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“I cut up my credit cards” experiment
What would it take to make you do something as extreme as cutting up every piece of plastic in your wallet? When one of my friends announced on Facebook that she was doing that very thing, I had to know why. So she agreed to tell me and let me share her story.
First some background… Maria admits she’s always been a bit of an impulse shopper. “If I want something, I buy it, and then figure out how to pay for it later,” she says. While that’s not exactly the approach that personal finance experts would recommend, she’s always managed to keep debt manageable. “I’ve never had too much credit card debt. When it started to get a little high, I’d cut back and pay it off before getting it back up again.”
The last straw
I had assumed it was a giant bout with debt that got Maria fed up with credit cards, but when I found out that wasn’t the case, I became even more intrigued. Here’s what did it: At the end of May, Maria noticed two charges on her statement that she knew she didn’t make. “I called up and got those resolved, but it left me with such a sour taste in my mouth,” she says. Anyone who has been through this knows the feeling — having your personal financial information violated is creepy and scary.
Maria took the fraud attempt as a sign that she was ready to break up with plastic for a while. But for her, she knew it wasn’t enough to simply leave her cards in a drawer at home. She wanted to make a clean cut — literally.
“I have a friend who uses only cash — no debit or credit cards — and I was curious if I would be able to do the same. So I decided to cut up the cards and see if I could do without them, too,” she explains.
The big day
Thinking it and doing it are two very different things, says Maria. When the day came when she was ready to take a scissor to several of her major credit cards and store cards, she was nervous and had some second thoughts. “I thought, what if something happens and I need a credit card?”
That’s a valid concern since not having any accessible credit can pose challenges down the line. So while Maria got ready to snip, she didn’t actually call to close out the accounts. In fact, after doing the deed, she actually called one of her credit issuers to ask for a replacement card to keep at home in case of an emergency.
The most surprising thing for Maria was that after posting the photo of her cards in pieces on Facebook, most people told her she had made a mistake. “Of course, this was on Facebook, where everyone has an opinion and no one is scared to share it,” she says.
The game plan
After the big card cut-up, Maria’s plan was to use either cash or debit to pay for everything. She knew she’d be missing the added layer of security credit cards offer, but that was something she could live with. “I know there is the risk of someone hacking my debit card, but I am very careful about where I use it, so that isn’t a concern to me,” she says.
It also forced her to think before she swipes. “I’ll admit, it’s hard not buying something just because I want to. I remember walking into TJ Maxx and seeing a beautiful Dooney & Bourke bag on sale, but I couldn’t buy it because I didn’t have a credit card and didn’t really have the money right then and there,” she says. In the end, though, she was happy she didn’t buy it. “It does make me think more about the purchases I’m making, that’s for sure.”
Two weeks into her experiment, Maria had to call a chimney repairperson to her house to fix the chimney liner. “I had just run out of checks and was still waiting for delivery of the new ones, so I had to go to the bank to make out a certified check to pay the balance,” she explains. She didn’t want to pay almost $3,000 in cash. Had she had a credit card, she wouldn’t have had to make the trip to the bank or pay the certified check fee.
Other than that, Maria says she does miss having access to cardholder-only sales, such as when certain store cards allowed her to save an extra 10 percent. “That 10 percent adds up over time,” she says.
So far, other than spending less on impulse items (which is probably a good thing!), Maria has adjusted well.
As for whether or not she plans to ever use credit again, Maria says she probably will, but definitely not in the same way. “This has forced me to be more thoughtful about my purchases. But ultimately, I do feel more secure paying with credit cards than debit cards. So while I don’t regret trying this, I don’t think I’ll keep it up.”
6 times when it’s smart to call your card company
No one likes calling their credit card companies, but sometimes, it can pay off.
Here are six times when calling your issuer is worth the effort:
1. When you forget a payment
It happens to the best of us — even people whose job it is write about credit cards. In fact, I was guilty of this just last month. I recently opened up a line of credit with Home Depot to buy a new dryer and figured I might as well take advantage of the six-month interest-free period rather than take a big chunk from my savings. As I waited for that first bill to come, I kind of forgot about it until I found it stuck to another piece of mail I had put aside. The due date had passed.
What to do: I called and explained about my embarrassing mistake, promised it wouldn’t happen again and said I planned to make a payment above the minimum. The customer service person let me know that they have a one-time forgiveness for a new account and that the late fee would be waived. Because it was only three days late, it wasn’t reported to the credit bureaus. Whew — crisis averted! Once the call was done, I set up my auto payments so that the balance will be paid off before the introductory period of zero interest is over.
Your mea culpa will also make it less likely that the issuer will impose an extra penalty, like hiking up your interest rate.
2. Before you go on a trip or huge spending spree
A friend of mine recalled the time she went to Ireland and had her card declined when she tried to rent a car. It was because the bank flagged the activity as a possibly fraudulent charge since she was out of the country. She was able to resolve the problem on the spot, but it cost her a hefty fee for the international call she had to make from her cellphone.
What to do: Before you’re about to use your card in a way that’s not typical for you, take a minute to alert your card issuer so that it can make a note on your account. Let the issuer know in advance your travel dates or if you’re planning to make a very large charge on the account .
3. If you’re confused
Whether you’re having trouble redeeming points or don’t know what kind of rental car coverage you have, just call.
What to do: Make a list of questions and get them all answered. You might just find out that you have thousands of unredeemed points or that you can stop paying for extended warranties because your card covers you.
4. To cash in on your good behavior
If you’ve been a loyal customer, and your credit score is in better shape than it was when you opened the card, don’t wait around for a gold star. Ask if you qualify for a lower interest rate or can get your annual fee waived. A recent CreditCards.com survey found that 65 percent of people who asked for a rate reduction got it.
What to do: Explain that you’d love to continue using the credit product, but are hoping the issuer will consider lowering your interest rate because of your strong history of on-time payments and stellar credit. Trent Hamm of The Simple Dollar offers a simple step-by-step on how to get creditors to say yes.
5. If you’re facing a crisis
It could be worthwhile to reach out to your creditors if you’re going through financial difficulty. Right after Super Storm Sandy, my mother’s card company sent an email blast to customers in her geographic area since it was hit hard, saying to contact them if they needed assistance. My mom, who had significant damage to her home, called and the card issuer ended up offering her several months of zero interest on any purchases made on appliances or other items she needed to replace. This saved her a nice amount of money since she was able to get what she needed, and then pay off the balance once her insurance claim came through.
What to do: If you come on rough times, be forthright with your creditor. It may be able to offer a small gesture such as giving you a one-time due date flexibility or waiving a late fee if, for instance, you were in the hospital and missed a payment. Every little bit helps.
6. If you suspect something fishy is going on
The minute you see a charge you don’t recognize, don’t hesitate to call. First, though, track back through your spending to see if there was a purchase you forgot about (maybe something auto-renewed, for instance). Particularly take note of small charges — scammers hope you won’t notice.
What to do: Someone in the fraud department can help you determine if further action needs to be taken.
Picking up the phone is often the biggest hurdle. But in my experience, if you’re pleasant to the person on the other line, they’ll be more than happy to help you resolve your issue. As for the cheesy hold music, you’ll just have to deal with it.
Why my brother chose a card with an annual fee
Now that he’s learned to use credit responsibly and has built up a good credit history, my 28-year-old brother recently decided to up his credit card rewards game and apply for a card with an annual fee to get a larger signing bonus and other perks. Since I’d recently done the same thing, he asked my advice on choosing the right card.
Here’s a look at the areas we discussed.
Study: More cardholders carrying balances
If you have a good job and steady paycheck, but can’t seem to get ahead financially, you’re not alone. One survey shows many U.S. employees still struggle with debt, cash flow and saving.
For example, the 2015 Employee Financial Wellness Survey by audit, tax and consulting firm PricewaterhouseCoopers found that 47 percent of full-time employees carry balances on their cards. That’s up from 45 percent last year, according to PwC’s report on the survey.
And even more Gen X and Gen Y employees — 52 percent — consistently carry credit card balances, up from 51 percent for both groups last year.
How Does Suze Orman’s ‘Approved’ Card Stack Up Against the Competition?
Financial guru Suze Orman is the latest celebrity to brand her own prepaid debit card, following the likes of reality TV’s Kardashian sisters, hip-hop artist Russell Simmons and rapper Lil Wayne.
Orman’s is called the Approved Card, and it’s promoted as “better than cash” and “safer than cash.” But reviews are mixed.
Prepaid cards are billed as a way to control spending or avoid steep bank fees. The idea is that you can’t go into debt because you can only spend the money that’s loaded on the card. The competition is fierce in this space because about one in four American households is “unbanked” or “underbanked,” according to the Federal Deposit Insurance Corporation (FDIC), and prepaid cards offer a way to avoid carrying cash.
But you can still rack up fees with prepaid cards. Orman’s card is no exception, though she says the card costs just $3 a month “if you use it how I tell you to.” For instance, you get one free monthly call to the customer service department, and then it’s $2 per call. If you want a paper statement, it’s $2. You also may get hit with fees at the ATM. The Approved Card partners with the Allpoint ATM network, which has 35,000 machines nationwide in stores such as CVS and Walgreens. Allpoint still charges $2 per withdrawal, unless customers set up direct deposit or a recurring bank transfer of $20 or more. If you go out of network, you’re charged Allpoint’s $2 fee, plus the ATM operator’s fee.
However, the Approved Card does look better than some of its celebrity predecessors. For instance, Simmons’ Rush Card has a $10 monthly fee, among a slew of other fees. It also gleams next to the disastrous Kardashian Kard. The sisters bailed on the card one month after it debuted in 2010 after its high fees were slammed by consumer groups. The card cost $59.95 just to buy and use for six months, or $99.95 for 12 months. That didn’t include the fees for any money loaded onto the card.
By contrast, the American Express prepaid card doesn’t have a monthly fee. Other prepaid cards, including Green Dot, give users ways to avoid the monthly fee, either by setting up direct deposit or making a certain number of transactions monthly.
Orman is working with the credit reporting agency TransUnion so that, eventually, customers’ records with using the Approved Card would be added to their credit reports. Currently, prepaid card use is not monitored by the credit bureaus, meaning that such cards can’t be used to improve credit history. Orman has said this is part of a two-year experiment to help the unbanked get credit. Yet it’s unclear how that experiment will turn out, how the data would be used and whether it would end up helping or hurting these consumers.
Orman’s card offers users unlimited access to TransUnion credit reports and scores for one year. That score, however, is a VantageScore, and not the more widely used FICO score. Keep in mind that, no matter which card you have, you can get one free report from each of the three national credit bureaus once a year at AnnualCreditReport.com.
Never too Early when it Concerns Credit Cards
With the new law in place putting requirements on the ability to get a credit card for those under the age of 21, today many American parents are finding themselves in a much more proactive roll when it concerns their children and using plastic. As plastic (debit, gift, prepaid and credit cards) continues to grown in popularity and is used by younger generations, making sure those using the products are educated has grown into a priority.
According to an article entitled "Credit Cards and Kids: 8 Tips to Teach Your Kids Credit Card Skills" there are many things that you can do to get your child on the right foot when it concerns credit cards. In many cases the earlier it is taught the better as your child will hopefully grow up making the smart financial decisions that were adopted years before. Some tips that can help include the following among others:
- Educate children early
- Teach the value of money
- Set savings goals
- Graduate to a credit card before college
- Outline the big picture
Over the last couple of years many changes have occurred and youths are using plastic more than any other time in history. Without teaching your children of all the aspects of financial products such as credit cards it is very easy for them to fall into debt that would take years to recover from. For the most part this education will not be taught in schools and it something that must be done at home in order to allow your children to reach their financial goals they set later in life.
Renting a Car? A Credit Card Could Have You Covered
As millions of people plan to hit the road this summer, many have chosen to rent a vehicle as part of their travel arrangements. While renting a vehicle is easily done on many accounts, one thing that sometimes confuses renters is wondering what all is covered in case of an accident or incident. While in many cases if the renter has automobile insurance of their own it somewhat mirrors that, in other cases it does not. Regardless of the case those that use credit cards to rent their vehicle could be covered on more than is expected.
In an article entitled "How Useful Is Credit Card Insurance for Rental Cars?", we are given details on a couple of benefits that many cardholders are not aware of when renting a vehicle. On many occasions these benefits are the same that one would get by opting into the insurance plan offered when renting a vehicle that could easily double the price of renting a vehicle. In all, things that could be covered include the following and more:
- Administration fees (collision and/or theft)
- Towing fees
- Car rentals in foreign countries
- Any obscure fees (ie: loss-of-use fees)
For these protections and others without adding extra money onto your total, all one must do it charge the entire rental fee to your credit card. When looking at what all is exactly covered it is best view your credit card’s terms or call your issuer. While one card may cover one thing, a different card could cover something entirely different so it is best to know what the extent of your coverage is before assuming.
When it comes to benefits, features and tools there are many things that millions of cardholders are missing out on. While car insurance is the main focus of this post, there are many others such as tax education and retirement planning that go unutilized by a countless number of cardholders. While they may not seem important to you now, all of the services that you can use are there for your benefit. In all, these services can save you both time and money in the short term as well as the long and could even help alleviate some stress by having the answers that you may be looking for.
Credit Card Mistakes Cost More than Others…Literally
Letís admit it. Every now and then we all do something that we all realize (hopefully sooner than later) was a big mistake and end up paying for later down the road. While some may be small, there are others like those that involve credit cards, which end up making us pay much more over a long period of time than we ever thought we would. Fortunately there are things that can be done to help us keep from making these mistakes and become financially independent.
To keep from paying more than we should for our credit card†purchases there are plenty of things that cardholders should make sure they refrain from doing. While some may be harder to control than others a few of the top mistakes to avoid include the following:
- Taking out frequent cash advances
- Keeping high balances with extreme high interest rates
- Only paying the minimum
- Transferring balances without have a payment plan in place
- Making late payments
Over the last year, for almost everyone’s credit cards have become a lot more expensive to hold in your pocketbook and that even includes not even using them. To keep cost down as much as possible cardholders must now be more observant on their actions with their plastic. Not only that they must know and understand the aspects of their cards, such as the terms of agreement, which were usually neglected in the past. The cost of not understanding your card or making the mistakes that are listed above now have more than just a monetary value. Today these mistakes effect both the long term and short term of your financial goals, which is something that a lot of cardholders have learned the hard way. Luckily it is never too late to learn from any mistake and learning from this one could literally save you hundreds or thousands.
To Share or Not to Share Credit Card Accounts
When it comes to credit cards, do you think it is wise to have joint accounts or authorized users? While the answer to that question varies among cardholders, it is one that many people at one time or another will have to think about. Whether it is a spouse, child, colleague or someone else having someone else on your account is something that takes a lot of thought. If you do decide that add someone onto your credit card account it is best to know the difference between having authorized users and having joint account holders. Each varies on the risk involved and what can and can’t be done by the secondary cardholder. An article on Bankrate.com entitled "Sharing Credit Card Accounts", explains both options in detail.
Like so many other stories involving credit cards, sharing plastic is something that can both help and hurt the main account holder. While there are many pros and cons that can be outlined there are a few that stand out more than others. As for advantages, those that share credit cards often find it easy to track any bills that are needed to be paid as well as any unexpected expenses. Sharing a credit card can also help those that may have little or no credit history. For these accounts, the credit card is reported on both cardholders’ reports and as long as payments are made on time, it will help increase both scores.
When it comes to sharing a credit card there are also disadvantages that often deter many people. A major problem that joint accounts come across is reaching and going above the allotted credit limit associated to their account. Another problem is that if the payments are late or never paid at all, this will be reported on your credit report even if it happens to not be your fault.
Citi Shows Cardholders how to Use Credit Wisely
As we continue to roll throughout 2010 and cardholders continue to grow comfortable with their credit cards, we have found many issuers put an emphasis on helping consumers gain a better understanding on the many things that have take place. While we have heard of educational sites and tools from many sources such as the government and Discover (with the use of "Straight Talk"), there are others available to help educate people when it comes to not only credit cards but to their credit itself.
When looking at credit itself and the impact credit cards have on it a site from Citi Bank entitled "Use Credit Wisely" is one that rates among the best between issuers. Since the focus is on those looking for ways to get and maintain healthy credit rankings you won’t see a push to get you to sign up for one of their cards. Instead you will see answers that are focused on the type of cardholder you may be (traditional consumer, student or business owner). In all you can find information on these topics and much more:
- Credit basics
- Maintaining good credit
- Payment assistance
- Understanding a credit report
- Avoiding identity theft
So will this site be what cardholders need to help them feel more comfortable with their plastic? While it all depends on the cardholder, the one thing that is for sure is that it really does not hurt anything at all. Right now the focus of every credit card issuer is to make sure that consumers are comfortable with the overall credit card environment. Information that helps consumers understand this could essentially help gain that individual cardholder both now and later. Even if you have a credit card and have decided not to use it ever again, the site could be worthwhile to view. The site can be seen at www.usecreditwisely.com.