Value for the amount of Points redeemed, USAA will credit one of your USAA Total Rewards Accounts for the difference.
If the cost of the airline ticket is more than the Reward Value for the amount of Points you want to redeem, you will have the option of paying the difference with one of your USAA Total Rewards Cards or other card we accept or choosing another flight within the Reward Value.

usaatravel

Gift Cards – You can also use points to redeem for gift cards. The number of points required are listed in their program catalog (see below). Their partners are the usual suspects found in most other programs.

usaagiftcards

Merchandise – Their website has a “sample catalog” which is where I got all the information for the review. Because it is just a sample, I can’t say for sure how great their selection is.

usaamerchandise

Charity – You can use your points and donate to Habitat for Humanity.

Cash Rebates – You can also exchange your points for cash. But you need to use 10,000 points before you can even get an equivalent of 1%.

usaacashcharity

Fees and Rates – There is no annual fee for the USAA card. The APR is varies but could as low as 7.75%.

My Verdict – Here are my thoughts as far as the reward version goes. There are some good things about their travel rewards. Firstly, the points required for the value of the ticket gets more favorable as the ticket prices go up. Sales taxes etc are counted and you can use your reward points for those. You will also be credited if you do not need as many points.

However, this system requires that you book with their own travel agent. Hence, though a flight may be available elsewhere, it may not be available with them. Using this system also means they may or may not have the best price and it means you really cannot shop around for the best deal. If this is important to you, then the Discover Miles Card is a much better alternative.

Because they only show a sample of their merchandise and gift card rewards on the website, I cannot really say how good it is. I suspect though that the American Express Membership Rewards would have a much wider selection of merchandise and that you are also better off with a Discover Card if you are interested in gift card rewards.

If I look at the big picture, I would say that at best, this is a pretty average reward card just strictly looking at the rewards. But folks who love this card always sight their great customer service.

As far as the cash back version goes, I do not recommend it. The rebate formula is nothing to shout about. In fact it is a tiered system where you rebate increases as your annual spending increases. There are much better cash back credit cards out there and I would give this card a miss. To find the best cash rebate card for yourself, you can fill your spending in the table below and it will show you the best card for you based on your spending.

To sum up, strictly on a reward basis, I would say that the USAA credit card is at best an average card. However, given how major issuers like Chase and Bank of America have pissed off their customers by cutting credit lines, jacking rates to ridiculous levels, those who are eligible for this card should at least consider it. I personally do not have this card and so cannot comment on their service and what level of credit you need to get approved. If you have this card, we would appreciate your feedback and comments (especially on the credit score you need to get this card and their travel reward features).

Enter your approximate monthly spending into the calculator below to see how much you can earn per month if you’re using the USAA Credit Card versus other cards!

Suze Orman’s Advice, Part 2

By: Jason Steele

04/16/2009

About a month ago, I took a stab at critiquing self styled financial guru Suze Orman’s latest advice. As you can see, I was not very complimentary towards her advice to save up cash rather than pay down your credit card debt.

The Readers Respond

I received several responses to this article, yet most were positive. While I appreciate the flattery, it is actually the criticism that I find most interesting, as it helps to illuminate a different point of view.

Here is one example from a reader named Becky:

I agree with her! When you have the choice (while Earth is in economic turmoil) to either pay off your credit card or put money is savings you should put it in savings because it is not uncommon to have your credit limits lowered when a card issuer feels like it. It would be horrible if you used your only/last $10,000 to pay off a credit card and then the next month you find out you lost your job and your credit card limit was lowered to $1,000 and you have nothing else to fall back on. I would rather have $10,000 in my bank acct and have to pay for interest payments on my card(s) but still know I can pay my mortgage a few more months while I try and get a job again.

I know from experience that credit issuers lower credit lines. I pay my balance off each month and my credit lines keep going lower and lower as the months go by.

I have thought about this comment for while, and I think I understand her perspective. The assumption of Becky, and presumably Suze, is that you have several thousand dollars worth of credit card debt, zero emergency fund, and mediocre credit. If you are worried about loosing your job, and all of your credit, I can see how Suze’s advice might resonate. These days, it is not paranoid for anyone to be worried about loosing their job. While job loses can and will happen in any economy, it is really the difficulty finding a new job in this economy that can be truly scary.

Another assumption that must be present to follow Becky’s and Suze’s advice is that you have mediocre credit and hold very few credit cards. In that circumstance, it is a real possibility that your sole card’s credit limit could be cut, leaving you with no options in the event of a fiscal crisis like job loss.

The source of my criticism really comes from my own situation where none of these assumptions apply. I have very good credit, and I have many credit cards, most of which I seldom use. So far, none of my lines have been cut, but if one were, it would not affect my planning. Not coincidentally, I never carry a balance on a credit card, so I don’t spend any time worrying about paying off debt. I can only imagine if I were to incur credit card debt, my first priority would be to pay it off. That is where my sentiments are coming from.

I realize that everyone is not in the same place, presumably many of Suze’s audience. I still stand by my criticism for people who don’t fit all three assumptions: High credit card debt, mediocre credit, and few credit cards. The truth is that having many credit cards helps your credit score by reducing your debt to credit ratio. A side effect of having multiple cards is the redundancy of having multiple backups in case one bank chooses to slash your credit limit.

In fact, one of the commenters, Eric hit the nail on the head when he said:

I didn’t seem to interpret her advice as strongly as you did. Basically I think she just wants you to build up some kind of emergency fund even if it means cutting back on your CC payments for the time being. It’s important to have some kind of cash protection in this economic catastrophe right now.

As for her statement about the CC industry pulling back, it definitely doesn’t apply to people like us who have great credit, but you must realize that Suze’s audience are mostly people on the opposite spectrum from us. They’re lower credit people who advice like this applies to more. They usually have zero savings and reduced credit.

Thank you to both Becky and Eric for contributing to the discussion. I really do welcome your comments, especially those who disagree with me.

Foreign Transaction Fee For US Dollar Transactions!

By: Mr Credit Card

I just received a letter from FIA (who process my Merrill Lynch Card – now Bank of America I guess). I’ll reprint this letter in full here :

CHANGES TO YOUR CREDIT CARD AGREEMENT

Please read this document carefully and keep it with your Credit Card Agreement. Except as amended below, the terms of your Credit Card Agreement remains in effect. If there is a conflict, the terms in this Amendment will prevail.

FOREIGN TRANSACTION FEE

What is happening:
We are expanding the definition of “Foreign Transactions” to include transactions in US dollars if they are made or processed outside of the United States. As a result, these transactions (posting on or after June 1, 2009) will be subject to the Foreign Transaction Fee, currently 2% of the US Dollar amount of each foreign transaction. This fee is in addition to any other applicable fee.

Amendment to Your Credit Card Agreement:
Effective on June 1, 2009, we are replacing the definition of “Foreign Transactions” in the section of your Agreement titled Words Used Often in this Agreement with with the following:

“Foreign Transaction” means any transaction made in a foreign currency, and any transaction made in US dollars if the transaction is made or processed outside of the United States. Foreign transactions include, for example, online purchases from foreign merchants.

My two cents – Great. While taxpayers subsidize BOA, they continue to reduce credit lines even on customers who pay on time! And now, they will consider a US dollar by a foreign merchant a foreign transaction fee. That means, for example, if your web host is in Canada and you auto bill it to your credit card, you will be hit by a 2% fee!

Now, my Merrill Lynch card is hardly used at all. So this will not affect me. But it sure is frustrating that credit card issuers who receive TARP money continue to find ways to squeeze the very consumers who are going to foot the TARP bill.

Which Credit Cards Are Easiest To Get After Bankruptcy?

By: Christina

Below is a list of credit cards that are likely to approve you after BK. These are taken from experience, readers feedback and from other readers from around the web. We’ve had lots of readers comments at the end of the post, which is worth reading. We will list store cards after doing more research.

Score of 500+

Contrary to what many think, you can get a low annual fee or even no annual fee card after BK. You might have to wait for about a year before you apply. If you need a card immediately, then a secured card is probably your best bet.

First Premier Bank has been in the sub prime market for the longest time. Beware of the interest rate (which is high). Best not to carry a balance with this card because interest charges could start to add up.

Household and Orchard Bank has traditionally fallen into this group. But they have been bought out by Capital One and are not being offered and promoted at the moment.

Secured Credit Cards

Aside from unsecured cards, secured cards offer an easier alternative. But if you wish to apply soon after BK, then be aware that mainstream banks are most likely to decline your application (even though the card is secured!). Below are a couple of viable secured cards.

Of all the cards mentioned here, this is probably the most reasonable one in terms of fees. Just one low annual fee and a deposit of your collateral and off you go with the card. (See Review).

first progress secured credit card First Progress is issued by Synovus Bank and you’ll probably get approved. One of the more reasonable sub prime secured cards available now that Orchard and Household are not around anymore.

The Applied Bank Gold Secured Credit Card has a low interest rate though it has no grace period. So making sure you pay in full is very important because the charges start to accrue immediately.

Get Both Secured And Unsecured Credit Cards

Secured credit cards require you to deposit money in a savings account in case you default on the balance. They eventually revert to unsecured credit cards and you get your initial deposit back. Or, if you default on the loan, then the deposit is used to cover your balance, and you can walk away without the card hurting your credit too badly.

All in all, secured credit cards are by far your best bet, and I speak from experience. After my own bankruptcy I got one secured credit card, and one bad credit, unsecured credit card. The secured card had a much better rate of interest, lower fees, and I will get my deposit back.

The unsecured credit card had a high interest rate, monthly fees, and about $250 worth of fees charged to the card initially. The initial fees forced me to pay the balance down immediately so that it didn’t lower my credit score.

Success Stories

Some folks are able to get normal credit cards almost right out of bankruptcy too. A reader, Joseph , sent me the letter below about his experience after bankruptcy. He was approved for a Platinum Capital One Card 8 months after his bankruptcy. When I asked him what he did to repair his credit he replied:

The only thing I did was get a WaMu secured card after my bankruptcy (filed 1/25, discharged 5/01) in July of last year. It got canceled in January due to Chase’s decision. I tried to apply at BoA for a secured card, but they denied me because it wasn’t one year since the discharge, which was on 5/01.
Other than that, I did nothing to repair my score…I applied for a capital one card the other evening and instantly got approved. I don’t know all the details of the credit limit, but it was for a platinum card at 22%.
However I keep no balances anymore, so that doesn’t matter!

I was so excited to hear this from Joseph, because it does give hope to those of us in the process of repairing our credit after bankruptcy. I should point out though, that Joseph is doing everything the right way – he applied for a secured credit card right after bankruptcy and made regular payments. He also makes a point not to carry a balance on his credit cards, which is the single biggest thing you can do to help your credit score aside from making on-time payments.

We also had another reader, Patricia, who left this comment:

There are several places that will give you credit, but use it wisely. I filed bankruptcy 4/30/08 discharged 8/27/08 (will never forget that day). Recently got the nerve to apply for a credit card in April was approved through Capital One. I spent $11 and paid it off before I got my first statement (4/11/09). Target is also known to be bankruptcy friendly but if you are not a target shopper I wouldn’t get one. Anyway my advice is be patient and things will come to you.

So, it’s looking like Capital One is a good place to apply for credit once you have repaired your credit score a bit.

As for my own experience, right out of Bankruptcy I applied (and got) a secured credit card from Orchard Bank, an unsecured credit card from Indigo Bank (used to be a different company and I can’t remember the name now – but it’s currently Indigo Bank).

About a year after my bankruptcy I got a Target card as well.

So, please don’t worry that you won’t be able to get credit after bankruptcy. You definitely can. You may have to put down a deposit, or pay high interest rates for a while. I just chalk it up as the price for my past mistakes, and work towards qualifying for better terms. It can be done, and easily!

How about you? Do you have a credit repair story? Which cards did you use to raise your credit score? Please leave a comment below!

Keep Reading:

List of more secured credit cards?

A Reader’s Question

By: Jason Steele

04/15/2009

A reader asks:

What is happening with US Airways Visa (Bank of America) being switched to US Airways Master Card (Barclays/Junpiter)? They are giving the present card holder a new card with out the new customer benefits, many fewer bonus miles AND a higher annual fee of $90 for both Platinum or Visa Signature to MC World Elite vs $79 for MC Premier World (same overall benefits). No choice to go to $49 World card. I have applied for the MC so I can switch manually and get the new customer benefits

Bill

A Confusing Situation

This seems to be a real confusing situation as US Airways is shifting their allegiance from Bank of America to Juniper. This thread over at FlyerTalk seems to delve into all of the gory details. Not being a cardholder or even a member of the US Airways program, I have no direct personal experience with this transition.

Your suggestion that you cancel your Bank Of America card and apply for the new Barclays/Juniper card seems like a good one. Unfortunately, they seem to specifically be trying to prevent Bank Of America customers from doing this, at least at first. Nevertheless, it is worth giving it a try.

Ultimately, you will have to decide for yourself if the new card is worth it. In many instances, you might find that a flexible program card such as the Amex Membership Rewards or Starwood Preferred Guest card might fit your needs better. If your location near a US Airways Hub dictates that you must frequent travel with them, you still have other options. Since US Airways is a member of the Star Alliance, you can choose to accumulate miles with any of their partners. United Airlines is a partner, although one strongly recommend against. Continental is soon to be a partner. If you are unsatisfied with the new card situation, yet you still need to travel with US Airways, and want a credit card that earns miles, you might consider a Continental Airlines credit card, once they join the Star Alliance. When you fly US Airways, you can earn miles with Continental just as easily.

Why United Cards Aren’t Worth It

Graham Atkinson, the president of United Airlines’ Mileage Plus frequent-flier program recently gave an interview with the USA Today newspaper. The subject of Starnet blocking came up and his answer was very, very weak. If you don’t know, Starnet Blocking is United’s policy of preventing it’s customers from redeeming seats on it’s partners, even when those seats are offered to other members of the alliance.

The question was submitted by a reader: “How can United continue to justify filtering Star Alliance awards when other members of the alliance make them available for their members?”

The meat of his answer is:

I don’t think we are failing our customers, but there will be occasions on which someone could call the carrier and find there is availability and (then) call us and we would say that there wasn’t availability. (That) might fall into that category of (customers) feeling that we’re behaving in a way which they don’t understand or is not consistent with the offering in the program.

So there you have it. We don’t fail our customers, except when we do. In that case, it is the customer’s fault for not understanding how bad our program is.

Of course, you can’t blame them, as it was only last year that United finally confessed to the practice. That confession sparked a thread of outraged fliers over at FlyerTalk that has reached an amazing 1,200 comments. It also flies in the face of what you hear from their customer service agents when you attempt to book partner award travel. Invariably, they will tell you that the partner themselves has no availiblity.

It is your choice, but when choosing an airline or a reward card, I highly recommend you avoid the dishonest and customer unfriendly practices of United. They may be the “Friendly Skys”, but they are downright nasty when you want to redeem an award.

Face Card Review

By: Mr Credit Card

Summary – The Facecard prepaid MasterCard® is a prepaid credit card that will actually appeal to the folks looking for a prepaid card for their teenage kids and also those who want a “low cost” prepaid card. Let’s find out more about this card.

Fees – As with any prepaid credit card, always watch out for fees. Well, for the Face Card, there is no activation fee or monthly fee. There is also not transaction fee (if you use your card in the US). The fee for international transactions is $0.50.

The fee for getting cash from ATM is $1.50. If you have a negative balance, you will be accessed a fee of $9.95.

Load Fees – For the Face Card, loading your card from a bank account via ACH and transferring funds from another face card is free. There is no direct deposit for this card.

Fee Table

facecardtable

Verdict – The Facecard prepaid MasterCard® will appeal to parents who want to give a prepaid card to their teenage kids and also to those who simply want a prepaid credit card. The thing I like about this card is that there is no activation or monthly fees and no transaction fees. Hence, it is a very cost effective card.

The only issue I have with this card is that there is no direct deposit feature. Hence, for those who do not have a bank account and who wish to use a direct deposit feature, this card is not for you.

Also, bear in mind that for those with poor credit, a prepaid card does not help to rebuild your credit. If that is an objective, you should consider a secured credit card.

Face Card Application Page

This is how the application page looks like :

facecardapplication

Ready Debit Card Review

By: Mr Credit Card

04/14/2009

ready debit review

Summary – The READYdebit™ Platinum Visa Prepaid Card is issued by BankCorp and has actually three versions of their card, the “control”, “select” and “platinum” version. Each has slightly different fee structure and features and is meant to segment their customer base according to their needs. As we will will find out in this review, there are some neat features that this card offers, but is it worth the price? Let’s continue….

Classic Version – The first thing to point out is that for all versions of this card, you have to pay a $9.95 activation fee. The classic version has the lowest monthly fee among the three versions at $3.95. Furthermore, if you load at least $1,500 a month via direct deposit, the monthly fee is waived. However, the low monthly fee comes with some caveats. For example, there is a fee for both PIN and signature based transactions (which amounts to $0.95). Live customer service calls are $2 per call and you will be charged a fee for an ATM balance inquiry.

Select Version – The “select” version has a slightly higher monthly fee at $9.95 a month. However, there are no fees for transactions (both PIN and signature based). With the “select” version, you can get an additional card for $10 (which is not available to “classic” holders). This version also allows for one free call to a live customer service representative a month. Thereafter, the charge will be $2 for any additional calls.

Platinum Version – The Platinum version has the highest monthly fee at $14.95. Like the Select version, there are no transaction fees. You will also get a free additional card. Live customer service calls are free.

Loading Your Card – With all prepaid cards, you have to load the card before you can use it. For the Ready Debit Card, Direct Deposit, and Bank ACH Transfer is free. You can also load your card at places where MoneyPak, and Visa ReadyLink are available. SSI and Social Security checks are be directed deposited into this card (though there is a $10,000 a month cap).

Table Showing Costs and Fees

ready debit fees 1

ready debit fees 2

Ready Debit Peer Comparision

Compare this card with it’s peers is a little tricky because there are three versions of this card. But let us start with the classic version. The positive thing about the classic version is its low fee of $3.95 a month. Furthermore, if you direct deposit at least $1,500 a month, the monthly fee is waived. However, there are cards like the Walmart Money Card, that has not only a lower monthly fee ($3), but also does not charge any transaction fees at all. Furthermore, the Walmart Money Card will waive your $3 monthly fee if you direct deposit at least $1,000 (which is lower than the $1,500 threshold for the classic version of this card).

The “platinum” version has perhaps the highest monthly fee of all at $14.95. And I cannot find any features that justify this high fee. The key feature of this version is that you get free live customer service calls. But the Walmart Money Card also gives you free live customer service rep calls with a $3 monthly fee!

Verdict – When the READYdebit™ Platinum Visa Prepaid Card first came out, it’s fees and features were pretty competitive. However, times have changed and market place has become more competitive. With regards to fees versus features, this card (regardless of the version) does not really stack up well against the better cards in the market. For example, cards like the Walmart Money Card, GreenDot, Upside Visa all have low fees with better features.

Also bear in mind that having a prepaid card does not help you rebuild your credit. If you need to rebuild your credit, then I suggest you get a secured credit card instead.

Snapshot of the Ready Debit Application Page

ready debit application page

Company Credit Card Questions

By: Mr Credit Card

04/13/2009

We had several readers write in with questions about corporate credit cards. How does a company credit card affect your credit score? Who owes the money on a corporate card? What happens if your company credit card is stolen? Read on…

I have a serious question. We had thought a company credit card was lost and used by a stranger. The owner called and put a fraud alert out and the credit card company is going to investigate. She later found out that it was her brother making the charges – not for company purposes, but she doesn’t want any legal action taken against him. How should she go about retracting her decision and just making her brother pay her back?

Lindsey

Lindsey,

As painful as it might be, the best option is to discuss the situation with her employer. If she intends to be responsible for the debt even if her brother does not pay her back, this is the best route.

She would not have to rat her brother out – she could simply tell her boss that she got to the bottom of it, and that it was someone she knew that made the charges without her permission. Now that she does know, she intends to correct the situation.

Honestly really is the best policy here. Otherwise, if the credit card company does find out that it was her brother making the charges, he will have to defend himself in court, not to the owner of the business.

I am about to start a new job where I will get a company credit card. My understanding is it will have my name on it and I will submit for reimbursement each month.

If I submit for reimbursement too late, and I don’t pay the card on time- they do not reimburse for late fees. So who’s credit is on the cc? Mine or theirs or both?

I have perfect credit right now, but I might be foreclosing on my house in a couple of months. I don’t want to jeopardize my company credit card or lose my new job because of my foreclosure or the credit hit I will take. Help! Will a foreclosure affect my new job?

J P

J.P.,

There is a simple way to know whether or not this card is affecting your personal credit score. Check your credit report. If the card is listed on your credit report, then it affects your credit score. If it is not listed, then it does not affect your credit score.

Now, this is a new job, and a new credit card, so it may not be showing up on your credit report yet. (It can take up to a month for new accounts to start showing up on your credit reports. The credit bureau’s just don’t update that often.)

There is another way to know whether or not a corporate card is affecting your credit rating though. You can ask your boss, HR, or your accounting department the following question:

Am I a personal guarantor on this company card?

Or, in other words, did you use my social security number to obtain this card? If you are a personal guarantor, it means that you are liable for the debt if the company does not pay it. That’s an important question to know the answer to, so don’t be afraid to ask.

Now, as for your possible foreclosure hurting your job – It is a possibility that your credit report will be pulled before they issue you a card. The bank is most likely making their decision based off of the company’s credit information, and not yours. I say most likely because I do not know which credit card you will be using, or any of the other details, so the best I can do is guess.

Just take a quick trip to HR if you can, and ask them these questions. You do not have to mention your foreclosure. Just tell them you have excellent credit, and you were wondering how this company credit card is going to effect that. Will it show up as a line of credit for you, on your credit report, or not?

I do have to say that most likely yes, your credit report will be pulled. If you have a foreclosure at the time, it could impact your job. It’s also very likely that this corporate card will be listed on your credit report, and theirs. It honestly just depends on the bank that is issuing the credit cards. The only way to find out is to check your credit report, or ask someone at your company. Failing that, you could ask the credit card company once you have the card.

Thanks for your question.

Have a question for us? Leave a comment below!

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Raising Your FICO Score With Secured Credit Cards

By: Christina

04/11/2009

When you are working to raise your FICO score, is one secured credit card enough? A reader, Robert, had this question:

I just recently went bankrupt, Chapter 7. I am trying to re-build my credit. I have a Orchard Bank Credit Card. I have a line of credit of $500.00, and I have been making full payments on a timely basis. Here’s the question. To better my FICO score should I apply for a second credit card? Please advise.

Robert

Robert,

FICO suggests having at least three different revolving credit accounts if you want to maximize your score. However, you probably don’t want to get all three cards at once.

How long have you had your Orchard Bank credit card? If it’s been a few months, it is ok to go ahead and apply for another secured credit card. You will want to wait a further three to six months before trying to open another credit account. Having too many inquiries (when companies check your credit report because you applied for credit it creates an “inquiry”) will lower your credit score – especially after a bankruptcy.

Space out your credit card applications to prevent damage to your credit score. Also, there are a couple of other things you will want to keep in mind as you rebuild your credit.

Keep your balances low

You stated that you had been paying your credit card off in full each month, and on time. That is the very best thing you can do for your credit score. The second best thing you can do for your credit score is to never charge very much on your credit card. If possible, keep your credit use to 10% of your available credit, or less. That means that you should never charge more than $50 on a credit card with a $500 limit.

I know it sounds wacky, but it matters tremendously. Your credit card company reports the amount that you charge to the credit bureaus each month. Even if you pay the balance in full, they still record the amount that you charged.

How much of your credit limits you use is responsible for 30% of your credit score, so keep that number as small as possible. Make sure you do use your cards though, otherwise you won’t get the benefit of them reporting positive payment.

Your third credit account:

Your third credit account will probably be a little different. If you wait 4-6 months to apply for your third line of credit, it’s possible that you may be able to get a normal unsecured credit card instead of a secured or sub prime,”bad credit credit card” that is full of fees. Just be sure to check your credit score before you apply for an unsecured credit card. Make sure that you have well over a 600 credit score, or it won’t matter.

Have you cleaned up your credit report?

The next step in repairing your credit score is to clean up your credit reports as much as possible. Challenge any incorrect information on your credit score. Every single negative account that you can remove will raise your score.

For a complete guide to removing negative items form your credit reports, you can view this article:

How to Dispute An Item On Your Credit Report

Thanks for your question!

We had another, related question from a reader named Ayesha:

I am trying to build credit. Will I be able to get a credit card?

Ayesha

Ayesha,

Yes, you can definitely get credit, but it is unlikely that you will qualify for top of the line credit cards. If you have no previous credit history, you can try applying for these starter credit cards:

Credit Cards for People with No Credit History

If you have a past negative credit history, your best bet is to apply for a single secured credit card to start. That means that you will have to deposit money with the issuing bank in order to get credit. If you fail to make the payments on your account, they will take your deposit and use it to pay the bill. As long as you do make payments, the secured card will convert to an unsecured credit card in about a year. You will get your deposit back at that point.

If you have a past negative credit history, you should avoid unsecured credit cards that target people with bad credit – they charge far too many fees, and you will never get your money back.

You might also want to consider looking into pre-paid credit cards. It usually costs $10-$15 a month for those cards to report to the credit bureaus, but people are rarely turned down when they apply for them. (Again because your own money is financing the line of credit.)

It’s not hard to build credit. If you use these types of accounts, and you make your payments on time each month, your credit score should go up pretty quickly. Just make sure you do not charge very much money on your cards. Make sure you never even come close to your limits if you are trying to build credit.

Thanks for your question!

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Credit Card Refunds

By: Mr Credit Card

04/10/2009

Thank you in advance for your advice. I made several large purchases in 2005/2006 from a local bath and plumbing store. In Aug. 2006 I returned $800.00 worth of product and was set to purchase another $600.00.

The store manager had difficulty trying to make the exchange and credit. I suggested they credit back the $800.00 separately then I’d make my $600.00 purchase using the same card. This happened, I received the confirmation for the refund and went forward with my new purchase.

I have gone back over my statements for the months that followed and found no refund. I am unsure now that so much time has passed if there is anything I can do about it. Have I lost the $800.00? And if there is something I can do about it I no longer have that credit card account.

Is there another way of refunding the money? I have all my receipts for the purchases and and refunds, plus all the statements showing only purchases and no credits from this store. Any help on the matter will be greatly appreciated.

My best,
Christine

Thanks for your question Christine. This might be a bit of a headache for you, but should be able to get the refund issued as agreed.

First, gather up all of your paperwork. Make several copies of everything. You need to send a certified letter to your credit card company explaining the issue, with copies of your proof.

After you send your letter you will want to wait about a week and follow it up with a phone call. It should not matter that you no longer have the account open. If both you and the merchant agreed on a refund, and you have proof of that, then your credit card company has to issue you a refund.

I am very sure that you will need to speak with a manager to get the issue resolved. Especially since the account is so old. As long as the company still has your account records (or even if you still do) then you should be able to get a refund. It will just take time and persistence.

Just make sure that you warn them in writing, and get a signature when your letter is delivered.

Here’s a sample letter that you can use:

Company Name
Company Address

Your Name
Your Address
Your Credit Card Account Number
Date

Dear [Company] representative,

In August of 2006, I purchased $800 of merchandise which I subsequently returned. I was issued a credit to my account by the merchant. However, when I reviewed my statements I realized that I had never actually been credited with the return.

I have since closed my account. Please issue me a refund for the amount of the returned items.

I have enclosed all of my documentation on this issue: Copies of the initial purchase, a copy of the refund receipt, and the following 6 months of statements issued by your company. These are the six months after the credit should have been issued. Please review the documentation and take the appropriate action.

You can contact me any time by phone at: (XXX) XXX-XXX

You can also contact me by mail at:

[You Address]

Thank you for your prompt attention to this matter,
Christine

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