Credit Card Lowdown

Make Money with Balance Transfer Arbitrage

--By Sagar Satapathy

There are many ways to make money. However, many of us may not be aware of all those. Ever heard about making money with balance transfer arbitrage? Arbitrage is used in various areas that include betting, stock market, online advertising, and transferring balances between credit cards. The article "How to: Make Money with Balance Transfer Arbitrage" at Your Credit Advisor gives an insight into the ways to make money with balance transfer arbitrage.

You will get 10 golden rules to balance transfers in the article. The best way to make money using the balance transfer arbitrage is to choose the credit cards with 0% APR. You can also utilize the credit for profit by following the second rule that talks about high-interest liquid investment vehicles. Other golden rules include maintaining a good credit rating and timely repayment of credit sources. The article is full of useful resources that will definitely help you to use the best options available to make money.

Protect Your Card From Its Issuer

--By Priya Jestin, Staff Writer

I know the title sounds a bit contradictory. Why would the issuer of a credit card what to harm it? Well, they are not out to harm the card, they are only trying to get as much money from YOU as they can. Did you know that your credit card issuer might be trying to wring you of more money than is due to them? They employ a variety of tricks including levying late-payment fees even if you’re only a day late.

I thought I'd focus on late fees because these are so blatantly high, they are unbelievable. And what's worse, these companies don't even give you enough time to pay the bill as before. In effect, quite a few card companies are shortening the payback time. It almost seems as if they want you to default on your card.

Latest Carnival of Personal Finance

This week's "Carnival of Personal Finance" is up at MyFinancialJourney. There are at least 47 great posts that provide extremely useful tips on money management and personal finance. Don't miss out reading those great articles. Our article "The Lazy Man’s Guide to Budgeting: 101 Painless Ways to Cut Spending" is featured there.

'Gen P' Leads The Plastic Brigade

--By Priya Jestin, Staff Writer

Consider this scenario: You are out shopping and once you buy everything you want, you reach the check out counter. What do you reach for, cash or your debit/credit card? Chances are you reach out for that card especially if you belong in the 20-30 age group!

Money has taken on a completely new meaning for the young generation of today. Or should we call them the plastic generation. People today are flashing their plastic for most purchases, even the mundane ones. And they prefer not to pay in cash. In recognition of their penchant for plastic over hard cash, Visa USA(https://www.visa.com) recently coined an apt name for people belonging to this age group: Generation Plastic or Gen P. As the younger lot grows up and begins to learn the advantages of using cards over hard cash, they are forcing merchants to learn new ways of doing business. One of the most prominent changes is that more merchants, shopkeepers, discotheques and other services are now open to the idea of accepting cards over cash.

But this does not mean that everyone accepts this trend as a good thing. Many people are worried about this growing fascination among youngsters for things plastic. And rightly so. Parting with cash is often more difficult than paying with a card. When we pay for purchases with a card, we don’t see the money actually leaving your hands. So, in a way, we are insulated from the feeling of having spent beyond our limits. Another problem is of diminishing savings. While a credit card may incur heavy debts on you, using a debit card is no better. According to The Nilson Report, a newsletter that follows spending trends, in over 23 billion transactions, debit cards were used as modes of payment.

Playing The Credit Card Game

-- By Priya Jestin, Staff Writer

For most of the month we live in a wonderland where we flip out a magic card every time we fancy something and want it. This magic (credit) card seems to be like the genie – ready to fulfill our every wish and whim. But the genie always takes his pound of flesh at the end – that’s something we usually tend to forget.

The same rule applies with credit cards. Most people believe that as long as you don't go over your credit limit, everything's fine. With credit cards, you have to play by certain rules – botch that up and you are in big trouble mate. And to play by the rules, you need to know certain credit card basics.

Most people don't CHOOSE to pay a high interest rate. The bank decides what interest rate it will charge you, usually based on how much of a 'credit risk' you are. They determine that by looking at your history of paying bills. If you've got a history of paying bills on time, then you'll qualify for lower interest rates. If you haven't ever had any bills to pay, or if you've had trouble paying your bills, that will show in your credit history, too. Since it's a little riskier to lend you money, banks will charge a higher interest rate.

Get A Hold Of Your Taxes Before They Alter Your Life

Just married? Chances are you are still not prepared for teh tax consequences of your act. Many people learn the hard way that a marriage, divorce, birth, death, move or job change, can alter your tax status considerably. Tax experts urge their clients to spend a few minutes each fall to avoid nasty surprises in April. Azstarnet.com reports:

What these experts suggest is called a tax projection, and it's smart to do this now for three reasons. First, if you discover that you're underpaying your tax, you can adjust the amount withheld from your pay. That prevents underpayment penalties from the Internal Revenue Service. Second, if you've paid too much, you can reduce the amount of taxes withheld from each paycheck.

Read more: Opinion by Kathy Kristof : Personal Finance

Stretching The Dollar

Have you ever wondered why things have gone so horribly wrong? Let me begin with a few figures:

• In 2003 Americans had 1.46 billion credit cards, or five per person.
• In 1946 households had 22 cents of debt for each dollar of disposable income.
• Today that figure stands at $1.26.

I guess, in some way, this explains why we suffer today. We have been optimists for too long now. We believed that we could repay today's debts because tomorrow's incomes will be higher. Well, I guess at least that belief is now shattered. It's unclear what will happen now. Though one thing is certain. We don’t have much of an option now. If we must survive in the America of today, we must learn how to stretch each dollar.

Let Your Card Hibernate This Festive Season

Fine you know how much your mortgage hurts your pay packet every month or how much money your gas is guzzling away. But do you know what percentage of your income should actually be allocated to these expenses? Chances are you probably don’t and are just paying money as and when the charges come up. And believe me, if you are deep in debt, probably is one of the biggest causes is – your inability to budget your income or your expenses.

Today, it has become so easy to pay for anything. You just have to take what you want and flash your card. Doesn’t matter if you really cannot afford whatever it is that you want as long as you have a couple of cards to pay with. Isn’t it time we took control of our lives? I mean it is easy to point blame – the government; the credit card industry; the shopping malls that entice us and even our kids who keep demanding for more and more.

But isn’t there something like our own judgment. Today, most American adults behave like little children who’ve been allowed to have a free run in an ice-cream factory. We just cannot seem to know when enough is really enough. We continue on this pleasure trip of ours till we get the bills and then we fret and worry. Now you have the festival season coming. Bet you’re gonna go out there and splurge on gifts for just about everybody. After all it is the festive season, a time for giving. Yes, it is a time for giving but only if the gift is within your means.

Let’s begin on a little belt-tightening, budgeting exercise. My first tip will be handy for the festive season: Leave home without your credit cards. Decide how much you will spend on gifts and take that amount of money with you when you go shopping. The figure should be affordable and you shouldn’t take a loan. Ensure that you get all your gifts within the fixed amount and once you run dry, come back home. Pronto!

Debt Management Hollywood Style

I don’t know how many of you watch Oprah (Winfrey), but I am a regular. I cannot do without my daily dose of Oprah and when I’m forced to miss her program, I ensure I have it taped. I’m sure there are quite a few of you who think you’ve clicked into an Oprah fan’s blog. Well, don’t worry, this is the credit card blog and yes we are still discussing credit cards and not Oprah’s hairstyle or clothes or where she’s off to next. So, let be get back to where I was: I was watching some of my taped programs and I found one of Oprah interviewing Maria Shriver (Arnold Schwarzenegger's wife). She was talking about how she managed her two daughters and how she refused to give in to all their demands.

One of the demands was that the girls wanted their own phone lines and that they wanted television sets in their own rooms. Well, not too much to ask for a teen, right? Well, so the fact that Maria refused was interesting. It seems she didn’t want the children to all be in their own rooms watching their own programs and not talking to each other. And the phone line, well she wanted to keep a watchful eye on her teens.

Whatever her reason, it got me thinking – there are so many of us who take these things for granted. I mean, things like a second phone line was something I took for granted. What we don’t realize is that it’s these small things that add up to create a huge debt. That extra TV, those lovely pairs and pairs of shoes to match every dress, every mood, those clothes… the list is endless. If a person like Maria, who could have everything money could buy, refuses to toe the line, we too can. A little self-control, a little restraint and we would be happier people. As Oprah said later in the show, the things you own don’t make you happy, it’s the relationships you maintain.

Know How Your Credit Card Charges You

There are many ways to choose a credit card. You could:

• Just go out and get the first one that comes your way
• Ask around and get the most popular card – so many people couldn’t go wrong
• Or, you could make an informed decision by asking around and reading up on the various charges you would need to pay for maintaining a card. Simple logic suggests that the card, which allows you to pay the least in terms of charges, is the best.

So in case you prefer to use the third method of choosing a credit card, you’d probably want to know more about finance charges – charges that you would have to pay to carry a balance between billing cycles. The exact amount would be based on your interest rate and various other factors, like for instance the uses you put your card to. Now your interest rate is also not flat across the board and varies depending on whether you make a purchase, a balance transfer, take a cash advance… etc.

Confused already? You know what, I believe that these credit card companies make the whole calculation so complex with the single-minded objective of confusing us and squeezing out as much money from us as possible. So, what are we as consumers supposed to do? Outwit them at their own game of course. Agreed there are fees within fees, different methods of calculating interests and even the grace period. However, once you know the basic methods of calculating interest charges, you’ll be able to ensure that your monthly statement is accurate.

There are quite a few methods of calculating interest and just so I don’t end up confusing you, I’m going to deal with them one by one. This time, we’ll examine the Adjusted Balance Method. In this method, once any credits or payments are taking into consideration, all finance charges are assessed. So in case you have a $750 balance on your card and you paid $100 on it before the end of the billing cycle, your interest charges would then only be applied to the remaining balance of $650. The adjusted balance method is the most favorable one for a consumer and works to his advantage. We’ll discuss the other methods next time.

Canceling Charges are Painful With Automated Payments

It is the modern amenities and facilities that make life extremely smooth. But in case of a small error, these facilities can make life extremely difficult as well. I know you are probably wondering why I’m trying to sound philosophical when we are here to discuss credit cards. Well, this little bit does have something to do with credit cards, or rather, the automatic payment facility offered by certain credit card companies.

If you are one of those who make use of automatic payments to pay your bills, then here’s a bit of news for you. It can be extremely tiresome to cancel such arrangements. I know this should actually be a cakewalk. Now there didn’t seem to be any hitch when you signed up for the service so why the trouble now? Well, all one can say is, ‘such is life’. According to certain debt counselors, lawyers and Better Business Bureaus around the country, the number of complaints from consumers is increasing considerably. Most of them complain about their inability to stop the recurring bills charged to their bank accounts and credit cards. And to make matters worse, these rules differ depending on whether your payments are linked to a bank account or credit card. Now, unable to stand the frustration any longer, people have even begun filing lawsuits against vendors or their banks to keep the charges from recurring.

Meanwhile banks, which have been bearing the brunt of complaints, say that they are unable to cancel recurring credit-card charges when a consumer has signed a long-term contracts like an extended gym membership. However, things are not as bad as they sound. In response to this troublesome issue, credit card companies Visa USA and MasterCard International say they've upgraded their systems. The new system is supposed to help banks and consumers more efficiently stop automatic payments.

If Your Credit Card Co. Offering You Insurance, Read On

Heard about credit card but bet you don’t know much about credit card insurance. Sounds interesting doesn’t it? Well, here are some tips on what you should do if you want to accept insurance offered by your credit card company. Personalinsure.about.com reports:

Unlike a lot of insurance plans, credit insurance can start by a verbal "yes" and does not necessarily require a signature so make sure you pay attention to what you are agreeing to or filling out on your credit application.

Read more: The 5 Step Guide to Considering Insurance Offered by Credit Card Companies

Students: Tips to make your credit card work for you

As a student you need to worry about one thing – debt, especially credit card debt. Being in debt has become a way of life for a majority of Americans, and we begin young – you’re just out of high school and if you want to study any further, you need loans and have to begin thinking of repayment. And there are other expenses as well like tuition, food, rent, and other incidental expenses. Only a student knows how difficult it can be to make ends meet.

One thing that you will notice once you enter college is how credit card companies solicit you and make you take their cards. Reason? For one, young people don’t usually have a credit history. College credit cards are a good and often necessary option for many students, but you can easily fall into a debt trap if you are not careful. All it could take is a few beers extra or buying something that you really wanted. What can you do to keep your debt within limits? One simple thing is to say no to cash advances. A common trap that many students fall into is getting a cash advance from their credit card just so they don't have to call Mom and Dad to ask for money.

Busting Credit Card Debt Myths

It’s that time of the year again when you go on a year-end splurge and forget about your more pressing debts. But did you know that every time you spend more than what you earn, you are being pulled down an enormous debt trap? Today, entire families are reeling under a debt epidemic and according to a CNN report; the average American household owes over $9,000 on credit cards.

Credit card companies love to portray those who declare bankruptcy as irresponsible shop-a-holics, who cannot hold onto their money for long. Hence the fault lies with the consumer, not with the credit card company. Is this allegation really true? Fact is that 90 percent of those declaring personal bankruptcy do so because of the financial impact of sickness, job loss or divorce. The inconvenient fact for the credit card companies is that 50 percent of the personal bankruptcies in the United States are due to illness in a country where almost a third of all adults are not covered by medical insurance.

Moving from credit to debit

Of course, credit card debt is rising and going through the roof. But that is something that our policy makers need to worry about. Not us… for we can now use another, less worrisome path – that of debit cards. Msnbc.msn.com reports:

Credit cards let you pay in the hereafter, allowing you a misty view of what you can afford. Debit cards limit you to the cash you actually have. To avoid "bouncing" a debit, you can add overdraft protection to your bank account. A funny thing about overdrafts—borrowers tend to pay them off rather than string them out, as you might with credit-card debts.

Read more: A Debit-Card Nation

Is your credit card safe or IS it safe?

Identity theft and other credit card crimes have today become the bane of our existence. Once you realize how open our society has become thanks to the electronic revolution, you’d understand how these crimes are rising. Today we live in a world where everything including our tax records to Social Security numbers and credit card data are recorded on databases. These can easily be hacked and used unscrupulously by enterprising individuals.

Thieves find it quite easy to target the information embedded in ATM, debit and credit cards. They just need to break into or even compromise the equipment and systems that are used for processing payments. And the results are there for all to see. Credit card companies like Citibank and Visa that have been hit are reissuing their cards or using some other methods to counter this fraud.

Credit card use jumps as interest rates go up

If credit card use and debt created thereof is a mark of our economic strength, then the country’s economy is not in such a good shape. Consumer credit, or nonmortgage loans to individuals, rose $4.4 billion, or 2.5 percent at an annual rate, to $2.174 trillion. Nytimes.com reports:

The figures suggest that Americans are using their credit cards to finance more purchases as rising interest rates and slowing increases in real estate values discourage borrowing against home equity.

Read more: Borrowing Rises as Credit Card Use Jumps

Student Credit Cards

Not sure how we missed this, but I don't believe we've ever made a post about student credit cards! If you're a college student, NOW is the time to start building credit responsibly (just always, always, always pay off the balance IN FULL and ON TIME). Read more information about student credit cards, or apply for one today.

Colleges don’t want credit card tuition payments

Bogged down by rising tuition fees and don’t know which way to turn? This is an extremely painful situation and the timing couldn’t be worse. I mean, here you are thinking of the rising cost of education and just about everyone is screaming consolidation from the rooftops. Well, if you do think of putting that upcoming tuition bill on a credit card, just check with your university before you try to do so. Many universities now impose additional fees on students and parents who pay by plastic. Some of them even refuse to accept certain credit cards altogether.

Universities have to incur increasing costs in processing credit card transactions. Like merchants, universities and colleges are charged a fee every time a credit card is swiped. Usnews.com reports:

"When you charge $20,000 or more, the consumer loves it because they get points or miles or some sort of benefit," says Jon Speare, codirector of the Treasury Institute for Higher Education, www.treasuryinstitute.org which offers financial advice to colleges and universities. "But it's a very high fee for the actual school."

Read more: Colleges clamp down on credit card tuition payments

Customers get credit-savvy

Let me admit, this piece of news made me very proud. Even as doomsayers are predicting the demise of America under a mountain of debt, credit card companies are discovering a very disturbing fact – the fact that all is not well with their business. Of course, there are more people using their credit cards for miscellaneous purchases than ever before. And the industry has managed to rope in young college-goers as well. So, what could be the reason for the worry among industry circles?

There is a very interesting phenomenon going on right now that is troubling credit card companies. Although Americans are deeper in debt than ever, they are paying off bigger portions of their monthly credit-card bills. And timely payment of bills is one thing card issuers don’t like. That’s because card issuers profit from interest on unpaid balances. In the past, when interest rates crept up, fewer cardholders could afford to pay down balances.

GE to launch new credit card

General Electric Co. recently said that it would collaborate with eBay Inc. and Internet payment service PayPal Inc. to launch and market a new credit card. The PayPal Plus credit card expands on the two-year relationship between GE and PayPal. Chron.com reports:

In 2004 they launched PayPal Buyer Credit, a revolving credit line for registered PayPal customers. This new agreement also includes GE eventually launching an eBay branded credit card, while eBay promotes the new card.

Read more: GE Teams With PayPal, EBay on Card

This youth brigade is financially savvy

Holidays are a time for overspending; for just forgetting how much money runs out your pockets. And when you come back from that lovely vacation with that beautiful tan, you are brought back to earth with a thud – thanks to your credit card bills. While popular media would love to have us believe that this is what the youngsters of today are up to, reality is something else altogether.

I know this sounds incredulous – okay, so some of us do overspend, but we do have more brains than our parents and seniors give us credit for. And we do know when enough is enough. So, while there is the occasional story of maxed-out credit cards, what you will most probably see now are 20 and 30-somethings who know what they are about and know where their finances are headed. And some of them have learnt their lesson the hard way – by battling enormous credit card debt. Mercurynews.com reports:

The others I spoke to said they spent only what they can afford to pay back in full when the MasterCard and Visa bills start coming next month.

Read more: Some young gift buyers set to pay bills

This youth brigade is financially savvy

Holidays are a time for overspending; for just forgetting how much money runs out your pockets. And when you come back from that lovely vacation with that beautiful tan, you are brought back to earth with a thud – thanks to your credit card bills. While popular media would love to have us believe that this is what the youngsters of today are up to, reality is something else altogether.

I know this sounds incredulous – okay, so some of us do overspend, but we do have more brains than our parents and seniors give us credit for. And we do know when enough is enough. So, while there is the occasional story of maxed-out credit cards, what you will most probably see now are 20 and 30-somethings who know what they are about and know where their finances are headed. And some of them have learnt their lesson the hard way – by battling enormous credit card debt. Mercurynews.com reports:

The others I spoke to said they spent only what they can afford to pay back in full when the Mastercard and Visa bills start coming next month.

Read more: Some young gift buyers set to pay bills

Having a Baby? Don’t get buried under credit card debt

Planning to have a baby? If it is your first baby, then you are probably excited and happy about the new arrival and are busy making plans for how to welcome your little one. There’s so much work to be done before the baby comes like decorating the nursery, buying little outfits, stocking up on diapers, getting good strollers… the list is endless.

But do you have any idea how much all this is going to cost you? I know this sounds more than just a little impolite. I mean, how does one ask about finances at such a joyous occasion. But now is the time to take stock and find out if you are up to paying for all the things that your baby will need. All those lovely items for your child don’t come cheap, and if you are not planning, you may find yourself buried in credit card debt.

Here’s a bit of news that could make you come down to earth with a thud: According to a September 2005 survey sponsored by REDBOOK magazine and Visa USA, 41 percent of expecting parents said they were not financially ready for their baby. So, how do you work this out so you can get your baby all those fun things and yet not have a too deep dent in your pockets? We’ll examine that next time.

Do you know the new minimum payment standards?

Though there was an increase in credit card minimum payments in the recent past, many people are still unaware of the practical details of this change. For starters, the new standard payment is 1% of the outstanding balance, plus all current finance charges and any other fees. Msnbc.msn.com reports:

The upshot is that there is a relatively new mandate for credit card issuers, and it's designed to help borrowers pay off debt more quickly. For some issuers, this means increasing (but not necessarily doubling) minimum payments. For others, it means no change at all, if the company's current policy meets the requirements.

Read more: Good Credit Card News Overstated

How’s the retirement fund coming along?

I know this may sound like a mockery of sorts, but have you begun saving up for your retirement? If you are like most other Americans with modest means, then you probably are already finding it difficult to stretch your pay to cover immediate costs. So there is no way you can even begin to think of saving up for the future. And the few people who do earn enough to save up a little either lack the discipline to save up or fall into the hands of unscrupulous companies that charge you huge fees. Usually you earn much lesser in these low-interest money-market accounts than even the fees you pay!

You are probably thinking that there should be some way for a person with modest means to invest and save up a decent sum of money. Of course, there are many options available to you, but remember to keep your eyes open and avoid unscrupulous companies. The first rule of the game is that you should never take any investment advice from a person who may not be an investing expert. This is a serious matter and needs proper handling.

Secondly, you may have found someone who may sound like he is giving you sound investment advice but is actually only trying to get you to invest in his company’s products. Are his intentions good? No way! He must inform you about all the products available in the market so you can make an informed decision.

And lastly, remember: No risk, no gain. You don’t have to go gambling but if you are overly conservative when it comes to retirement investing, you are probably losing too much – there is a chance that your investments won't grow enough.

About Co-Signing

A co-signer is required when an individual applying for a credit card or loan does not meet the lender's criteria. The co-signer will have their personal credit checked and need to sign an agreement to pay back the debt if the primary applicant fails to do so. Usually both the primary applicant and the cosigner are jointly liable for the debt.

The implication here is that default by the primary applicant with one or two missed payments, will result in the creditor attempting to collect from either of the two or both until the full amount is repaid. The cosigner may even have to pay off the entire amount and can also be sued, have assets seized and wages garnished.

Being asked to become a co-signer requires a great deal of thought. The risk is huge, so is the benefit worth it? Becoming a co-signer may sometimes be beneficial but only when you can count on the primary applicant to be responsible enough to handle the obligation. Credit card info.com reports:

When an individual credit applicant does not meet a lender's requirements, they may be able to obtain a loan or other account by having a co-signer. The co-signer's personal credit will also be checked, and s/he will be required to sign a contract agreeing to pay the debt if the primary applicant does not. Typically, the contract will specify that the primary applicant and the cosigner are "jointly and severally liable" for the debt.

Credit card companies mum on details of breach

While a large number of people are now aware that a computer attack compromised their credit and debit card numbers recently, quite a few of them have been finding it extremely difficult to know more details behind the breach and also how to defend against identity theft. According to consumer advocates, the lack of information comes as a move by Visa and MasterCard to control bad publicity. Nbc5i.com reports:

One North Texas woman's debit card information was stolen in a recent attack against a merchant's database. Her bank told NBC 5 News that Visa refused to provide details such as the identity of the merchant or when the breach occurred.

Read more: Credit Card Companies Decline Details On Breach

Financial Jargon

Annual fee refers to the flat yearly charge of membership. There are many companies with no annual fee charged on cards. Those with annual charges too are usually prepared to waive the fee aside for your business.

Finance charge is the amount you are charged for the facility of credit. In addition to interest charges there could be other charges like cash advance fee, when availing the cash advance facility.

Grace period can be a duration of about 25 days during which you can pay your bill without incurring finance charges. Most if not all credit cards offer grace period only for the full balance paid every month. Carrying a balance forward cancels the privilege. Grace period doesn’t apply to cash advances either.

Annual percentage rate is the yearly percentage rate of the finance charge. The rising interest rates affect other interest rates like prime rate or treasury bill rate which are called variable rate plans. Sometimes other interest rates are not affected in the case of fixed rate plans. Credit card info.com reports:

Before we get into shopping for a card, let's go over some important terms you'll encounter in credit-card brochures or discussions with potential lenders: Annual fee - A flat, yearly charge similar to a membership fee

ATM card

An Automatic Teller Machine card works like a debit card, with the difference being, you use it in a cash machine by punching in your code number. Debit cards are similar to credit cards for making purchases except that the charges are deducted immediately from your checking account. An ATM card looks different from a credit card without any Visa or MC logo and can only be used for making cash withdrawals from ATMs.

The advantage of an ATM card is reduced risk in case of loss as uit cannot be used by any body to withdraw money from your account as they won’t have your Personal Identification Number (PIN). Banks also usually have a limit for the amount of cash that can be withdrawn with an ATM card in a single day. With a Visa or MasterCard, on the other hand, a thief can wipe your account clean with just one purchase. Credit card info.com reports:

An ATM (automatic teller machine) card is a form of debit card but you use it in a cash machine by punching in your code number. Clear as mud? Try this: a "debit card" looks very much like a credit card and is treated like a credit card by most merchants but the charge is immediately deducted from your checking account. An ATM card looks nothing like a credit card, has no Visa or MC logos on it, and is only good for making cash withdrawals from your checking account at cash machines. Better?

Taxes and credit cards don’t go well together

Recently, I informed you of how businessmen can now charge their taxes to their credit cards. This facility has already been availed to individual taxpayers who have made good use of it. What we haven’t yet discussed is the downside of doing this. Of course, there is a really big downside here and that is the heavy loss of money that you can incur if you do it. To put it simply, charging taxes to your credit card can be an expensive mode of payment, especially when the IRS offers an installment plan. Yes you heard me right there. The IRS offers enough benefits to negate any positive impact that you could have got from using your credit cards to pay taxes.

And now many debt settlement firms have begun asking their clients to resist the many incentives offered by companies to encourage them to pay taxes with their credit cards. You will be (or have already been) bombarded with rewards including offers of points, miles and many others just so you can charge the taxes to their cards. Some card companies even offer cash-back rewards.

Now here is the murky underside which none of these companies want to discuss: If you opt for this mode of payment, the service providers that process your transaction will charge a fee of 2.49 percent of the amount owed. So, if you owe $1000 in taxes, you will pay an extra $25 to the service provider. Then there are the interest rates and potential penalties in case you default on payment. So, what exactly is the benefit of using your credit card here when the IRS offers you the much better option of paying in installments?

If you still think that charging taxes to your credit card is a good option, then before you exercise this option, read the fine print that accompanies any special offer and develop a plan that will help you pay it off as soon as possible.

Read the fine print in your credit card contract… It could make a huge difference

Did you know that when you sign up for a credit card, you might be giving up your right to sue the credit card company? According to a 2005 Consumer Action survey, nearly half the banks that issue credit cards require you to give up this right and instead resolve a complaint through arbitration.

So, if you have a dispute, then remember that suing your credit card issuer may be out of bounds for you. You possibly have to go through an arbitration, which is a private process and takes place outside a courtroom. What you can expect is an independent arbitrator or a panel that will hear your case. And you may not have the right to appeal an arbitration decision. In case this method of finding a solution to your problem doesn’t bode well with you, then you may have to look for options. Since the number of issuers who require arbitration to settle disputes are less than 50 percent of the total, you could always switch to another credit card issuer. Usatoday.com reports:

Multiple lawsuits are now winding their way through the court system, challenging the validity of arbitration clauses in credit card and other consumer-product contracts.

Read more: Here's a map for dissecting credit card fine print

Credit card abuse at Parks Department

This bit of news should teach us to be wary and very careful with our credit cards. Recently it was found that Parks Department workers misused special credit cards to cut through red tape. Ny1.com reports:

A report by city Comptroller William Thompson’s office found managers split up bills to stay under the spending limit on more than a dozen purchases, totaling more than $24,000.

Read more: Report Finds Parks Department Workers Misused Credit Cards

Are you using plastic to pay taxes? Think again

And you thought you could only buy things with your credit card. Well, here’s some news for you: Now credit card issuers are encouraging people to use their credit cards to pay federal taxes. And an increasing number of people are falling for this easy trap. Check out these figures: In 2005, nearly 1.5 million taxpayers paid federal taxes on their credit cards or MasterCard- and Visa-linked debit cards. According to IRS data, this figure is up 54 percent from 2004!

And to make the offer even more lucrative, credit card companies like Chase and United Airlines are now awarding double miles for each dollar of taxes paid on their United Mileage Plus SignatureVisa card. Not to be outdone, American Express also has similar deals on its Delta and Starwood credit cards.

Now should this added convenience make us taxpayers happy or should we be wary and read between the lines before using plastic to pay taxes. The second option is more viable. And there are many reasons against using plastic, of which the most prominent is that the rewards from credit card companies are not going to stop them from charging you interest rates. These rates can go up as high as 30 percent if you don't pay off your credit card bill every month.

Another problem with using credit cards is that in addition to the tax, you will have to pay an extra 2.49 percent of the federal or state tax. This fee goes to third-party companies that process the transaction.

Despite all these problems associated with using credit cards, the number of people availing of this facility is only increasing. According to experts, the number of tax payments charged to credit cards will rise even further in 2006.

Credit Cards: Late Fees

It can be very tricky avoiding late fees on credit card payments mainly due to the procedures involved. It takes 5 to 7 days from the time your payment is actually received by the credit card company till it is reflected in your account. In case your payment is being made by certified or air mail, checks are stapled or bound with a paperclip to the remittance stub, or include a cover letter, another couple of days are sure top be added before your payment reaches your account.

The reason for the delay is that the sorting machine has a conveyor belt that is just able to accommodate an envelope, enclosed check or money order and remittance stub. Everything else, even a mere paper clip requires manual sorting to be done.

It usually takes 7 to 10 days for your payment to be credited if sent by post. However your bill may only be mailed as late as 10 days before the due date. So avoiding late fees can prove nearly impossible. One way to avoid delaying your payment unintentionally or otherwise is to pay online or over the phone. Credit card info.com reports:

The Company processes millions of payments each month through huge sorting machines (in training we saw a short video of this process). From the time we ACTUALLY receive your payment in our warehouse to the time the payment posts to your account takes 5-7 days.

Students in credit card trap

Credit card debt, the bane of modern America, has tainted young students as well. The average student today has a credit card debt that ranges between $3 and $7,000. So, when they graduate from college, these youngsters already shoulder a heavy debt burden. And this is in addition to their student loans!

And the worst part is that credit card companies are targeting a very young segment. Students, who are still to cross the age of 20, roam around with four or five credit cards. An alarming trend shows that even before they enter college, these youngsters are propositioned and charmed by credit card companies into taking cards. Thetraveleronline.com reports:

A recent article in USA Today stated that 23 percent of college students have gotten credit cards before they entered college, said Joel Doelger, Director of Counseling for Credit Counseling of Arkansas. Debt from those cards can begin to accumulate as early as freshman year because when students enter college, they are targeted by credit card companies as potential new customers.

Read more: Student credit card debt in the thousands

Smart and Simple Financial Strategies for Busy People

Personal finance is something not all of us are comfortable with. Most Americans are a pampered lot and are very used to the easy and unlimited access to credit.

This makes personal finance seem like a tedious chore. Jane Bryant Quinn, a personal finance columnist and syndicated newspaper writer offers a few nuggets of wisdom in her book Smart and Simple Financial Strategies for Busy People.

She provides you with simple strategies to buy a house and get out a debt trap. One of her better pieces of advice is to automate your personal finance wherever possible. This includes using services such as online banking and putting in place an automatic savings plan for your retirement. Ensure that you buy financial products directly from companies whenever possible and try to avoid brokers or planners.

Prevent abuse of your credit information

If you are like most other people, you depend on your credit card issuer to keep your personal information safe and secure. But a recent spate of incidents where such information has been compromised, throws up a lot of uncomfortable questions. The latest in the line of companies where identities have been compromised include Marriott Vacation Club International and Ford Motor Company.

This means that the onus of keeping your credit information safe at all times rests with you. While that may not be practically possible, you could always take steps to prevent the abuse of your credit card information. This means you must increase your awareness about the means to be used to prevent abuse. Abuse can be in many forms.

If your credit card number falls into the wrong hands, the consequences can be disastrous. Abclocal.go.com reports:

Once your credit card number or social Security Number are in the wrong hands, they can be used for other crimes. Sergeant John Lucki, head of the Chicago police financial crime calls identity theft a feeder crime that can lead to more serious and long lasting problems for the victims.

Read more: Security breaches remind consumers to keep an eye on credit reports

Youngsters show the way to financial stability

Are people getting fiscally responsible? Sounds incredible that in a country where a large number of people are facing bankruptcy because of unpaid debts, youngsters are holding the beacon of financial stability and refusing to overuse plastic money. Mercurynews.com reports:

Maybe my generation and younger are more fiscally responsible than I thought or than our boomer parents give us credit for. Or maybe enough of us have spent enough time -- and finance charges -- battling credit card debt that we've learned our lesson.

Read more: Some young gift buyers set to pay bills

Budgeting secrets

Attitude is among the primary reasons for failure in budgeting is one’s attitude. Don’t think of it as a penny-pinching sacrifice which doesn’t last long but as a way of achieving financial goals. It may help to think of it as a spending plan rather than a budget for a more positive approach. If you fail in your attempt, don’t give up and keep trying till you succeed or the negative feelings can dissuade you from trying again.

The purpose of budgeting is to give you a clear picture of where exactly your money goes and with a spending plan, you’ll be able to save for the more important expenses including house, car, retirement, college education, travel, etc.

A key aspect to a successful budget is customization to your needs. Don’t plan according to the habits and lifestyle of people in general but take your specific situation. Simplicity makes commitment easier. A realistic practical budget will ensure rewards to keep you motivated. Credit card info.com reports:

Have you ever attempted to budget and given up in frustration or discouragement? If you can figure out the reason your budgeting attempt failed, you'll be able to institute a rewarding, successful budget and stick to it. Think about it. What really determines whether budgeting works for you?

Holiday gift giving ideas

It’s the season to be merry, not to mention traveling, decorating, holiday parties, family, friends, relatives and shopping. It’s an all too familiar scenario of flashing your credit card for every gift purchase and then dreading the day you receive your credit card statement.

Instead of splurging your hard earned money on expensive gifts that prove worthless, take some time to consider some meaningful gifts that best express how much the recipient means to you.

Avoid greeting cards and individual letters to all and sundry that take up substantial time and expense. A yearly wrap-up letter to all your friends and family can achieve the same purpose for much less. With the help of computer softwares you can design it to look attractive.

Think about each person you want to give a gift to and consider what they might be requiring at the moment or the immediate future. For example somebody starting college would appreciate a gift hamper of eatables and essentials like toiletries. For an office-goer, a fancy container with office supplies like calendars, coffee mugs, personalized pens, etc would be ideal. Credit card info.com reports:

It's that time of year again, time for traveling, decorating, holiday parties, family, friends, relatives and of course. . . . shopping.

Student credit cards

Xorev is a new site with reviews of student credit cards. It never ceases to amaze me how there is a credit card for literally anything.

Getting the Right Card and Using It

Credit cards are just a form of borrowing and as such they have certain terms and conditions that must be adhered to. This includes the payment of fees and interests associated with the card. Annual Percentage Rate (APR), annual fees, transaction fees, and balance computation for finance charges are some of these. These fees and interests vary from card to card.  Some cards which have a low APR may slap you with very high penalties on late payments or non-payment. To discern these differences, make sure you read the fine print before making any commitments as Credit Companies are noted for hiding fees in the fine print.

Having discussed the negatives, one of the primary benefits of credit cards is the liability limits.  To take advantage of this, it is important that if you ever lose your card, report it immediately. This will minimize your liability, particularly if the card is stolen and then misused. Always keep transaction receipts so you can locate discrepancies, if any, on the bill sent by the financial institution. Ftc.gov Reports:

You'll probably also want to consider if the credit limit is high enough, how widely the card is accepted, and the plan's services and features. For example, you may be interested in "affinity cards" - all-purpose credit cards sponsored by professional organizations, college alumni associations and some members of the travel industry.

Read More: Choosing and Using Credit Cards