Posts Tagged tips

How many credit cards are too many?

It will depend on many factors, including your income level, credit history and other ongoing loans. Many financial advisors will tell you to keep just one or two - after all, unless you’re planning to carry pretty high balances, there’s really no point in having more than that.

American consumers, on average, have four credit cards each. A considerable number (14%) have over 10 cards each. How many do you have?

Too many cards can encourage unscrupulous spending simply by having the means to be able to do it. Credit cards can feel like cash once you’re in the store salivating at the thought of buying all sorts of stuff. As a result, buying what are otherwise unnecessary expenses can prove a little too hard to resist.

Keeping 10 credit cards also mean you’re paying annual fees ten times a year, apart from maintaining and tracking balances for ten credit cards. Cutting them down to one or two will not only eliminate those yearly charges but also save you some time by removing many card-related activities from your to-do list, from reading statements, paying balances monthly and regularly updating personal information.

When you’re cutting out credit cards, though, don’t rush into it and call up eight issuers at the same time. While you want to eliminate the temptation of extra credit, you don’t want your credit rating to suffer as a result.

Add up your total credit card limits and compare them to your existing credit balance. If cutting off one credit card will bring your balance to over 40% of your total line of credit, better wait until you pay it down further first. Cut down them one by one, ensuring that your balances, at the least, stay within 30% to 40% of your available limit.

Got a little too much credit card balance to handle? There are many ways to help cut it down and a short look among websites and personal finance magazines can easily show you there is no shortage of advice. I’ve read a whole lot of them over the last couple years and if you apply them religiously, most of them should work.

Here’s a bit of advice based on my own experience cleaning out my credit card debt.

* Organize your debt - Make a list of all your cards, how much you owe from each, and current APR. This will help you get a clearer idea of which ones are hurting you the most - naturally those ones with high finance charges that you’re carrying large balances on. Try to pay down the most damaging ones first.

* Use your rewards points - Some cards will allow you to use your rewards as card payment. You’ll probably get a bad deal, but with large enough reward points, it should help ease the burden.

* Call up your card issuer to arrange better payment terms - If you have too much debt and feel that settling it will take you too long, call up the card company to waive over-the-card-limit charges and late fees, even for just a couple of months. At worst, they’ll deny your request. At best, you can save a ton in additional fees. If it doesn’t work the first time, try again. Persistence, in this instance, can do wonders.

The Annual Percentage Rate (APR) is one of the most important things to look or in a credit card. When you’re intending to keep a balance, most especially, a high-APR card can mean thousands more in interest over several years compared to a lower APR offer. However, APR should not be your only concern. Sometimes, other factors can play more importantly into how much value you can get out of your card.

For instance, if you’re familiar with your credit history and know that you will occasionally end up paying late, a card with a slightly higher APR but a considerably lower late fee can prove a better deal. If you regularly pay off your balance from month to month, on the other hand, the APR may not be so important as a $0 annual fee and rewards features.

When getting a new card with a low APR, always check whether it is an introductory rate or the actual finance rate of the card. Many cards offer very attractive low teaser rates to entice customers to apply but they typically last only between six months to a year. If it is an introductory rate, make sure to ask what the updated APR will be and whether any other part of the deal changes along with it.

One of the most best things with low APR cards is the ability to transfer existing balances from other cards and pay them off at the lower, more manageable rates. If you’re interested in doing this, make sure to check our three-part feature on balance transfer pitfalls so you can take advantage of this service without falling prey to common cardholder mistakes.

Here’s a couple of credit card tips in this season of shopping.

Paying By Check Versus Paying By Card

Generally, paying by card is a better option than checks. Remember that checks can get stolen, washed and used by thieving individuals. Cards are safer on that end, not to mention that the US Fair Credit Billing Act gives cardholders plenty of protections.

Special Prices For Credit Card Purchases

More and more merchants are tacking on higher prices on credit card purchases compared to shopping with cash, as an incentive to spare the store of the extra trouble card purchases can be. Save for a handful of states, there’s no concrete law against.

Discover allows it with no problem except for the aforementioned states while Amex, Visa and Mastercard expressly forbid credit card surcharges. Even with most of the credit card companies officially frowning on the practice, though, merchants continue to get away with it.

Instead of announcing the price difference as a surcharge, retail stores will often point to it as a discount for cash purchases. This means that while they cannot “charge you a premium” for swiping for a sale, they can “give you a discount” for paying in cash. It effectively works the same way but gets around the policies of the credit card companies.

Is it legal? Yes. Is it fair? Well, when has fair ever been an issue when it comes to siphoning your money away?