More Money Generated With The Credit Card

Nearly everyone knows that little piece of plastic is really a money mint for the credit card companies but do you or those companies themselves really know how much money they do actually generate?

Why we ask the question of the companies themselves is because these companies have literally grown up creating more income sources for themselves without really knowing where it is all going to end.

In this short article we are not really going to examine the profits that accrue in the basic money generating system of the card companies which of course is the interest they are charging their customers on the money they are lending them to shop using their credit card. Here we will only mention the fact that they are charging much more interest on the loaned money than almost any other form of loan one can get into.

One must actually understand when we say ‘much more’ that we are understating the facts by a long way. If a credit card company is only charging 4% more than your average bank’s interest rate it does not seem too bad. But if you understand what it really means, it isn’t that good. If a bank has a prime rate of 10% that means you can borrow money yourself at that rate and if you were to pay it back at 14% it would be a 40% return on that money. Not a bad return on any commodity or product.

However, many credit card companies are charging much more than given in that example, and many people who see the credit card companies charging 20% interest think of them only making 10% on the money should sit down and work it out to see what they are really getting on the money lent at that rate.

One of the very grey areas your average person does not know much about is the amount of money these credit card businesses charge the merchants to process the sales. The merchant being the retailer your credit card holder is purchasing from. Here, the credit card company is getting a percentage of each sale and this can vary from less than 1% to 5%. This works out to an awful lot of money, and many companies that make massive investments in people, products and market share would be happy to get a total return in this region from their entire business.

Remember, this is only one stream of income for the credit card company.

Another area that they seem to take the average person to the cleaners with is items like insurance premiums; whether on their own services, or for products the credit card holder is purchasing. Because insurance premiums are normal calculated on an annual basis, and the insurance companies know the average person can only afford to pay at a monthly rate, they offer very attractive monthly terms themselves – very often working out to be an interest free monthly rate.

The credit card company will charge the amount for the annual premium and add interest on to this debt they have just created for the cardholder. On top of this, they could be acting as an agent for the insurance company and thus get a commission on the premium the cardholder is paying too. To add insult to injury, they could even negotiate better terms with the insurance company and the credit card holder could end up paying interest on a loan he has in fact floated!

The trouble why this kind of thing goes on is because some of these companies have become so large that people are assigned to looking after only an aspect or division of the credit card company and only see what is happening in their area. Very few people understand, or have clear picture of, the entire operation of a credit card company - and so this will continue.

Credit Card: Tips On Avoiding Late Fees

Many people ruin their credit card score by not paying their credit card bills on time, or by missing payments. Late fees can be very expensive. Before you know it, the fee has piled up and the interest rate can grow and, after a while, you will not even be able to pay the minimum payment. This could be a disaster for you. But with a bit of careful management, you can avoid late payments and expensive late fees altogether. There are seven golden ways to avoid late fees on your credit card. Let’s look at them.

1. Follow the payment rules

This is one of the most important things you can do, and start doing right now. Sometimes we are sloppy about getting our payments sorted out. But remember that carelessness can cost you. If you mail payments, make sure you fill out the paperwork correctly, make sure your checks are legible, and make sure there is enough postage on the envelope. You will be kicking yourself later if you don’t. And be sure there is enough in the account your transferring from to cover the payment.

2. Make minimum payments immediately

We often procrastinate about paying, even when we have enough to cover the minimum. But a safe strategy is to pay the minimum as soon as your credit card statement arrives. You can always pay more later, and you won’t be tempted to spend what you should be paying off.

3. Change your due date

Bank statements always seemed to arrive at the worst possible time - at the end of the month when we are “skinned”. Most of the time, we are surprised that payment time has come around again and can never keep enough aside to make a payment. The solution is changing the date of your credit card bill to be issued right after payday. A lot of credit card companies will do this, if you ask them.

4. Direct Debit Payment

Setting up your accounts so that your bills are paid automatically is a great way to avoid late fees – no human error! It’s a big plus for you, so that you won’t forget about the payment and kick yourselves the day after it is due.

5. Pay by Telephone

This is a great one for last minute payments, if you know you’re not going to get it done any other way – but be careful. Some banks charge for this service, anywhere from $7 to $20. Still, if it’s lower than the late fee it’s definitely a good option to get your payment made fast.

6. Get your fee waived

If you mailed your payment on time, but you still get hit with a fee? Make sure you challenge it. Do you usually pay on time, but were late just this once? Ask your credit card company to waive the fees. They are sometimes lenient with customers that have a consistent payment record.

7. Change your credit card company

You’ll be shocked when you realise how much you could save by changing to a smaller credit card issuer; the local community bank for example, or a credit union. You’ll also be happy to note that they are more forgiving when you are late with payments.

How To Benefit From Using Credit Cards

It is simple really, as far as taking care of plastic cards is concerned, yet so many of us abuse the flexibility of the credit card. Usually, this is due to paying off debts or extraneous spendthrift activity. If this applies to anyone then it should be a firm decision to simply stop using the card, or find ways to make the card work better. That is to say, other than being a financial sinker for the wallet after a few years of constant spending.

Most of us are aware of how hard it can be to avoid using the plastic credit pals like Visa or MasterCard when its time to pay the fiddler. It is right there in wallets upon entering shops. ‘Hey, I’ll take one of those, no cash in my wallet, but I have my trusty plastic buddy.’ This is probably a very familiar thought, and not one secluded to the husband’s spouse on a weekend shopping spree. Let us face it, all people will spend more than they can afford at some point in their lives. These helpful hints on the use of credit cards will help avoid unpleasant debtors:

Hint 1: Do not let the balance build. Ensure that the outstanding amount is paid off quickly, or the card will suffer interest penalties. Not to mention the insurance, if the option for insuring the payments against unexpected unemployment, as this can really add up. This accrued interest will be noticed once the card is used often, and a hefty debt rears its ugly head.

Hint 2: Many credit cards offer rewards to the consumer that can be spent on travel, discounts, and other ‘rewards through points’ programs. Many of the leading brands will support this point system. Examples are MBNA and American Express.

Hint 3: If the credit card currently owned has a high interest rate – get rid of it. Transfer to a card offering 0% for 6 months, or even some others that give a year. Heavy credit card users will notice the benefits of this simple manoeuvre over an annual period.

Hint 4: Find a card that is useful when needed. Don’t just take a card because it has a $10,000 limit; question that - ‘Do I need that much’ and ‘what will I specifically need the card for??’ These are important questions. If discipline is a problem, the card will become a problem. Take care and use it for needful things and not as a daily spender. That is the path to debt doom…

Hint 5: Recognise and stay within personal limits. Use the amount of household income as a frame of reference to establish this. How much can be spent on the card before monthly bills exceed monthly expenditure? That magic word, or bane of family life, called Christmas soon comes. This is when most people tend to go ballistic and attack the trusty credit card. Care should be taken to ensure that limits are withheld. Spendthrifts do not understand limits, and should avoid credit cards at all costs until cured of the spending bug.

Hint 6: Avoid applying for too many cards, as payments can become difficult. Measure the monthly income against the card limits. If they almost match, or the household income monthly falls below the card limit, a good general rule is to only possess one - or at the most - two cards. This may sound generic and too simple. Work it out. If the card is maxed, and the income falls below that amount, the card will be demanding a hefty minimum payment which may mean that there is no further flexibility on the card as it is maxed, plus there is a staggering minimum amount to pay now.

Hint 7: Avoid late payments. Pay the minimum amount plus more. If you cannot manage more, just pay the minimum, but this means that card usage should cease until available income has increased. Always try to pay the debt off completely or as much of it as possible rather than just paying the minimum amount monthly.

Use credit cards wisely, and they will be a versatile friend. Do this not, and they will become apostates of hell. Be wise, and be sensible, and credit cards will always be a useful aid for every financial need.

Credit Card For High Schoolers?

College students are some of the worst offenders when it comes to racking up mountains of unpayable debt; a problem that stay with them long after college has finished – the irresponsible use of credit in college can continue causing damage until much later in life. By teaching your kids how to manage money responsibly when they’re young, you’re setting them on the road to financial health and happiness.

Many banks offer credit cards tailored especially to the needs of high school students. They are issued with a guarantor or co-signer – usually parents or guardians. So although the ultimate responsibility of the card payment lies with the co-signer, wise students will also find they are able to use the credit card to start building a good financial history while they are still young.

Be sure to check out all of the options with your child before you commit to a card. Beware: some banks will try to charge exorbitant fees, reasoning that the applicant has no credit history. But there are reasonable deals to be found if you are willing to do some homework.

Of course there are risks involved – you will have no control over your child’s spending and reckless behaviour could lead not only to a heavy burden of debt, but damage to the child’s credit rating in the long term. Make sure that the card has a very low credit limit when applying and offer your child as much guidance as possible; encourage them to keep within a budget and to make payments in a timely manner.

If you’re not sure whether your child is ready for the responsibility of their own credit card, another option is to get an extra card issued from your own credit card account and give it to them. Most credit card companies will be happy to issue cards to family members at no extra cost. Students will feel less tempted to run-up insurmountable debts, and you can keep a very close eye on their spending habits.

If your child is still too young to qualify for a credit card of their own, or if your aim is to teach them financial responsibility after they have demonstrated the opposite, the best option may be a pre-paid card. It’s not exactly a credit card, and not exactly a debit card. This will allow parents to set up accounts for teens and children. They are quick to set up and you have complete control over them – just put in the amount of money you want your child or teenager to have – when it runs out, the card stops working.

Giving your kids the responsibility of a credit card could be a nerve-wracking ordeal, but it doesn’t have to be. If you make the right choices with the card, give proper instructions and support – making sure they understand the consequences of their actions – teaching your kids about the risks, the benefits of credit can be immensely rewarding. This will give them a sense of responsibility that will last for a lifetime.

Top Tips For Increasing Your Credit Card Limit

Having a credit card gives you flexibility and purchasing power that you have grown used to. But what about when it comes to making those big purchases, or consolidating your debts? There are times when everyone wants to charge more on their card, but banks are not always quick to offer a credit card limit increase. What can you do to sway the banks decision in your favour and take that dream holiday in the sun a bit quicker? Here are some tips that should make you a shoo-in.

The banks want to know that you are a good risk; you have to prove to them you deserve it. The easiest and most obvious first step is to abide by terms and conditions set by your bank.

A less obvious, but equally important strategy, is to prove your overall credit rating. Banks immediately look to your credit score to determine whether you might be a bad credit risk. Keep up on your loan (mortgage, student, car) repayments to avoid damaging your credit rating.

Maxing out the card to the limit is bad news, so use your card sparingly. Keep your outstanding balance to less than thirty percent of the limit, even if you pay off the outstanding amount in full every month. When your credit score is calculated, it will also help to have a low balance on your card relative to your available credit. Remember the thirty percent limit.

The older your active credit history is, the better, in the eyes of the bank. Got any old cards lying around that you haven’t used for a while? Pull them out and put them to work. If you use your old card once in a while for a small purchase, and pay off the full amount before the due date, the information will be updated at the credit bureau and your rating will be positively affected. Don’t use your credit card for emergency purposes only. Use it every chance you get. This is another way to increase your credit limit.

Of course you should always make payments on time – nothing damages your credit rating the way consistently overdue payments can. But if you’ve been a good customer and can’t avoid one late payment – you can request a ‘goodwill adjustment’ to prevent the incident from damaging your record. And it’s never too late to start paying on time – if you make 12 consecutive prompt payments, your lender may re-adjust your account to erase a poor track record.

When you do make your payments, try making more than the minimum. The whole lot if possible. The bank will see that you are comfortable making repayments above your current minimum, proving you will be able to cope with the increased minimums that come with a higher limit.

Ironically, having a higher limit can itself improve your credit rating, which makes it something worth striving for. Once you get your increase – spend wisely and protect it by budgeting carefully. Soon enough, you’ll have the credit you need - and more - for a comfortable, stress free lifestyle.

Knowing Your Predatory Credit Card Companies

For a number of credit card consumers, lending options are widely available. However for individuals with bad credit, the options are few and far between. With this in mind, lenders may take advantage of individuals who have problems repaying debt. These organizations typically target people with tarnished credit, elderly, or low-income individuals. Predatory lending for credit cards companies are becoming rampant thanks to the ease of targeting certain demographics and markets.

Predatory lending is a practice that provides unreasonable rates and fees for bad credit consumers. They offer high interest rates and, often, high fees for each credit that they sell to the borrower. By doing so, the repayment amount becomes too steep - or fees become unusually high for the average cardholder.

For people with tarnished credit scores, careful consideration should be taken for “bargain loans.” Bargain loans are programs that promise that an individual’s tarnished credit isn’t a problem. The offers are often labeled as a “limited time” offer and consumers are enticed to quickly apply. In many instances, the lenders offer instant approval or even guaranteed approval for their card application.

Interestingly, it’s illegal for lenders to require payment of fees before a loan is actualized. If this happens, the borrower should immediately report this to the proper agencies. There are plenty of scam operations that charge a huge fee and then not offer the loan to the applicant.

Before applying for such a loan, the applicant should check to see the terms of the credit card before signing the dotting line. One should verify that the terms of agreement is the same as what was discussed with a sale representative.

Individuals with bad credit should try to determine if the lender is a trustworthy company. One can simply ask for references from the lender, or contact the Better Business Bureau for any complaints. Sometimes information about the lender can be found by a simple search in a search engine like Google. News or complaints by customers on popular websites such as ripoff.com can raise red flags. There are even forums for credit cards that have opinions and complaints from cardholders.

Card applicants should shop around as well. The consumer should look at the rates and fees for each credit card and assess which one is right. Sometimes customer service is an important factor. Ask for the customer service hours and service quality.

Credit cards can also come in the form of a secured card. In other words, you would need to provide collateral such as cash to get the credit card. For example, a $300 credit card limit will require you to upfront $300. However, if the credit card company requires that the collateral amount should be over the card limit, then it may be best to walk away from the program.

Predatory lenders also take advantage of the grace period. In fact, the lending company could issue the bill with a payment due date of the mail issue date. This means that by the time the recipient receives the bill, the bill will be already past due. The lender now has means to raise the rates and fees.

Consumers need to be aware of Credit Card companies that are involved in predatory practices, especially consumers with bad credit. As more of these practices become apparent, consumers now have the means to arm themselves from such lenders.

Credit Cards - Lowering Your Interest Rates

is your credit card interest too high? Do you carry large balances on your credit cards? Do you want to apply for a new credit card? Many people struggle with these issues everyday. However, there may be a light at the end of the tunnel. Interest rates can be lowered, or eliminated, and a higher percentage of each monthly payment can go to the principal amount on your credit card. This can be accomplished by adhering to the following process.

First, gather all of your credit card bills together. List them in order of the highest percentage rate to the lowest percentage rate you are paying. Once you have this list compiled, you can see how much money is wasted on interest every month. You might now be asking, “What can I do about this?” You are now going to call the customer service number from the card that was first on your list (the highest percentage rate you are paying). Ask to be connected to a customer account representative. When connected, ask the representative if your interest rate could be lowered. Tell the representative how long you have been a customer, you always pay your bills on time, and you never are late with your payments. (If you have been late or missed a payment in the past, your bargaining power is reduced somewhat, but still ask for the interest rate reduction anyway – The answer is always “No” unless you ask.) The representative will most likely put you on hold and come back in a few minutes with an answer. If that answer is “Yes,” then congratulations! You have just saved money. If the answer is “No,” thank the representative for their time and end the telephone call.

After you have called all of your credit cards and had your interest rates lowered, we now want to call them back and ask for a balance transfer. (This is assuming you have more than one credit card. You should wait at least two weeks from the time you made your first call.) A balance transfer will transfer the balance from one credit card to another. The advantage of this is that a balance transfer normally receives a lower interest rate. You may be able to get as low as 2.9%. When you speak to the account representative, ask if you qualify for a balance transfer, what the interest rate would be and the length of time the balance transfer rate will last. It is also important to ask what the balance transfer fee will be. It can be as much as $75 if you don’t ask for it to be waived. Negotiate with the representative to lower or eliminate the transfer fee. (It still might be worth transferring your balance if you have to pay the fee.) If you qualify, you can transfer the balance from your higher interest card over the phone. If you don’t want to transfer the balance over the phone, ask the representative for balance transfer checks to be sent to you in the mail. You may then use the balance transfer checks to transfer the balance to the lower interest rate card.

The last phase of lowering your credit card interest rates might be to apply for new credit cards. We all get numerous credit card applications in the mail everyday. Don’t just blindly throw these away. Many new cards offer 0% interest on balance transfers. What this means is that you will be paying zero interest. Each payment you make will go directly to pay off the principal amount on your card. You should be aware of the following before you apply for a new card. Do not apply for a card with an annual fee. The credit card company makes too much money as it is and they don’t need an extra annual fee payment from you. As mentioned earlier, try to avoid paying balance transfer fees. Sometimes this is unavoidable, but if you negotiate, you may eliminate the fee altogether.

Credit card debt can be a huge burden. You can, however lighten your debt and pay less interest (or none at all) if you follow the steps in this article. Good luck on your interest-lowering journey.