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Author Archive for Deb Silverthorn

Balance Transfer

Published
by
Deb Silverthorn
on February 26, 2008
in Credit Card News
. 0 Comments

When peace of mind hangs in the balance, moving your credit balances, through a balance transfer might be the answer – simple, safe, and swift!  Chances are your mailbox is overrun daily with offers of 0% or low interest rates, decreasing your overall debt load.

With average annual interest rate charges of 16%, finance charges can make it difficult to reduce or clear credit debt.  Most balance cards provide a grace period for their zero or low interest rates that allow you, the client, to pay down your balance.  Once that period ends however, realize that the interest rates rise and the “honeymoon” is over.  Making sure to take advantage of the benefit of whatever your clearance time is, often between six months and a year, is crucial. Otherwise, you’ve only procrastinated, pushing off the inevitable, likely resulting in greater charges than you started with.

Also important to note are bank charges, transfer fees, annual or joining fees, and other “fine print” that might be attached to the transfer.  Transfer fees may be a percentage of the actual transfer, other times there is a sliding scale, making it important to realize the charges up front.  The purpose of the transfer is to help reduce your charges, using monies that might otherwise go to interest fees to pay down the principal of a loan, be sure you aren’t just trading interest charges for other fees.

“Transferring your balance to a card you already have, which might be offering a low or zero interest rate, rather than applying for a new card is a good option,” said Michael Solano, Chief Financial Officer for Pioneer Credit Counseling in Rapid City, South Dakota.  “Credit card companies will be making inquiries to your credit and you need to realize the impact signing on for a new card might be.”

Using balance transfers to clear credit is a positive move, making sure you don’t respend on the now freed up credit card, sending yourself in a circle, is an even better move.  Put the card away, freeze it in an ice cube, cut it up and “fuggedaboutit” is the way to go.  Closing the account may affect your credit score in a negative manner so just don’t use it!  Remember that transferring the balance doesn’t make you not accountable, it allows you a “moment” of freedom during which you must take advantage and pay down your debt.

“It’s important to see the overall picture and there are many advantages of setting up balance transfers,” said Mr. Solano whose agency has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.  ”Knowing the exact rates you’ll be paying to begin with, and how those will change over time, is important.”

Having a plan of how much and how long it will take you to pay down your debt, before you make your transfer, will likely make you more successful.  Paying down the balance to bring yourself out of “a hole,” and into the light, rather than just freeing up space on a card to make further purchases, is THE reason to move forward.

Note that new purchases to a card, that provided the low or zero balance transfer, are often charged at a higher rate, and payments made go first to the lower rate charges, those transferred.  This is important because while you may be paying down one end of the debt, your new charges and higher interest rates may override your payments, getting you nowhere in the hope of reducing your debt.  Keeping the card “clean” of new purchases, and just paying down the debt, is a reasonable and practical way to manage the account.

Managing and reducing is the key, not making transferring balances a habit as lenders, both within the credit card industry and those outside, want to see payments, not just movement, when considering loaning monies.  In addition, managing payments, in a timely manner, is critical because on many cards, missing a payment, even for just a day, may result in voiding of the low rate of interest and APR’s, bringing you back to square one.

Making your way down the road to reducing debt can be a hop, skip, and a jump.  It’s up to you to exercise your way into financial good shape!

Your First Card

Published
by
Deb Silverthorn
on February 16, 2008
in Credit Card News
. 0 Comments

You always remember your first! Your first bike, baseball game, date, and view of a sunset. Your first credit card is a gateway and, with millions and millions of credit cards issued each year, the fact is that your first card, is likely the easiest you’ll ever attain.

“College kids have cards handed to them on a platter,” said Bettye J. Banks, of Consumer Credit Counseling Services in Dallas, Texas. CCCS is an affiliate of National Foundation for Credit Counseling in Silver Springs, Maryland. “It’s a free ride at that point.”

Books, tuition, payback of loans and “the college experience” can all be charged and, at the same time, be the source of credit building history for a lifetime. The ease, or lack thereof, of getting the loan for the house and car you buy down the road begins here.

“We live in a credit driven world,” said Ms. Banks. “To rent a car, a hotel room, or buy a plane ticket, you need plastic. You just need to understand that plastic can be explosive if you don’t use it wisely and well.” FICO scores, which change with almost every transaction, purchase or payment, are used by most lenders to determine risk and are assessed by the three credit bureaus Equifax, Experian, TransUnion. Each of the credit bureaus will provide, free of charge upon request, one credit report per year. The FICO score affects how much a lender is likely to loan and at what rate of interest.

Low interest rates, the cost of annual fees, and due date grace periods are all keys to look for when determining “your” card. “Rewards cards are a low priority for students because they aren’t spending enough to matter. Finding the cards with no annual fee, the lowest interest possible, and terms to meet their circumstances, is what students should be looking for. Credit unions often offer cards with terms that are typically better and they’ll often listen to the extenuating circumstances of a customer,” said Joe Ridout, spokesperson for Consumer Action, a San Francisco based non-profit organization offering education and advocacy since 1971.

“Students need to realize that credit follows you everywhere and that when you graduate from school, a good credit score is important,” said Mr. Ridout. “From the apartment owner who will check your credit to see you can pay your rent, to many employers and insurance companies, the list is long of those who will be looking at your history, as short as it may be.”

Credit cards that provide reward incentives, airline miles, hotel points, and others, are an opportunity for users to “earn free” gifts but it’s important to be sure that balances are paid off so that the “free” doesn’t end up costing you in the interest fees that are accrued. “Rewards cards are a low priority for students,” said Mr. Ridout. “But there are cards available to university and college students that will give rewards, or points, for good grades and for paying bills on time which can be used to pay down student loans. ‘Shopping’ for the right card, and listening to the terms of each situation, is very important.”

“I’m 18 and an adult.” Those calls are heard for, it seems, a lifetime and now, here you are. Realize that with that independence comes responsibility and credit built from the age of 18 belongs to you, and not your parents. Monies owed, and the credit scores created, belong to you and it’s your future. “It’s mastering the fundamentals and building a strong credit history that is important. It’s easy to make mistakes, and those mistakes, once reported, can stay on your history for up to seven years,” said Mr. Ridout. “Use your credit as a spending card, and spend the way you would pay for goods with cash, then pay it off at the end of each month.”

You’re a student. Educate yourself on the right cards for you.