Posts Tagged ‘credit cards’

Apparently Debt is the New Cigarettes

Thursday, June 23rd, 2011


(photo credit: paalia)

Now, debt isn’t necessarily a bad thing, okay? But this is a little crazy. For the past 25 years, people in their early and mid-twenties have reported feeling a thrill of maturity and self-confidence when they first started to dig themselves into the debt hole.

Whether the money was going toward education or just going into the “I’ll pay for this pizza later” pile, young adults – especially those in the lowest 25% of income earners – said they experienced greater “self-esteem and perceived mastery” when they began to run up a tab.

Some kinds of debt are better than others. In general, debt that can be considered an investment in something – like a home, or an education that can get you a better job – is a good thing. But debt that gets you nothing but fees, interest rates, and a pizza that has long since been digested and forgotten – i.e., credit card debt – is not good.

The most important factor in determining whether your debt is good or bad is whether you’re able to make payments in full and on time. If you don’t, your credit score will suffer and you’ll find yourself on the road to Massive Debt.

Which, by the time you reach 28 (according to the study), will start to make you feel kind of bad about yourself.

It’s All in the Wrist

Wednesday, May 25th, 2011


(credit: JASON ANFINSEN)

Going to Bonnaroo this year? Prepare to wear your credit card on your sleeve. Er, wrist. Concert producers have switched from a paper-based to a microchip-based ticketing system, which means you’ll be wearing your right to be there in a little plastic bracelet on your wrist.

But wait, there’s more! Concertgoers can also choose to embed their credit card information in their bracelets, so they’ll be able to pay for stuff without searching for their wallets. (We all know how much of a hassle that is, right?)

You’ve got to love how easy it’s becoming to spend money. Okay, maybe it’s not such a good thing for our budgets (or our souls) here in the U.S., but think about the implications for people who live in countries with developing economies… Technology like this could eliminate a lot of hurdles to economic participation – kind of like how the invention of the cell phone ended up democratizing long-distance communication in Africa. (In 2005, 1 in 11 Africans had a mobile plan; only 1 in 33 had a land line.)

Student Loan Debt Exceeds Credit Card Debt for the First Time in History

Friday, April 29th, 2011


(credit: scui3asteveo)

Q. What’s the difference between defaulting on your student loans and defaulting on your credit card debt?

A. If you fall into a hopeless debt spiral because you can’t pay back your credit card company or your mortgage, you can declare bankruptcy and get a clean credit slate after a few years. If you default on your student loans, you can never escape. Ever.

Unfortunately, it looks like a lot of college grads are about to find themselves with a black mark on their permanent records. Your credit history, unlike that mythical permanent record your teachers threatened you with in 4th grade, can really affect your opportunities in life. It can determine whether or not you get a credit card, a school or car loan, or a mortgage on a new home. Some employers even check credit reports to get the dirt on potential new hires.

Check out this article on good.is for more fun details and a glance at the ever-increasing Student Loan Debt Clock!

See also: this depressing article on “mal-employed” college grads.

Also see also: this list of the “20 most useless college majors,” which shows the limited mid-career earning potential for chemistry majors, among other obvious low-paying career tracks (hello, art history scholars!) Of course, being “useless” financially doesn’t mean your degree of choice won’t make your heart soar like an eagle. We recommend you use your own criteria for success when making major career choices. And don’t default on your student loans.

Whoa – Credit Card Fees Higher Than Ever!

Wednesday, February 2nd, 2011

“NEW YORK (CNNMoney) — Interest rates are now hovering near record highs, at an average rate of 14.72%. And if your credit is bad enough, you could even end up with a rate as high as 59.9% APR.

That’s because while the CARD Act helped crack down on certain fees and requires more disclosures, it didn’t cap every credit card holder’s worst enemy: interest rates.”

What do you think?

Do you know how much interest your card company will charge you for a late payment?

Santa’s Skipping The Credit Card Debt This Year

Friday, December 10th, 2010

Credit card companies are freaking out as they try to entice shoppers to pay for gifts with credit. But those 5% cash back offers aren’t exactly worth taking on thousands of dollars in debt.

  • Even though holiday spending is up compared to last year, shoppers are less likely to whip out their credit cards at the register this year.
  • Some shoppers are trying to avoid taking on more dangerous debt, and some simply lost their cards because of the recession and last year’s credit card reform. Outstanding credit card debt is “bad debt” because it lowers your credit score.
  • Card issuers make money when customers run up their credit bills and then fail to pay the entire balance at the end of the month. If they miss payments, their interest rates go up, and so does their total amount owed.

Facts & Figures

  • Use of Visa and Mastercard cards fell 11% in the past year
  • Spending on Black Friday was up more than 6% over last year
  • 15 million Americans lost their credit cards because of the recession and new credit card regulations

Best Quote

“With the interest rates, it just seemed like I never paid it off.” – Liz Gonzalez, talking about her credit card debt

Loan-Linked Debit Cards Sidestep College Credit Card Law

Tuesday, October 5th, 2010

The CARD Act of 2009 has barely been in place for a month, but companies are already turning a profit with a variation on the theme…

  • A company called Higher One has figured out how to make money on college students using plastic, despite recent regulations designed to keep credit card companies from preying on the under-21 population. And they’re not the only ones finding loopholes in the new regulations: PNC Bank has been encouraging schools to market PNC’s products to students on campus, since PNC is now barred from doing so itself.
  • With the cooperation of school administrators, Higher One links student loan accounts to debit cards, allowing students to spend their financial aid funds anywhere with a single swipe. The cards are accepted anywhere MasterCard is, and they’re often branded with the school’s emblem.
  • Though participating colleges say the card program makes accessing financial aid easier for students, many students are not convinced. The cards come with all sorts of fees, and the way the program is pushed by schools makes it look suspicious. Some schools use the cards as substitutes for student IDs, requiring everyone on campus to have one even if they don’t have a HigherOne account.

Facts & Figures

  • The penalty for not using your Higher One debit card for 9 months is $19 per month.
  • Other fees include $2.50 for ATM transactions with other banks and $0.50 per transaction made as “debit” (entering a PIN) rather than “credit” (signing a receipt).
  • 675 colleges in the U.S. participate in Higher One’s debit card program.
  • Higher One’s sales in the 3rd quarter of 2010 were $27 million.

“The [Higher One] Refund Card mailing may look like an unwanted credit card offer. PLEASE DO NOT DISCARD IT.” – From the website of the University of Maryland at Baltimore

Your Friend Can Now Lend You $20 Using A Credit Card

Friday, October 1st, 2010

Is this the end of the entire credit card business model as we know it??

  • A new company called Square is blowing the minds of credit card company executives everywhere. Square produces a little gadget that plugs into the headphone jacks of a variety of iThings and the Android phone. That’s where things get crazy.
  • The free device allows anybody with a bank account to accept credit card payments in person or over the phone.
  • Usually, only businesses accept credit cards. They have to purchase expensive equipment and then pay fee after fee just for the ability to process credit payments. Square Up changes that, eliminating equipment, setup, and maintenance fees.

Facts & Figures

  • Square’s chief executive is the co-founder of Twitter.
  • Each time you process a payment using Square Up, the company keeps 2.75% of the transaction amount, plus $0.15.
  • At first, transactions are capped at $1,000, but that cap can be raised over time or for established businesses.

A Different Kind Of Credit Crunch

Friday, October 9th, 2009

Pay now or pay later? In a bad economy, more consumers are choosing to feel the effects of their spending right away.

  • In a significant shift in credit-happy American spending habits, people are beginning to use their debit cards more than their credit cards to pay for purchases.
  • The recession has most consumers trying to curb their spending, which the immediate monetary loss of a debit card transaction can make easier. People are also shopping less for the big-ticket items that are usually paid for with credit, but they continue to use debit for everyday purchases such as groceries.
  • The drop in credit card transactions may also have something to do with recent legislation, which had the effect of credit card companies lowering limits and raising fees – and making themselves less attractive to the struggling shopper.

Facts & Figures

  • According to the Federal Reserve, total revolving credit went down $6.1 billion in July.
  • Both Visa and Mastercard saw debit card transactions increase and credit transactions decrease in the first part of 2009.
  • In the past 15 years, debit card transactions have grown to represent more than 50% of all non-cash transactions.

Best Quote

“People are managing their money in a different way. You clearly have a situation where those people who have jobs are exhibiting recession anxiety and they are making more debit transactions.” – David Robertson, the Nilson Report (which tracks credit card industry)

The White House Takes On Credit Card Fees

Monday, April 20th, 2009

Credit card companies aren’t always crystal clear about their fees & charges; D.C. is taking a hard look at the fine print and you should, too.

  • President Obama is seeking reform on “credit card abuses” – practices that include misleading credit offers and extremely high interest rates.
  • Congress is already working on legislation to combat certain fees and rate increases, but support from the White House should help these measures pass.
  • Banks are wary of the plan, saying the government should wait for existing legislation to go into effect before pursuing more.

Facts & Figures

  • There are already new rules limiting credit card rate increases, but they won’t go into effect until 2010.
  • Among 21 of the biggest banks that received federal bailout money, overall lending decreased by 2.2% in February.
  • Number of specific plans unveiled so far by the White House to deal with these issues: 0.

Best Quote

“As we go forward we need to be careful about piling on rules that very much may have the impact of restraining the availability of credit.” – Edward Yingling, President of the American Banker’s Association (tha banking industry’s lobbying group)

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What is the difference between a debit card, a credit card, and a charge card?

Thursday, April 9th, 2009

All three cards allow you to make purchases without handling any cash, but each has its benefits and drawbacks.

A debit card is linked to your bank account and when you use it to buy something, the money is immediately taken out of that account. This is a good option if you want to make sure you’re only spending money you have, as the card will generally be declined if you don’t have enough money in your bank account to cover the purchase. But using a debit card won’t help you build your credit history.

A credit card is like a short-term loan. It is not linked to any bank accounts. Instead, the a credit card company covers the cost of your purchase today (up to a certain amount per month) with the understanding that you will pay them back later. You don’t have to pay it all back right away, but you do have to make a minimum payment every month. If you don’t pay in full, your remaining balance plus interest (called APR) will appear on next month’s bill. Using a credit card responsibly can be a great way to build a good credit history, but consistently missing payments or carrying a balance from month to month will do the opposite.

A charge card isn’t a loan and it isn’t linked to a bank account. This type of card covers the cost of your purchases today with the understanding that you will pay back what you owe at the end of every month. Unlike credit cards, charge cards do not have a pre-set spending limit.  If you do not pay off the full balance at the end of the month you will be hit with high fees or possibly a spending cap. Charge cards are good for people who want unlimited spending and can afford to pay off their balance each month. However, unlike credit cards, charge cards cannot help you build a good credit history.

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