Credit Card Inform

 

Q: Are there advantages of having a credit card?

A: Besides convenience, credit cards allow users to track purchases and avoid carrying large amounts of cash which may be lost or stolen.  In addition, credit cards enable users to establish a credit history which can make it easier to obtain a mortgage or other loans later in life.

 

Q: How much interest do credit card companies charge their customers?

A: Companies may use low introductory rates to draw in new customers.  These rates may be in effect for the first few months only; carefully read the fine print of the agreement.  Interest rates can range from 0% introductory rates to 30% for customers who are late on making their payments.  Credit card companies need little excuse to increase the interest rate charged to users.  It is important to know that credit card companies can change the interest they charge at any time simply by giving the user 15 days notice so students should check their statements carefully to determine the exact interest rate being charged.

 

Q: Is the minimum monthly payment on my credit card bill sufficient?

A: While it is important to ALWAYS pay at least the minimum amount due each month, paying only the minimum each month usually results in long repayment periods and can cost the user large amounts of interest payments.  Users should make every effort to pay more than the minimum due because even small additional payments made on a regular basis can reduce the time required to pay off balances and subsequent interest charges.

 

Q: What does it mean when I get a credit card offer in the mail that says I am "Pre-Approved"?

A: Unfortunately, it doesn't mean much. A credit card offer with "pre-approved" only means that a potential customer has passed a preliminary credit-information screening. A credit card company can deny a customer it invited with "pre-approved" junk mail if it doesn't like the applicant's credit rating.

 

Q: What is the difference between a credit card and an ATM/Debit card?

A: A credit card is a revolving line of credit- a loan that must be repaid with interest. An ATM or debit card is a payment card that is linked to your checking or savings account. Charges that are made with an ATM card are debited immediately from the account. Charges that are made using a credit card are added to a balance and must be repaid.

 

Q: How does a cash back credit card differ from a regular credit card?

A: In many ways, it doesn't. You still have the same convenience that comes along with using a line of credit to make purchases, pay bills, manage your finances, and organize your expenses. You still receive a bill for the charges at the end of each billing period that you are to pay on or before a certain date. You still have the opportunity to take advantage of low interest rates, reasonable (or non-existent) annual fees, and other amenities that come along with many of today's credit plans. The major difference is that your credit provider offers you a reward for your loyal services and continued use of your card.

 

Q: What is the difference between a fixed interest rate and a variable interest rate?

A: Interest is calculated as a percentage rate of the loan/credit account principal. The interest rate can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case it changes periodically. However, even a credit card with a fixed interest rate may see increases in the rate if the card user exhibits negative payment behavior (i.e. late payments, over the limit charges, etc.)

 

Q: Are debit cards better than credit cards?

A: Many people prefer debit cards over credit cards because they allow purchases like a credit card, but prevent spending more than the amount that has been deposited in the checking account.  One important disadvantage that debit card users should remember is that debit cards do not contribute to credit history since users are not taking loans to purchase items but merely withdrawing their own funds.

 

Q: Are credit cards appropriate for college students?

A: Credit cards can be used responsibly by adults of all ages, but using credit cards unwisely can have huge negative impacts on your life for years to come.  When used properly, credit cards can be a convenient method of payment for needed items.

 

Q: How many credit cards should a person carry?

A: Generally, the fewer cards the better. Remember the more open credit accounts you have (whether or not you carry balances) the worse your credit score may be. But it can be beneficial to carry one or two major credit cards. (Avoid carrying store credit cards, such as department stores, home improvement centers, etc.) Here's a great example: It's better to have two cards with $5,000 credit limits than 10 cards with $1,000 credit limits.

 

Q: What information will I need to provide for a credit card application?

A: You will need to provide basic information about yourself such as your driver's license number, Social Security number, date of birth, address and annual household income.

 

Q: How long does it take to receive a credit card application decision?

A: The waiting time varies. Some credit cards offer instant approval; others require weeks. Generally, the better your credit rating, the faster the response time for a credit card application. Once a decision is made you will be notified by mail, e-mail or both.

 

Q: Are online credit card applications secure?

A: By law, the application process must be secure.  Secure Socket Layer (SSL) technology and offer the highest level of Internet security involving sophisticated data encryption. Your information is safe as long as your browser indicates that a secured connection has been established.

 

Q: Can I apply for more than one credit card?

A: Yes, you can apply for more than one credit card. Many people have multiple credit cards. However, only card issuers can decide whether they want to approve your application for an additional card or not. If you have several credit cards, at some point issuers may decide that your total available credit is already high relative to your income, and may decide not to issue you more credit cards.

 

Q: Is a checking account required with the bank I want to apply for a credit card with?

A: No. You do not need a bank account open with a particular bank in order to apply for their credit card.

 

Q: What are the dangers of having a credit card?

A: The greatest danger is the temptation for users to purchase items that they can’t afford.  Once the bill comes due and there is not enough money to cover the balance due, the interest charges begin.  A combination of buying unneeded items and high interest rates can rapidly snowball into a significant amount of debt.  Credit card companies will provide monthly bills showing a minimum amount that must be paid.  Interest will be charged each month on the balance that is not paid off.

 

Q: What if my credit card gets lost or stolen?

A: If you have a missing credit card, report it immediately to your 24-hour Customer Service number, which may be on the back of your credit card, or on your credit card statement. Normally, your lost card will be canceled, and a new credit card will be issued.

 

Q: What if there are unauthorized charges on my stolen card?

A: If your card is stolen, you're not liable for these charges. If you suspect your card has been stolen you should contact your credit card issuer immediately.

 

Q: What if I want to dispute a charge on my statement?

A: If you have a problem with the quality of property or services that you have purchased with your Credit Card, and you have tried in good faith to correct the problem with the merchant, contact your credit card issuer at their service number.

 

Q: What if I see some late payments and high balances on my credit report? What should I do?

A: First, determine whether or not these are accurate accounts. Basically, did you make the late payments and do you have high balances? If not, you'll need to get these corrected and erased from your credit report.

 

Q: What if I find that my debt-to-income ratio is really high?

A: A high debt-to-income ration means that you're a riskier customer for a creditor. So before you apply for a loan, work on getting your debts paid down. This includes consumer loans, credit cards and even student loans. If you do have to apply for a loan before you pay down your debts, you may still be approved for the loan, but it will most likely have a higher interest rate.

 

Q: How does someone re-establish good credit after filing bankruptcy?

A: There is life after bankruptcy! To achieve good credit, you'll need to start fresh and borrow a new loan or open a new credit account. The most important thing is to not get yourself back into the situation that lead to bankruptcy! So start small. Take out a small loan or open a credit card with a low limit. Make all your payments on time. Never charge over the limit. Do not borrow more than you can afford to repay. Simply use your credit wisely!

There are two things to keep in mind as you re-establish good credit: first, a creditor might offer you a secured card to help you rebuild your credit rating. And second, when you are approved for a loan or card, it will have a much higher interest rate.

In time you'll be able to apply for additional loans. And as lenders see your credit rating increase, they'll be more likely to want to lend to you and offer you lower rates.

 

Q: What should I do if I find I'm a victim of identity theft?

A: If you see strange information or unfamiliar accounts on your credit report- it might not be identity theft. Sometimes credit reports have one or two errors that simply need to be corrected- this is not uncommon. However, several unfamiliar accounts are more suspicious.

Either way, you'll need to contact the credit bureau that supplied you with your report. The bureaus allow you to dispute incorrect data that appear on your report, either by phone, mail, or even the Internet. If you think it may be a case of identity theft, you'll want to inform the bureau of this. Also be sure to request your credit report from all three credit bureaus, because if the accounts appear on one report, they're probably on all three!

If the thief simply has your account numbers, you may be able to fix the problem by closing your credit accounts and opening new ones. If the thief has your personal identifiers (i.e. date of birth, address, Social Security number), the problem is much harder to fix. Even after you clear the incorrect data from your report, you'll want to closely monitor your accounts so you can spot new fraudulent accounts as they appear in your name.

 

Q: What is a credit score?

A: Credit card companies will report to one, two or all three of the credit bureaus (Equifax, Experian and TransUnion), the payment status of each monthly credit card payment made.  Landlords, utility companies and other lenders also report to the credit bureaus.  When you make payments on time, you establish a credit history that shows you are responsible in paying your debts.  Once you establish a positive credit history, it will make it easier to obtain future loans at lower rates.