We all know by now – after feeling the negative impact of the recession, the credit crunch, and the high rates of unemployment – that it pays to be smart about how we use credit and manage our levels of debt. Right before the worst of the global recession and credit crisis hit, for example, the average American consumer was carrying such a large burden of debt that he or she was actually earning less each month that was being spent.
You cannot continue to balance your finances if you are spending more than a dollar for every dollar you bring home from work, but that is exactly what millions of Americans were doing. That’s why the average USA saving rate – which calculates how much money the typical household saves versus how much they spend – was in negative territory when the credit crisis hit. That was the first time it had been in negative territory since the Great Depression, and many economists now blame that lack of saving and obsession with living off of borrowed money for helping to usher in the hard economic times we are all now trying to weather.
But understanding a little bit about the history of economics or the national recession might not make it any easier to manage your credit cards and monthly budget, so here are a few tips that may help.
For starters, if you are accustomed to carrying a balance on your credit card then this year would be a good time to update your strategies for doing that. It used to be that you could carry a higher balance – or a bigger portion or percentage of your credit card balance – without much trouble. But banks and credit reporting agencies have tightened their policies, and now if you continue to carry balances that exceed 25 or 30 percent of your total credit line or limit, your card company might raise your interest rates and fees. A better strategy is to either carry a lower balance of borrowed money or divide it up between two cards. If you have a credit limit of $5,000 on two different cards for example, and an outstanding balance of $2,000 on one of them then you might be better off keeping only $1,000 on each card.
You can, of course, also take advantage of an attractive introductory offer to do a balance transfer at a low or zero percent interest rate. But those offers have also seen some significant changes in recent months. The offers may still have great rates attached to them, but most of the offers are for shorter periods of time. Instead of enjoying the new low introductory rate for the first year you have the credit card, for example, your teaser rate will likely expire after only six months.
In addition to shorter introductory periods banks are also charging customers a fee to do the initial balance transfer, so you might get hit with a fee worth five percent of the amount you are transferring. That could make a balance transfer less profitable for you so you should do the math and crunch the numbers to help you leverage credit card debt in a way that works out best for you. Plus, don’t forget that even if you have a fantastic zero percent rate on your card you can lose it overnight if you just make one late payment.
Even if you mail your payment and it gets delayed en route to your credit card company, or you make an online payment or payment by telephone but you miss the deadline for the transaction to get credited to your account on time, you will suffer the consequences. You may have a zero percent interest rate and if your payment gets credited to your account just one hour too late, that rate could quickly jump to 25 percent or higher. So the first rule of credit card management is to always make your payments in a timely fashion. Forget that rule and it could wipe out all of your other savings strategies instantly.
Other ways to save money in a big way on your credit cards involve improving your credit score or persuading your credit card company to lower your APR. Raise your score by reducing the ratio of your overall debt to your monthly income and then you’ll be a stronger bargaining position because you will become a more preferred and low-risk customer. Then you can phone your card company and ask for a reduction in your interest rate, telling them that if they cannot offer that you then you may need to take your business to their competitor. If your track record of payments is good and your credit score is high enough they may agree in order to keep you on as a customer.
Of course if your credit score is in trouble and you are having lots of problems managing your credit card debt and monthly expenses, you may want to seek help from a non-profit credit counseling service. These professional organizations can show you ways to reduce your debt and get spending back under control, and if necessary they can intervene on your behalf and negotiate with your creditors to get you the debt relief you need.
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Thursday, July 1, 2010
Saturday, June 19, 2010
Advantages and Disadvantages of Student Credit Cards
Having a credit card is a very convenient way of purchasing things in an instant without having to worry about cash. There are credit card companies that give opportunities to young adults. However, student credit cards come with limitations, even if they can be used just like any other regular credit card.
A lot of credit card companies and banks offer student credit cards and basically request a cosigner who would serve as a collateral. The consigner, who is usually a parent or guardian, would sign the loan together with the student. The consigner has to pay the student’s debt if the student can no longer pay his or her own bills. A consigner with good credit score gives the company peace of mind.
The interest rates of student credit cards are higher than that of regular credit cards to ensure the company. But student credit cards do give benefits to students who make huge purchases. To make a huge purchase, the student should have a good credit score. Credit cards would serve as a starter to build credit and to establish a good credit rating. When the student has good credit score, it is a big plus in applying for loans in the future.
Students who use credit cards should acquire enough knowledge about the risk of using the credit card. At a very young age, students might think credit cards mean free money. This would be very dangerous for them and could lead to bad credit records. The students could even be forced to work harder to be able to pay their debt. Plus, they can no longer apply for loans if they would have bad credit scores. This would force them to get bad credit credit cards. They might be one of those unlucky people who would end up getting credit cards for bad credits.
The company would go directly to the consigner if ever the student is unable to pay the credit card bills. This would affect the consigner’s name as well. A specific budget is highly recommended to avoid overspending.
Credit cards might be good for students because this would help them learn how to budget money. However, they must know and understand the dangers first before getting a credit card.
A lot of credit card companies and banks offer student credit cards and basically request a cosigner who would serve as a collateral. The consigner, who is usually a parent or guardian, would sign the loan together with the student. The consigner has to pay the student’s debt if the student can no longer pay his or her own bills. A consigner with good credit score gives the company peace of mind.
The interest rates of student credit cards are higher than that of regular credit cards to ensure the company. But student credit cards do give benefits to students who make huge purchases. To make a huge purchase, the student should have a good credit score. Credit cards would serve as a starter to build credit and to establish a good credit rating. When the student has good credit score, it is a big plus in applying for loans in the future.
Students who use credit cards should acquire enough knowledge about the risk of using the credit card. At a very young age, students might think credit cards mean free money. This would be very dangerous for them and could lead to bad credit records. The students could even be forced to work harder to be able to pay their debt. Plus, they can no longer apply for loans if they would have bad credit scores. This would force them to get bad credit credit cards. They might be one of those unlucky people who would end up getting credit cards for bad credits.
The company would go directly to the consigner if ever the student is unable to pay the credit card bills. This would affect the consigner’s name as well. A specific budget is highly recommended to avoid overspending.
Credit cards might be good for students because this would help them learn how to budget money. However, they must know and understand the dangers first before getting a credit card.
Find The Right Credit Card In Three Easy Steps
After years of consumers racing headlong into debt, many people have learned the hard way that not knowing the terms of your credit card agreement can be detrimental to your finances. This is partly banner_comparethe fault of card holders who eagerly applied for and used credit without thought for the consequences. The credit card companies are not without blame as they often used less than forthcoming marketing techniques to target consumers that really shouldn’t have credit in the first place. As a result there are major changes taking place within the credit card industry. Consumers looking for credit in the future will have a harder time finding good credit card offers. Knowing what to look for will be the first step in securing credit in the next few months.
Know Where You Stand- Before you can compare credit card offers you must first know what it is you are looking for in a credit card and the risk the lender assumes when offering you credit. Will you be using your credit cards for all expenses and paying in full each month? If so you will need a higher credit limit and possibly a rewards program to reap the benefits of using your card frequently. Perhaps you are looking to have a credit card as backup in the event you need access to cash in an emergency? Your needs and how you intend on using the card play a big role in the card you select. The next question is are you qualified for the type of card you want? Lenders are raising the standards for potential borrowers and your credit worthiness will play a big role in what type of cards and terms for which you qualify. Know your credit score and any possible negative marks on your history before applying for cards.
Do Not Randomly Apply For Credit- As a general rule people who apply for any and all forms of credit cards are viewed as consumers desperate for credit. Each time you apply for credit, the potential lender pulls your credit report to consider your credit worthiness. Other lenders will be able to see this “pull” on your credit report. Applying for credit too often in a short period of time can lower your credit score and reduce your chances of being approved for any cards. For this reason you should carefully consider all offers and your likelihood of qualifying before applying for credit.
Read The Terms and Conditions- Prior to the recent credit crisis, consumers found applying for and receiving credit cards was relatively simple. Many people accepted offers received in the mail or applied online without fully understanding the terms of the credit card agreement. Credit card offers can seem misleading, however people who take the time to not only read the entire agreement but also understand the conditions will likely find all the information needed to make an informed decision. If you do not understand the language in the fine print- contact the credit card company before applying to reduce the chances of agreeing to terms you do not fully comprehend.
The rules and climate within the credit card industry are changing each day. Consumers who take the time to research, review and understand the contract to which they will be legally bound will make out far better than people who blindly apply for and use credit cards
Seven “Wonders” of the ATM World
After years of using ATMs I’ve stumbled across several unsolved mysteries I never quite understood. Some are just funny curiosities others I really always wanted to know the answer to. I’ve talked to others and realized I’m not alone in just not along in being confused by these enigmas. I decided to research the answers to each of these questions, so I present to you my seven wonders of the ATM world. With answers!
The Wonders
1. Why do ATMs allow you to enter the amount you wish to withdraw in penny increments? If I type in I want $53.28 it’s not like it’s going to shoot a quarter and three pennies out of the bill changer. Pretty much all ATMs only give out cash in $10 or $20 increments so I won’t even get the three ones! Why not just type in the dollar amount? It sure would be a lot simpler.
2. Why do-drive up ATMs have Braille? This is a common wise-crack many people have made. The rationale is blind people shouldn’t be driving, and there’s warning on most drive up ATMs telling you not to walk up and use them, so why have Braille.
3. What does the Braille say? This isn’t one I’ve heard any one else ask, but I think the better question than why do the drive up ATMs have Braille is what could it possibly say next to those buttons? The function of the buttons change with every screen. In recent years they added headphone jacks that probably solve this problem, but for years they didn’t. So what do the buttons say?
4. What’s with the $2.50 or more fee you have to pay when using an ATM from another bank? I can almost understand the $1.50 fee the foreign banks ATM charges you for using their machine, but why does your own bank charge you another dollar. They don’t charge you when you use that same card to pay for something at a store so why is it any different when you use an ATM. The $1.50 seems high too, especially when you only take out $20. A merchant is only charged around 30 cents on average to make that same $20 purchase on your check card.
5. Is the “Fast Cash” option really any quicker? I don’t think so. I rather skip that screen all together and just go to the 10 key. It takes me longer to search for the dollar amount on the Fast Cash screen and try to figure out which button it almost lines up to than to just type it in. Also the inputs are usually in $20 increments so I have to go to the 10 key anyways to get my $50 out of the machine.
6. Why are PINs 4 digits? It seems backwards that my email provide feels it’s necessary to secure my account with a password that is at least 8 characters, alpha numeric, has at least one upper and lower case letter and at least one number, yet my bank it feels four numeric characters will suffice. It’s 1 in 10,000 pretty good odds of guessing someone’s pin? If you consider that most people use some sort of date as their pin in MMDD format, you’re down to 1 in 365 odds.
7. What do you do if the ATM give you the wrong amount? There’s usually a number to call on the ATM, but how do you go about proving you got the wrong amount.
The Answers
I researched these answer to the best of my ability, however on some of them the answer just isn’t there to be found so I had to go on speculation.
1. It appears to be for consistency sake. When you make a deposit you can enter a decimal amount, so they provide that option for withdrawals as well to keep the input format consistent.
2. The primary reason is legal compliance. The Americans with Disabilities Act requires all ATMs to be accessible by the blind. You may think this is one of those stupid laws in the case of drive-up ATMs, but there actually are some good scenarios where the Braille would be needed. The main one that comes to mind is for when a blind customer is in a cab and needs to get cash. I know I sure don’t want to give my card and PIN to a random cab driver!
3. All ATMs are designed differently but on most the Braille options are just the numeric values for the 10 key and alpha values for the option buttons. For the years blind customers had to memorize the keystroke sequence. Fortunately newer ATMs have headphone jacks which provide audio instructions.
4. In short because they can. Most people are surprised to learn that the primary source of income for many banks isn’t the interest they make from loans or from investment commissions, but from charging fees. Overdraft fees, refinancing fees and yes ATM fees. It has become a significant source of income for banks over the past decade and rates continue to rise. Of course customer frustration with this also continues to rise and many customers have begun switching banks. As a result some banks have stopped charging fees and certain online only banks have gone as far as reimbursing their customers for the fees the other bank charges when using a foreign ATM.
5. It’s not faster for me, but then again I’m pretty quick with 10-key and usually want $50 which is not on the menu. However, not everyone is 10-key proficient and are many are ok with taking a $20 increment. It has an added benefit of encouraging you to get a $20 increment which allows the bank to more efficiently pack the ATM with mostly $20 bills.
6. Old standards are hard to change. Even if your bank decided to install a full keyboard and allow alpha-numeric, you’re going to have a real problem when you go to foreign ATM that still only accepts 4 digit numeric and try to get your money out. What incentive does any bank have to be the first to offer this? There’s also some interesting standards around how ATM pins work that would have to be changed. We’ll talk more about this in a later post.
7. In theory they should be able to count the cash remaining in the machine and find the difference. Even if not, if you’re a good customer and they don’t have any other reason to suspect fraud from you, they’ll usually just give you the benefit of the doubt to keep you as a customer. If all else fails a call to your local TV station should get the problem solved for you.
The Wonders
1. Why do ATMs allow you to enter the amount you wish to withdraw in penny increments? If I type in I want $53.28 it’s not like it’s going to shoot a quarter and three pennies out of the bill changer. Pretty much all ATMs only give out cash in $10 or $20 increments so I won’t even get the three ones! Why not just type in the dollar amount? It sure would be a lot simpler.
2. Why do-drive up ATMs have Braille? This is a common wise-crack many people have made. The rationale is blind people shouldn’t be driving, and there’s warning on most drive up ATMs telling you not to walk up and use them, so why have Braille.
3. What does the Braille say? This isn’t one I’ve heard any one else ask, but I think the better question than why do the drive up ATMs have Braille is what could it possibly say next to those buttons? The function of the buttons change with every screen. In recent years they added headphone jacks that probably solve this problem, but for years they didn’t. So what do the buttons say?
4. What’s with the $2.50 or more fee you have to pay when using an ATM from another bank? I can almost understand the $1.50 fee the foreign banks ATM charges you for using their machine, but why does your own bank charge you another dollar. They don’t charge you when you use that same card to pay for something at a store so why is it any different when you use an ATM. The $1.50 seems high too, especially when you only take out $20. A merchant is only charged around 30 cents on average to make that same $20 purchase on your check card.
5. Is the “Fast Cash” option really any quicker? I don’t think so. I rather skip that screen all together and just go to the 10 key. It takes me longer to search for the dollar amount on the Fast Cash screen and try to figure out which button it almost lines up to than to just type it in. Also the inputs are usually in $20 increments so I have to go to the 10 key anyways to get my $50 out of the machine.
6. Why are PINs 4 digits? It seems backwards that my email provide feels it’s necessary to secure my account with a password that is at least 8 characters, alpha numeric, has at least one upper and lower case letter and at least one number, yet my bank it feels four numeric characters will suffice. It’s 1 in 10,000 pretty good odds of guessing someone’s pin? If you consider that most people use some sort of date as their pin in MMDD format, you’re down to 1 in 365 odds.
7. What do you do if the ATM give you the wrong amount? There’s usually a number to call on the ATM, but how do you go about proving you got the wrong amount.
The Answers
I researched these answer to the best of my ability, however on some of them the answer just isn’t there to be found so I had to go on speculation.
1. It appears to be for consistency sake. When you make a deposit you can enter a decimal amount, so they provide that option for withdrawals as well to keep the input format consistent.
2. The primary reason is legal compliance. The Americans with Disabilities Act requires all ATMs to be accessible by the blind. You may think this is one of those stupid laws in the case of drive-up ATMs, but there actually are some good scenarios where the Braille would be needed. The main one that comes to mind is for when a blind customer is in a cab and needs to get cash. I know I sure don’t want to give my card and PIN to a random cab driver!
3. All ATMs are designed differently but on most the Braille options are just the numeric values for the 10 key and alpha values for the option buttons. For the years blind customers had to memorize the keystroke sequence. Fortunately newer ATMs have headphone jacks which provide audio instructions.
4. In short because they can. Most people are surprised to learn that the primary source of income for many banks isn’t the interest they make from loans or from investment commissions, but from charging fees. Overdraft fees, refinancing fees and yes ATM fees. It has become a significant source of income for banks over the past decade and rates continue to rise. Of course customer frustration with this also continues to rise and many customers have begun switching banks. As a result some banks have stopped charging fees and certain online only banks have gone as far as reimbursing their customers for the fees the other bank charges when using a foreign ATM.
5. It’s not faster for me, but then again I’m pretty quick with 10-key and usually want $50 which is not on the menu. However, not everyone is 10-key proficient and are many are ok with taking a $20 increment. It has an added benefit of encouraging you to get a $20 increment which allows the bank to more efficiently pack the ATM with mostly $20 bills.
6. Old standards are hard to change. Even if your bank decided to install a full keyboard and allow alpha-numeric, you’re going to have a real problem when you go to foreign ATM that still only accepts 4 digit numeric and try to get your money out. What incentive does any bank have to be the first to offer this? There’s also some interesting standards around how ATM pins work that would have to be changed. We’ll talk more about this in a later post.
7. In theory they should be able to count the cash remaining in the machine and find the difference. Even if not, if you’re a good customer and they don’t have any other reason to suspect fraud from you, they’ll usually just give you the benefit of the doubt to keep you as a customer. If all else fails a call to your local TV station should get the problem solved for you.
How ATM PINs Work
Did you know that your ATM pin is not stored ANYWHERE? That is assuming you don’t have it written down on a sticky pad stuck to the back of your card. You’re probably thinking “It has to be stored somewhere. How else would they know if you enter it correctly? ” Well there’s an interesting story behind that.
Most people think that when you enter your PIN in an ATM, a call is made to some back-end database that compares the pin you enter to the one they have on file, if they match then access is granted. This is close, but not quite accurate.
The problem with having a massive database of account numbers and PINs is that it’s just too risky. No matter what steps you take to secure this list, there’s always the risk someone could get a hold of it, and the effects would be devastating to a bank. So they have a clever system to help mitigate this risk.
Remember when you first got your ATM card and you were assigned a default PIN and told to change it? This PIN wasn’t just some random number the bank assigned you it’s the “natural pin” which holds significant value.
This natural pin is generated by a complex mathematical formula. In short it involves encrypting your card number using a set of encryption keys that your bank keeps extremely secure. Usually these keys are only contained on the one system that generates the natural pin, and on paper in the bank vault. Once that account number is encrypted, it is then converted to decimal format and certain digits are stripped out of that decimalized version, which become the natural pin for that card.
You are then forced to use that ATM card in one of that bank’s ATMs and change your PIN before it can be used anywhere else. When you do this, the PIN you enter isn’t stored at your bank but rather an offset. For example say the natural PIN assigned to your account was 0112 and you chose the pin 1234, the offset would be 1234-0112 which is 1121 and is what’s stored with your bank.
If the banks database of these PIN offsets was ever compromised all that would be gained is your PIN offset of 1121 which would be worthless to the person who obtained it unless they also had the encryption keys and formula the bank uses to generate the natural PINs.
Most people think that when you enter your PIN in an ATM, a call is made to some back-end database that compares the pin you enter to the one they have on file, if they match then access is granted. This is close, but not quite accurate.
The problem with having a massive database of account numbers and PINs is that it’s just too risky. No matter what steps you take to secure this list, there’s always the risk someone could get a hold of it, and the effects would be devastating to a bank. So they have a clever system to help mitigate this risk.
Remember when you first got your ATM card and you were assigned a default PIN and told to change it? This PIN wasn’t just some random number the bank assigned you it’s the “natural pin” which holds significant value.
This natural pin is generated by a complex mathematical formula. In short it involves encrypting your card number using a set of encryption keys that your bank keeps extremely secure. Usually these keys are only contained on the one system that generates the natural pin, and on paper in the bank vault. Once that account number is encrypted, it is then converted to decimal format and certain digits are stripped out of that decimalized version, which become the natural pin for that card.
You are then forced to use that ATM card in one of that bank’s ATMs and change your PIN before it can be used anywhere else. When you do this, the PIN you enter isn’t stored at your bank but rather an offset. For example say the natural PIN assigned to your account was 0112 and you chose the pin 1234, the offset would be 1234-0112 which is 1121 and is what’s stored with your bank.
If the banks database of these PIN offsets was ever compromised all that would be gained is your PIN offset of 1121 which would be worthless to the person who obtained it unless they also had the encryption keys and formula the bank uses to generate the natural PINs.
How ATM PINs Work
Did you know that your ATM pin is not stored ANYWHERE? That is assuming you don’t have it written down on a sticky pad stuck to the back of your card. You’re probably thinking “It has to be stored somewhere. How else would they know if you enter it correctly? ” Well there’s an interesting story behind that.
Most people think that when you enter your PIN in an ATM, a call is made to some back-end database that compares the pin you enter to the one they have on file, if they match then access is granted. This is close, but not quite accurate.
The problem with having a massive database of account numbers and PINs is that it’s just too risky. No matter what steps you take to secure this list, there’s always the risk someone could get a hold of it, and the effects would be devastating to a bank. So they have a clever system to help mitigate this risk.
Remember when you first got your ATM card and you were assigned a default PIN and told to change it? This PIN wasn’t just some random number the bank assigned you it’s the “natural pin” which holds significant value.
This natural pin is generated by a complex mathematical formula. In short it involves encrypting your card number using a set of encryption keys that your bank keeps extremely secure. Usually these keys are only contained on the one system that generates the natural pin, and on paper in the bank vault. Once that account number is encrypted, it is then converted to decimal format and certain digits are stripped out of that decimalized version, which become the natural pin for that card.
You are then forced to use that ATM card in one of that bank’s ATMs and change your PIN before it can be used anywhere else. When you do this, the PIN you enter isn’t stored at your bank but rather an offset. For example say the natural PIN assigned to your account was 0112 and you chose the pin 1234, the offset would be 1234-0112 which is 1121 and is what’s stored with your bank.
If the banks database of these PIN offsets was ever compromised all that would be gained is your PIN offset of 1121 which would be worthless to the person who obtained it unless they also had the encryption keys and formula the bank uses to generate the natural PINs.
Most people think that when you enter your PIN in an ATM, a call is made to some back-end database that compares the pin you enter to the one they have on file, if they match then access is granted. This is close, but not quite accurate.
The problem with having a massive database of account numbers and PINs is that it’s just too risky. No matter what steps you take to secure this list, there’s always the risk someone could get a hold of it, and the effects would be devastating to a bank. So they have a clever system to help mitigate this risk.
Remember when you first got your ATM card and you were assigned a default PIN and told to change it? This PIN wasn’t just some random number the bank assigned you it’s the “natural pin” which holds significant value.
This natural pin is generated by a complex mathematical formula. In short it involves encrypting your card number using a set of encryption keys that your bank keeps extremely secure. Usually these keys are only contained on the one system that generates the natural pin, and on paper in the bank vault. Once that account number is encrypted, it is then converted to decimal format and certain digits are stripped out of that decimalized version, which become the natural pin for that card.
You are then forced to use that ATM card in one of that bank’s ATMs and change your PIN before it can be used anywhere else. When you do this, the PIN you enter isn’t stored at your bank but rather an offset. For example say the natural PIN assigned to your account was 0112 and you chose the pin 1234, the offset would be 1234-0112 which is 1121 and is what’s stored with your bank.
If the banks database of these PIN offsets was ever compromised all that would be gained is your PIN offset of 1121 which would be worthless to the person who obtained it unless they also had the encryption keys and formula the bank uses to generate the natural PINs.
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