Cash Back Credit Cards That Have Your Back

Posted on November 27, 2019 | by Carlie Lawson

You might think you already did everything possible to create the perfect budget, but if you have not started using a cash back credit card, you have not yet. You can earn back cash or miles for travel using one of these credit cards. If you just started college, you can potentially get one of these amazing cards to help pay for your monthly expenses.

These cash back credit cards let you earn back a small percentage of what you purchase with them each month. Depending on your expenses each month, that can create a significant payback for you.

What Are Cash Back Credit Cards?

Cash back credit cards offer a rebate or refund of a percentage of your monthly charges. Typically, the rates offered by this type of credit card range between one and two percent.

These cash back credit cards fall into the category of rewards cards. If you do the research, you will see that more than half the companies offering rewards credit cards offer a cash back card.

Cash Back Cards to Try

Discover it Cash Back

The Discover it Cash Back card offers 5 percent cash back on up to $1,500 each quarter. You need to activate the bonus categories to get that rate. It offers a no annual fee. Some retailers do not accept Discover, but you can earn back money from those that do.

Double Cash Card

We’re not sure how Citibank affords the Double Cash Card, but you earn two percent cash back on all purchases – one percent when you buy, one percent when you pay. There are no categories, caps and no annual fee. You have to pay the minimum payment due on time to keep earning. It also allows balance transfers although you do not earn cash back on those. You do get zero percent APR on the transfers for the first 18 months you have the card. Thereafter, it switches to a variable 15.49 percent to 25.49 percent. You must make the balance transfer within the first four months you have the card. You will pay a fee of $5 or 3 percent of the amount transferee, whichever is greater.

American Express Blue Cash Preferred Card

The American Express Blue Cash Preferred Card costs a whopping $95 per year annual fee, but you will make it back pretty easily. You earn six percent cash back when you buy groceries in any US supermarkets, up to a $6,000 per year cap. Then you switch to a one percent cash back. You get the cash back as reward dollars redeemable as a statement credit.

Amazon Rewards Visa Signature Card

If you have excellent credit, apply for the Amazon Rewards Visa Signature Card, a branded cashback credit card from Chase Bank. It offers no annual fee. You earn cash back of one to three percent and earn a signup bonus of $50. The variable APR ranges from 16.24 to 24.24 percent. Enjoy no foreign transaction fees and cash back on gas of up to two percent for every $1 spent. Amazon Prime members earn five percent back when shopping at Amazon.com and Whole Foods and three percent back for non-Prime members. But you need at least a credit score of 690 for this luxury card that gets you the best rates at 900 luxury hotels worldwide and concierge, plus Travel Accident Insurance, Baggage Delay Insurance, and Lost Luggage Reimbursement.

Discover It Secured Credit Card

If you have not so awesome credit, apply for the Discover It Secured Credit Card. You will need to put down a refundable security deposit and that amount varies depending on how much you want your credit limit to be. It allows balance transfers with an applicable APR of 25.24 percent. You can obtain a balance transfer 10.99 percent for up to six months. You can qualify for this card with a credit score between 300 and 700. There is no annual fee and a cash back rate of up to two percent. If you carry a balance, avoid this card. Improve your credit or build it.

How Much You Earn Back

Most cards offer a one percent rate of return. If you charge $1,000 in a single month, you earn back $10. While that may not sound like much, if you charge a lot each month or use your credit card for business expenses, you could amass significant charges. Spending $10,000 per month would earn you back $100.

Cash back credit cards come in four reward rate types:

Flat,
Variable,
Accelerated,
Rotating.

A flat rate credit card pays the same percentage of cash back regardless of your spending or the items on which you spend it. A variable rate offers different rates for various spending categories while an accelerated credit card offers a higher percentage reward for purchases in one or more categories. Typically, the higher rate reaches 5 or 6 percent while the main rate remains one percent. You might be capped on how much you can earn in the higher-rate categories annually.

A rotating rate provides the higher reward for each various category, but not all categories at one time. Rather, some cards, rotate to a new spending category every quarter. This lets customers benefit from making major categories to earn the higher, five percent cash back rate. This is a feature you must activate, such as that of the Chase Freedom credit card.

Specialized Cards with Multiple Rewards

You will need to choose a cash back credit card based on your spending habits and the credit card’s rewards structure. Many of these cards only pay you back when you purchase travel or when you shop at specific stores. The ideal credit card offers a rewards structure that fits your existing buying habits.

Some cash back credit cards offer a sign-up bonus. It may require you to spend a specified amount within a time frame to qualify. For example, you must charge $500 in the first three months you have the Wells Fargo Cash Wise Visa to earn its $150 cash back bonus. A good rule of thumb is to choose a cash back credit card with a higher cash back reward percentage and small sign-up bonus.

With some cash back credit cards, you earn points that convert to a cash back amount. These often have point caps that limit how many points you can earn during a specified period, such as a per month, quarter or annually. Other cash back cards offer cash value refunds issued as gift cards. In this case, you need to ensure that the gift cards are for stores you use. The point is moot if they issue Visa gift cards since you can spend those anywhere.

Keep in Mind Your Existing Habits

Do you want a credit card with a standardized reward or one with accelerated earnings for a specific type of purchases? Typical accelerated earning categories include gas, groceries, dining out, drugstores and travel. Some incentivize parking or paying for your utilities.

Some cash back credit cards limit their rewards earnings to specific stores, gas stations or restaurant chains. Choose a credit card that lets you earn at places you are already a regular. Your cash back credit card should let you spend as you usually do and still earn rewards. The idea is to reward your existing expenses, not to change where you shop.

You might have to register online to earn the cash back. If you forget to register, you can invalidate your purpose for getting the card. This also applies to special promotions from the credit card.

Typical Cash Back Credit Card Requirements

Okay, let me be totally honest with you here. You need a terrific credit score to get a cash back card. Rewards cards are tough to come by. You can count on the required credit score being in the very good to excellent range.

While there are good credit cards for bad credit, they are not typically cash back cards. A few, like the Credit One Bank Unsecured Visa with Cash Back Rewards, may extend credit to those with good scores.

You need to know where on the FICO scale your credit score falls before you attempt to apply for any credit card.

FICO Score Guide

300-579 Very Poor 16% not offered credit or only secured credit

580-669 Fair 17% subprime borrowers who obtain high APR credit cards

670-739 Good 21% average borrowers who pay bills on time

740-799 Very Good 25% obtain receive better than average APRs

800-850 Exceptional 21% obtain the best APRs on credit cards

The Annual Percentage Rate (APR) on Cash Back Credit Cards

Cash Back Credit Cards were made for people who pay their bills off completely at the end of the month. That is because this type of credit cards generally features a higher interest rate than others. You are paying for the privilege of getting money back every month. By paying your bill in full every month, you avoid the interest payments. This increases in importance as the interest rate rises.

You need to pay it off completely every month so that the interest does not eat up the payback. The idea to devise every possible angle to max out the cash back reward.

Read the card details very carefully. It may offer a low sign up introductory interest rate, but that could jump to a high interest rate six to twelve months into the life of the card. One example of this card is the Wells Fargo Cash Wise Visa card. It gives you a zero percent rate for 15 months which then jumps to 15.49 to 27.49 percent, a variable interest rate.

Prepare for the Fees on Cash Back Credit Cards

If you are accustomed to no-fee credit cards, prepare for a shock. These cards typically carry annual fees ranging from $50 to $100. The higher fee cards usually offer bigger cash rewards for purchases.

How do you know if the fee is worth the cash back reward? Calculate how much you would get paid if you moved all your spending to the cash back card. If it more than covers the fee and you can avoid the interest payments, it makes the card worth it. If you would lose money though, look for a credit card with no annual fee or a low annual fee.

Never pay late. You will get charged a late fee and it will hurt your credit. Just one of these fees can cancel out the money you made on the cash back. You must make timely payments.

Do you travel to other countries? Do you shop on international websites? You will get charged a foreign transaction fee. Shop around for credit cards with no or a low foreign transaction fee.

How to Redeem Points on a Cash Back Credit Cards

You will have a selection of ways to choose from regarding how you want to get paid. Different cards offer different ways to redeem or cash out your earned points. You could do any of the following:

Mail a check.
Have a direct deposit sent to your bank account.
Apply the cash back reward to your credit card balance.
Get a gift card for a retail store such as Amazon or Walmart.
Donate the cash back to a charity you choose.

Most cards allow you to cash out from the bank’s website or by phoning their customer service center.

How Often Do You Get Money Back?

How often you get paid varies by the card. You might get a percentage back every month or you might have to wait until you hit a minimum payout amount such as $20.

Depending on the cash back credit card, the rewards can expire. Here’s where you need to very carefully read the credit card agreement, check your credit card’s expiration date and check its website for the forfeit policy. Some credit cards do not expire. As long as you keep your card active, you keep your earned points.

There are also cards that enforce a cutoff time for redemption. This typically falls between one and five years. If your points do expire, redeem them on a regular basis of six to twelve months. If you ever decide to close your credit card, redeem the points first. This also applies to if you decide to transfer your balance to another card to save money on your exorbitant interest rate. Do not forget because if you zero out your balance, you could render your card inactive thus losing all of your points. Yikes!

How Do You Get a Cash Back Credit Card?

These cards make a perfect fit for you if you have good credit and you can pay your balance every month. The better your credit score, the better interest rates, and higher payback percentages you will get. You also need to have predictable spending habits. You need to spend enough on the card each month to earn the rewards, but little enough that you can pay it in full at the end of the month.

Start at Loanry.com. This credit card shopping trick can help you find the ideal credit card for you. It makes it really easy to shop for a good credit card for you. Every time you apply for a credit card or a loan, your application results in the creditor making a hard hit to your credit report to obtain a copy and report that you asked them for money. But Loanry does a soft check, so there’s only one of many advantages.

You Got It!

After your card arrives, you need to carefully review what you can spend on the credit card. If you go over your limit, they will charge you fees which will drive you further over your limit.

Also, pay attention to what you can earn points or cash back on and what you cannot. You will not see cash advances listed as something on which you can earn cash back. Remember that when you see the ATM after the fourth or fifth beer. You cannot earn cash back on a cash advance. Cash back only comes from purchases.

The opposite will happen when you make a cash advance. The credit card company charges you the money for the ATM use. If they do not own it, the company that owns it will charge you, too.

Then you get hit with the cash advance fee. You think the $3.50 or $5 non-member ATM fee was a lot. Wait until you see your credit card statement and find out that the cash advance cost you $25. Wait? That was all the available credit you had left? Nope. They do not care. It is theirs now.

First, pay it off every month in full and do not let your credit limit get near the maximum.

Be ready. Those fees will kill you.

Final Thoughts

As great as cash back credit cards sound, they have much higher fees and interest rates. Be careful if you decide to take one out without having a full-time job and a savings account capable of covering a few months full payments. They can help you make back some money in the right situation. If you travel a lot and want free flights or hotels, go for it. If you just want a starter card, a simple credit card, go for something with a super low-interest rate and low fees. That makes a great card for learning the ropes.

How to Evaluate a Credit Card Offer: Credit 411

Posted on November 13, 2019 | by Carlie Lawson

You probably get a ton of credit card offers in the mail and via email. Every week another credit card company seems to want you to apply. You are pre-approved, they claim.

Ah, but what does this really mean? Pre-approved?

It does not necessarily mean they will send you the credit card they advertise. In fact, those advertisements get away with sounding so good by hiding tiny caveats in the small print at the bottom of the page or on the back of the offer letter. You need to become an expert at spotting a scam, so you can report it and save yourself and others money. Here is the best way to determine which offers really live up to the hype and which to skip, so you can build your creditworthiness.

How to Evaluate Credit Card Offers

How do you know which card advertisement is honest? And how can you tell a trap from a treat?

Read on and I’ll explain, in detail. As you will learn, the details really matter. You can evaluate any card offer in ten steps. There is no such thing as a simple credit card offer, so you have to know your stuff.

10 Steps to Evaluate a Credit Card Offer

Evaluate the bank or financial institution offer the credit card. Avoid applying for a credit card from a lender with whom you are unfamiliar. It could be a scam. Unsolicited credit card offers typically do not offer the best interest rates or other terms.
Determine if it meets the criteria of the credit card you desire. If you need a balance transfer card, but the offer extends a potential rewards card, it does not meet the card requirements of what you need. Taking out a credit card you do not need just mess up your credit more.
Study the fee schedule. How easily avoidable are they? I once had a card with a bank that got into huge trouble with pretty much every financial oversight agency because they left off the caveats of their fee schedule. One of their no-nos was claiming a person had paid late if they paid at 5:01 pm on the due date – in their time zone. That is illegal. The credit company has to fully explain all fees and card terms in the documentation they give you. That bank got sued and had to pay back numerous “late fees” to people who had paid their payments on the day they were due. I learned the hard way not to do business with new organizations or “re-structured” banks.
Do the math to determine the value of the annual fee. You may have the option to take out the card with an annual fee or the one without. Calculate which provides a better deal. Grab a calculator and pen and paper. Make notes so you can keep the various credit cards straight.
Calculate the cost of financing purchases on each credit card offer. Be honest with yourself. Lying to yourself about how you handle money only hurts you. It is one of the biggest credit card mistakes. If you typically make only the minimum payment, then you won’t want a card with a mid- to high-interest rate. If you never carry a balance month to month, this has little bearing, so long as you have enough savings to keep paying the card in full if you lost your job.
Closely examine any rewards program offered. The reward rates vary on these cards and everyone is different. Typically, different types of purchases earn different payouts. You need to reference your budget to determine where you spend money. That will tell you whether the rewards card will benefit you. If it pays you back on airline flights, but you only fly somewhere once every five years, that will not benefit you. Also, consider for what items you can redeem credit card rewards. Common items include cash, travel, gift cards, charitable contributions, and merchandise.
Study the credit card offer for other card benefits, such as shopping and travel protections. The credit card information also covers other provisions the bank may extend include price and purchase protection. The card might include trip cancellation and interruption protection, car rental insurance and lost baggage protection. Cards with EMV chips have become more popular and this factor keeps your finances safer since credit cards with this feature are much tougher to hack.
Consider the bank issuing the card and which retailers accept it. While four ..major payment networks exist — Visa, MasterCard, American Express and Discover, only the former two are widely accepted.
Check if the card issuer extends credit to those with your credit score. Also, check for other application qualifiers. You can enhance your approval rating by only applying for what you genuinely qualify. If you have a low-income, do not apply for a platinum card. If you have bad credit, do not apply for cards offering prime rates. Make sure you already meet income threshold requirements or membership requirements.
Read the fine print carefully. Read it a few times. You need to fully understand everything in the fine print. Some credit cards will actually repossess the items you purchased with them rather as a bank takes back your car if you miss the payments.

Let’s go into some of those topics in greater detail. First, let’s talk about the main types of credit cards available to you.

Credit Card Types

You typically come across four types of credit cards, balance transfer, rewards, temporary zero interest and secured. Each offers vastly different benefits.

Balance Transfer Credit Cards

These cards let you pay off existing credit card debt by transferring the balances to a card with a low-interest rate or no interest rate. You should use these to pay off high-interest rate cards. You may pay a fee to transfer but will probably make it back through the interest saved.

Rewards Credit Cards

You can earn cashback or other rewards by using these cards. If you pay off your balance in full each month you can use these cards to make money. Some provide a signup bonus that pays you when you hit the required spending minimum within a specific time period.

Introductory Zero Percent APR

Often, this gets offered in conjunction with balance transfer cards. Typically, these offer zero percent interest on purchases and balance transfers for six to 18 months.

Secured Credit Card

Secured cards let an individual re-establish their credit by matching the credit limit with a deposit of the same amount. They can help a person with poor or limited credit obtain a card to prove their creditworthiness. These differ from prepaid cards because you still must make timely payments and your payment activity gets reported to the credit bureaus.

If the card offer you receive does not meet your needs, ignore it. Do not apply for every card offer you get since this will ruin your credit score. Every time you apply for credit of any type, the creditor requests your credit report from a credit bureau. This activity results in what those in the financial sector call a hard hit to your credit score. Every application drops your score by two to five points. You can quickly tank a decent score by applying for only a few cards. The 10 to 25 points a score drops from five applications can take a 700 to 675. That means going from a “very good” to a “good” score. Only apply when you feel certain you will get accepted for the card. That means you ensure you meet all of the criteria before you try.

The Fees, The Fees!

Every credit card has fees. There is no way around it. The bank wants to make money, and they charge you at every possible juncture to do so. These fees are a method of risk reduction.

Financial lending institutions are typically quite risk-averse. They like very low-risk situations only. Like an insurance agent not wanting to extend a wind policy on the east coast of Texas because they would have to pay a claim so often, a bank or credit union does not want to extend a credit card to those with low credit scores because they are doubtful they will get paid on time or at all.

Individuals with high credit scores obtain credit cards with much lower fees. Those cards also charge far fewer fees. Check the credit card offer for the full fee schedule. Look for the following.

Annual Fee

Every year you will get charged for the privilege using the card provides. This could amount to $25 a year or $200. Annual fees are all over the place. The range is huge. Higher fees typically provide higher rewards.

Late Payment Fee

Nearly every credit card charges late fees. They might vary, but you should expect an average cost of about $35 if you pay late. The bonus is you can avoid this by paying on time. Set up automatic payments so you do not need to worry.

Cash Advance Fee

Another fee you cannot avoid the credit card having is your cash advance fee. If you use the card to get money back from the ATM or bank branch, you get charged a cash back fee. You will never need to pay this if you do not use the card for advances. If you use it for an advance though, you do pay the cash advance fee as well as a higher APR. Also, advances do not provide a grace period, so you will get charged interest from the first day you take out the advance.

You also need to watch for situational fees. The most common of these is the foreign transaction fee.

Foreign Transaction Fee

You only incur this foreign transaction fee when you use your credit card in another country. This percentage-based fee, typically three to four percent, gets charged every time you make any purchase in another country. To avoid it, just do not make a charge using that card when you travel to another country.

Calculate the Annual Fees

Up there in step two, you read about comparing types of cards and now we covered many potential fees, too. The annual fee requires your closest attention.

As mentioned in step four, credit cards can have two annual fee options, one with and one without. You need to compare the costs with the credit card’s benefits. Some are more straightforward than others. Here’s the math.

Let’s say you have two versions of the same card, one with a fee, one without. Both feature a sign up bonus, but in different amounts. You need to find the y, in this case, how long it takes for the cards to exhibit equal benefit. Since you only get charged $89 in years two and thereafter, you need to figure out how many years the bonus pays for as compared to the bonus you get with the no annual fee card.

Card A: $400 signup bonus, $89 annual fee waived the first year

Card B: $200 signup bonus, no annual fee

The Math for Card A
$400
$400/$89 = 4.49 (round to 4.5)
4.5 + 1 = 5.5 years of annual fees paid

The Math for Card B = 200
Provides you with a flat rate.
You do not pay any annual fee, so the $200 is yours to spend as you like. You could pay it to the card once you have purchases to avoid paying interest.

If the card with higher bonus has better rewards, use the $400 and the fee waived year to earn rewards, then just before year five’s annual fee occurs, transfer any remaining balance to a balance transfer card after cashing out your rewards. You made money on the deal.

Compare rewards rates, too. Some cards with an annual fee provide more points per dollar spent. The only time you benefit from this though is if you spend money on what the card rewards are.

Fees Credit Card Companies Don’t Want You to Know

Bait and Switch: It Is Illegal

So, remember way up there where I mentioned that the card offer you get in the mail is not necessarily the card you get? Yeah. That happens all the time, but it is not supposed to happen.

Advertising one product, but switching in another after the contract gets signed or the product gets purchased is against the law.

Credit card companies try it all the time though. That keeps the lawyers busy.

So, you sifted through the whole pile. You worked your way through all the math on multiple orders. And you chose the card. You applied to the pre-approved offer. Then you got a letter that says you are approved but wait. You got approved for a different card than you applied for from the pre-approved offer. Somewhere in this letter, perhaps in very teeny, tiny print, it says something to the effect of, “Well, dude, you did not quite qualify for that one credit card, but we have this nearly, equally fabulous card for which you do qualify. Here it is, all wrapped up with a bow on the front card face and an [insert way obscene credit limit for your actual credit situation].”

Guess what? It is not equal to the other card. But, you will not know that unless you remain super calm and read every, single, solitary word in front of you just as you did the prior pre-approved credit card. What you probably got sent has higher interest rates or higher fees or some awful surprise.

Resist the urge to go buy a new TV and computer. Instead, do the reading and the math. For one thing, you were pre-approved. That means that they already knew your credit score. They should not have sent the letter with pre-approval if you did not actually qualify. When you find the hidden fee or the catch, you will know whether or not you should reject the card. You probably should because it typically will be a huge diference.

That’s how they get you. You excitedly tear open the envelope, recognizing the address and company on the outside. And you remember applying. But you do not read the letter. You just rip the card of the front, sign the back and go shopping! So, protect yourself. Read the letter anally. Double check everything against your pre-approval letter. (Yes, you should have kept it.)

If the card is not up to par, as my CPA pal would say, reject it. Phone the company and let them know you will not accept the new card terms. Close the account without charging to it. Doing this can save you from massive fees you did not expect. The great news is that you will only be out the two or five credit score points from the hard hit to your credit report for the check. That is much better than a surprise $200 setup fee or $100 annual fee or interest rate 10 points higher than the original.

A Credit Card Shopping Trick

If you’re looking for a magic credit card shopping trick, here’s something that may interest you. Conduct wise shopping for a credit card. You need to use combination of Creditry and Loanry to best protect your credit and to find really high quality credit cards.

Wait. Why would I say you would need Loanry when you keep getting offers in the mail for credit cards?

Simple. Those offers may not be good credit cards for you. You may actually need a credit card because you need to shop online at certain retailers that do not let you use pre-paid cards. You might need to rent a car and the rental companies typically do not rent to people without a credit card. They want to be able to tack on fees, charges and extra rental days, just in case you keep the car extra time.

So, eventually you will need a credit card. When you do, you need to be choosy about to which you apply.

The ones they mail to you in the offers may not be appropriate, but somewhere, there is a credit card perfect for you.

Loanry works like a mall. You know how you go shopping for jeans or a sweater? Loanry lets you apply the same concept to loans.

The brief form you complete on it front page may only contain basic info like your name, address and the last four digits of your Social Security Number, but it acts like a personal shopper gathering potential blue jeans for you to try on in the fitting room. Loanry makes a soft hit to your credit report that does not ding your credit score for any points. It then may find a good fit and you may get the name, URL and essential details of the credit product to you.

The site handles the research of for which credit cards you may qualify for you. You then simply read through the information and pick the offer for which you want to apply. You apply knowing that you already meet the minimum qualifications for the card.

Managing Your Credit

You need to be a smart cookie about your credit. You can use a simple website like Creditry.com to help you manage your debt and develop your credit score. If you already have credit, be sure to use a debt tracker to monitor all of the credit lines you have open.

The advantage to using a service like Creditry is that it helps you track everything that has to do with your credit. You can quickly find mistakes on your credit report and improve your credit score.

Creditry can help you watch for things that lead to credit damage and zombie debt like:

identity theft,
computer error,
fraud.

Those things can happen more easily than you think. Take identity mix ups, for example. Right after graduating from graduate school, I landed a job at a major university. The school benefits office unintentionally mis-entered my information and that of another woman who worked on a different campus. They had confused us since one has the middle initial “R” and the other has the middle initial “L.” Paperwork gets confusing when you see hundreds of the same form everyday and they were short-staffed on data entry clerks.

They fixed it, but it took time. For months, we similarly named women traded benefits paperwork through campus mail between the main campus and health sciences campus. We laughed about it and struck up a telephone friendship. We chuckled when I got notices about her then teen’s braces (and I have never had kids) and she got the ones of my physical therapy for a mountain biking knee injury (and she had never mountain biked).

Creditry can help you watch your credit report for the craziness like that. We just lucked out that we were both anal about paying our bills and sending paperwork back and forth. The benefits office eventually got it straightened out. It takes time and commitment to solve such problems. It took us months and we had a friendly benefits clerk, plus it was our employer.

Vigilance about keeping watch over your credit score can help protect your credit score and/or help you rebuild it. Use services like Creditry to monitor your credit report. Quickly respond to the credit bureau to question any unusual data.

Final Thoughts

Credit card companies will try to draw you into their lair. Tame their attempts by fully examining and analyzing each offer. If you only receive offers that do not meet your credit needs, turn to Loanry or Cashry to find the right option. The best plan is to have few credit cards with large credit lines that you do not max out. Manage your money and your credit wisely.

The brands within Goalry can help with that. We unified finance to help make shopping for loans, credit, money and real estate more efficient. These sites work together to help you achieve the goal of financial independence. To begin building wealth, you first must get out of debt. Your next step is saving with a third step of establishing and building great credit. Start now and get a handle on the credit card offers in your mailbox.

You have to be careful with your credit. Your credit cards should serve you. You should be their master. MasterCard should not be yours.

How to Use Facebook Messenger P2P Payments

Posted on August 30, 2019 | by Jackie Strauss | Leave a Comment

Facebook Messenger P2P Payments are part of the increasing need where millennials are leveraging mobile devices in order to make small payments to each other. Facebook now brings person-to-person payments to its Messenger application.

What Are P2P Payments?

If you want to get technical, every payment can be a P2P payment since every payment involves two parties where one person pays another. However, P2P payments have been popular due to apps such as PayPal, Venmo, and Square Cash. Social networks like Snapchat and Facebook have also gotten into this, along with traditional financial players.

P2P payments work by a person creating an account with a P2P solution and linking up a card so they are set to go. The next time you want to borrow $20 from a friend or split a tab, you can do so by transferring funds in just a click.

How to Pay Friends with Facebook Messenger P2P Payments

Following the instructions is easy to set up your preferred payment method and to start sending money to your friends through Facebook Messenger P2P Payments. Paying through Facebook Messenger is pretty straightforward.

Add a Payment Method

There are several different payment method options for Facebook

as a whole but only a U.S. debit card will work for Facebook payments currently. PayPal and credit cards can be added later. Both you and your friend you want to send the money to must have a Facebook account, live in the U.S., be 18 years old, have a MasterCard or Visa debit card, have your preferred currency set to U.S. dollars, and not be disabled form sending or receiving money on Facebook.

There are two ways to add a payment method, either by using the mobile app or on the computer.

If you are on the mobile app, tap on the three horizontal lines in the bottom menu. Select Settings then select Payment Settings from the menu. Tap on New Credit or Debit Card to add your card details. You can also optionally add a PIN that you enter when you want to send money. In that way, you can review the transaction before it’s sent. This provides more security.

If you are on the computer, the process is similar. You will want to click on Settings from the dropdown menu and then click Payments. From there, click Account Settings and Add Payment Method. Enter in your card details and click Save. Once you have added your payment method, you will see it listed when you click on Payment Methods.

Open a Chat and Tap Payments

Once you have added a payment method, it’s easy to send money to a friend securely and safely through the Messenger app or on your desktop when you are logged in to Facebook.com. Payments won’t be stored by Facebook and will go straight to the recipient’s bank account associated with their own debit card. You won’t be charged a fee for either sending or receiving money. Money is sent right away but it can take three to five business days before the payment will show up in your friend’s bank account.

Mobile Device

If you are on a mobile device, open the Facebook Messenger app and open a chat with the person you want to pay. You can either open an existing chat or you can use the compose button and type in your friend’s name. Tap the blue plus sign button that shows in the menu at the bottom of the screen. Then tap Payments. Enter the amount you want to pay. You can add a note about what it’s for and then tap Pay.

If you are on Facebook.com then open a new or existing chat with the friend you want to pay with the messenger button. Click on the dollar sign in the bottom menu in the chat box. Enter the amount you want to pay and your optional note and click Pay.

If you make a mistake and send the wrong amount, you don’t have any time to undo it. Instead, there are two options to fix the mistake. If the recipient didn’t accept the payment yet, send a message asking them to decline it. Payment is automatically canceled if the recipient doesn’t accept it within seven days of being sent. If the recipient has accepted the payment, message him or her and ask to have them send the difference or sum back to you.

Prevent mistakes with payments by adding a PIN and leaving it turned on. The PIN feature can be used from the mobile app and isn’t available on the web version.

Request or Send Money to Multiple Friends

You can send payments to individual friends but you can also make it possible for multiple members of a Facebook group. You will receive a chat request to make a payment if a group member requests payment from you or other members. If you are the group member that is handling the payment, you can send your request for payment to everyone in the group by opening the group chat or starting a new one and following the same instructions for sending money to individual friends.

Before you enter the amount requested for payment, you will be shown a list of the group members who are part of the group. If you only want to include specific friends in the payment, just add a checkmark beside those friends. You can include yourself if you are chipping in to the pay the same amount as everyone else in the group. Facebook also lets you decide whether you want to enter a specific amount request to everyone or a total sum amount that will then be divided amongst everyone. Once you have made the request, the group chat will display the names of those who have already made the payments so it’s easy to keep track.

Benefits of Facebook Messenger P2P Payments

Facebook Messenger P2P Payments helps keep Facebook users on the platform and adds value. It also opens the door to promotion and loyalty capabilities for advertisers. There is already stiff competition in the payments space, which include Venmo, Snapchat, and several banks. Up until the rollout of Facebook Messenger P2P Payments, Facebook users would, for example, communicate on the site about tickets to a concert but then have to go to another site to exchange money in order to purchase the tickets. With this new feature, Facebook users can stay on the site.

Currently, the strategy is only limited to P2P payments but it can also open a door to wider payment strategies for Facebook when mobile payments are growing.

Security of Facebook Messenger P2P Payments

Facebook already processes more than one million transactions daily on the site and knows that security of P2P payments is a huge concern when it comes to digital money. To manage concerns, Facebook has highlighted the use of secure systems that will encrypt the connection between users and Facebook, as well as card information. The company says that it uses layers of hardware and software protection and the payment system is kept in a secure environment that is separate from other parts of the social network. A team of anti-fraud specialists also monitor for suspicious purchase activity in order to keep accounts safe. An option for iPhone and iPad users who want additional security involves the use of Face ID or Touch ID available on the device itself.

Ways to Keep Finances Safe on Facebook

If you are going to be using Facebook Messenger P2P payments or the social platform for managing your money, there are some tips you need to consider. A password helps keep your financial information secure. When you have a successful transaction, you will see the password or PIN options for future transactions. You always want to keep this secure. Don’t let the new functionality make it easier for hackers and scammers.

You should think about if a friend requests money out of the blue without prior discussion. A person’s messenger account can be hacked. So you want to make sure you are communicating with the right person and they should know when to expect payment. Remember to not share personal details with anyone you don’t know. When you want to exchange personal information with a trusted friend, use a different platform or app so information can’t be compromised by any single website or app.

Advantages of Using P2P Payments

The main advantage of using P2P payments is that they are easy to use, convenient, and quick. Transferring funds from one person to another can be done with just a click of a button. Another advantage is the cost involved. Unlike many other payment solutions, P2P payments are between two parties. This means you don’t have to pay for expensive processing, service, or transaction fees. Many solutions don’t even charge users when they receive the money. For the most part, payments are secure since they are encrypted and there are fraud monitoring capabilities. Man platforms are also beginning to use extra security features. They will send notifications for every transaction so it’s easy to stay on top of any fraud.

Risks of Using P2P Payments

Even with so many advantages, there are still risks associated with using P2P payments. Refunds can be difficult and possibly nonexistent since there isn’t a middleman involved. Even if payments are immediate, transactions can still take up to three business days to show up in the account. There can be a lot of human error involved, such as sending money to the wrong email address. The biggest concern with P2P payments is with fraud and security. While P2P payments are secured, this doesn’t mean that they are infallible. If companies aren’t taking the right precautions against fraud, they will be charged with fines. Companies do need to stay ahead of fraudsters but there are still some risks. If you have your bank account connected to your account, instead of just a credit card, then you could be putting your personal data in danger.

Why Use Mobile Payments?

Mobile payments are some of the most convenient ways to pay. Especially since smartphones are owned by a large percentage of Americans and seem to always be in reach. Mobile payments serve as a natural extension of daily tasks. They are already done on a smartphone, from updating social media accounts to checking the weather. If you put payments in your hand as well, it’s even more convenient than before.

Mobile payments will allow fully digitized financial transactions. Since consumer payments are an important part of the household budgeting process, digital wallets can integrate easily with mobile apps and software so people can see what they are spending and how often. Mobile payments are fast. Searching for cash and waiting for a chip card transaction aren’t a problem when it comes to mobile payments. Consumers just present the mobile device, it authenticates the transaction, and they go on their way. This can create an even more user-friendly experience for consumers and can help expedite business transactions.

How Mobile Apps Can Help You Save Money

If you are struggling to save and need a loan to get out of debt, there can be money-saving apps as well as personal finance sites to help. Getting started with your savings goals can be difficult at first. So it helps to have all the resources you need.

Money savings apps use the power of technology to effortlessly save and invest. Apps are available through Android and iPhone. They help shift your behavior to help you save more, even if this feels impossible. This allows you to manage money more efficiently, so you don’t need a loan for buying what you need. In order to find the right app for you, take a look at the platform and the costs. You’ll see how these apps can help you meet your financial goals. Some examples of apps are below.

CreditKarma

Since your credit score and creditworthiness impact many factors in your life, including interest rates and even where you can live if you want to rent, you want an app that can help you track your score. The CreditKarma app provides you with credit score data from two of the major credit reporting agencies. It will offer advice on ways to raise your score so you can improve your chances of getting a simple credit card or even loans for car repairs and medical bills.

Joy

Joy can help you understand the reasons why you spend money and help you focus on making a happier purchase. The app is a money coach app and it won’t guilt you when you make an impulse purchase. Instead, the coach will help you track your transactions. You’ll also set savings goals to help align with your finances and personal lifestyle. It is geared toward finance management but can also help you lower interest rates and pay off debt.

EveryDollar

If budgeting is new to you then EveryDollar can help you get started on the right foot. This is a personal finance app that will allow you to create budgets in eight different categories, including savings, housing, lifestyle, debt, insurance, and transportation. It works by having you enter your monthly income and how much you want to spend. Then you start to balance the budget for each category, You’ll cut down on cats, pay off any loans faster, and most importantly save money.

Conclusion

Facebook Messenger P2P Payments creates another space to easily send money through a mobile device. The process is simple, whether you are sending money to a friend through the online app or through the desktop site. There is plenty of different security in place to give you confidence that your payments are secure. There are many advantages to using P2P payments, as well as mobile payments, but there are also some risks involved.

As always, it’s important to use caution. Don’t just share information with anyone through an app. Also, always keep passwords secure. While Facebook Messenger P2P payments can make payments to others even easier, there are also many mobile apps that will allow you to meet your financial and savings goals.

Tips for Paying Your Credit Card Bill on Time Every Month

Posted on August 20, 2019 | by Brandy Woodfolk | Leave a Comment

Raise your hand if you have ever been or are in credit card debt? Ok, you do not really have to raise your hand, but I am willing to bet that at least 98% of the people who read this fit the bill. I am also willing to bet that you are reading this because you are in credit card debt or you are trying hard to stay out of it. Paying your credit card bill can be challenging.

I do not think I know a single person that has not experienced some credit card debt. And why is that? Because credit cards are designed to encourage us to borrow money. That is the entire point of their existence. Lenders give us this nifty little card that is supplied with money that we can spend, and then owe interest on.

I am not being cynical or negative here. These are facts. How else do credit card companies make money? They loan you the money, you pay it back with interest. It is just like a loan, but if it is so simple why are so many people in credit card debt and how can a person stay out of it? Let’s answer these questions one at a time.

Credit Cards 101

Take out your pencils and your notebooks- we are going back to school. Let’s start with some basic information on credit cards– really basic so everyone is on the same page.

How They Work

Credit cards are really just personal loans on a card from which you can continually borrow money. When you apply for a credit card, the lender takes a look at your credit score and credit history to decide if you are a good risk. If you have a good credit score and payment history- and an income- you will likely be approved. The amount you are approved for, your credit limit, is determined by how much they feel safe letting you borrow. It will usually depend as much on your income as it does anything else.

Once approved, you will receive a card in the mail within a few weeks. The card will have money attached to it that you can then use. When you swipe that card for a purchase, there is an agreement made between the credit card company and the seller in which the credit card company basically says, “I’m covering the sale.” The retailer then transfers ownership to you because they know they will be getting paid. Paying your credit card bill is on you, not them, so if the credit card company covers the cost, the item is yours.

And what then?

At the end of the billing cycle, the credit card company calculates the amount that you have used and the interest. They send you a bill of that amount where they are basically saying, “Hey, remember when I fronted you the cash to pay for your stuff? It’s time to repay, but it’s cool if you do not have the full amount. I added another number on your bill of a much smaller amount you can pay right now.” As you pay down or off the principle amount you owe, your credit limit will replenish and you can borrow it again. This is known as revolving credit.

Credit Card Basics Spelled Out: Credit 101 | Loanry https://t.co/JdNnSniKu9 #creditcards #comparecreditcards

— Loanry.com | Loan Shop ? (@LoanryStore) July 25, 2019

Paying Your Credit Card Bill on Time Each Month

Yes, we have finally made it to the main purpose of this article- paying your credit card bill on time each month. Let me start by saying that it is not as hard as it may seem. It can be overwhelming in the midst of trying to figure everything out, but you can relax. I have some really simple tips for paying your credit card bill.

Budget

If you are like most people, you are really tired of hearing the word budget. Unfortunately, it is necessary. You can always find a new word to call it. Creating a budget is important if you want to pay your credit card bill on time. For now, let’s go with financial planning. That sounds a little better.

Again, financial planning is key to paying your credit card bill. You have to have the money to pay the bill, and you have to have a plan for getting that money. Rework your financial plan to make sure the funds you need for paying your credit card bill are included and set aside.

Also, paying your credit card bill once a month is not the only option. Try instead paying something out of each check. If your minimum payment is $25, try paying $25 out of each check. This will ensure that you are never late paying your credit card bill, and it can help pay down your balance sooner.

Set Up Auto Pay

Another awesome thing about technology is that is can now make payments for you. How awesome is that! You can set your credit card account to take money from another source when the payment is due- no thought necessary. If you are like I was and are rolling your eyes saying something like, “But my bill is due before payday. If I set up auto-pay, I might end up with overdraft fees.” Not if you change your due date, which is something most companies allow now.

Remember that they actually do want their money back, so most of them will work with you on things like this.
I would also like to point out the fact that using auto pay is no excuse for ignoring your bills. You still need to look at them and make sure that you are being charged correctly. Do not overpay simply because you stopped looking at your bill details.

Stay within Your Limit

Yes, this should be understood, but sometimes it is not. Some credit card companies are a little lax and will let you go over your limit. In fact, they have a fee for when it happens. Keep up with how much you use on your card, and stop when you are at your limit- earlier if you can.

Reminders

With all of this technology around us, there really is no excuse for forgetting anything. Set reminders in your Google calendar, the Asana app, your phone’s calendar, or where ever you keep up with dates. I love electronic ones because sometimes I get so busy, I forget to look at my calendar. I need reminders that actually remind me, so an alert on my phone or tablet is much better.

Only Borrow What You Can Afford to Repay

Part of paying your credit card bill on time relies on being able to afford your payment. There is a very simple way to make sure you can afford it. Do not borrow more than you can pay back.

Pay the Full Amount Every Month, if possible

Again, you need to be able to afford your bill, which you will not be able to do if the interest is growing astronomically. Try very hard to pay the full bill every single month so your payments do not get unbearable.

Introductory Promotional Periods

Many credit card companies offer a promotional period in which you do not pay interest on your credit card charges. This might be for the first month, the first year, or any other length of time the company chooses. It is an incentive they offer for signing up. These promotional periods can be wonderful times to make large purchases, like a refrigerator, if you can pay it off before the promotional period is over. If you sign up for a credit card with a promo period, be sure you know the ins and outs of the promotion. And do not go on a spending spree just because you can. Remember, the idea is to actually make paying your credit card bill possible, so overspending is counterproductive.

Fees and Interest Rates

Every credit card that I have ever known has some type of fee attached, and there is definitely interest. Some fees you might come across are annual fees, late payment fees, and cash withdrawal fees. Most fees can be avoided. Pay your bill on time to avoid late fees, do not get cash withdrawal, and so on. However, annual fees can only be avoided if you find a company that does not charge them. There are a few out there, but before you make up your mind, check out the perks of the cards with annual fees. Sometimes you get rewards that will more than cover that fee, so compare before you choose.

Here comes the fun part: the interest and how it is calculated. This section could quite literally carry on for pages and pages because there is so much to the topic of interest, but we are going to stick with some basics.

Compound vs Simple Interest

Simple interest means that you pay interest on the amount of money you use on your card. If you use $200, the interest is calculated for that and that is it. The next month, you will again only be charged for the amount you have actually used.

Compound interest is very different. The simplest definition is paying interest on the interest that you already owe. Sounds crazy, right? To illustrate, let’s say I borrow that same $200 at 25% interest. I would then owe $250 back once interest was included. If I decide not to pay my bill in full this month and instead only make the minimum payment, there will be some interest left. So if I pay $25, I will still owe $225.

The next billing cycle, any interest that has carried over is now considered “borrowed” as well. Instead of being charged 25% only on what I have borrowed, it will be calculated on the full $225. The interest will simply add on top of the interest, i.e. compound. This will continue until you pay your bill in full. If you have the opportunity to choose a simple credit card over one with compound interest, that will be the wiser option. If you do not have that opportunity, attempt to pay your full bill every single month

Variable vs Fixed Interest

Variable and fixed interest are easier to understand. Fixed interest means that the interest rate will remain the same through the specified term while variable interest can fluctuate. With fixed interest, it is possible to somewhat predict your bill. Not so much with variable interest, though.

Pros and Cons of Credit Cards

Credit cards can be both a blessing and a curse, but they are almost necessary in today’s world. Below are two of the biggest pros and cons of credit cards that you should know:

Convenience

Credit cards are one of the most convenient financial tools ever, I believe. You do not have to worry about dropping or losing cash, it takes so much less time to check out, you can shop online with them, swipe them at the gas pump so you do not even need to walk into the store, and they let you spend money you do not yet have. Is there any wonder why people sign up for them?

About ten years ago, a friend and I piled our five children into her Expedition to visit this new thrift store about an hour from home. In truth, we had plenty of thrift stores nearby. We just wanted to get out. We walked around that store for probably two to three hours, jumped back in her SUV, and started to head home.

No more than two minutes down the road, we noticed that one of her tires were flat. We pulled into the next parking lot, which happened to be a WalMart- thank goodness. Here we were an hour from home in the summer time with five hot children and no cash. We thought we were being smart only carrying cash with us to the thrift store so we would not overspend. Though it was smart, we probably should have carried something extra.

Even worse, we had no one to call for help. My husband was in the military back then and a very long way from home. Her husband worked out of town, so he too was nowhere near us. Ever the hopeful one, I started clawing through my purse with the idea that some money would miraculously appear so we could purchase a tire. And like an answer to a prayer, I suddenly saw my credit card.

A credit card can come in handy

I had intentionally forgotten that I had signed up for this credit card because it was only meant for two reasons. The first was that there were times my husband would call and say he was back on post with no notice. As I did not want to miss the chance to see him, that credit card was intended to pay for gas, airfare, hotel stays, and so on in case we did not have enough in the bank.

The second reason for the card was, well, emergencies. With it being just me and two little ones, I did not want to be stranded with no one to call. The predicament we were currently in just happened to fit that second reason to a “T”, so to speak. I was able to purchase a tire so we could get home.

Pros and Cons of Credit Cards: Swipe?

Credit

As I said, credit cards are incredibly convenient, and they can help you build your credit- if you are paying your credit card bill on time. Unfortunately, the convenience of credit cards also has the propensity to lead you down a dark path of financial ruin if you are not managing it well. To make it help your credit instead of hurt, follow these steps:

Being Responsible

Really, it all comes down to being responsible with your money and your debt. Do not borrow more than you can repay. Avoid borrowing just because you can. Make paying your credit card bill in full as often as possible a priority, and ensure that you are paying your credit card bill on time. Definitely pay more than the minimum balance so you bill stays manageable.

Staying Under 30%

Credit utilization is a huge factor in your credit score. Basically, it is the percentage of your available credit that you are using. You need to keep that utilization under 30%. For instance, if you have $1,000 of credit available to you, you want to be using less than $300. Why? Lenders like to know that you are worthy of borrowing money, but that you do not really need to. This means that you should not run out and spend the $1,000 on unnecessary items just because it’s there. If you do have to use more than 30%, just try paying your credit card bill down to 30% before the end of the billing cycle.

Know When to Use Your Card and When to Use a Personal Loan Instead

If a credit card is really just a loan on a card, why would you need a personal loan? Though it is, in fact, a loan, different terms, interest rates, and fees come with them. Most often, a personal loan has lower interest rates and longer repayment terms while credit cards are much more like quick cash loans- high interest and short repayment terms. You should be aware of the pros and cons of credit cards and personal loans.

Before we go any further, the following suggestions are relative to certain conditions, i.e. interest rates, promo periods, and so forth. These suggestions are based on having no promotional periods or other external factors that might affect prices and repayment- more on this in a moment.
As credit cards and personal loans are so different, they are actually each beneficial for different circumstances. Below is a list of times when each would be a better choice than the other:

Times to Choose a Credit Card:

If you need money for gas, some household supplies, or other items lower cost items.
A movie ticket
Grocery shopping
Paying a bill that is due before payday

These items would be best on a credit card because they are smaller purchases you could most likely pay off during the current month or by the next one.

Times to Choose a Personal Loan:

For purchasing a car
You have gotten behind on your bills and need some time to straighten things out.
Any purchase that will take you multiple months or longer to pay off, i.e. appliances
A vacation or wedding

These items are best for a personal loan because, most likely, you will not be able to pay off the full amount in one payment. Instead of putting something that will require multiple payments on a credit card that will charge you a lot of interest, look at personal loans instead. You are still charged interest, but it is spread out over payments instead of owing the full amount every month.

Credit Card Consolidation

If you are currently in a lot of credit card debt, you might consider credit card consolidation. This basically means that you are borrowing the money from another source to pay off your current debt. The new debt, ideally, charges less interest, and you only have one payment to make instead of multiple ones. There are two common ways to do this- with a personal loan and with credit card refinancing.

With a Personal Loan

If you owe a total of $1500 in credit card debt, you could use a $1500 personal loan to pay it all off at once. This gets rid of the ridiculous interest that is stacking up and choking the life out of you. Ok, maybe that was a little dramatic, but you get the idea. You need to be aware of the differences between credit cards and personal loans.

Once you have paid off those credit cards, you will owe the lender the $1500 back, but here’s where the benefits come in: Typically, your interest is calculated up front- most likely with a fixed rate- then spread out over a period of months or even years. Finally, you can breathe. Let’s look at how different it would be than continuing paying your credit card bills.

If you owe a total of $1,500 in credit card debt, you might be getting charged as much as $375 a month in interest alone. I do not know about you, but even if I could afford that, I would not want to throw away that much of my hard-earned money on interest- an intangible thing that brings me no excitement whatsoever.

Now, let’s say you a $1500 personal loan. For the sake of fairness- and to really drive home this point- we will keep the 25% interest rate (this is actually really high interest for most personal loans). You agree to a 12 month repayment period. All of this means that you owe a total of $1875 to the lender, and your payments will be $156.25 per month.

That’s it. There is no additional interest because it was already calculated and added into the total amount of the loan. For almost 1/3 of the credit card payment, you can pay your entire debt off and save more than $200 per month in interest- yes, please!

Credit Card Refinancing

You can also refinance your credit cards with another credit card. I know it sounds a bit counterproductive, but under the right terms, you will still save money. Again, we will use the $1500 debt and 25% interest as the current charges. You might be able to find a new card with much lower interest or even one that has the 0% interest for a year. By using the new credit card to pay off the previous ones, you are still consolidating into one payment with low or no interest.

Credit Card Shopping

Okay, do not get too excited. This does not mean to take your credit card out and enjoy a shopping spree. This type of credit card shopping actually means shopping around for credit cards. Never assume that you are getting the best deal. The card you have may have been the best option at the time you got it but credit card companies compete, so they are consistently changing what they can to win customers.

On a regular basis, shop around for the lowest APR credit card x and best terms. Take advantage of 0% introductory rates when you can. Remember that you can use a new credit card with no interest to pay off other cards and save yourself some money. Here’s a list of credit cards to consider:

You can put in your information right here on Loanry, and get offers within minutes.

Conclusion

It is sometimes amazing that something as small and thin as a credit card can destroy entire lives. But that is how powerful they are. If you use credit cards, you should work hard to master them instead of letting them master you. With the information and the tips here- as well as some determination- you can take control of your credit cards and your financial life.

Avoid These 7 Common Credit Card Mistakes to Save Money

Posted on August 8, 2019 | by Cole Lehman | Leave a Comment

Credit cards enable consumers to make big purchases that they would not otherwise be able to afford, offer convenience by reducing the need to carry cash, have electronic records that make it easy to track spending and identify fraud and can be a simple solution in case of an emergency. Credit cards have also gained acceptability since they allow users to build their credit history when used responsibly, with most of the cards offering reward programs that accrue to great benefits.

While managing your credit can seem like a lot of work, it is very critical as it impacts many aspects of your life. If users are not careful with how they use these little plastic cards, their actions may affect whether they get a job, security clearance, or secure an apartment. Before we explore common credit card mistakes to avoid, let’s look at responsible credit card usage.

Common Credit Card Mistakes to Avoid

How consumers use their credit cards is just as important as the particular card they select. The manner in which you use the card will play a vital role in determining whether you make credit card mistakes. Here are some common mistakes users should avoid in order to save money.

Making Minimum Only Payments

Most credit card issuers allow for minimum repayments to make it easier for users to repay their balance. This is usually a fixed amount that is calculated as a percentage of the balance. A factor that makes it tempting for those with a tight budget. While there are times when financial circumstances may force users to make minimum payments, doing this regularly is one of the most common credit card mistakes that will cost a borrower a lot and result in other financial implications.

Making minimum payments means that a consumer pays only interest and the applicable fees. In essence, their balance does not reduce through the payments. The result is that the amount of time it takes to pay off the credit card balance will increase significantly. This, in turn, increases the amount of interest that the user pays on their credit card. Regardless of whether you are using a credit card, you should resist the temptation to make minimum only payments.

The only time that minimum payment will make sense is when they are used as a strategy to get out of debt. However, increasing the monthly repayments helps to pay off the balance faster and at a lower cost.

Paying Bills Late

Just like with any other loan, borrowers have to repay the money once it has been made available to them. This is why it is important for credit card users to think carefully before making any purchase decision. Ensure that they are comfortable with repaying their loans.

Credit card debt is similar to other loans. Indeed, there are due dates by which users should pay their bills. Failure to send monthly payments on time will not only result in penalties. They will also hurt the user’s credit score. Most credit card issuers will charge late fees depending on the number of times that a consumer has been late over a given period of time. This is why it is recommended that users come up with a system to remind them of their due dates.

To understand why this is one of the credit card mistakes that can have a big impact, borrowers should be aware that the credit card issuer can raise the interest rates once the user’s credit score reduces. Every credit card holder should have a clear understanding of what the different actions and decisions they make in relation to their credit card affect their lives.

Credit Card Debt Payoff Plan: Swipe Here https://t.co/e5aoBpSKW3 If you are ready to take action against your credit card debt instead of letting it control you, follow the steps in this guide to get a good start. #creditcarddebt #outofdebt

— Debtry.com – Free Debt Tools ? (@DebtryStore) March 4, 2020

Loaning the Credit Card

One of the most common credit card mistakes that people make is giving their credit card to someone else. This may include giving it to a family member or friend as a favor or to make purchases on your behalf. While this in itself does not seem to have a problem, the credit card holder will have no control over the purchases that could be made in their absence.

Regardless of who uses the credit card, once the purchase has been approved, the person whose details appear on the card will be responsible for paying the bill. This is why it is essential to ensure that you are prepared for all the purchases that may be made when you loan the credit card. Failure to do this will result in unexpected interest and penalties.

With the temptation associated with credit cards. It is clear that the financial tools can lead one to spend beyond what they had budgeted for. Leaving purchase decisions to another person may sink you further into debt, leaving you with accumulated debts that you may not be in a position to afford. In the end, such a move may affect your credit score and limit your chances of accessing other loans.

Taking a Loan Offer without Comparing It With Others

Today, there are many companies that offer credit cards. While this is a good thing, it makes it difficult for consumers to choose the right credit card company. In addition, it means that it takes a considerable amount of time to ensure that you are getting the best possible offer.

If borrowers are to avoid common credit card mistakes, they should take time to compare the various possibilities available to them. A small difference in interest could result in significant savings in the long run. They could also ease pressure on your wallet when the bill statement is sent. Consumers should also not underestimate the importance of consulting financial experts before applying for and taking a credit card.

Ultimately, credit card cash advances should help users to meet their financial needs. They could make it easier for them to achieve their goals. Whether you prefer an apr credit card or a credit card, you should be sure that it offers the financial services you need. This, when combined with responsible use of the card, will help you avoid the headaches and frustrations that come with late payments and defaults.

Waiting to Report a Stolen or Lost Credit Card

There is a chance that credit cards will get lost or stolen. The decision you make after such an incident will affect your life in a major way. This is because the credit card holder can be a victim of identity theft. With their information being used in all manner of fraudulent activities. Although most of the credit cards today have security features in place, reporting the matter to the relevant authorities will help in canceling it.

Taking too long to report the loss or theft of the credit card gives the thief time to charge up the account. If the credit card holder reports the theft or loss of the card in good time, they will have no liability for any fraudulent charges that may be made.

It follows that one of the most serious credit card mistakes is failing or taking too long to report these incidences. Apart from law enforcement agencies, credit card users should inform the issuer in case of theft or loss.

Applying for Too Many Credit Cards at Once

Although debt can come in handy when one is in financial need. There is always a need to take out loans responsibly. When one is in need of financial assistance, they may be tempted to take out any loans that they qualify for. When it comes to credit cards, some people apply for too many of them at once. This ranks highly among credit card mistakes that could cost you a fortune.

Every single credit card application that a consumer makes has the potential to take away from their credit score. In case a consumer tries to apply for several credit cards over a short period of time, it will reach a point when denials become more frequent. This is because lenders will grow suspicious about the sudden increase in the number of applications. Financial experts recommend applying for the cards one at a time and on an as-needed basis.

Apart from affecting the applicant’s credit score, the more credit cards one has, the higher the chances of making huge purchases on impulse. This means that the consumer will have several bill statements sent to them at the end of the month. In the end, the credit card holder may be unable or struggle to pay off the debt.

Not Knowing Your Credit Card Terms

Most credit cards have very confusing terms and conditions. With limited knowledge on the financial tools, it will take a consumer a considerable amount of time to go through and understand the terms and conditions. However, not knowing what the credit card terms are could end up being one of the most costly credit card mistakes.

It may seem like a lot of work. Knowing the terms offered on the service and how the company handles late payments will help in financial planning. This also gives the consumer more control over the associated costs. They will also be in a better position to decide how to use and how not to use the card. They will be aware of how the creditor will respond to certain actions.

Whether you are using an apr credit card or a simple credit card, you should review the terms of the credit card at least once a year. This can be done by visiting the credit card issuer’s website or requesting them from customer service. The most important thing is to keep abreast of the terms and conditions.

This list is by no means exhaustive. There are many more credit card mistakes that could cost you a fortune. Right from the time that one is considering applying for a credit card, they should have a clear plan of how they intend to use the financial tool. Some of the actions and decisions that could prove costly include making purchases you cannot afford. Not to mention maxing out the card, paying annual fees, co-signing an account. Borrowers should educate themselves about the basics of credit cards if they are to avoid some of these mistakes.

Responsible Credit Card Usage

While a good number of consumers know that they can use credit cards to buy something, very few understand how they work. Most people get a bill at the end of every month and pay it off without realizing what impact using a credit card has on their lives. This results in many people making costly credit card mistakes.

Credit cards in their most basic form are loans from banks. These little plastic cards have the user’s name and credit card number on them. They also feature a chip on the front and a magnetic strip on the back. When looking to make a purchase, the user can either swipe it or insert it in the merchant’s machine. It is this machine that will read this information and communicate with the credit card company to determine whether the purchase is approved. The bill that users get and pay at the end of the month is usually a repayment of the loan they took on purchasing products or services.

Credit Card Basics Spelled Out: Credit 101 | Loanry https://t.co/JdNnSniKu9 #creditcards #comparecreditcards

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Why You Should Use Your Credit Card Responsibly

There are numerous benefits that users will enjoy if they use their credit card responsibly. Perhaps one of the most notable is that the cards grant borrowers replenishable credit. This means that buyers are able to pay off certain purchases over an extended period of time. Consumers can also use credit cards to protect themselves in the event of a disputed charge by a retailer or service provider. The card not only gives the holder leverage but also offers an avenue for the payment to be corrected or reversed.

In a world where cash is used less and less, using credit cards responsibly can help in keeping track of spending habits and knowing where your money is going. This makes it easier to modify their budgets and organize themselves by relying on their spending records.

By using the cards responsibly and avoiding credit card mistakes, users with bad credit may have an opportunity to build their credit score. However, this will require them to borrow responsibly and pay their bills on time. Users should also avoid the higher rate card and resist any temptation to cancel or destroy the card. Over time, they will be able to build their credit and enjoy the benefits that come with it.

What Can Happen if You Are Not Careful with Your Credit Card Use

As much as credit cards offer several benefits, there are also dangers associated with using the cards. Users will particularly be exposed to these dangers if they do not embrace responsible financial habits or keep making the same credit card mistakes.

Here are some of the dangers of poor credit card usage:

Vicious Debt Cycles

Most users do not realize that credit cards can keep them in debt. Here’s how. Unlike other types of loans, credit cards work in such a way that most users are perpetually using and paying, resulting in a cycle of debt. Since users keep spending and paying interest, using the cards can be costly. Similarly, the interest and fees on credit cards add up quickly, especially if you lose track of how much you are supposed to pay. This could sink you into further debt and cause unnecessary frustrations.

Impulse Spending

Credit cards give users a lot of freedom, allowing them to be impulsive. Buyers can spend money in any place, at any time and in whichever way they see fit at the time. This means that they may end up buying items that they either had not planned for or do not need altogether. With credit cards, minimum payments will see users paying interest and fees on the card without actually reducing their balance. This means that consumers are likely to fall further behind each month if they keep paying only the minimum payment.

Personal Loans vs. Credit Cards

With the serious financial commitment associated with any loan, borrowers need to understand the options available to them before making a choice. When comparing credit cards with personal loans, there are a number of factors that borrowers should be mindful of.

The loan amount:

Personal loans would be a better option for borrowers who need a large amount of money that they cannot pay back quickly. This is because the interest will be calculated and spread out over a period of time to ensure manageable payments.

The loan term:

Personal loans have a significantly longer loan term than credit cards. This means that both the interest and the payments will be spread out over the full term of the loan. On the other hand, credit cards are not designed for long repayment periods, effectively having shorter loan terms.

When you need cash:

While credit cards can be considered to be a type of loan, they are not cash. What the user gets are cash advances at a fee. Personal loans are cash and are not associated with additional fees. Any borrower who needs cash or wants to make a purchase where there is no way to accept a credit card can consider taking out a personal loan.

Additional temptation:

Unlike a personal installment loan where a borrower knows how much they are approved for, a credit card can encourage impulsive buying. Depending on an individual’s financial discipline, they can decide whether to go for a credit card or a personal loan.

Credit cards give a convenient way out for those drowning in financial struggles. Instead of having to wait and save, users can get the things they need and want at that particular time. However, users should be aware of what an apr credit card offers them as compared to other cards.

Refinancing Credit Cards

Your Ultimate Guide to Credit Card Refinancing

While it is always advisable to avoid making credit card mistakes, one should not lose hope after making some. Certain mistakes can be corrected through credit card refinancing. Credit card refinancing can help borrowers to save money and avoid accumulating more debt. It can also save borrowers the hassle of having to think about several payments and instead focus on one payment.

Simply put, credit card refinancing means taking the current debt from one or more credit cards and transferring it to another one. When done right, refinancing can help to save the borrower the money they pay on interest on their current credit card. By reducing the amount of money you pay every month, this will also give you an easier time paying off the debt.

Another common way of refinancing a credit card is to get a refinancing loan to settle the debt. Most credit card users will take out a personal installment loan to pay off their credit card debt. With the loan terms and interest rates associated with personal loans, the borrower will be in a more comfortable position to meet their financial obligations. However, it is important to remember that there are positives and negatives to using personal loans to consolidate debt.

Alternatives to Using Credit Cards

Besides credit cards, there are other possibilities for anyone looking for a line-of-credit. Apart from educating themselves, borrowers should take time to ask different lenders what they offer. This will help them to make an informed choice and access financial products that will enable them to meet their needs. Today, although online lenders may be less well-known, they offer the kind of flexibility and creativity that borrowers need.

One of the best alternatives to using credit cards is to open a savings account. Even more where one can put in money for the extra things they would like to have. Whether it is a vacation, occasional shopping spree, or an emergency, savings will be a cheaper alternative. Even more as they do not attract fees and interest. It will also help consumers to avoid the common credit card mistakes that could cost them a fortune.

Apart from taking out loans with traditional and online lenders, consumers can also turn to family and friends to finance their purchases. For borrowing from family and friends to be considered a smart move, the money obtained should be put to proper use. In addition, the item to be bought should make for a necessary purchase. This will help consumers to avoid getting themselves further into debt.

Deciding Which Credit Card to Get

The importance of credit card shopping cannot be denied. It is not easy to decide which credit card is right for you. However it is important to consider your wants and needs. Users should also familiarize the different options that they qualify for at that particular time.

With the wide range of options available today, prospective users should do their research and ask the issuing companies the relevant questions. This will not only help them to avoid some of the credit card mistakes but also inform them of what they are about to get themselves into. Consumers can also talk to financial experts to help them learn the differences between the different credit cards, including an apr credit card and a simple credit card.

Smart Money Tip!

In the end, there is one thing that all credit cards have in common. The user is the customer and should end up happy with both the financial services and how they use the card. Ultimately, the more attentive and informed an individual is, the better the choices they are likely to make. This is in relation to choosing as well as using the credit card.

With proper guidance, you should not have any difficulties when deciding which card to get. The fact that you are reading this article shows that you are responsible and you’re already taking steps to protect your finances. Loanry is always here to help you make the best decisions. We bring you reputable lenders and credit card companies, together with our partner Fiona. If you’re interested in getting a credit card, start here:

So what’s the best way to avoid credit card mistakes?

One of the best ways to avoid costly credit card mistakes would be to embark on a thorough credit card shopping exercise. This will not only help you to identify financial companies that charge affordable interest rates. Also get a card that does not have hidden fees. However, with the numerous options available, making a decision on which card to get can be overwhelming. This is why we help consumers to find a lender, effectively helping them to increase their chances of getting financial services that meet their needs. As a third party that is not in the loan business, we ensure that the process is both quick and easy so that you enjoy a hassle-free borrowing experience. In the end, borrowers will meet their needs, achieve financial growth, and reach their financial goals through prudent management of the resources available to them.

Your Ultimate Guide to Credit Card Refinancing

Posted on July 24, 2019 | by Julia Peoples | Leave a Comment

We all have credit cards. Many of us use them, but we do not know the best way to do so. According to USA Today, Americans owe over $1 trillion dollars in credit card debt and that number continues to increase. USA Today states that about 40 percent of those who use credit cards are able to pay the balance due every month.

The other 60 percent have a staggering amount of credit card debt. There are tons of reasons why people owe so much in credit card debt. We will touch on some of those reasons as you continue reading. We are also going to talk about your options when you find yourself drowning in credit card debt, including credit card refinancing. Keep reading to find out everything you need to know about credit card refinancing.

What Does It Mean To Refinance Credit Cards?

Credit card refinancing is when you choose to take your debt from one or many credit cards and transfer it to another credit card. The overall goal is to save money on the interest you are paying on your current credit card debt. Typically, when you transfer money from one credit card to another, the new card gives you 0 percent interest on the transferred balance. Credit card refinancing can save you money in the long run. It helps decrease the amount of money you have to pay each month. If the interest does not build, you have an easier time of paying off your credit card debt.

Another way to refinance your credit cards is to get a refinancing loan. This is an actual personal loan that you use to refinance your debt. As with anything else, there are positives and negatives to obtaining a personal loan to consolidate debt. Some of these refinance options can be handled online with online applications. Today, it is much easier to file for credit cards and loans online with online card shops.

What Are Credit Cards?

In order to really understand how to use credit cards properly, you need to have a basic understanding of credit cards. I do not think many people truly understand how they work. They know they want to buy something, so they use their credit card. Then a bill comes every month and they pay what they can. Not knowing how this is truly impacting them is dangerous. So, let’s dig into the details of credit cards a little bit.

A credit card is a plastic card that has your name and credit card number on it. They have a magnetic strip on the back and a chip on the front. You can either swipe the card, or insert it so the chip can be read. When you swipe or insert the card into a merchant’s machine, it can read your name, account information, and other pertinent information to determine if your purchase is approved. A bank, such as American Express, Chase, or Discover secures the credit card. Individual businesses, or stores, such as Amazon, Best Buy, Target, also have a store credit card. While most credit cards can be used anywhere, they can only be used in that particular store. In its most basic form, a credit card is a loan from the bank.

Credit Card Basics Spelled Out: Credit 101

Bank gives you a credit limit

The bank gives you a credit limit and you cannot borrow beyond that limit. You can pay off the amount you borrow by a specific date each month. If you cannot pay the full amount, there is a minimum payment you must make. Any amount that you do not pay is subject to interest charges. If you do not make the minimum payment or make the payment late, the bank assess a fee. Only paying the minimum amount or getting hit with a lot of fees puts you in a dangerous place. You may run the risk of drowning in debt and need credit card refinancing. Keep reading for more about that.

When you use the credit card, that decreases the amount available to you. As you pay off the amount you owe, that increases the amount available to you. I will give you an example to illustrate how it works.

Your credit limit is $2,000. You purchased $500 worth of items. Your credit limit is currently $1,500. Your minimum monthly payment is $25. You owe $500, but can choose to only pay $25. If you only pay $25, you still owe $475 and will pay interest on that amount. If you pay $500, you owe $0 interest. If you pay $500, your available credit goes up to $2,000. If you only pay $25, your available credit is $1,575.

For better deals, you can shop for a credit card online! It’s easier and faster because you can find all the information you need in one place. Loanry helps you with that. Consider our suggestions below:

How Does Interest Work On A Credit Card?

I mentioned above that if you do not pay the balance in full each month on your credit card, you have to pay interest charges. That is typically how credit cards work. Some credit cards offer specials where you can get 0 percent interest for a set period of time. I am not talking about credit cards offering special deals. I am talking about a typical credit card interest scenario. It is important to understand how an APR credit card works.

For a typical credit card, they offer a grace period which is a period of about 15 to 30 days between when you purchase items and your monthly due date. Your due date is the same date every month. That means, if you pay off your credit card by your monthly due date, you do not have to pay interest. Interest is calculated on the balance you owe. Every credit card has a different interest rate they charge to your credit card. The initial rate they offer you is based on your credit score. Some credit cards have interest rates as high as 20 percent.

Let’s take an example

Let me show you what that looks like with real numbers. This is an example, the numbers may not be what you really see with your credit card.

Your credit card has available credit of $5,000. You have charged $2,000. Your available credit is $3,000. Your minimum monthly payment is $75. You can pay $500. Your new available credit is $3,200. However, you must consider the interest. Your credit card charges you 10 percent interest. That means you are charged 15.9 percent interest on $1,500 since that is the balance that is left. This is how you determine how much interest you owe. There are a few calculations that take place when determining interest.

First, you take your interest rate (15 percent or 0.1599) and divide that by the number of days (365) in the year:
0.1599 / 365 = a 0.00044 daily periodic rate

Then, you multiple the daily rate (0.00044) by your daily balance ($1,500):
0.00044 x $1,500 = $0.66

Lastly, multiply the number above by the days in your billing cycle (30):
$0.66 x 30 = $19.80 interest charged for this billing cycle

The bottom line is not paying off your full balance causes you to accrue interest and you pay more money. Over time, this amount adds up and may cause you to have such a high amount of debt, you may consider credit card refinancing.

What Are The Benefits of Credit Cards?

First, I am going to focus on the good things about credit cards. They can help you build your credit. If you are young, or do not have much in the way of credit, a credit card is a great way to begin to build your credit. You should be mindful that the only way you can build good credit is to use a credit card wisely and pay it off every month. Credit cards also provide revolving credit for you. You can keep a credit card forever. As long as you pay the bill timely and more than the minimum amount, you always have credit available to you. You can keep this for times when you have emergency expenses.

Credit cards offer you convenience because you are able to purchase something today even though you will not have the money for it until next week when you get paid. Credit cards provide you the opportunity to purchase the item when you need or want it, even when you do not have the money. Some credit cards offer rewards and incentives, and if used properly, you can actually earn money by using them. You can receive points that allow you reduced prices for airline tickets, dinner, or other items you buy. This translates directly to savings for you.

You can also use them to do credit card refinancing. Some credit cards offer special deals if you transfer the balance of a high interest credit card to a new lower interest one. This can save you money on interest charges, especially if you have 0 percent interest for a set period of time on balance transfers.

Pros and Cons of Credit Cards: Swipe?

What Are The Downsides of Credit Cards?

I would like to touch on the negatives to credit cards. They are another bill. Whenever you use your credit card, you still have to pay for your purchase. That becomes a bill at the end of the month. It is easy not to think about at the time of purchase because you do not have to pay any money in the moment. You will have to pay for it, eventually. There is that pesky interest that I keep mentioning. I keep bringing it up because it is important for you to remember. If you do not pay the bill in full, you have to pay interest on your daily balance. This is something you can avoid, but you must pay the bill in full to do so.

One thing I have touched on only a little bit is your credit score and how credit cards can impact it. Using credit cards improperly can cause your credit score to decrease. When you use credit cards properly, they can help you build your credit. The opposite of that is also true, improper use of credit cards can negatively impact your credit score. Late and missed payments are the most common ways credit scores are negatively impacted. This is true for loans, general bills, and credit card payments. Just using your credit cards can also impact your credit.

The higher your credit card balance, the more credit you are using and this is a negative mark for your credit. Also, the more credit you use the higher your debt to income ratio becomes which also negatively impacts your credit. Carrying a high amount of credit card debt may also put you in a position where you may need to consider credit card refinancing.

What Else Should I Know About Credit Cards?

As I have highlighted above, credit cards are an amazing tool at your disposal. There is a simple credit card that is simple to use. However, you have to use them responsibly. Credit cards can be a constant source of temptation for you. If you know that you have credit available on your credit card, you might feel compelled to make purchases. You may not need these items, or possibly cannot even afford these items, but because you have available credit, you purchase the item anyway.

This is can lead you down a dangerous path of quickly getting over your head with credit card debt. If you begin to feel like your credit card debt is out of control, you may want to consider credit card refinancing. You have to be aware of your own spending habits and will power when it comes to credit cards. There is no one to police you, but yourself.

Another consideration is identity theft. It is much easier with credit cards, especially with online purchasing. You probably have heard that gas pumps are the worse with stealing credit card information. Gas providers try to stay ahead of those who are out to do harm, but they always seem to be one step ahead of the technology used to prevent them from stealing information.

Face our today world!

Today, there is technology where a thief just has to be within a certain proximity of you and can steal your credit card information. You have to be alert about when and where you use your credit card. When shopping online, make sure you are using a secure checkout process. In the website address, you will see a lock that is closed to indicate to you the website is secure. If the lock is not there, or it is open, do not make a purchase on that site because it is not secure.

According to creditcards.com, 16.7 million people were impacted by fraudulent activity in 2018. Most credit card companies help protect you from fraudulent activity. Many of them will send you a text or email when a purchase is made, so you know immediately if there is fraudulent activity. Credit cards also have mobile apps that enable you to lock your credit card from use if you believe it is lost or stolen. Credit card companies are working hard to protect you and them from fraudulent activity.

Are There Options Other Than Using Credit Cards?

When it comes to credit card debt it is especially important that you remember even though you are not paying money upfront, you still have to pay. If you know that you may not have the best control over your impulse to shop if you have credit cards, you might want to think of alternatives. You can open a savings account and put money in there for extra things you might like to have. Some people call this a rainy day fund. It could be for vacation, emergencies, or just an occasional shopping spree.

It is money set aside for just that purpose, so you are not spending money needed for bills. You are not raking up credit card debt. This way you do not have to worry about negative implications to your credit rating. You will not have to worry about bills coming in at the end of the month.

Saving money for your needs is a great alternative to getting yourself further into debt. If you have ever felt like you were drowning in debt, you know what a terrible feeling that is. Anything that you can do to prevent yourself from getting into the downward debt spiral, is a smart financial move. If you have been deep in debt previously, you want to do everything you can to prevent that from happening again. If you are currently in debt, you want to get out of it as soon as you can. You may feel like it is impossible for you to save money when you are working hard to pay your current bills. This is the time when you may consider credit card refinancing.

What Is Bill Consolidation?

I mentioned a little bit about debt and bill consolidation above, but I want to dig in a little deeper. The major difference between credit card refinancing and bill consolidation is what debt is being paid. Bill consolidation does not just have to be credit card debt. It can be any type of debt that you have. It is consolidating all of your debt into one manageable payment. Often, you are paying off high interest debt with a lower interest loan or credit card. When you are considering consolidating debt, you need to understand what components make up your debt. This helps you determine which debts you want to consolidate and how to do that.

In the following sections, I touch on the positives and negatives about credit card refinancing. It is important to fully understand the pros and cons of consolidation when you are considering it. When you consolidate your debts, you take on more debt initially. No matter if you obtain a loan to pay off your debt, or open a new credit card to consolidate credit card debt, you are adding to your debt to income ratio.

What Are The Benefits to Bill Consolidation?

There are many obvious advantages to consolidating your debt. The biggest one is taking all of your debt with many different payments and consolidating into one payment. This allows you to focus on paying off one payment instead of many different payments. This also allows you to focus on paying off your debt faster. You know exactly what amount you have to pay each month. It does not change based on usage like a credit card does. The interest rate is fixed and does not change based on how much money you pay each month.

VIDEO: How to Consolidate Credit Cards Using a Personal Loan

Credit card refinancing may also be able to give you a lower interest rate. This is not always the case. However, when it is, it can significantly lower the amount of money you pay over time. When you have a lower interest rate, it decreases the amount of extra money you are paying on top of the actual money borrowed. When you think of interest, you should think of it as a fee the bank, or lender, charges you to borrow money from them.

What Are The Negatives of Bill Consolidation?

There are some negatives that you should consider with credit card refinancing. One major thing you should be mindful about is the interest rate. You should make sure that the interest rate you are given during consolidation is actually lower than what you are paying now. If you end up paying a higher interest rate, you may end up paying more money. When you consolidate your credit, you may have a long repayment time frame. It may take you up to five years to pay off the consolidated amount. Keep in mind that it may take you longer to pay off your debt if you do not consolidate it.

Unlike a loan, there is no time limit to how long it takes you to pay off your credit card debt. In fact, if you only pay the minimum, it could take you over 10 years to pay off credit card debt.

Another major negative to consolidation is you feel like you have managed your debt. Since you have consolidated to one payment, you may feel like you have paid off more debt than you really have. You still have the same considerable amount of debt. You just have one payment. You need to be mindful that you do not get yourself back into the cycle of credit card debt. You actually might want to consider cutting up all but one credit card. Then you might want to hide that credit card so you have it for emergency purposes only.

How Does My Credit Impact Debt Consolidation?

VIDEO: Debt Consolidation for Bad Credit Explained

I have not talked too much about your credit score before now, so let me give you some helpful information. Your credit score directly impacts the interest rate you receive during credit card refinancing. That in turn becomes a direct impact on the money you pay each month. Your credit score may seem like it is not that important, but it is a huge deal. Your credit score is prominently displayed on your credit report. Your credit report is a detailed listing of all of your activities involving credit. It shows your payment history, how much debt you have and how you use it.

It shows the age of your credit. It shows all of your late or missed payments. It even shows loans on which you have defaulted. All of these items listed on your credit report impact your credit score. It is built, or destroyed over time and gives lenders an indication of your credit worthiness. It takes hard work to build your credit score. However, it only takes one or two missed payments to send it downward.

What Is Considered Bad Credit?

Now that you know how easy it is to negatively impact your credit, let’s focus on what is considered bad credit. A typical credit score range from 350 to 850. Most people have a credit score somewhere between 600 to 750. Good credit falls somewhere between 670 to 800. Anything below 570 falls into the danger zone of bad credit. When you have bad credit, it is much harder to get a good interest rate. You may find it is difficult to be approved for a loan. Lenders feel those with bad credit scores may not be the best candidates for credit card refinancing at a lower interest rate.

Conclusion

I have given you a lot of basic information about credit card refinancing. It is easy to feel like you have no control when you are buried in debt. There are websites that help you focus on getting your debt under control. They can help provide guidance for credit card refinancing so you can feel like you are making sound decisions. When making financial decisions, it is best to have all the information and make rational decisions. This will go a long way to helping you become debt free.

Pros and Cons of Credit Cards: Swipe?

Posted on July 14, 2019 | by Brandy Woodfolk | Leave a Comment

As with almost everything in life, there are both pros and cons of credit cards. Nothing is quite perfect. The question is do the pros outweigh the con? I do not think that the answer will be the same for each person, as everyone has a different financial situation, different characteristics, different strengths, and weaknesses. Therefore, anyone who is considering applying must understand the pros and cons of credit cards so they can answer that question for themselves.

Good and Bad Facts About Credit Cards

This article is a pretty comprehensive list that you can use to make credit card decisions. You may be in limbo about whether or not you should apply for one, and that is completely understandable. Some people do really well with credit cards while others are drowning in credit card debt. What is the difference between these people? It is usually that one group handles them responsibly and the other does not.

One advice

When looking for a credit card, make sure you do so by considering only reputable lenders.

Loanry helps you find reputable lenders and connects you with them. How? By leaving your information in the form below, you are giving us enough to work with so we can match you with lenders who may be willing to give you a credit card. You are not obliged to accept offers, but if you want to get them in the next couple of minutes, start here:

Many times, the way a person treats a credit card is based on the knowledge of credit cards or the lack thereof. Knowledge is power, in my opinion, so understanding credit cards gives me more power over them than they have over me. Below is a list of the pros and cons of credit cards to empower you as well.

The Pros of Credit Cards

Ah, yes, the pros, aka the bright side to the cloudy day. When you are truly breaking down the pros and cons of credit cards, it is hard to ignore the following characteristics:

They are Convenient

Let’s be honest: a credit card can be one of the most convenient things ever. You can make purchases before you get paid, and you can purchase items online. You do not have to carry cash, so you decrease the chances of losing your money. And, it is so much quicker to swipe a card than it is to count out cash or write a check- yes, some people still do that.

They Provide Revolving Credit

Credit can have the capability of staying open forever, so long as you are paying the bill. If you pay your balance, it will be there the next time you need it, so you have an ongoing loan available. That is always nice, especially if you find yourself struggling around a certain time every month. If you get paid on the 1st of each month but find yourself need milk and gas on the 27th, you can use the credit card to get you through. Pay the balance when you get paid on the 1st and you will have it again on the 27th if times are tough again.

They Can Help Build Your Credit

Credit cards are a great tool for building your credit if you handle it responsibly. The best way to use a credit card is to have it cover small expenses or bills that you have the money for. Then, immediately pay it off. So, for instance, if you need $20 in gas and have the money on your debit card, use your credit card to pay instead.

When you get home, use your debit card to pay off the $20 on your credit card. This shows you using your credit but you still are not paying anything extra. There is a common myth that you need to let your credit card add debt in order for it to build your credit. That is very simply not true- your credit just needs to be used. And, in fact, the faster you pay the debt, the better it looks.

So, repeat that pattern of using your credit and immediately paying as often as you can. And do try very hard not to use it for something you cannot afford. Otherwise, all of your hard work will go down the drain, and your credit will be messed up instead.

Credit Cards Can Get You Through Tough Times- and Some Not So Tough Ones, Too

If you need gas before you get paid, a credit card can handle it. Emergency room trips and co-pays? Pull out your card. Impromptu date night? All you have to do is a swipe. Really, a credit card can help you through pretty much anything, as long as the amount is within your credit limit.

The Promotions Can Be Awesome

Sometimes, you can find a credit card that offers 0% APR for 6 months or more. These promotions offer a great opportunity to make payments on a purchase without paying interest. I once worked in a mattress retail store where we sold some pretty expensive mattresses. (If you have not been mattress shopping for the last ten years or so, prepare yourself or you will go into sticker shock.)

This retailer is linked with a couple of finance companies, and they would often run promotions for 0% APR for 36 months, or 24 months. Once they offered it for a full five years. These promotions were awesome to me because I am a proponent of good sleep and good mattresses. The promotions gave me the opportunity to guide my customers to a much better mattress than what they could normally afford.

So, if you want to make a large purchase with a credit card, look for one that offers 0% interest for a set period. Doing this is really no different than putting it on layaway since you are not paying any extra. Just be sure you pay the money back before the interest kicks in.

Some of Them Offer Rewards

I am sure you have seen the commercials. Capital One offers great airline miles, Discover offers double cash back, and so on. Many credit card companies offer great perks for using their card. You might earn some free gas, or over time have enough cashback for a nice night at your favorite restaurant. The rewards may differ, but you should be able to find a card that offers you something you like.

The Cons of Credit Cards

I have always been told that you cannot appreciate the good things unless you know and experience the bad things. In response to that, we will now look at the second portion of the pros and cons of credit cards, otherwise known as the downs.

They are an Ongoing Source of Temptation

While those credit cards are there for you when you need them, they are also there for you when you don’t. For those who feel the need to spend money, having available credit lying around is too much of a temptation. When you are broke, it is easy to tell the difference between what you need and what you do not. When you have money to spend, those lines can get a little blurred.

If you know you will be too tempted to use your credit card, you need to take some precautions. Find a spot to hide it- just do not be like me and hide it so well that even you cannot find it. More so put it out of reach, and out of sight. Maybe you could put it in a lockbox or hide it behind a picture frame. Basically, anywhere that it is not so easy to grab yet easy enough you can get to it when you need it is a good place.

I cannot really remember when but some amount of years ago, there was a commercial about impulse purchases and credit card debt. The lady was standing in her kitchen when some ad came on her TV. She rushed to the freezer to get her credit card out- she had literally frozen her card. She went through a series of things trying to break and melt the ice before the commercial with the phone number went off.

Fortunately for her, she could not get to her card in time, and she could not see the numbers because the ice blurred them. This commercial still goes through my mind when I consider impulse purchases. While the ice was a drastic measure, it was also an effective one.

The idea behind this is that when temptation arises, you cannot immediately give in. You actually have to put in some effort. Hopefully, by the time you have got the card in your hand, you have decided whether what you are going for it is really worth it. Most often, you will probably find it is not.

Credit Card Payments are Another Bill

I hate bills. I hate them with a passion- as my granddaddy used to say, which always seemed a bit redundant to me since the definition of hate is actually passionate dislike. Anyway, I really hate bills. I, unwillingly, came to terms with the fact that some bills are never going to end. At least not unless I decide to live completely off of the land. If I already have to deal with the necessary bills that I despise, why would I want to add another unnecessary one? Though having a credit card in your wallet is not necessarily costing you, using it does.

The Interest- Need I Say More?

I probably don’t need to, but I will anyway. Though sometimes necessary, interest is never fun. Technically, it is money that you do not get to enjoy in any way. It is simply the fee you have to pay for borrowing the money. I understand why credit card companies charge interest. They are loaning you money and taking a risk in doing so.

What I do not understand is why consumers put themselves into a position to owe interest when it is not necessary. Using your credit card because your baby runs out of diapers or your power is about to get cut off is one thing. It may still not be fun but at least it is justifiable. Using that card to go to a Lakers game you cannot afford is just adding a bill. When it is at all possible, save the money for your purchase instead.

They Can Destroy Your Credit

We talked previously about the fact that credit cards can build your credit. Though that is true, they can also destroy your credit if you are not responsible to them. And this is a major factor when comparing the pros and cons of credit cards. Interest gets calculated and added each month to your bill. If you do not pay that interest and some of the principle, your debt will grow. The more money you owe on your credit card, the higher your credit utilization- which is something you do not want.

Smart Money Tip!

Credit utilization should be around 30% or less. If the interest on your credit card grows, your credit utilization could show as high as 100%- way above the sweet spot. If you must use your credit card, use as little of it as possible, and pay as much as you can.

Sometimes They Come With Fees

As if paying interest is not enough, sometimes credit cards come with additional fees. Some of these fees include annual fees, monthly service fees, late payment fees, return payment fees, foreign transaction fees, balance transfer fees, cash withdrawal fees… I will stop there but you get the idea.

You cannot judge all credit cards by the fees of another because not all cards charge fees. Those that do are adding to the bill. It is important to check terms and conditions for any associated fees and make an educated decision according to that information. If there are any fees attached, weigh that fee against the benefits of the card. I would not mind paying a $29 annual fee if I received $200 or more in cash back on groceries. Visit some online card shops, look into a few cards, and judge on a case by case basis.

Identity Theft is Easier with Credit Cards

There was once a time when every transaction was taken care of in-person and with either cash or some form of trade. Back then, it was hard to steal someone’s identity. Well, maybe it was not so much hard since someone could use your name. However, they could not clean out your bank account with a keystroke.

Even if they used your name and acted terribly across the nation, who would know? There was no way to track someone digitally so your boss would not run your name and find out you have credit issues. In this digital age, though, it is all too easy to steal someone’s identity and destroy them. Every time I turn around I hear about some new way that it is happening.

And credit cards do not help the matter. Do you know how easy it is for someone to skim credit card information off of gas pumps now? I think it says something about the state of our world that we need tamper indication seals on gas pumps. And worse, tech-savvy people, or just those with the right equipment, have to do no more than get close to you to transfer your credit card info to their device.

Online ID Theft Can Be Worse

So if you carry credit cards around, be cautious. When you make an online or mobile purchase, check-in the web address bar for the lock emblem- that tells you the site is secure. If that is not on the checkout page, back it up and find one that does. Also, if you choose to pay at the pump, check the seal. It is usually a yellow or red color and specifically says, “If this seal is broken, do not use and inform the cashier”.

The wording may differ from place to place, but it means the same thing. If that tape is broken, there is a really good chance that someone has tampered with the card reader. Anyone that is authorized to work on those card readers will have more tape to attach when they are finished.

Credit Cards Usually Have Very Confusing Terms and Conditions

The phrase “terms and conditions” makes my head hurt long before I have even looked at them. I love to read, but all of those tiny, dry words are not my forte. I just need straightforward, basic words. If a person has to read a sentence more than two times and use a dictionary to understand what the words mean, it is simply too much. It is even worse when you put the effort forward to read them only to be met with confusing terms.

Unfortunately, it is really important that you know them, so what do you do? You have a few options. The first is to get on the credit card company’s website and visit the Help section and the FAQs. The information you find there will probably tell you what you really need to know. You can even Google the card itself and see if there are any easy to read posts about it. Or you can call the credit card company and have someone sit on the line with you and break down the terms and conditions.

The Rewards are Sometimes Complicated, Useless, or Both

I love rewards. Who doesn’t? Rewards are awesome- well, they can be. A credit card that gives rewards definitely catches people’s attention, but what happens if they are rewards you care nothing about? If I have a credit card that gets me airline miles, it is wasted. Why? I will be honest- I do not fly. Nope, not doing it.

As many times as people have tried to talk me into it, I have not changed my mind. And, yes, they have quoted me the statistics about flying being safer than driving. Well, I happen to feel like I would survive a crash closer to the ground than I would with a plane plummeting towards the earth, but I digress…

The point is that if the rewards are not relevant to you, why would you care about them? Give me cashback on groceries. With a household of six to feed, including a teenager and two more kids that are almost there, I buy a lot of groceries. Earning some cashback from that would be marvelous.

Even worse, some rewards programs are so complicated, users have no idea what they even have. What good does that do anyone? If rewards are important to you, you can card shop for some that you can use and understand. If you do not care about rewards, just look for a simple credit card. There is no need for complicated if it is not benefiting you in some way.

Credit Card Debt Can Easily Get Out of Control

Like a fungus, interest just continues to grow and spread until credit card debt has taken over your life. Does that sound extreme? Sadly, it is all too real. That is why there are so many debt consolidation companies- they would not be popping up everywhere if there was not a market for them. And that market is bigger than people like to admit, and it is everywhere.

A week ago, I was driving down the road with the radio on, and suddenly a loud booming voice came over the speaker. A man was explaining that we do not have to have credit card debt and that we should call so this company could get us out of it. The commercial itself did not surprise me. What did is the fact that the guy specifically mentioned my area.

On a very real note, I live in a smallish town surrounded by even smaller towns. It is small enough that when I heard this commercial, I looked around wondering, “Since when do we have enough people living here to justify a target market?” I literally spent the rest of the day trying to determine how much money this company could make off of this little town. The answer- apparently enough for the company to dedicate resources to reaching out to us. Completely shocking.

On a serious note, though, debt is indiscriminate. It cares not about your age, religion, race, socioeconomic status, or whether you play quarterback in high school or playing the trumpet. It hits everyone. If you are not careful, it will knock you out of commission. All it takes is one missed payment or even one low payment, and it can take a turn for the worse. By taking the time to understand the pros and cons of credit cards, you are equipped to make wise choices concerning them.

One Last Word of Advice: Keep an Eye on Your Finances

Do not just pay your credit card bill when it comes in. Check it for any errors. The sooner you catch them, the easier they should be to fix. Also, look through your credit reports and check for any errors. If you see debts you do not recognize or addresses you have never used, or anything like that, contact someone immediately. The credit report should point you to the correct person to speak with about that charge.

After you have looked through the credit report, sign up for a free credit monitoring service. Your bank may have one you can use. If not, Creditry.com will alert you if there are any changes to your credit report. When you receive that notice, take a quick look to make sure it is something you did. You may not prevent someone from stealing your identity, but you can make it really hard and make them regret it.

Conclusion

I have always told my children that anything can be good, or it can be bad, depending on how you treat it. There are both pros and cons of credit cards. If you are responsible with a credit card, it can absolutely help you and open new doors for you. Those who are not responsible, though, will find themselves suffering. Yes, life happens and things go awry, but being responsible and making good decisions when you are in control is a big step in improving your financial state.

If you are still unsure about having a credit card, read over the list of pros and cons of credit cards again and imagine yourself in each scenario. Working through each, can you see yourself suffering or benefiting from them? Let the answer to that question guide your decision.

Line of Credit vs. Credit Card: Swipe Here or Draw?

Posted on June 29, 2019 | by Brandy Woodfolk | Leave a Comment

When it comes to finances, there are so many terms and definitions that it is easy to get confused. Many of these terms sound similar, and the available definitions on Google often serve to only add to the confusion. Not everyone is a finance guru, so some of us appreciate much simpler definitions. After all, how are we to know what to apply for or what we are getting into if we cannot even understand the textbook definitions?

For the moment, we are going to speak about the two often confused terms and how they differ: line of credit vs credit card. And for those of us who appreciate simplicity, we will be breaking the terms down into useful definitions and explanations. The simpler, the better, in my opinion. Let us begin.

Line of Credit VS Credit Card: Which is Best?

In truth, it is a matter of need and preference. Both offer benefits and risks. Both can be harmful and helpful. Each can be either the answer to your prayer or temptation you do not need. Either way, in order for you to choose between a line of credit vs credit card, you need to understand them on a basic level in order to make an accurate assessment. Below you will find the pertinent information needed to decide on a line of credit vs credit card.

What is a Credit Card?

Yes, it is a card that has credit on it, but how exactly does it work? What does that credit mean? Let’s pretend for a moment that I am yourbest friend. You ask me if you can borrow $500 to pay your power bill because your check will not get to you in time. I know that you make enough money to pay me back, so I say “yes”.

However, instead of just handing you $500 cash, I hand you a card, and I say, “There is $500 on this card that you can use. Next month, I will need you to pay me back at least $50. Every month, you can use whatever is available of the $500, but I need at least $50 a month.” It sounds like a good deal, so you accept. These are the basics of a credit card. Like all things in life, there are pros and cons, so let’s get started on those.

Benefits of a Credit Card vs Line of Credit

First and foremost, the credit is available when you need it, as long as you are paying on it. You have the convenience of pulling the card out when you need it and simply swiping it. There is not waiting for the cash to be put in your hand. As long as it is available on the card, you are free to use it.

Minimum payments are usually not very high, so you probably will not have a hard time making those payments. My credit card has a minimum payment of $25 per month. Even during the tight financial months, I can usually squeeze $25 into the budget without too much stress. Also, making timely payments can improve your credit score as well as increase your credit limit on your card.

If you are thinking about taking a credit card, Loanry is always here to help you make the best decisions. We bring you reputable lenders and credit card companies, together with our partner Fiona. If you’re interested in getting a credit card, start here:

Drawbacks of a Credit Card

One of the biggest drawbacks of a credit card is that the minimum payment required is not really helping you at all. That is because the interest on credit cards is compounded. In simple terms, compounded interest means that it is added monthly. If your interest rate is 10%, your interest will be 10% of the balance on the card for that month. Next month, the interest will be calculated again, and added on top of the previous interest. So, if that is the case, what do you suppose happens if your minimum payment is lower than your interest?

In the simplest answer possible, you will dig yourself into deeper debt every single month. Let’s say you have a credit card with a $200 limit, and that card charges 20% interest. You used $150 of your available credit and your minimum payment is $25 per month. Follow along below to learn what happens if you only pay that $25 minimum.

Month 1 Month 2 Month 3 Month 4

Total Due: $150 $155 $161 $168.20

Interest Rate: 20% 20% 20% 20%

Interest Due: $30 $31 $32.20 $33.64

Total w/Interest: $180 $186 $193.20 $201.84

Payment: $25 $25 $25 $25

Balance: $155 $161 $168.20 $176.84

As you can see, your interest is higher than your payment, so paying only the minimum payment will not get you out of that debt. These numbers are just examples- yours might be higher or lower. The key to getting out of credit card debt is to always make more than the minimum payments. Many cards do not add on interest until the end of the billing cycle. If it is possible for you to pay all or at least some of your balance before then, you will save yourself some cash.

Secured VS Unsecured

As with most loans, there are secured and unsecured credit cards. Secured cards can be of great help to those who have no or low credit. Basically, you pay a deposit on the card, and the company issuing you the card will hold that deposit. Once they have received the deposit, they give you credit. Sometimes, you have to put up the entire amount of credit as a deposit, and sometimes it is just a portion.

For instance, if they are giving you $200 in credit, they might require that you pay as low as $50 as a deposit or may require that you pay the full $200 as a deposit. This minimizes their risk, which is why they are willing to give you credit. If you make timely payments for a set amount of time, the deposit will be returned. Also, they report to the credit bureaus. So even though the cards are secured, they can improve your credit. Unsecured credit cards are simply approved or not according to your previous credit, your ability to repay, and your promise to pay.

What is a Line of Credit?

A line of credit is slightly different from a credit card in how it works and is given. Let’s go back to the example of you and I being besties and you needing some money. You again ask me for money but this time you have different needs. Maybe you want to take some classes at the community college and you have to pay cash. We know that the classes will cost $1,000, but we have no idea what the materials and supplies you need will cost.

This time I say, “I am going to open a bank account and put $3,000 in it. You can borrow anything you need up to that amount. I will leave that money available to you to borrow as often as you need for the next three years as long as you pay the agreed upon interest.”

You take the $1,000 for the classes and register. Two days later, you receive a list of textbooks you need to purchase and find out the total of them is $600. When classes start, you learn that there are lab fees and other costs you had no idea about. Fortunately, it is not a big deal because you still have $2,000 in the account. You take the $800 you need and leave the rest for future use.

The following month, you pay the required interest on what you have borrowed plus $200 on the principle. Now, you still have $1,600 available when you need it. Every month you pay more than the interest, you are replenishing your line of credit. Though some variables may change, this example is the basic idea of a line of credit.

Benefits of a Line of Credit vs Credit Card

One of the major benefits of a line of credit is that you have access to cash. While you can get a cash advance on a credit card, it is generally not a high amount and the interest is often higher. Plus, there are often fees for getting a cash advance. With a line of credit, the expenses associated are often lower than that of a credit card.

You also have flexible repayment options, usually from one year to more than ten years, and the APR is most often lower than that with credit cards. Lastly, there are very few restrictions, and they are an open ended credit line.

Drawbacks of a Line of Credit

First, the interest rates are usually variable, so your interest may change from month to month unlike a fixed rate loan. Lines of credit generally require an account at the financial institution you are borrowing from and a very good credit score. Additionally, you will likely find yourself paying both monthly and yearly maintenance fees so long as the line of credit is open, even if you are not using it.

Secured VS Unsecured

Most lines of credit are unsecured. This means that you provide no collateral. However, as the lending institution assumes a higher risk, it is more difficult to get a line of credit vs credit card, personal installment loan, or other loan options. If you get approved, though, you have a revolving line of credit that can be handy when you are in need.

Similarities and Differences

Now that we have broken down each separately, let’s take a closer look at which is better between a line of credit vs credit card. The two are similar in the sense that in ways, they are both lines of credit. As you generally borrow, payback, and replenish your credit card funds, it is technically a line of credit.

However, a line of credit is often much higher than a credit card. Credit cards are generally a few hundred to a couple of thousand dollar limits, though some may go higher. Lines of credit can start as low as $1,000 and go as high as the institution allows, though most cap out by $100,000. The highest most go are $25,000.

Interest Rate Differences

You will also typically notice a difference in interest rates in a line of credit vs credit card. These differences can vary widely, as well. Some credit cards offer 0% APR for the first year. With lines of credit, you begin paying interest the moment you take out any of your available credit. However, when interest rates begin, lines of credit often run from 9% to 23%.

Credit card interest rates usually start at 23%, though you may find some a little higher or lower. It is also important to remember that with a line of credit, the interest rates- unless stated otherwise- are variable. You may find yourself paying 9% one month and jolting to 23% the next. This makes it rather difficult to budget your payment.

Also, as previously mentioned, most lines of credit require that you have an account with that institution. This is not always the case with credit cards. In fact, some credit card companies do not have other account types.

Lastly, consider the actual rewards when it comes to a line of credit vs credit card. Most credit cards offer some type of reward. It might come in the form of cashback, airline miles, or other rewards. I have yet to find a line of credit that offers any reward beyond borrowing the money and building your credit- if you pay on time.

An Invaluable Lesson

There is one major downside that comes with both options. Regardless of your choice between a line of credit vs credit card, both can impact your credit hugely. If you have never looked at your credit report or really paid attention to it, I am about to tell you something really important, so pay attention: the more you borrow, the lower your credit score. If you borrow more than 30% of your available credit, your credit score drops.

Wait- what? But doesn’t it look good if I can borrow a lot of money?

Yes, unless you are borrowing it. I know, it sounds crazy, but it is true. The percentage of your available credit that you use at a time is called “credit utilization”, and it is a big factor in your credit score. The lower your credit utilization, the better your score. At the same time, they want to see you use credit. There is just a fine line between using it and using it too much.

Let me help you draw that line. If you have a $200 credit limit, the maximum you use should be $60. If you borrow more, try your best to pay it down to 30% before the billing cycle closes. Keep the amount you borrow as low as possible. However, do not ignore your credit. Sadly, using no credit can hurt you about as bad as using too much.

True Story

About five years ago, my husband and I really began trying to clean up our credit. We have been aiming to buy a family home for years and knew our credit would have to improve. We started paying every dime we could to debts, even if it was only $5 at a time. Slowly, we saw our debts dwindling and our scores rising. But goodness, those scores were rising very slowly.

We also made the decision to not use any more credit at all. We did not want any loans to cancel out our other hard work. After three years of paying debts and staying away from credit, we applied for a home loan. And we were denied.

Thinking that maybe our income was too low for approval, I reached out to the finance company. The agent told me, “No, it’s not your income. Actually, that and your work history look great. The problem is you two are not using any credit.”

I have to admit, this completely confused me. Some part of me thought that not using credit and paying for everything out of your income showed great responsibility, but nope.

She went on to explain that lenders want to see that you use credit and are good at paying it. However, they do not want to see you use more than 30%. Learn from our experience: use your credit, just do not abuse it.

Which Should I Get: Line of Credit vs Credit Card?

A major factor in this decision is what you need, or will use, the money for. Are you looking to make a large purchase? Paying ongoing extra expenses, like the college example? Or is it more for everyday expenses?

If you just need something to help you put gas in your car or to buy groceries and tissue between checks, a credit card should suffice. If you want to buy a car with cash, need to make repairs to your home, or something similar, you should probably go for a line of credit.

Then again, maybe it is best not to choose between a line of credit vs credit card. Consider applying for both. Just because you have them does not mean you have to use them. If you get approved for both, you can leave them alone until you need them. How much peace of mind would it give you to know that you have money to the side in case you need it? Everyone needs a rainy day fund. Perhaps these credit types can serve as a rainy day fund until you can save one separately.

Line of Credit for Planning Ahead Security

Also, it is likely a good idea to apply for a line of credit long before you actually need it. Let’s say your car breaks down- a common occurrence for the fortunate among us. If you have no money put to the side, or money available to you through credit, you will have to find a way to cover it. If you apply for a line of credit then, it may take a few days or more to be approved. That means you will be stuck worrying about how to get around until you find out if you were approved.

On the other hand, if you applied and got approved for a line of credit months in advance, the stress would lessen. After the initial shock, frustration, and, “What do I do?” reaction, you will remember that you have some money available. You just need to get to the bank to retrieve it. Before you know it, you are back on the road. The bottom line is that it is better to be safe than sorry, so applying for both a credit card and line of credit well before they are needed might turn out to be very beneficial to you.

Conclusion

As you can see, making a choice between a line of credit vs credit card is a personal and situational choice. However, you may find it helpful to have both available to use depending on the situation you face. Another similarity between the two is that lenders for both are widely available. When you are trying to decide where to get a loan or where to credit card shop, Loanry can help. Whether you are searching for a line of credit or a simple credit card, we can help you find a lender that may suit your needs.

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