Credit Advice Question

Looking for a Credit Card for Christmas Shopping? Before you submit a credit card application, first review the main points which will help you choose the right credit card for your needs.

What Charges You'll Make - If you're going to use the credit card mainly for booking airline reservations and hotels, it might be best for you to get a travel credit card that offers sky miles and hotel points or cashback. If this will be an emergency credit card only, then your main concern may be for a low interest rate credit card with low fees.

When You'll Repay Charges - Will you pay off credit card charges in full every month, or will you carry a balance month to month? If you're going to carry a balance, you want the lowest possible interest rate as well as a low introductory rate. But if you'll payoff balances in full every month, then interest rate really doesn't matter so no annual fee and/or a long grace period would be a bigger concern. If you're going to carry a balance, be concerned about how the finance charge is calculated. The most common method is the Average Daily Balance, which means that the daily balances are added together and then divided by the number of days in the billing cycle. Stay away from credit cards that compute the balance using two billing cycles, as this method costs more money in financing fees.

What Amount You'll Charge - If you're going to use the credit card for all your monthly expenses, then you need a card that has a high credit limit and a high cashback percentage.

More info about Interest Rates, Credit Limits, Incentives, Fees and Penalties

Interest Rates - The interest rate (Annual Percentage Rate) APR can either be a fixed rate or a variable rate that is tied to another financial indicator, most commonly the prime rate. With a fixed rate credit card you know what the interest rate will be every month, whereas a card with a variable rate can fluctuate. Of course, even the interest of a fixed rate card can change based on certain events, such as paying your credit card bill late, exceeding your limit, or simply because the credit card issuer decides to change it after providing you ample advance notice.

Credit Limit - This is the amount of money the credit card company will let you charge to the card. This amount varies depending upon the card offer and your credit history. Be sure to get a credit card with an ample limit, because getting close to your max can hurt your credit score. Just remember that you don't have to max out your limit just because it's available.

Incentives - To compete for and to gain customers, many credit card companies offer rewards. Even if you normally use cash, why not use your credit card and then use the cash to make the payment during the grace period? You still won't pay interest and meanwhile you'll rack-up rewards. A credit card with 5% cashback will earn you $5 for every $100 charged. If your total bills come to $2,000 per month, you'll earn a free $100 every month. Look for a rewards program that you'll use and which offers flexibility, such as cashback or travel.

Fees and Penalties - Compare common charges such as late fees, overlimit fees, balance transfers, cash advances, and for making payments by telephone. Regarding balance transfers, look for credit card offers with no transaction fees and zero percent interest for at least 12 months.

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Credit Advice Question

By Credit Federal | Published 03/28/2007

A Credit Federal visitor asked for advice regarding a credit question:

Advice Question: "Recently, the company that issued my oldest credit account had a breach of their security systems. This necessitated closing all current credit card accounts and re-issuing new cards (and account #'s) to all of their customers.

"I have my FICO score constantly monitored by www.myfico.org's ScoreWatch system. I noticed that the closing of my old account and reissuing of my new one dropped my credit score by 11 points. I assume this is because I simultaneously raised the average age of my existing accounts and opened a new account.

"Obviously, neither of these actions were required because of anything I did wrong, and I don't feel my credit should have to take any kind of hit because my credit card company made a mistake. Is there anything I can do to get my score back to where it was before this credit card re-issuing was carried out?"

Advice Answer: "Regarding your FICO score drop of 11 points, we suggest that you order a recent copy of your credit report and compare it to your previous report. Although we are not credit report experts, our opinion is the drop in the FICO score may not be caused by the re-issue of a credit card. There are many factors which can affect your credit score, such as new lines of credit (typically not "re-issued" lines of credit), as well as applications for new lines of credit. Also, the amount of open lines of credit can affect your credit score. For example; if you recently paid off a large portion of a credit card balance, or have reached a credit limit, or you have been granted a higher credit limit, these may also impact your credit score. Although it may seem illogical, having a large open line of credit is often viewed as potential debt and a potential risk.

"Again, our recommendation is to review a current credit report against the previous credit report to look for changes; including but not limited to, inquiries into your report caused by you or your spouse applying for new credit, or by someone attempting to use your identity to obtain credit in your name."

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Credit Advice Question - by <a href=http://creditfederal.com>CreditFederal.com</a> A Credit Federal visitor asked for advice regarding a credit question: Advice Question: "Recently, the company that issued my oldest credit account had a breach of their security systems. This necessitated closing all current credit card accounts and re-issuing new cards (and account #'s) to all of their customers. "I have my FICO score constantly monitored by www.myfico.org's ScoreWatch system. I noticed that the closing of my old account and reissuing of my new one dropped my credit score by 11 points. I assume this is because I simultaneously raised the average age of my existing accounts and opened a new account. "Obviously, neither of these actions were required because of anything I did wrong, and I don't feel my credit should have to take any kind of hit because my credit card company made a mistake. Is there anything I can do to get my score back to where it was before this credit card re-issuing was carried out?" Advice Answer: "Regarding your FICO score drop of 11 points, we suggest that you order a recent copy of your credit report and compare it to your previous report. Although we are not credit report experts, our opinion is the drop in the FICO score may not be caused by the re-issue of a credit card. There are many factors which can affect your credit score, such as new lines of credit (typically not "re-issued" lines of credit), as well as applications for new lines of credit. Also, the amount of open lines of credit can affect your credit score. For example; if you recently paid off a large portion of a credit card balance, or have reached a credit limit, or you have been granted a higher credit limit, these may also impact your credit score. Although it may seem illogical, having a large open line of credit is often viewed as potential debt and a potential risk. "Again, our recommendation is to review a current credit report against the previous credit report to look for changes; including but not limited to, inquiries into your report caused by you or your spouse applying for new credit, or by someone attempting to use your identity to obtain credit in your name." Get personal finances under control and pay bills timely. Use our free <a href="http://creditfederal.com/personal-budget.html">personal budget</a> software to <a href="http://creditfederal.com/track-expenses.html">track expenses</a> so you can stop wasteful spending, and use our free <a href="http://creditfederal.com/reminder-pay-bills.html">bill reminder calendar</a> so you send in your payments on time. Free desktop software to <a href="http://creditfederal.com/balance-checkbook.html">balance checkbook</a> entries, or use the software as a computer <a href="http://creditfederal.com/checkbook-register.html">checkbook register</a>. This article provided courtesy of <a href=http://creditfederal.com target=_new>www.CreditFederal.com</a>, a personal credit resource of good or bad credit credit cards and loans.

Credit Tip: Need a high limit for Christmas credit card charges? If you have bad credit, consider a personal loan by refinancing your mortgage. Even if you have cash to buy Christmas presents, we recommend using a prepaid card to make purchases because it's safer than carrying cash.