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5 Credit Card Myths Hurting Your Wallet and Credit Score

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Credit cards, like any financial product, seem to create a certain amount of anxiety for people. There are myths and rumors running rampant about how to spend on a card, when to pay it off and whether or not to even have one. Unfortunately, some of these credit card myths may be causing your wallet – and your credit score – more harm than good.

Here are five credit card myths we hope you’ll disregard next time you hear them.

1. Don’t get a credit card, just use prepaid or debit cards

Never drink one beer, you’ll just get incredibly sick.

That’s essentially what people are saying when they tell you not to get a credit card.

There is a common misconception that carrying a credit card will ultimately lead to damaging credit card debt. Sure, some people don’t understand how to handle credit cards – or have personality types (looking at you present hedonists), that result in maxing out any credit limit.

However, for the responsible individual, a credit card offers one of the easiest ways to establish and build credit history. Prepaid cards and debit cards do nothing to help establish credit history.

Instead of just listening to scare tactics, consider your time perspective (which you can test here), responsibility levels and history with debt. If you’re the kind of person who always handed homework in on time, never misses an appointment and understands how to budget – well you can probably handle a credit card.

Having a credit card in your wallet doesn’t just mysteriously incur debt, but it can magically help you improve your credit score.

Expertise from a former Credit Card executive:

Your credit score measures your ability to behave responsibly when you borrow money. Lenders use this score to see the likelihood that you will repay. So, the score looks at your behavior when you borrowed previously. Prepaid cards and debit cards do not involve the bank lending you money, therefore they are not included in your credit score.

2. Carry a balance on your credit card; it helps your score

NO, NO, NO!

Sorry, was that confusing?

Let’s try again: NOOOOOOOO!

A terrible myth is floating around out there that carrying a balance on your credit card and only paying the minimum due each month will help your credit score.

This is simply untrue.

It may have started by someone saying, “Don’t pay off your credit card until your credit card company sends you a bill. Paying it off early doesn’t help your score.” And it morphed into, “Don’t pay off your entire bill, it will help your score.”

Wherever it came from, it’s flat out wrong.

Each month you should pay your credit card bill on time and in full. If you can’t afford to pay off the balance in full, then pay at least the minimum (preferably a little more than the minimum) on time. Never miss paying at least the minimum because missing a payment – even by a day – can cause major damage to your credit score.

If you’re carrying a low balance on your credit card and paying the minimum month-to-month because you heard you should, you aren’t damaging your score nor are you improving it. But you are losing money each month in interest to your lender. Why throw away money?

Keep in mind: Carrying a high balance from month-to-month can hurt your score because you look irresponsible to lenders.

If you’re struggling with credit card debt, consider utilizing a balance transfer to cut the interest rate and cost of paying down the debt.

Expertise from a former Credit Card executive:

The two most important parts of your credit score are paying on time and utilization. Utilization is your statement balance as a percent of your total available limit. Your goal is to keep that utilization below 30%. Nowhere in your credit score does it reward you for paying interest on your balance.

3. Only have one credit card

This myth is linked with the notion that people can’t have a credit card in their wallets without incurring debt. This is valid for some, but not everyone.

If you feel you can’t handle paying off bills on multiple credit cards because you’ll either a) forget b) rack up too many purchases or c) get overwhelmed, then stick with one.

For those who are organized, responsible and maybe like to take advantage of cash back rewards – then go ahead and get more than one credit card.

We recommend finding a card at that matches your particular spending habits. We make this easy with our cashback rewards tool.

It also is useful to have at least one card with a low interest rate, like a PenFed VISA card at 9.99%, in your metaphorical freezer. In case of an emergency, it’s best to use a card with a low-interest rate in case you won’t be able to pay off the full balance.

If you get into the habit of credit card churning for rewards, then be mindful of all your payments, any annual fees and not overspending to get a sign-on bonus.

Expertise from a former Credit Card executive:

Your goal is to keep utilization low. One way to make sure that happens is to have a number of credit cards open. That increases your total limit available, making it easier to keep your utilization low.

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4. Opening a credit card will hurt my credit score

Oh, don’t be so dramatic!

Opening a credit card will only drop your credit score by a handful points, usually about five points. If you have a score resting comfortable in the 700s, this is no big deal.

If you’re in the 500s – 650 range, then you should focus on improving your score, and you likely won’t be eligible for many of the better credit cards. Instead, you may need to focus on a secured card first in order to improve your score.

One exception to the rule: if you’re applying for a mortgage or another loan, you should hold off any applying for any forms of credit or doing anything that may cause a dip in your score. The higher your credit score when applying for a loan, the lower your interest rate will likely be.

Remember: your credit score isn’t a trophy!

Expertise from a former Credit Card executive:

If you open a new credit card and max it out, it will hurt your score and your financial health. Applications for credit take, on average 10 points off your score. But, so long as you behave responsibly, the impact of that reduction wears off quickly. And, if you apply for credit to get a lower interest rate, helping you pay off your debt faster, then your score will improve even more quickly.

5. Don’t accept a credit limit increase

Get an offer to increase your credit limit? Yes, your lender is trying to lure you into a trap. But get this – you can use their trickery to your advantage.

To understand why, let’s recap how your FICO credit score works:

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • New credit (10%)
  • Types of credit used (10%)

“Amounts owed”, which accounts for 30% of your score, is also referred to as utilization: the amount of your credit limit you use. The more debt you have, the lower your score. The ideal utilization is 30% or less of your overall credit limit.

For example, if you only have one credit card with a $2000 credit limit and spend $800 a month on your card, that’s a 40% utilization ratio.

Now, let’s say your bank offers you a $1000 increase on your credit limit. If you keep your spending the same at $800, but have a limit of $3000, your utilization will decrease to about 27%. This small change will help move your credit score up.

Another way to increase your overall credit limit is to simply apply for another card.

Of course, if you tend to overspend and know that you’ll just max out a card with a higher credit limit then stay away from an increase or a second card!

Expertise from a former Credit Card executive:

So long as you keep your utilization low, credit limit increases should not hurt you. If you call and ask for an increase, they may run a credit bureau and put a hard inquiry on your report. That could result in a 10 points drop. But, when a bank offers you an automatic credit limit increase, you should not have any negative side effects.

Have you heard another rumor or myth you want details on? Get in touch with us via Twitter, Facebook or email (info@magnifymoney.com).

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Where to Get Your Credit Report for Free

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Where to Get Your Credit Report for Free

If you haven’t checked your credit report lately, you’re not alone. A 2016 survey conducted by Princeton Survey Research Associates International found more than half — about 54% — of Americans hadn’t even checked their credit score — the number constructed from factors in your credit report — within the past year. What’s worse, almost a quarter of respondents had never checked their score, making them extremely vulnerable to financial crime. Checking your credit report may seem like any other financial chore, but you shouldn’t keep placing it on the back burner. Similarly to getting a check-up at the doctor’s office, checking your credit report is a preventative measure you should take at least once a year with a bonus: it’s free.

What Is a Credit Report?

Your credit report paints a financial picture of your life. It is a complete history of your use of credit going back at least seven years, good and bad. This includes credit card accounts, student and personal loans, and mortgages, and information about how you use them such as payment history or accounts that have gone to collections. It may also include any utility and other bills that have gone unpaid and were sent to collections. There are three main companies that track your credit report: Experian, Equifax, and TransUnion.

Don’t confuse your credit report with your FICO credit score. Your credit score is a numerical figure that is calculated by using the information from your credit reports. Banks and lenders weigh information from your credit report to create a credit score to gauge how responsible you are when it comes to credit. If your credit reports show a solid history of on-time payments and a good mix of different types of loans, your score will reflect that. Likewise, if your credit report shows lots of missed payments and debt collection accounts, you can expect a poor score.

Knowing the information that is currently on your credit report can help you stay ahead of fraudsters and give you details about how you can improve your credit score. If you don’t check your credit report annually, you may not be able to accurately track the health of your credit score, or know when someone has used stolen personal information from you. In addition to those benefits, checking your reports annually can be an exciting way to benchmark your financial progress.

Where to Get Free Credit Reports

You should check your credit report annually for yourself, but you may also need a report to apply for a car loan or to rent an apartment, etc. When you do need a copy of your report, you can get one for free from a few sources.

You are entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting bureaus. You can order a free copy of your credit report from all three bureaus from AnnualCreditReport.com. Like the name implies, you can only order each report once a year for free.

Since you only get one free report from each of the three bureaus per year, stagger them throughout the year. For example, once every four months, request a report from one of the bureaus.

If you want to get an update on your credit report more than once a year, but you don’t want to pay for it, there are a bunch of tools out there that offer credit monitoring for free.

Credit.com offers a Credit Report Card tool to monitor your Experian credit report. All you need to do is go to credit.com, and click “Free Credit Report Card” under the “Credit Cards & Score” tab to create an account. The report card updates every 14 days.

Credit Karma gives you access to your TransUnion and Equifax credit reports for free. You can also sign up for their free credit and account monitoring services. If you do, you’ll receive an email alert whenever your credit score changes, and you’ll be notified whenever a new account is opened. The reports update weekly.

Credit Sesame gives you access to your TransUnion credit report via their credit monitoring service. The service updates your report each month.

Mint.com, a free money-management website and app, gives anyone with a Mint account access to their free Equifax credit report. The report is updated every 30 to 60 days.

Quizzle offers a free VantageScore — a scoring model developed by all three credit bureaus — and a free Equifax credit report, which is updated every six months.

Once You Have Your Report

Once you see your credit report, you should check it carefully for any wrong or negative information impacting your credit score. Double check to make sure the open accounts reported all belong to you. Check that the payment information is accurate and all of the account balances are correct. If you find any errors, you should dispute them directly through the bureau websites. MagnifyMoney has a more in-depth guide about how to do that here.

You might not see any errors, but realize that you need to work on rebuilding your credit. A healthy credit score can be very helpful to you when making a large purchase like a car or first home. MagnifyMoney’s complete guide to help you rebuild your credit can be found here.

You may also notice that you’ve been a victim of identity fraud. That may take a few more steps to clear up, but you can find what to do here.

 

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BankAmericard Secured Card Review: $39 Annual Fee, 20.74% Variable APR

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Building credit when you’re starting from zero can be difficult. One way to build credit is by opening up a secured card. Secured cards are an introduction into the world of credit. You deposit a certain amount of money to establish your credit limit. Then, you pay off your balance in full every month to establish a good credit history and avoid late fees.

If you prove you can use a secured card responsibly, you will likely be offered a traditional credit card.

Today we’ll review Bank of America’s secured credit card. Bank of America is not the only financial institution that offers secured credit cards. In fact, you may find better terms elsewhere. Check out our full review for more details:

BankAmericard Secured Credit Card Details

Minimum deposit

To open a BankAmericard Secured Credit Card, you have to make a minimum deposit of $300. The maximum you can deposit is $4,900. BankAmericard Secured Credit Card users do not earn interest on their deposits. For this reason, it may make sense to make a smaller deposit to open your secured card and store any extra funds you have in a savings account where you can earn interest.

Determining your credit limit

Your credit limit is determined by your security deposit, your income, and your ability to repay. Some users will only be able to spend as much as they originally deposited to open the card. However, if you prove that you have the income to repay, you may have a larger line of credit extended to you, making the card only partially secured. For example, if you deposit $300, but Bank of America looks at your income and decides you’re able to pay $700 back, your line of credit would exceed your deposit by $400.

Building your credit

Once you’ve had the card for 12 months, Bank of America will re-evaluate your credit history and ability to repay. If both of these things are trending to the positive, they may return your deposit, making the card fully unsecured. This is an ideal situation for those trying to establish or rebuild their credit.

Because Bank of America does report their secured card customers to each of the three credit bureaus monthly, you are likely to see an uptick in your score if you’re using the card responsibly. This increases the likelihood that you’ll get your deposit back at the end of the 12-month period.

Interest rates and fees

The BankAmericard Secured Credit Card is not without fees. In fact, its fees are probably the least attractive thing about it:

(Terms are current as of Jan. 3, 2017)

  • $39 annual fee
  • 20.74% variable APR on transactions, balance transfers, direct deposit, and check cash advances
  • Up to 29.99% variable APR penalty if you miss a single payment
  • Fee of $10 or 3% — whichever is more — on all balance transfers and direct deposit or check cash advances
  • 25.49% variable APR on bank cash advances
  • Fee of $10 or 5% — whichever is more — on all ATM, over-the-counter, same-day online, or cash-equivalent cash advances
  • 3% foreign transaction fee
  • Maximum late payment penalty fee of $37
  • Maximum returned payment penalty fee of $27

In addition to these fees, you have an option to set up overdraft protection with your secured card if you have a Bank of America checking account. If the card is used for overdraft protection, you will be charged a $12 fee each time. While this is better than the typical $35 overdraft fee, it’s still not ideal. Many financial institutions offer free overdraft protection when you are linked to a savings account; however, Bank of America charges $12 every time, whether you’re linked to your savings account or your secured card.

Safety and benefits of the BankAmericard Secured Card:

The BankAmericard Secured Credit Card does come with some security benefits. For one, you have $0 liability protection. This means that if anyone uses your card fraudulently, you won’t have to pay a dime as long as you report it and provide any requested information to Bank of America.

It also comes with chip technology and ShopSafe. ShopSafe is a program that generates a temporary card number for use when shopping online. It links directly to your card, but protects you from having your real card number stolen.

Another benefit is signing up for email and text alerts. These can either provide you with the information you want at the drop of a hat or remind you when your bill is due so you don’t rack up those nasty interest charges and late fees.

What You Need to Get Approved for a BankAmericard Secured Card

To determine approval, Bank of America looks at several factors, including:

  • Your ability to pay the security deposit
  • Your ability to make monthly payments
  • Information pulled from all three credit bureaus
  • Past management of other Bank of America accounts for current members

Pros and Cons of the BankAmericard Secured Card:

Pros

  • Option for partially secured card for those with adequate income
  • Status regularly reported to all three credit bureaus to help you build or rebuild your credit
  • Potential to turn into an unsecured card after twelve months if used responsibly, removing the need for the hard credit pull that would be involved in opening a new card

Cons

  • Annual fee of $39
  • Interest rates are high — once you qualify for an unsecured card, it may be worth the hard pull and shopping around for lower rates
  • Associated overdraft protection is not free
  • Deposit does not earn interest

How the BankAmericard Secured Card Stacks Up to the Competition

Bank of America is not the only financial institution that offers secured credit cards. In fact, you may find better terms elsewhere.

USAA’s secured credit card does offer interest on your deposit through a 2-year CD. Interest rates are variable, but currently sit at 0.54% APY. The minimum deposit is $250, and the maximum is $5,000.

Interest rates charged to customers and associated fees are lower. There is a $35 annual fee, but no penalty APR or foreign transaction fees. Interest rates are between 10.15% and 20.15% APR, depending on your creditworthiness. All cash advances and balance transfers come with a 3% fee, and the fee for a late charge is $35. The only place where this card is more expensive than the Bank of America option is returned payment fees, which come in at $35. Both fees are only $25 for the first occurrence, however.

Another option is the Discover it Secured Credit Card, with a minimum deposit of $200 and a maximum of $2,500. This card earns you cash back rewards points on all your purchases as you build your credit. Depending on how much you spend, you could yield more in cash back rewards than the CD with USAA would yield you. It comes with no annual fee, penalty APR, or foreign transaction fee. They also won’t charge you a late fee the first time you miss a payment. After that, you pay $37.

While it lacks many fees, interest rates are actually higher than the Bank of America option at 23.24% APR on purchases and balance transfers. Balance transfers also incur a 3% fee. (Currently, there is an offer for 10.99% APR on balance transfers for the first six months.) APR for cash advances is 25.24%. The fee for cash advances is either $10 or 5% — whichever is more.

Don’t Focus on Rewards

Maybe the fact that the BankAmericard Secured Credit Card doesn’t offer you cash back is actually a positive. It won’t reward you for spending more money, and that’s a very good thing from a psychological perspective — especially if you are recovering from past credit follies.

We still like USAA’s interest-bearing CD option as it doesn’t incentivize additional spending, but does offer consumers a return on their deposit.

Your exclusive goal when using a secured card should be to rebuild your credit by using it and paying it off in full every month so you don’t incur interest or late charges. If rewards would entice you to do otherwise, sticking with Bank of America could be a smart move.

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Here’s the Right Way to Use a Student Credit Card

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Here's the Right Way to Use a Student Credit Card

Credit cards can be a great way to build your credit while in college. But if you aren’t careful, they can quickly turn into a seductive debt trap, sending you down a path to poor credit.

If you are an inexperienced borrower, you could easily spend more than you are able to comfortably pay back each month and end up in delinquency or being hounded by debt collectors. You also run the risk of ruining your credit score before you really need it for important purchases after college.

If you’re ready to start building your credit, then that’s great. Before you do, you should get a good idea of what you’re getting yourself into before you apply for a credit card.

What Is a Student Credit Card?

A student card is a credit card specially designed by a lender to get college students started with credit. It helps them build a relationship with customers early on and helps you build your credit score.

The major difference between a student credit card and a regular credit card is that the student card will likely have a higher interest rate. That’s because the bank has no way to prove you are a reliable borrower yet since you have little to no credit history. Regular cards tend to average about 15% annual interest. In a recent MagnifyMoney study, we found the average student credit card carries an interest rate of 21.4%.

Why Should I get a Student Credit Card?

Your goal with your student credit card is to build your credit so that by the time you graduate, you have a healthy credit score in the high 600s to mid 700s. That way, when you graduate, you’ll be in a great position to make larger purchases like a new car or your first home. At that point you may actually want to earn rewards, and you’ll qualify for the best cards because you have a great score.

Many people look to credit when they need extra money.

However, you should only get a credit card if you want to build your credit score, not because you need extra money to make ends meet. This is important, so we’re going to repeat it again: You should only get a credit card if you want to build your credit score, not because you need extra cash to make ends meet.

If you can’t afford your monthly expenses as it is, a credit card might only make things worse. When you take out a credit card, you are paying a company to lend you money for a short while. If you can’t afford to pay the full balance on your card before your bill is due, the bank or credit card company will charge you interest.

Let’s say you charged $300 to your student card for books at the start of the semester. If you made a minimum monthly payment of $9, it would take four years and four months to pay off a card with a 21.4% annual percentage rate (APR). At that point you would have paid a total of $460, assuming your books were your first and only charge on the card.

Choosing Your First Credit Card Wisely

Because you likely have little or no credit history, your main goal with a credit card should be to build your credit score. There are two main criteria you should look for when shopping for your first credit card:

  1. No annual fee

Choose a card that has no annual fee, first and foremost. You shouldn’t worry about finding a card with the best rewards or even the best interest rate. You’re not getting a card for the perks, and since you don’t have much credit history, a low APR isn’t really an option for you right now.

You just need to make sure that the card won’t cost you anything annually to build your credit. Carefully read the fine print. Some lenders may waive the fee for a period, then start charging you.

  1. Easy to set up auto-pay

This next point is almost as important: look for a card that has an online platform that makes it easy to set up automatic payments. This will make it easy to make sure you pay your bill each month.

Three no fee options with well rated smartphone apps for easy payments are The Discover it for Students Card,  Citi ThankYou Preferred Card for College Students, and Capital One Journey.

Discover even gives you your free FICO credit score and offers perks like $20 back annually for customers who maintain a 3.0 GPA.

Your limit may not be very high as a student, but that’s fine because this card is for practice and to build your score. Your limit will likely land somewhere between $500 and $2,000.

The key is to make all your payments on time, and in full each month, which is why having a reliable smartphone app from your credit card provider is so important. Otherwise, penalty interest rates on these card are 29% or more.

You may also want to check with your parent’s credit union to see if they have a student credit card. The mobile apps aren’t always as easy to use for payments, but they can have lower rates in case things go wrong and many credit unions allow parents to cosign for students under 21.

Justice Federal Credit Union’s student card has a 0% rate for 6 months, and a  fixed 16.9% APR afterward with no annual fee. It allows parents to co-sign and anyone can join Justice credit union by becoming a member of the Native Law Enforcement Association for $15. You can apply for the card before you take care of membership formalities.

Since the implementation of the Credit CARD Act in 2010, lenders have been barred from promoting student credit cards on college campuses. As a result, the number of student credit card accounts have fallen by more than 60%. The Consumer Financial Protection Bureau found in its 2016 Campus Banking Report that lenders and institutions have shifted their partnerships to checking accounts or prepaid debit cards loaded with fees instead.

Using Your First Credit Card

Focus on making consistent, on-time payments, and keeping your credit utilization — that’s how much of your total credit limit you use — as low as possible. You should aim to use no more than 20% of your total limit. For example, if you have a credit card limit of $500, you should never charge more than $100 at a time to your card.

On-time payments and utilization make up 60% of your credit score, so it’s a big deal to miss a payment or max out your card.

Automation makes it very, very easy to achieve both these goals.

  1. When you get your card, figure out what 20% of your credit limit is. Example: 20% of $200 is $40.
  2. Find something that you pay for each month that costs less than that. This might be a payment for a streaming service such as Hulu, Netflix, or Spotify.
  3. Set up your account to take the payment from your credit card each month.
  4. Set up your checking account to pay your credit card balance each month.

After you set up all of the payments, you can forget about using your credit card. The automation is doing all of the work for you. Stash it somewhere safe (not your wallet) so that you won’t be tempted to use it.

Sit back and watch your score grow with free tools such as Credit Karma or the Discover Credit Scorecard. By the time you graduate, you should easily see your credit score in the high 600s or mid-700s.You’ll also have demonstrated your self-discipline and responsibility to banks, and will have an easier time getting a loan for a car or mortgage.

5 Other Ways to Build Your Credit Score

There are plenty of other ways to build your credit score if you aren’t quite ready to take on the responsibility of a credit card.

Become an authorized user on your parent’s credit card

Ask your parent to add you as an authorized user on one of their credit cards. If you are an authorized user, the behavior on that card (spending, payments, etc.) will be reported on your credit report as if it were your own, helping you build your credit. This strategy could also backfire. If your parents don’t use credit responsibly, it could hurt your credit score in turn. Negative behavior — even if it isn’t yours — will be reported as if it were yours as well.

Get a secured credit card

A secured card is a simple way to start building your credit history. This card can help prove to lenders you can be responsible without a lender having to take much risk. You’ll put down a deposit, and the lender will give you a line of credit. Typically, your line of credit will equal the amount of your deposit.

Get a co-signer

If for any reason you don’t qualify for a credit card on your own, you might be able to ask someone to co-sign the agreement with you. Big banks generally don’t offer this, but some credit unions like the Fort Knox Credit Union allow parents to cosign for students under age 21.

That means that they will be responsible for the payments if you can’t pay them. If you go this route, you’ll need to be very careful to only charge what you can afford to pay off each month. If you miss payments, it will negatively affect both of your credit scores.

Get a credit-builder loan

A credit-builder loan is similar to a secured credit card, but it requires no down payment. These loans are typically only offered by community banks and credit unions. When you are approved, the bank will deposit your loan in a savings account for you. You can’t access it until you’ve paid the loan back, however.

Build credit with rent payment

Paying your rent on time can help you build your credit score if it’s reported to the bureaus. Ask your property management company or landlord if they report rental payment data to Experian, TransUnion, or Equifax rental bureaus.

If they don’t, you can ask them to either start reporting or you can sign up for a rent payment service like PayLease or RentTrack that will let you pay for your rent online and give you the option to report your payments to the bureaus. The rent payment information will be included on your standard credit report and can help you build a score without a credit card.

A Final Word of Advice

We had to add this, because we know you just love it when a professor keeps talking after the lesson is over. But really, this is important so pay attention.

If you don’t think you have the self-discipline to handle a credit card right now, then don’t get one. College is full of opportunities to be a present hedonist — to say YOLO — and having a credit card can make it tempting to spend money you don’t really have.

Rebuilding your credit takes a long time and can get very expensive. It’s not worth ruining your credit score, and it will make it a lot harder to make those larger purchases when you graduate. If you can’t be disciplined enough to keep your utilization low and make your payments on time, then don’t get a credit card. You will have plenty of opportunities to build your credit after college.

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View Your Free FICO Score for all 3 Credit Bureaus

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View Your Free FICO Score for all 3 Credit Bureaus

Updated December 20, 2016

There are lots of free credit scores floating around, but most of them are not the true FICO score that lenders subscribe to and use as part of their decision.

[Click here to learn where & how to get your free credit score.]

However FICO is working to change that by allowing banks and credit unions to give you free ongoing access to the real score they use to make lending decisions as long as you are an account holder.

New (and updated): On May 20, 2016 Discover announced the launch of a new service called “Discover Credit Scorecard.” You do not need to be a customer of Discover – anyone can get their official FICO score for free. This is the first place where anyone, not just a Discover customer, can get their official FICO for free. The data is from the Experian credit bureau.

To find out where to get your FICO score from the other bureaus, read on.

Every bank chooses at least one of three credit bureaus to calculate a FICO score: Equifax, Experian, and Transunion. The FICO score one bank uses can be different than another depending on which credit bureau they pulled a report from.

The good news is, you can now see your real, free FICO score from all three credit bureaus depending on which banks hold your accounts. FICO itself charges almost $60 for you to see those scores, though they also throw in full copies of your credit reports, which the free bank scores do not.

Here’s where to find your real, free FICO scores from banks or credit unions anyone can join:

Equifax Scores

Citibank

  • Available With: Any Citibank branded credit card. This does not include Citibank cards with other brands like the American AAdvantage or Hilton HHonors cards.
  • Where to Find It: On your online statement
  • Score updated: Monthly
  • Learn more

DCU Credit Union

  • Available With: Any credit card, or a checking account with direct deposit
  • Where to Find It: Look for an invitation in your online account
  • Score Updated: Monthly
  • Learn more

Huntington Bank

  • Available With: The Huntington Voice credit card – you will get a FICO Bankcard 02 Score from Equifax
  • Where to Find It: Log into your account and you’ll see a link

PenFed

  • Available With: PenFed members with active checking accounts, installment loans, and revolving lines of credit
  • Score Updated: When PenFed refreshes – no set schedule
  • Where to Find it: Login to your account and click ‘Your FICO Score is Ready’
  • Notes: PenFed uses a more advanced ‘Next Gen’ FICO score that has a different scale than traditional FICO scores, with 150 as the lowest score and 950 as the highest score. Most banks use a score with a scale of 300 to 850. Because of this the score you see on PenFed’s site may be higher or lower than what you see from others.
  • Learn more

Experian Scores

Capital One and American Express regularly use Experian’s FICO among others for credit decisions.

American Express

  • Available With: Any American Express credit card
  • Score Updated: Monthly
  • Where to Find It: On your online account

Chase

  • Available With: Chase Slate credit card accounts
  • Score Updated: Monthly
  • Learn more

Discover

  • If you have a Discover credit card already, you will see your FICO score on your statement and online. It is updated monthly.
  • If you are not a Discover customer, you can sign up to get your FICO score for free by visiting CreditScoreCard.com.

First National Bank of Omaha

  • Available With: Any credit card account
  • Score Updated: Monthly
  • Where to Find It: On your online account
  • Learn more

Please note: a previous version of this blog post noted that USAA provides a free FICO credit score. USAA actually provides a free VantageScore.

Transunion Scores

Bank of America

  • Available With: Select credit card accounts
  • Score Updated: Monthly, with history
  • Where to Find It: Link available on your account summary page under the ‘Tools and Investing’ section

Barclaycard

  • Available With: Any credit card account
  • Score Updated: Monthly
  • Where to Find It: Link available on your account summary page
  • Learn more

Walmart / Sam’s Club

  • Available With: A Walmart Credit Card, Walmart MasterCard, or Sam’s Club Credit Card
  • Score Updated: Monthly
  • Where to Find It: At Walmart.com/creditlogin, only if you enroll in online delivery of monthly statements
  • Learn more

Unknown Bureau

 State Employees Credit Union of North Carolina

  • Available to all credit card holders

Other, less open to the public free FICO providers include:

  • Ally, for auto loan holders
  • Hyundai and Kia Motor Finance, which offer a quarterly score, but only if you’re a new buyer, recent college grad and bring your diploma to the dealer at the time of purchase.
  • Sallie Mae, which offers a free, quarterly Transunion score if you receive a new Smart Option Student during the 2014-2015 academic year or later.
  • Merrick Bank doesn’t have open applications, but does offer free scores to its cardholders.
  • Some credit unions with limited membership also offer scores, so check yours to see if it provides them.

[Click here to learn where & how to get your free credit score.]

 

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Build Your Credit Score: 6 Best Secured Cards With No Annual Fees

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Build Your Credit Score

Updated: December 5, 2016

Applying for a secured card is a simple way to begin building (or rebuilding) your credit history. Secured cards are a way to prove to a lender you can be responsible without a lender having to take much risk. When you open a secured card, you put down a deposit and the lender gives you a line of credit. Typically, your line of credit matches the amount of your deposit. But just like credit cards, not all secured cards are created equal. Below are the five secured cards that don’t charge an annual fee, thus save you money as you build credit history.

Our #1 Pick from Discover

Discover it® Secured Credit Card – No Annual Fee

Discover itDiscover has just launched a market leading secured credit card. This is one of the best no fee secured credit cards on the market. Unlike most credit card companies, Discover is ensuring that benefits and rewards traditionally associated only with unsecured credit cards will be available on the secured card. This card is designed for people with fair credit and for people who are new to credit. Here are the reasons why this card is our favorite:

No annual fee: There is no annual fee on this card. You do need to make a deposit of at least $200, and your credit limit will be based upon the amount of your deposit. If you want a bigger limit, you will have to make a bigger deposit.

Bankruptcy? No problem: If you have filed Chapter 7 bankruptcy in the past, you can still qualify for this card. It is a great way for people to rehabilitate their credit.

NEW: Eligible for an upgrade in 7 months: At the end of seven months (it used to be a year), Discover will start monthly automatic reviews of your account. Once you qualify for a standard credit card, you will be upgraded. At the time of the upgrade to a standard card, you can expect to have your deposit refunded. Even better, you could be eligible for a bigger credit limit. This feature really sets Discover apart from the competition – and your goal should be to get back your deposit as quickly as possible.

Earn cash back: Most secured credit cards do not offer any rewards. With Discover it, you have the opportunity to earn cash back while earning rewards. You can earn 2% at restaurants and gas stations (on up to $1,000 of spend each quarter) and unlimited 1% on everything else. Earning cash back is not the primary reason to select a secured credit card, but it is a nice option to have available.

Free FICO Credit Score: Discover will provide you with a copy of your official FICO credit score. If you use a secured credit card properly, you should expect to see your score increase over time. And by providing your FICO score for free, you will be able to watch your improvement.

You can learn more and apply by clicking on the link below:

Learn more

New – Citi Secured MasterCard with $0 Annual Fee

Citi® Secured MasterCard® – No Annual Fee

citi-secured-credit-cardCitibank has just eliminated the annual fee on its secured credit card. If you are declined by Discover, this could be a good back-up option. In order to qualify, you cannot have filed for bankruptcy in the last two years. Citi will hold onto your deposit for 18 months. Unlike Discover, there is no cash back available and Citi will not perform annual eligibility checks to see if you can be approved for a standard card. Here are the key facts:

  • $0 Annual Fee
  • Provide a security deposit between $200 and $2,500. Your credit limit will be equal to the amount of the security deposit you’ve submitted.
  • 22.49% Variable APR

LearnMore

Option Two – Your Local Credit Union

If you belong to a credit union, go there and ask. They probably have a no annual fee option and could set you up right away. It doesn’t hurt to ask a bank either, but they are less likely to have a no annual fee option.

Option Three – Credit Unions “Anyone Can Join”

If you don’t belong to a credit union, or don’t like the secured card options your bank offers, below are three no fee cards from credit unions anyone can join. While it may cost as much as an annual fee to join the credit union, there is also an added benefit of being a credit union member for life.

These are ranked by lowest to highest minimum deposit

JFCU-LOGO-2C

Justice Federal: Visa Classic Secured Credit Card

  • Cost to join – $5 to join JFCU or $43 if you need to join another organization to become eligible
  • Minimum deposit – $110

Eligibility

Unfortunately, not everyone can easily join Justice Federal Credit Union. JFCU provides financial services to employees of Justice, Homeland Security and the Law Enforcement Community, as well as their family members. If you believe you may qualify, then check the credit union’s member eligibility page. Those who qualify, will need a five dollar deposit and to fund their account.

However, there is a loophole.

One of the eligible associations for membership is the National Sheriff’s Association. It costs $38 to join the NSA as an auxiliary member or student. By joining the NSA first, anyone can then become a member of the Justice Federal Credit Union. This brings the cost of membership to $43.

The Secured Card

Visa Classic Secured Credit Card

  • No annual fee
  • 16.90% APR
  • Credit limits ranging from $100 up to 110% of pledged shares

State Department

 

 

 

 

State Department Federal Credit Union 

  • Cost to join – $1 to join the credit union (which the SDFCU usually covers) + $5 (or $15) to join American Consumer Council, if you don’t work for the Department of State.
  • Minimum deposit – $250

Eligibility

You are eligible to join the SDFCU if you’re an employee of the Department of State or one of the extensive organizations with ties to the credit union (all listed here under “who can join”). If you don’t work for the Department of State, you may also be eligible through the American Consumer Council. You can join the ACC for only $5 if you’ve used any major consumer product or service within the past 12 months – and you probably have.

The Secured Card

EMV Savings Secured Visa Platinum Card

  • 7.49% APR
  • No annual fee
  • Minimum deposit –$250

  DCU

 

 

 

Digital Federal Credit Union (DCU)

  • Cost to join – $5 to join DCU + membership costs to join eligible organization if you aren’t eligible
  • Minimum deposit – $500

Eligibility

You must be a member of DCU in order to apply for the secured card. You can be eligible to join DCU if a relative is already member, if your employer offers membership or your community is included within field of membership. If none of these apply, you can join an organization with member privileges. Joining these organizations range in membership cost from $25 to $120. Once you join DCU, you have a lifelong membership, so you could cancel a membership with the other organization after joining.

The Secured Card 

Visa Platinum Secured Card

  • No annual fee
  • 12.00% APR (18% penalty APR)
  • Minimum deposit – $300

Option Four – Banks

If you don’t want to join a credit union, these banks offer instant online applications with no annual fee.

Harley Davidson Visa Secured Card from US Bank

Harley

 

 

 

We know it seems a little strange, but the Harley Davidson Visa Secured Card from US Bank offers a good option for those not interested in paying to join a credit union.

  • 23.49% APR – so don’t carry a balance
  • Minimum deposit – $300
  • No annual fee

Capital One secured card

Capital One secured cardIf you currently can’t afford the $110 – $500 deposit, consider the Capital One  secured card with a $49 minimum deposit for a $200 line of credit. Capital One used to have an annual fee of $0.

However, this deposit is based on what Capital One deems as “creditworthy.” It is possible it will ask for a deposit of $99 or $200.

Understand how to use your secured card properly

Once you’re approved, be sure to use your secured card responsibly. You can find more tips on how to use a secured card and build your credit history here.

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Building Credit, Reviews

Self Lender Review: Building Credit History with an Installment Loan

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

self-lender_full

Taking the first step in your journey to building credit isn’t always easy. The dilemma is you need credit to build credit. But companies and financial institutions are hesitant to offer credit unless you’ve already proven yourself. Self Lender is a platform that seeks to solve this dilemma.

Self Lender provides resources you can use to monitor your credit history and score. Beyond monitoring, there’s a credit-building aspect of the platform as well. In partnership with Austin Capital Bank, Self Lender offers a credit-builder account to help you improve your credit history.

The credit-builder account is a CD-secured installment loan. This works similar to a secured credit card in the sense that your certificate of deposit (CD) is providing collateral against your loan. Since the loan is secured by a CD the qualifying criteria is less stringent than a typical personal loan. After getting approved, you’re given a small loan that’s held in the CD account until you repay it.

The purpose is to build credit history by making loan payments. In this post, we’ll discuss what the Self Lender service is and whether what it offers is a viable method for you to build credit. Read on for:

  • How Self Lender works
  • How much Self Lender costs and the terms
  • The pros and cons
  • Other methods of building credit

How Self Lender Works

Signing up on the Self Lender site gives you access to credit monitoring and credit score tracking resources via TransUnion for free. The credit-builder account is an optional service you can sign up for within the Self Lender platform.

The credit-builder account is a small loan with fixed payments. There are three loan amount options, and each loan term is 12 months. Austin Capital Bank will lend you $550, $1,100, or $2,200.

Interest on the loan is 10.57% or up to 14.77% APR. The fixed payment for each loan amount is:

  • $550 — $48.50 monthly payment
  • $1,100 — $97 monthly payment
  • $2,200 — $194 monthly payment

Once you pay off the loan, you get the original amount of the loan ($550, $1,100, or $2,200) plus interest earned. The APY (annual percentage yield) on the CD is 0.10%. Here’s how much each CD should earn in interest by the end of the loan term:

  • $550 — $0.55
  • $1,100 — $1.10
  • $2,200 — $2.20

Self Lender Costs and Account Terms

Self Lender allows you to have only one credit-building account open at a time. Starting a credit-builder account doesn’t require a hard inquiry on your credit report. You don’t get access to cash from the loan while it’s in the CD account, so this product won’t be useful if you need money right away. You can, however, pay the loan back early without penalty.

Now, let’s talk about costs. The basic Self Lender service, including credit monitoring and credit score tracking, is free. However, the credit-builder account has a $12 administrative fee on top of the installment loan interest.

If you make a payment over 15 days late, the late fee is 5% of the payment due. A payment over 30 days late will be reported to the credit bureaus. If this happens, it will defeat the purpose of opening an account to build your credit. Fortunately, there’s an automatic payment feature to help you avoid making late payments.

Pros and Cons

Pro: Self Lender can help your credit score. Making on-time loan payments will help you build a positive payment history, which is the most important component of your credit score. An installment loan also adds account diversity to your credit report and can have a positive impact on the credit mix aspect of your credit score. Applying for an account doesn’t require a hard pull, so as a bonus, Self Lender won’t hurt your score either.

Con: The cost. The cost of this service is a red flag. Let’s take the $550 credit-building account for example. You make 12 monthly payments of $48.50, which equals $582 and makes the total cost of the loan $32. Add the $12 administrative fee and you’re spending $44 for credit building.

Pro: The cash windfall at the end. You do get a lump sum of cash from the account when you complete the loan term. If you have trouble staying disciplined enough to save, the money you get back could be used to start an emergency fund or to meet other financial goals. (Although, on the flip side, you can make scheduled payments to yourself without this product or its fees by setting up automatic transfers into a savings account each month. You can compare savings accounts here.)

Con: It encourages you to take out a loan you may not need. Building credit isn’t a good enough reason to take out an unnecessary loan. This loan isn’t free, and there are other ways you can build credit without it costing you.

Pro: Credit monitoring. Besides the CD-secured installment loan for building credit, Self Lender offers basic credit monitoring through TransUnion. Credit monitoring and score tracking are always worthwhile to have for free.

Other Ways to Build Credit

Here are a few other methods you can use to build credit from scratch:

Secured credit cards are credit cards that require an initial deposit for your credit line. You can find secured credit cards that require a deposit as low as $50. This does mean you need to fork over cash upfront, but the benefit is you can find a secured card with no fees, and the deposit is refundable (if you pay the credit card bill).

You can also avoid interest altogether on a card by paying off your balance in full each statement period. The credit card issuer usually sends you the deposit back after a set amount of time. You may even get a credit line increase after you prove your creditworthiness. Compare secured cards here.
Finding a co-signer is another option that can help if you can’t qualify for a credit line on your own. Since the co-signer takes on some responsibility for the debt, a financial institution or company may be more willing to approve your application. Eventually, your co-signer may be able to apply for a co-signer release if the account is in good standing, and you can get approved for other credit on your own.
Credit piggybacking is a credit history building shortcut you may be able to use if you know someone who has credit cards in excellent standing. Credit piggybacking is when you become an authorized user on someone else’s account. As an authorized user, the account shows up on your credit report to improve and lengthen your history.

Who Will Benefit the Most from Self Lender

Self Lender shouldn’t be the very first tactic you use to build credit because it’s not free and it makes you take out a loan. There are other free methods, including the ones above, that can help you build credit instead.

The most important aspect of your credit history and score is paying your bills on time. Before taking on a new debt payment, you should focus on keeping up with current bills first (rent, cable, utilities, etc.) to establish a payment routine. Afterward, a secured credit card could be a more affordable and less cumbersome way to build credit on your own.

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Minimize Rejection: Check if You’re Pre-qualified for a Credit Card

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Check if You're Pre-qualified for a Credit Card

Updated September 28, 2016

Are you avoiding a credit card application  because you’re afraid of being rejected? Want to see if you can be approved for a credit card without having an inquiry hit your credit score?

We may be able to help. Some large banks give you the chance to see if you are pre-qualified for cards before you officially apply. You give a bit of personal information (name, address, last 4 digits of your social security), and they will tell you if you are pre-qualified. There is no harm to your credit score when using this service. This is the best way to see if you can get a credit card without hurting your score.

What does pre-qualified mean?

Pre-qualification typically utilizes a soft credit inquiry with a credit bureau (Experian, Equifax, TransUnion). A soft inquiry does not appear on your credit report, and will not harm your credit score.

Banks also create pre-qualified lists by buying marketing lists every month from a credit bureau. They buy the names of people who would meet their credit criteria and keep that list. When you see if you are pre-qualified, the bank is just checking to see if you are on their list.

A soft inquiry provides the bank with some basic credit information, including your score. Based upon the information in the credit bureau, the bank determines whether or not you have been pre-qualified for a credit card.

If you are not pre-qualified, that does not mean you will be rejected. When they pull a full credit report or get more information, you may still be approved. But, even if you are pre-qualified, you can still be rejected. In my experience, over 80% of pre-qualified applications are approved. So, why would you be rejected?

  • When you complete a formal credit card application, you provide additional personal information, including your employment and salary. If you are unemployed, or if your salary is too low relative to your debt – you could be rejected. There are other policy reasons that can be applied as well.
  • When a full credit bureau report is pulled, the bank gets more data. Some of that incremental data may result in a rejection.
  • Timing: your information may have changed. The bank may have pre-qualified you a week ago, but since then you have missed a payment. Final decisions are always made using the most up-to-date information.

Where can I see if I have been pre-qualified?

We have put together a list of the main banks. This list is kept updated regularly.

CreditCards – CardMatch is a very good tool developed by CreditCards.com that can match you to offers from multiple credit card companies without impacting your credit score. This is the best first stop.

Bank of America

Barclaycard – unfortunately Barclaycard has taken down their pre-qualification tool, but we will keep looking to see if it comes back.

Capital One (Click Credit Cards and then “See if you’re pre-qualified”)

Chase

Citibank

Credit One  – This company targets people with less than perfect credit.

Discover

U.S. Bank

American Express – this one is a little roundabout. After following the link, click ‘Your Pre-Qualified Card Offers’ on the left hand side of the page.

Consider A Personal Loan (No Hard Inquiry and Lower Rates)

If you need to borrow money, you may also want to consider a personal loan. A number of internet-only personal loan companies allow you to see if you are approved (including your interest rate and loan amount) without a hard inquiry on your credit report. Instead, they do a soft pull, which has no impact on your credit score. Personal loans also tend to have much lower interest rates than credit cards. If you need to borrow money, personal loans are usually a better option.

You can use our online tool to see if you can qualify for a loan. You only need to fill in one application, and MagnifyMoney will check your rate with multiple lenders (and without hurting your score). Check your rate without hurting your score here.

Not pre-qualified but still want to apply?

We still believe that people are too afraid of the impact of credit inquiries on their score. One inquiry will only take 5-10 points off your score.

If you pay your bills on time, do not have a ton of debt (less than $20,000) and want to apply for a new credit card, an inquiry should not scare you. The only way to know for certain if you can get approved is to do a full application.

How We Can Help

Don’t forget to follow us on Twitter @Magnify_Money and on Facebook.

*We’ll receive a referral fee if you click on the “Apply Now” buttons in this post. This does not impact our rankings or recommendations You can learn more about how our site is financed here.

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Credit Cards: The Ultimate Present Hedonist (a.k.a. YOLO) Trap

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Credit Cards

In 2014, I led a six-nation study on financial literacy with MagnifyMoney. The purpose of the study was to understand:

  • Is traditional financial literacy training sufficient to help people live financially healthy lives?
  • What role does a person’s time perspective play in how that individual makes financial decisions?
  • How does an individual’s national identity impact his or her approach to time and money?

We conducted the study in the United States, United Kingdom, Germany, Sicily, Hong Kong and Brazil. Every participant was given:

  • A traditional financial literacy exam
  • A “financial health” exam, which determined whether an individual was living a financially healthy life. Someone who is financially healthy would have retirement savings, an emergency fund and a good credit score. Someone who is financially sick would be in debt, have a bad credit score and possibly could have suffered bankruptcy or other defaults.
  • The Zimbardo Time Perspective Inventory, to determine an individual’s approach to time.

The results were groundbreaking. We found millennials are less financially literate than their boomer counterparts, but are actually more financially healthy. 33% of the American population tested as financially healthy, with the United Kingdom coming in with 54% and Brazil only 14%. Most importantly, we uncovered that an A+ math student doesn’t correlate to being financially healthy. What does matter, is the direct link of a person’s approach to time with financial behaviors.

The Failure of Traditional Financial Literacy and The Importance of Time Perspective

Traditionally, financial literacy training focuses on mathematical aptitude. A traditional financial literacy exam would ask people to understand inflation-adjusted returns and to calculate the impact that an interest rate change would have on the price of a bond. The implicit assumption underpinning traditional financial literacy education is that by understanding math, you can live a financially healthy life.

However, our study conclusively demonstrated that simply “understanding the math” was not sufficient to live a financially healthy life. A high financial literacy score did not translate into a high level of financial health. That does not mean that we encourage people to stop learning math. Quite the contrary. Instead, the data demonstrated that financial acumen is necessary but not sufficient to live a financially healthy life.

It’s a person’s time perspective that can really predict how financially health they are.

An individual’s approach to time has a big impact on financial health. People who took our quiz and scored a very high “past negative” score (meaning they have negative associations with past events in their lives) tended to be financially healthy.

But why?

Aversion to risk can be bad for your social life (keeping people from enjoying life and falling in love) but great for your finances. Because you are afraid of what might happen, you are more likely to save. Because you don’t trust people, you won’t buy into their next big speculative investment.

People who start saving early and invest consistently, without emotion, in a diversified investment portfolio do extremely well over time and are the most prepared for retirement. It seems that being past negative actually does have a benefit: when the next Ponzi scheme comes along, a past negative individual will reject it. Imagine your wise grandmother who lived through the Depression. She might not be able to calculate compounding interest, but she knows how to save and isn’t a fool. Your grandmother probably has more money sitting in her bank account than her flashy neighbors.

We found the strongest statistical relationship between “present hedonists” and financial sickness. And while intuitively this finding is not surprising, we now have data from six nations validating our intuition. Present hedonists want to enjoy the moment without thinking about the consequences. Imagine the investment banker making millions every year. He understands the complexities of derivatives, but he is unable to say no to a first class air fare and the VIP room at a club. Although he makes millions, he spends it all (and then some) as part of one big adrenaline rush. Present hedonism helps him work 80 hours a week on a big financial deal, completely focused on the outcome. But it also helps him lose all of his money on champagne and the other addictions found in close proximity to champagne.

And when we compared the different geographic limitations, we saw time perspective at work. The most “financially sick” country was Brazil, which is culturally a much more present hedonist than other surveyed nations.

While we might not worry too much about the intoxicated investment banker, we should worry about present hedonists and their impulsive indulgences. A single mother living on minimum wage knows that she needs to save. But she buys those concert tickets because they make her feel better. The hard-working husband knows that he needs to save for his children’s education. But during a trip to Vegas, the temptation of the tables proves to be too much for him. Present hedonists often make very bad financial (and life) decisions. They might feel fleeting regret, but it doesn’t last. They will search out their next present hedonist treat and repeat the pattern.

Since our study in 2014, we have been looking at financial products that bring out the worst in present hedonists. And we have focused on one product in particular: credit cards.

Credit Cards: The Perfect Present Hedonist Trap

Present hedonists are driven by two key driving forces:

  1. They want it now. There is a strong desire for instant gratification.
  2. They do not want to think about the consequences. And if you force a present hedonist to think about the consequences of their actions, they might move on to the “next easiest adventure.”

Credit cards have been designed to take full advantage of a present hedonist.

I will explain the trap in a moment. But first, it is important to understand that this is not an indictment of credit cards for everyone. A financially healthy past negative individual can make excellent use of a credit card. He or she can find a credit card to be a convenient way of paying. Credit cards can be a convenient way to make transactions all over the world. A responsible individual could earn rewards or airline miles, which can result in free trips. And so long as the individual does not spend more than he or she can afford, most credit cards are virtually free. If you pay the credit card balance in full and on time every month, you will never pay any interest expense. So, for a financially responsible individual, a credit card can be both a convenience and a way to earn rewards. In fact, credit card companies lose money on responsible people. But they more than make up for it with present hedonists who overspend.

And for a present hedonist, a credit card is like a loaded gun.

Why is a credit card so dangerous for present hedonists? Because it’s a carefully designed product to trap those willing to live beyond their means:

A credit limit that is much higher than your monthly gross income.

When you apply for a credit card, you will be assigned a credit limit. Most credit card companies will assign a credit limit that is significantly greater than your monthly gross income. If you make $3,000 a month, you might get a $6,000 or even $10,000 credit limit.

The credit card company charges a minimum due that is usually 1% of the principal balance (and includes any interest that accrues). For example, if you have a $10,000 balance on your credit card, your minimum monthly payment would only be only $225. The credit card company will be happy if you only pay $225 a month (the minimum due) because $125 of the payment would go towards interest. And for someone making $3,000 a month, a $225 payment could be affordable.

But that big credit limit is a huge temptation for a present hedonist. In the heat of the moment, a present hedonist has at least $10,000 available that could make today more fun. Do you see shoes that you would like to buy? Do you see a new iPhone you would like to buy? Your big credit limit makes it easy.

There is no “pain of paying.”

Present hedonists want to enjoy the moment without any thought of the consequences. At the moment of the transaction, any barriers to that payment removes fun, slows down time and makes the consequences more visible. With credit cards, a payment is instant and easy. A simple swipe of the plastic and the purchase is complete.

A credit card makes it possible to spend very large quantities of money with very few barriers or moments to create thought. Retailers are willing accomplices. At Amazon, you can make a purchase with just one click. Retailers and credit card companies have created a world where present hedonists can indulge quickly and easily, with no thought of the consequences.

Automate Payments and Eliminate Statements

Credit card companies offer the ability to automate your monthly payment. You can easily set up a recurring monthly payment that only covers the minimum payment due. You can also sign up for electronic statements, which removes the monthly physical reminder of the decisions you made and the cost of those decisions.

Tactile therapy has proven an effective way of helping present hedonists. A monthly, physical statement would force a present hedonist to stop and think about his or her financial statement. But once those are turned off, all can be forgotten.

What to Do

Because of the importance of time perspective, individuals must self-diagnose. Financial literacy training should include a mandatory self-assessment using the Zimbardo Time Perspective Inventory.

Present hedonists need to know and understand who they are. They should consider cutting up their credit cards. Perhaps cash is the best way to ensure financial health. If the money in the wallet is gone, there is nothing to lose.

Credit card companies should consider creating tools to help people reduce their credit limits and limit their spending. For example, maybe a credit card would allow people to turn off the ability to make transactions after 10 PM, making it impossible for the hedonist to spend wildly in dangerous situations.

But one thing is certain: teaching a present hedonist how to calculate compounding interest and then handing him or her a credit card is not the way to ensure a financially healthy life.

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Building Credit, Credit Cards

How (and why) to Request a Credit Limit Increase with Capital One

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Credit Limit Increase with Capital One

In continuation of our multi-part blog series about how and why to request a credit limit increase, today’s installment will detail the steps necessary to increase your limit when you own a Capital One credit card like Quicksilver, Venture, or Spark.

It’s important to understand that each credit card company may have different requirements in place that they use in order to consider a credit limit request. Before sharing what criteria Capital One uses to grant or deny a credit limit increase request, let’s discuss why you might want a credit limit increase in the first place.

How to increase your credit limit with American Express and Barclaycard

Why Increase Your Capital One Credit Limit?

Capital One offers flexible credit cards for personal or business use that provide several benefits and perks from bonus rewards and Uber ride discounts to and cashback and 0% intro APR promotions. While the perks of using a Capital One credit card are nice, if you are spending near or close to your limit each month, your credit may be taking a negative hit. It’s important to make sure you are using credit cards to improve your credit and not because you need them in order to get by each month.

Keeping your utilization below 30% of your credit limit each month is the best way to use credit cards to build your credit. Plus, if you are spending less than 30% of your credit limit, it will be easier to pay off the balance in full in month so you can avoid paying high interest rates. Even if your card currently has 0% APR for a limited time, it’s best to get into the habit of paying off your balance in full each month because that promotion won’t last forever.

With that being said, a credit limit increase could actually help improve your credit score, just as long as you don’t inflate your spending. If you keep your spending at the exact same level after the credit limit increase, then your utilization will automatically drop. For example, you spent $300 a month on a Quicksilver card with a $1,000 limit – a 30% utilization. You requested an increase and now have a $2,000 limit, but continue to just spend $300 a month. Without doing anything differently, you’ve lowered your utilization to 15%, which could help improve your credit score.

What to Know When Considering a Capital One Credit Line Increase

Capital One allows users to request a credit line either online or by phone. Some accounts are not eligible to request a credit line increase and those include accounts that are less than three months old and accounts that have received a credit line increase or decrease within the last six months.

When you submit a credit line increase request, Capital One looks at a variety of factors like on-time payment history, average monthly payment amount, and your credit score. They will also look at what your current utilization rate. On the FAQ section of their website, Capital One states that it likes to see on-time payments and card holders who make substantially more than the minimum payment each month. If you are responsibly using your card and paying more than the minimum each month, this tells them that you can handle possible increased monthly payments if they offer you a credit increase.

What’s nice about this process is that it will not negatively affect your credit. When you submit a request to increase your credit limit, Capital One will use the information they normally receive from the credit bureaus each month so your credit report will not be pulled.

How to Request a Credit Limit Increase with Capital One

Requesting a credit limit increase is easy and only takes a few minutes. First, I’ll walk you through how to do it online, then I’ll explain how the phone option works. Start by logging into your account at www.capitalone.com/

Step 1

Once you’ve logged in, click on Services.

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Step 2

Under Card Services next to Digital Serving, click on Request Credit Line Increase which is the second option from the bottom of that list.

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Step 3

Fill out the short form to the best of your ability, then click Submit Request. (If you are a small business owner, you’ll need to provide your annual total income in the income section)

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In some cases, Capital One says they can approve credit limit increase requests immediately. If the case that they don’t, it’s very common and you will be taken to a confirmation page similar to the one shown below.

As stated on the confirmation page, Capital One will notify you with the outcome of your request in just 2-3 business days if you are signed up for a paperless account or within 10 business days if you receive paper statements.

Screenshot 4

If you prefer to request a credit line increase by phone, you can call 1-800-955-7070 and choose the ‘More Options’ prompt to get to the credit line increase request option.

What’s Next?

If you are denied for a credit limit increase, Capital One allows you to apply again at any time, but they don’t guarantee that your request will be approved. It’s best to work on addressing the reason or reasons why you were declined. In addition to making payments on-time, and making more than the minimum payment each month, Capital One recommends that you keep your income and employment information up-to-date because that is what they use to regularly review your account and determine if you’re eligible for a credit limit increase.

If you are approved, your new credit line will be available immediately. Try to keep your spending habits the same and continue using your card wisely. If you have another Capital One credit card, you can follow the same process shown above to request a credit limit increase for that card as well.

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Get A Pre-Approved Personal Loan

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Won’t impact your credit score