Patience = A high credit score

Impatient people have lower credit scores.
If you think about it, this is pretty self-evident, and if it wasn't obvious to you, it's probably news you could have used before last season's holiday-shopping onslaught, and not after you're in full-throttle bill paying mode. Nevertheless, a study in the January issue of Psychological Science shows that a trait may be shared by a lot of people with lower credit scores.
They're impatient.

Columbia Business School professors Stephan Meier and Regina Pitaro and Stanford University's Charles Sprenger came up with this conclusion, thanks to an experiment conducted at the Federal Reserve's

The study

The researchers were trying to find the reason some people default on their mortgages, but their conclusions, as you'll see, can easily be extrapolated to consider how people pay their credit cards, auto loans and any other bill. They found that people with low credit scores were more likely to select immediate rewards rather than waiting for a larger reward in the future.

How did they determine that? Meier and Sprenger went to a community center that offered tax preparation help and sought out 437 customers with low to moderate income. They were able to get all of them to agree to have their FICO credit scores accessed, and the customers were offered cash rewards ranging from accepting $22 in cash right away or waiting a month and then getting $50.

Many of the people took $22, and those who took that amount had the lowest credit scores in the bunch, under 620. The people who were willing to wait for their money generally had a credit score about 30 points higher.

What this means for the rest of us

Of course, what the study may have failed to consider is that when you're short of cash, it may not be impatience that is driving some people to choose short-term rewards, like not paying a bill and keeping the money, over longer-term rewards, like paying the bill and avoiding the late fees and stress that come with being late with a payment.
It may be sheer desperation driving the poor financial decisions, and desperate, cash-poor people might conclude that if they accept quick cash now, they may pay a bill off faster and avoid a late fee. Someone who accepts $22 now versus $50 later may need the money immediately to buy groceries and feed a child. A whole host of psychological and financial reasons go into why and how people spend money (especially those who don't have much), far beyond who is patient and impatient.
One of the researchers, Meier, stated as much in a press release Columbia Business School sent out. But he feels there is still something to the impatience factor, explaining, "There is a little bit of strategic defaulting going on, where some people make a cost-benefit analysis and choose to have more money now and deal with the repercussions later."


True enough, and it certainly makes sense that some people make foolish decisions, particularly with what they spend on a credit card, because they simply want something now, rather than waiting until later when they have the money to pay for it.
So if you went overboard in your holiday shopping and had to max out credit cards or take out loans to do it, you have been warned. You may have spent too much during the holidays not because you're lousy at math or because you have an overly generous spirit. You may have a low credit score because you're one of those people who reads the ending of a book before you start it.

Article found at http://money.msn.com/credit-rating/impatient-your-credit-may-suffer-cardratings.aspx

Credit Card Debt: A Problem in the United States

Credit card debt is a major problem in the United States

The average household with at least one credit card carries an average of $9,498, nearly twice the level of a decade ago.

Signs You're in Trouble

-You routinely need to pay for your basic expenses -- food, utilities and transportation -- on plastic or use a cash advance because you don't have enough cash at the end of the month.

-You are only able to pay the minimum balance on your cards.

-You are paying a higher-than-average interest rate on your cards -- about 14 percent -- and are unable to find a lower rate card because of your credit score.

-You've been caught in a universal default situation and you are now unable to handle your credit card balances because of rate increases across the board.

-You are unable to contribute to a savings program, like a savings account or IRA

-Perhaps most importantly, you are lying to someone you love about how much you charge or how much you owe.

Getting Out of Debt

Cut the Cards
If you are in a hole, you have to stop digging. Don't take out another credit card to pay off the ones you have. This can be tempting because 5.3 billion credit card solicitations are sent out every year. You may need to make some lifestyle changes, whether this means not eating out or realizing you can't afford the car you drive or the house you live in. In extreme cases you may need to change both.

Pay off High Interest Cards First
Pay off the cards with the highest interest rates first. Don't close out the cards, pay them off. It's the fastest thing you can do to improve your credit rating. As soon as you start lowering the debt figure, your rating goes up. It happens as quickly as 60 days to 90 days. Then you can call credit card companies to ask for a lower rate.

Ask for Help
Your friends and family need to know that you are paying off this debt so that they can be supportive and understand that you are cutting back on expenses. Also, some people may need to get professional help by going to a credit counselor who can help work with credit card companies to make a payment plan. You can check with your state attorney general's office to find a credit counselor.

Article found at http://abcnews.go.com/GMA/story?id=1921876&page=1

Credit Card Basics

Credit card companies are in the business of making money. Obviously, they do not offer loans and lines of credit to consumers out of the goodness of their heart. They expect you to use their cards and to keep balances on them over a period of time, thereby providing them cash in the form of finance charges. Luckily, it is possible to outsmart the credit card companies at their own game by taking advantage of the best credit card offers, such as cash back rewards and balance transfer options.

Credit card companies are in the business of luring customers in to applying for their cards. Common hooks include low interest offers and promises of instant approval. While there is nothing inherently wrong with these easy and cheap credit cards, consumers need to weigh their options carefully. For example, those cardholders that spend regularly on their credit card but are unable to pay the debt off each month should choose a credit card with a low interest rate. It is best to look through the many options available to find the one with the lowest APR for purchases. At the same time, the cautious consumer sets a goal for when the balance will ultimately be paid in full in order to avoid becoming overrun by debt.

Credit card companies are counting on consumers to use only their card to make all of their purchases. Consumers that dedicate all of their purchases to just one card can be making a mistake - while making the credit card company very happy. For example, when a consumer uses a balance transfer card to make purchases, they are playing right into the credit card company's hand. When the consumer pays back these loans, the payments are purposely directed by the credit card company toward the interest-free or low interest loans. In this way, the high-interest loan remains on the card longer - building additional finance charges the entire time. Therefore, a consumer utilizing a balance transfer card should use it for just that - balance transfers, and nothing else.

The same concept is true with low-interest cards. A card with a special low interest rate on purchases should be used when making purchases. Similarly, a card with a 0% APR can actually be used to make money for the consumer. Consider this: what if a consumer withdrew all of the money from his or her credit card with a 0.00% APR introductory offer and placed the money in the bank? While in the bank, that money collects interest. When it comes time to pay off the balance (which is when the introductory period ends), the necessary money can be sent to pay off the credit card and the rest of the money can be kept as profit.

Choosing the right card for the right purpose will ensure more money is saved. And, if executed properly, can even make money for the credit cardholder.

Credit cards are vying for consumers to use their card. After all, the more people out their spending money on their cards, the more finance charges they collect. In order to persuade new customers to switch to their card, many offer special introductory balance transfer offers. There hope is that consumers will transfer their balances and get rid of the old card altogether.

Smart consumers can take advantage of this battle. Those carrying balances on other credit cards can transfer their balances to those with special introductory APRs on balance transfers. Ideally, the balance transfer card should not charge fees for balance transfers. In addition, the longer the balance transfer lasts, the better the card. By transferring balances from cards with higher interest rates to those with 0.00% interest rates, the consumer is essentially making the new credit card company pay off the debt owned to the other card. Once again, this balance transfer card should never be used for purchases, unless the introductory rate also applies to purchases.

For those that do pay their entire balance in full at the end of each billing cycle, it is important to look at the other features offered by the credit cards. Many offer special rewards programs, which include access to gift certificates to restaurants, theaters, and retailers. Yet others offer free or reduced travel, with many working in conjunction with airline miles rewards. Still others provide cold, hard cash rewards to cardholders. Rewards credit cards tend to have higher interest rates than those without a special program. Therefore, the smart consumer will only use these cards if he or she can pay the balance in full each month. In this case, the consumer can make money off his or her credit card.

It is best for consumers to stick with only major credit cards rather than store cards. Store cards offer attractive instant approval programs, making it tempting for consumers to apply for a card and spend, spend, spend at the store - all on the same day. This type of impulse spending is exactly what the stores are hoping for. To make it even worse, store credit cards have higher interest rates than major credit cards. The only time these cards should be used is when they offer special discounts at the store when applying for the card and the consumer had already planned to make a large purchase there. The balance needs to then be paid off immediately in order to avoid high finance charges. Once again, this forces the credit card to work for the consumer rather than the consumer working to pay off large debts.

Article found at http://www.creditcardassist.com/cardbasics.html

Credit Cards: How many is too many???

You may sift through your stack of credit cards and wonder if you have too many. Or, if you're considering opening new credit accounts, you want to be sure it won't affect your credit before doing so. The best number of credit cards is one of those questions that doesn't have a one-size-fits-all type of answer.

 

Do You Have Difficulty Managing Credit Cards?

 The more credit cards you have and actively use, the harder it will be to manage your payments. You need to have the ability to track your credit cards, including payment due dates, interest rates, fees, and charges you've made. This is easier with just a few credit cards – like one to three – but becomes increasingly difficult as the number of credit cards exceeds five. Still, it depends on your own ability to manage your credit cards.
You can use an online tool like TrackCards to help manage your credit card payments.

Do You Have Too Many Cards?

If you're just starting out with credit or rebuilding your credit, one credit card is enough. You need successful experience managing a credit card before taking on additional credit responsibilities. As you get that successful experience and consider opening additional credit cards, think about your ability to pay and track your credit cards.  Before you close any credit cards, first make sure the cards you close won't hurt your credit score.

Is Your Credit Utilization High?

Your credit utilization (30% of your credit score) is your total debt divided by your total credit. So, for example, if your credit card limits total $5000 and your credit card balances total $2000, then your credit utilization is 40%. Ideally, your credit utilization should be less than 30%.  The more credit cards you have, the more temptation you have to charge purchases. As your credit card balances increase, your credit utilization goes up. So, one way to keep your credit utilization down is to keep your number of credit cards and balances down.

Just keep in mind that there is not a set number... only you can decide how many cards you can balance!

Information found at http://credit.about.com/od/usingcreditcards/a/numcreditcards.htm

Credit Card Tips

Credit cards make spending far more convenient for the consumer than writing checks or paying with cash. Nearly every business accepts credit cards, even fast food restaurants. So, more and more, people are utilizing their credit cards and leaving their cash and checks at home. But, there are some risks involved with using credit cards - namely the ability to easily creep further and further into debt without realizing it. Luckily, there are many steps a credit card holder can follow in order to prevent falling so far into debt that there is no way out.


Don't Ignore the Credit Limit
Nearly every credit card, whether they are airline credit cards, instant approval credit cards, reward credit cards, or credit cards for college students, has a credit limit. As a responsible cardholder, it is important to be aware of this credit limit and to never overspend. Going over the credit limit can result in hefty fees and also removes the freedom and flexibility a credit card allows because there is no room left for additional purchases. This can be particularly upsetting if an emergency situation should arise.

Some credit cards do not have a predetermined credit limit. For these cards, and even for cards that do have a set limit, it is a good idea to establish a personal credit limit. This credit limit should be well below the credit limit established by the credit card company. Remember, most credit card companies calculate the minimum monthly payment based on a percentage of the balance. Often, this is 2%. If the balance becomes too high, it may be difficult to pay the minimum balance.

Of course, paying just the minimum balance each month is not enough to get out of credit card debt. Therefore, the cardholder should take care to only charge what he or she is able to pay back within a reasonable time. In addition, the credit limit set by the credit cardholder should be substantially below the credit limit established by the credit card company. That way, there will always be room left on the card in case of an emergency.


Avoid Unnecessary Spending
Even cheap credit cards with low APRs and little or no fees can create an insurmountable credit card debt if not watched closely. It is easy for cardholders to get swept away by the shopping bug, particularly when it is so easy to do with a credit card. One way to avoid impulse shopping is to simply leave the credit card at home. Many people carry several credit cards with them at all times - this is only asking for trouble. Keeping the cards at home makes it easier to resist temptation. Of course, credit cards are good in emergency situations and, as such, many cardholders want to keep a card with them for this purpose. If this is the case, the cardholder should only carry a card with a low credit limit so large purchases cannot be made.

Cardholders also need to be weary of high-pressure sales. Radio and television ads are designed to make products seem irresistible. Cardholders should give it some time before deciding to make a purchase and allow themselves to think it through. In fact, shopping in general should be avoided for those that are shopaholics. The word "Sale" gets many cardholders' pulses racing. Consumers need to be sure to avoid making purchases just because they can save some money with a coupon or a discount. If this means avoiding the stores, then that is what needs to be done.

Another option is to use a secured credit card. Many credit cards for college students are secured. This means the money is sent to the credit card before it is used. Once the available money is used up, the card cannot be used anymore until more funds are added. These cards can make it much easier to keep track of expenses and prevent overspending. Credit cards with a low APR are also a good choice. These cheap credit cards help prevent creating large finance charges, which only serve to make the debt more difficult to overcome. Carrying only cash is another great way to keep credit card spending to a minimum.

Along with determining a personal credit limit, it is also a good idea to create a budget and to make a list of things that need to be purchased. Creating an itemized list with projected costs can help the cardholder determine what items really do not need to be purchased. The list should also be adhered to in order to prevent impulse buying. It is also a good idea to save receipts and to review them weekly and monthly. This gives the cardholder a good idea of how much he or she is truly spending on the credit card.


Choose the Right Card
There are many cards to choose from, but it is best to learn as much as possible about each card. For business owners, it is important to compare business credit cards. For those looking for a reward credit card, it is a good idea to sort through them to find the best cash back credit cards or best reward credit cards. On the other hand, those with balances on cards with high APRs should seek out the best balance transfer cards. The credit card should work for the cardholder, not against him. Therefore, the cardholder should actively seek the card that has the most to offer and that best fits his lifestyle.

Article found at www.creditcardassist.com/tips.html

Prevent and Repair Credit Card Debt

A credit card is a very delicate instrument because it requires a level of responsibility and financial maturity that not all consumers have. After all, using a credit card means paying off the debt within the next month, throughout the year, or simply in a series of periodic payments. Of course, finance charges are building up in the meantime and, if you fail to make a scheduled payment, your credit report will suffer. The following article describes ways for consumers to avoid building up credit card debt, and if necessary, methods to repair the damage already incurred from excessive credit card debt.

Keeping Grounded in Reality

Whether the cardholder intends to pay the credit card balance off within a short period of time or to stretch it out for awhile, he or she must be continually aware that this money is borrowed money. Often, credit card holders look at their credit as additional cash in their pocket. This is when the troubles start. While using this credit as if it is earned income, it is building up finance charges and increasing the cardholder's debt burden.

This is why it is very easy to lose control of a credit card. It requires discipline and knowledge of the basics of personal finance in order to prevent the creation of an overwhelming debt. This is why young adults are typically the ones that get into the greatest amount of trouble when it comes to credit card debt.

Estimate Your Earnings

So, if a cardholder finds himself in the difficult situation of owing money that he won't be able to pay back any time soon, he needs to establish some parameters in his life. To do this, he must first make an estimate of his annual earnings.

Once this has been determined, he must then calculate all of the different costs of maintaining his lifestyle. This includes ALL expenditures -- rent, insurance, gasoline, car maintenance, food, clothes, medicines, entertainment, school, and life's little luxuries.

If, after making this estimate, the cardholder finds that he spends more money than he earns, then there is a huge problem. The reality is that he has been living an illusion provided by the credit card. If the cardholder makes more than he spends - great! This means he will not have to make big adjustments in his life in order to pay the card.

Create a Plan

Whether you are living above your means or not, you still need to create a plan. So the primary question to ask is how am I going to pay for the card?

The easiest way to develop a plan for paying off the card is to determine a fixed amount of money that you can pay off each month. The amount you select should allow you to still pay your other bills. After all, it doesn't make sense to stop paying an insurance policy, for instance, in order to pay off a credit card debt. Similarly, you should still allow yourself some money each month to buy the "extras" that you enjoy if there is enough money leftover to do so.

Unfortunately, all of this planning may not be enough for the bank if you have already fallen behind on your payments. In this case, the credit card company may cancel the credit card and consequently report you to the credit bureaus. That's a pretty serious situation because it damages your credit and takes away the convenience the credit card provides. After all, without a credit card, you cannot make purchases online with many retailers and you won't even be able to make reservations for a car rental or for items such as airline tickets. Therefore, it is absolutely critical to develop a plan before you start to fall behind in your payments.

Take Advantage of Prepaid Debit Cards

If you have really hurt your credit or you know you simply cannot be trusted to monitor your spending, you might want to consider applying for a prepaid debit card. With prepaid debit cards, you can still enjoy the convenience of card ownership but your spending will simply be restricted to the amount of money you prepaid on the card ahead of time, or a portion of that amount. This can help ensure that you spend only what you can pay for. Equally as important, there are several prepaid debit cards that will actually report the activity of their customers to the 4 major credit bureaus, helping to improve or reestablish your credit if you have previously damaged it from failure to pay your debts.

Once you have proven yourself to be reliable with your prepaid card, which may take a couple years, the bank may offer an upgrade to an unsecured credit card. In this case, you will not longer need to make payments ahead of time and an actual line of credit will be extended to you.

Article found on http://www.creditcardassist.com/

Five Simple Ways to Prevent Credit Card Debt

Article by Jeremy M. Simon


1. Establish a budget and then follow that budget exactly.  In other words, don't be tempted to charge that plasma TV to your credit card on a whim when you haven't budgeted for it this month.


2. Carry a credit card balance for no longer than six months. Beyond that point, the compounding of simple interest can produce a very expensive balance to pay off.  If it helps, think of your credit card balance as a snowball that grows larger as it rolls downhill.


3. Know what you're doing with reward credit cards. Holders of these can end up spending more than the reward itself is worth if they don't pay attention to the fees and interest associated with their credit card.


4. Get a low interest credit card if your credit card's interest rate is excessive. The better your credit, the lower the rate for whichy you will qualify.


5. Be aware that balance transfer credit cards' teaser rates won't last forever. Six months is common now. The "normal" rate will return sooner than you think, so use that interest-free period to aggressively pay down balances.


Article found on http://www.creditcards.com/