Credit Cards, News

Deeper Into Credit Card Debt With No Regrets This Holiday Season

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Deeper Into Credit Card Debt With No Regrets This Holiday Season

This holiday season, spending increased 7.9 percent from a year ago (according to the MasterCard Spending Pulse report). People spent more money on gifts, making many retailers happy and helping the overall economy.

Although the increased spending will be applauded by retailers, many American households are left with a precarious post-holiday financial situation. The euphoria of giving gifts will undoubtedly be replaced by a predictable debt hangover in January. MagnifyMoney conducted a national survey, and found that:

  • American consumers spent without a plan. 50.7% of people set no holiday budget at all. A further 15.1% of people set a budget, but ignored it and spent more than planned. That means 65.8% of people had no control over their holiday spending.
  • After spending money on holiday gifts, a majority of Americans are “broke.” 56.3% of people surveyed have less than $1,000 combined in their checking and savings account.
  • Credit cards will be used to fund a big portion of holiday purchases. 38.3% of the people surveyed will not be able to pay off their credit card in full this month. High interest rate credit cards were used to fund holiday debt.
  • Despite the debt, there was “no regret.” Despite borrowing money at high interest rates to fund holiday purchases, 85.7% of Americans have no regrets about their holiday spending.

During the 2015 holiday season, American consumers have demonstrated their willingness, and apparent happiness, to spend money they don’t have on gifts they can’t afford.

But in just a few days, people will start making New Year’s Resolutions. And if 2016 is like any other year, two themes will dominate the resolutions made across the country. People will promise to become physically fit and financially fit in the New Year.

One of the top resolutions made in January 2015, according to Nielsen, was to “spend less and save more.” This is a recurring theme, and we can expect similar resolutions in 2016, as the credit card statements start to arrive and the debt hangover begins.

However, Nick Clements, Co-Founder of MagnifyMoney, has two messages for people who have found themselves deeper in debt after the holidays:

First, we need to learn valuable lessons from our grandparents and great-grandparents about how to manage money. Before credit cards ever existed, people would only spend money if they had it. Most of our grandparents would have never even considered borrowing money to buy people gifts during the holidays. If we don’t develop that same type of mentality, any New Year’s Resolution will fail. I don’t want to sound like a belated Grinch, but borrowing money to buy gifts should have left more people feeling regret.   

Second, people need to be wise about how they try to fulfill their New Year’s Resolution to become financially fit. Skipping a few lattes isn’t going to do the trick. I recommend taking a day off, and spending as much time and effort building a financial plan for 2016 as you did organizing your presents and your holiday parties in 2015. 

Survey Results in More Detail

There was no spending plan or budget in place

  • 50.7% set no budget. Instead, they “just spent.”
  • 34.2% set a budget and followed the budget.
  • 15.1% set a budget, but ignored the budget and spent more.

A majority of Americans are “broke”

  • 24.8% have less than $100 in their accounts.
  • 23.8% have between $101 and $500 in their accounts.
  • 7.7% have between $501 and $1,000 in their accounts.
  • 16.4% have between $1,001 and $5,000 in their accounts.
  • 27.3% have more than $5,000 in their accounts.

Most financial planners recommend having an emergency fund with at least $1,000. Ideally, the fund should cover three to six months of living expenses. 56.3% do not have even the minimum of $1,000.

A significant minority will be paying off their credit cards for a long time

  • 61.7% of people will be able to pay their balance in full.
  • 27% will take some time, but pay more than the minimum due.
  • 11.3% can only afford to pay the minimum due.

For the 11.3% paying the minimum due, they can expect to stay in debt for more than 25 years and will end up paying more interest than the original amount borrowed.

Despite the spending, we felt no regrets.

  • 85.7% do not regret the amount of money they spent.
  • 14.3% do regret the amount they spent.
  • Of those with no regrets, 13.3% felt they could have spent more.

Tips for A Successful New Year’s Resolution

When the credit card bills start to arrive in January, many people will start to feel the annual debt hangover. As an antidote, people will start making resolutions to spend less, save more and get their finances in order.

MagnifyMoney believes that people should spend as much time in January building a financial plan for 2016 as they did shopping in December for the holidays.

For people in credit card debt, MagnifyMoney has a free 45 page Debt Guide available for download. This guide helps people prepare a customized action plan to lower interest rates, build a budget, negotiate hard with creditors and become debt-free.

In addition, MagnifyMoney recommends that all people spend time in January 2016 doing the following:

  1. Understand where your money actually went. When people create forward-looking budgets, those budgets almost always balance. Yet, when people look back in time, they have usually spent more than they planned. The best way to diagnose your spending problem is to understand where the money has actually gone. And there are great apps, like LevelMoney or Mint, which can help you understand where your money has gone. We particularly like LevelMoney, because it splits your expenditure into fixed, recurring expenses and variable expenses.
  2. Review your credit report from all three reporting agencies. You need to know what is on your credit report in order to build a good credit score. You can download your report for free at AnnualCreditReport.com.
  3. Understand your credit score and put together a plan to improve your score during 2016. People with the best scores never charge more than 10% of their available credit and pay their bills on time every month. Not only is that good for your score, but it is good for your wallet. And you can now get your official FICO for free in a number of places. Otherwise, you can get your VantageScore at sites like CreditKarma.
  4. If you have a good credit score, all debt can probably be refinanced. Mortgages, student loans, auto loans and credit cards (with a balance transfer or personal loan) can all be refinanced. Although the Federal Reserve increased interest rates in December, the rates are still very low. Find ways to lock in much lower interest rates now to help you pay off your debt faster.
  5. There are two big warnings with refinancing. First, try to avoid extending the term to get a lower payment. The biggest trap people fall into with refinancing is that they lower their rate and extend their term. By doing this, you might end up paying more money in the long run. Second, be careful before you refinance federal student loans, because you give up valuable protection.
  6. Automate all of your decisions, including savings and making credit card payments. Data has consistently shown that automating decisions greatly increases the likelihood of achieving your goals. To build that emergency fund, set up automatic transfers from your checking to your savings account. (Even better, get a higher interest rate online account and keep it completely separate from your checking account). To build your retirement savings, automate your 401(k) or IRA contributions. And to pay your credit card bill, automate your monthly payments.
  7. “Net worth” is not just a concept for the rich, and you need to focus on your net worth now. Net worth is a simple concept: it is what you own minus what you owe. Building wealth and being financially responsible means you are building your net worth. It doesn’t mean you make your payments on time and have a fancy car. Focus on the right number: building your net worth.

holiday-spending-trends

Survey Methodology

The survey was conducted by Google Consumer Surveys for MagnifyMoney between December 24 – 26, 2015. 532 people responded to the questions in a nationwide, online survey. All respondents were 18 or older.

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Building Credit, Credit Cards

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

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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.

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.

Screenshot 1

 

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)

Screenshot 3

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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Building Credit, Credit Cards, Earning Cashback

The new Discover it Secured Credit Card wins: No fee, Free FICO and up to 2% cash back

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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.

Discover it Secured Credit Card Review

Updated July 31, 2016

Discover has just launched a new product, the Discover it® Secured Credit Card – No Annual Fee . Secured credit cards are an excellent way to build or rebuild your credit history. With this product launch, Discover has created one of the best secured cards on the market. You do need to make a deposit of at least $200 to open the account. If you are unable to afford the $200 deposit, you should consider the Capital One Secured MasterCard, which only requires a $49 deposit. But if you can afford the $200 deposit, this new card is clearly one of the best no fee secured credit cards available.

Key Product Features

Here are the key product features:

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.

Eligible for an upgrade in one year: At the end of the first 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.

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:

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How to Use a Secured Credit Card

A secured credit card is an excellent way to build or rebuild your credit history. In order to gain the most number of points in the shortest amount of time, you need to have a strategy. We recommend the following strategy (and describe how it helped someone build an excellent score in one year here):

  1. Avoid spending more than 10% – 15% of your available credit limit. Yes, that means if your credit limit is only $200, you should not spend more than $20 – $30 a month. Utilization is a very important part of your credit score. To calculate utilization, divide your statement balance by your available credit. People with the best credit scores have utilization well below 20%. Because you want to build an excellent credit score, you should keep your utilization low.
  2. Pay your statement balance on time and in full every month. To ensure your payments are made on time every month, you should consider automating the monthly payments. At the Discover website, you can sign up to have your monthly payment debited automatically from your checking account.
  3. Just continue to repeat Step #1 and Step #2. Your credit score should improve over time, which will help you qualify for a standard credit card.

If you have less than perfect credit and need to borrow money, you should consider shopping for a personal loan.

Who is Eligible to Apply?

According to disclosures on the Discover website, you are eligible to apply if:

  • You are at least 18 years old.
  • You have a Social Security Number.
  • You have an address in the United States.
  • You have a bank account in the United States. Note: You will need to provide your routing number and account number when you apply. If your account is overdrawn, it is highly unlikely that you will be approved.

Your credit history will be reviewed, and not all applications will be approved.

The Application Process

You can apply online and Discover usually provides a decision instantly. You will need to make your security deposit as part of the application, which is why Discover asks for the routing number and account number of your bank.

Please remember that when you apply for the secured credit card, you will have an inquiry on your credit report just like an application for a normal credit card.

The Fine Print

There are some additional fees and terms that you should understand.

  • If you take out a cash advance, you would be charged a fee of 5% or $10, whichever is greater. The APR for cash advances is 25.24%, and there is no grace period.
  • The card offers balance transfers. If you transfer a balance by May 10, 2016 you will be charged a 6 month intro APR of 10.99%. After the intro expires, and for any transfer completed after May 10, 2016, the balance transfer rate is 23.24%. A balance transfer fee of 3% will always be charged.
  • The first late payment fee is waived. But, afterwards, you would be charged $35. Returned payments also cost $35.

Alternate Secured Credit Cards

Discover it has one of the strongest offerings in the market. However, it might not be right for everyone. Here are some other good options.

If you cannot afford the $200 minimum deposit, you should consider the Capital One Secured MasterCard. There is no annual fee and a minimum deposit of $49. You will also be able to receive your FICO score for free. Capital One is known for accepting people with more adverse credit histories. So, if you are rejected by Discover, you might want to consider trying Capital One instead.

capone secured

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You should also consider a secured credit card from your local credit union. MagnifyMoney has a list of some of the best no fee secured credit cards offered by credit unions here.

Build Your Score, Not Your Balance

Secured credit cards are a great way to build your credit score. And, with this product launch, Discover has created an excellent tool. Just make sure you don’t use your credit card to build a balance and borrow money. Keep your balance well below 20% of your available credit, and pay your statement balance on time and in full every month. If you do that, you should start to see real improvement in your score.

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Credit Cards, Reviews

Blispay Credit Card Review: 2% Cash Back Card, if You’re Careful

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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.

Credit Card Review

When it comes to cash back cards, the competition is fierce. Blispay is a new Visa credit card that offers 2% cash back with no restrictions and a financing option for large purchases. Although 2% cash back with no cap is decent, the special financing promotion incentive could easily do more harm than good. In this post, we’ll help you determine if the Blispay credit card should be in your wallet.

Here’s what we’ll cover:

  • The Blispay credit card offer
  • How cash back works
  • The fine print details
  • The pros and cons

The Offer  

1. All purchases earn 2% cash back

There’s no revolving categories or spending limits. The Blispay credit card gives you unlimited 2% cash back on all purchases, no spending caps and no strings attached.

2. Special financing for 6 months

Beyond the 2% cash back deal, Blispay offers a financing option for big spending. Whenever you make a purchase of $199 or more, you get 6 months to pay it off interest free. However, if the balance of that purchase is not paid off within 6 months, retroactive interest will be charged at 19.99% APR from the day the transaction posted to your account. That’s a big catch: you’re interested isn’t waived, it’s retroactive. Failing to pay off the purchase in 6 months means the 19.99% APR that’s been accumulating will all get tacked onto your balance.

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A Closer Look at Blispay 2% Cash Back

How to earn cash back

Cash back can be earned at any merchant where Visa is accepted. Purchases made through Apple Pay, PayPal or a digital wallet with a Blispay credit card will count for 2% cash back as well. Occasionally, Blispay may offer special cash back promotions where you can earn even more from your spending. For an example, if you spend $5,000 on your card for the year, you have the potential to earn $100 in cash back, which is a 0.02% cash back value.

How to redeem cash back

The draw of the Blispay cash back program is you won’t need to do anything beyond pay for a purchase to earn and redeem cash back. Each month, the cash back tallies up and automatically applies as a credit to your statement balance when the billing period ends. The application process is also quick. You can apply online and start using your account right away.

The Fine Print

Simple way to earn rewards: The 2% cash back on all purchases with no cap is an uncomplicated way to earn a reward from using the Blispay card. However, the fine print comes in with the special financing. The “no payment, no interest” promotion seems like a deal upfront, but it can really be a trap if you’re not careful.

Understand the consequences of deferred interest: This special financing is really just deferred interest and means interest accruing on your balance will be charged at a later time. If you rely on the promotion to avoid making payments right away on many purchases, you can easily run into trouble when 6 months expires on each one. The way Blispay includes the interest-free period as a promotion alongside the 2% cash back deal could be a way to lure you into spending more money than you can pay off before interest hits.

Cash back is worthless if you don’t pay off your bill in full: If you choose to use this card, understand that earning 2% cash back is worthless if you keep getting charged 19.99% APR later on. You want to avoid interest entirely to get the most benefit from a cash back card. Otherwise, you may pay more in interest than you even earn in cash back.

The Blispay Fee Structure

The Blispay credit card has no annual fee. So, if you choose this card and pay off your balances diligently, it is possible to earn cash back for free. But, you will have to pay more for purchases made internationally since there’s an international fee of 3%. Lastly, there’s a minimum interest charge of $2.00 and the late payment fee is $25 to $35.

Pros and Cons

Pro: No restrictions on the 2%. You can earn 2% cash back without adjusting your spending habits or paying attention to categories. There’s also no cap. You’ll earn 2% cash back no matter how much you purchase.

Con: Special financing is retroactive interest. If you rely on the financing for many large purchases, you can fall behind on payments and get charged retroactive interest. When that happens you won’t see much, if any, return from 2% cash back. The no-interest financing option could be a trap, so be cautious.

Pro: No annual fee. You won’t need to earn a certain amount of cash back to compensate for an annual cost of this card because there is none.

Con: High fees. Although there’s no annual fee, the interest rate and other fees such as the 3% foreign transaction fee are ones that need your attention. If your credit score is good to excellent, you may be able to get a lower interest rate with another card that doesn’t have the special financing element. For instance, the starting interest rate on the Citi Double Cash card is just 13.24% APR as opposed to 19.99% APR.

(No matter what cash back card you decide on, it’s best to pay off your balances entirely to skip interest altogether. But a lower interest rate is ideal in case you do need to revolve a balance.)

Pro: Automatic statement credit. Each statement period your cash back will appear as a credit on your account. You won’t have to initiate the redemption of cash back. This card requires hardly any maintenance.

Alternative Cash Back Option

Another simple double rewards card you want to consider is the Citi Double Cash. You earn 1% cash back for making purchases and your rewards double when you pay off those purchases. In this case, you’re incentivized for paying off your bills right away which is the best method of using a cash back card.

Who Will Benefit Most from the Blispay Credit Card

The Blispay credit card gets a low score from us because of the financing angle included in the promotion. Reeling you in with deferred interest can hurt you more than 2% cash back can help if you fall off track. But, if you plan to avoid the 6 month special financing trap, you may be able to reap the benefits of cash back while steering clear of the pitfall.

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Credit Cards, Earning Cashback, Reviews

Ally CashBack Credit Card Review: Is it Worthwhile if You Don’t Bank with Ally?

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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.

Ally CashBack Credit Card Review

Ally cashback credit cardThis summer Ally Bank introduced the Ally CashBack credit card. The program offers cash back with no cap for accounts in good standing. According to Ally Bank, good standing means you pay your bills on time and the account doesn’t go dormant for 12 consecutive months.

In addition to the cash back you earn from spending, the Ally CashBack Credit Card gives you a special bonus when you deposit money earned into an eligible Ally Bank savings or checking account.

In this Ally CashBack Credit Card review we’ll cover:

  • What the Ally CashBack card offers
  • How cash back works
  • The fine print details
  • How to get the most out of the offer
  • The pros and cons

The Offer

Ally offers a 3-prong approach to earning cash back for new customers. While 2% is a great deal, it’s only available on two types of purchases.

1. Unlimited 2% cash back at gas stations and grocery stores

There’s no cap for the 2% cash back category. You can earn at both gas stations and grocery stores unlimited throughout the year.

Fine print alert: Superstores and warehouses are not included, which means Target, Walmart, BJ’s and Sam’s Club are off limits for the 2% bonus.

Ally Bank qualifies your purchases for 2% cash back using merchant codes. Merchant codes are determined by the stores themselves, so there’s no comprehensive list of whether or not the stores in your neighborhood count for 2% cash back. However, you could call up the store and ask directly if it’s merchant code is for one of these eligible 2% cash back categories:

  • Grocery
  • Bakery
  • Dairy
  • Service station
  • Gas station code

2. Earn 1% cash back on all other purchases

Purchases outside of the 2% category earn 1% cash back. This will include gas and groceries sold at superstores, warehouses and specialty stores that don’t qualify for 2% cash back based on merchant codes.

3. Two intro bonuses

Bonus one: $100 for $500 of spend in the first 3 months of opening an account

For an introductory one-time bonus, you can earn an additional $100 if you spend $500 on the card within the first 3 months of opening an account. If you meet the terms of this bonus, the cash will appear as a credit to your statement within 6 to 8 weeks.

Bonus two: Extra 10% if you deposit cash back into eligible Ally Bank account

But, the highlight of this program is the Ally Deposit Bonus. You can earn an additional 10% on top of the cash back you earn when you deposit into an eligible Ally Bank account.

Qualifying accounts include:

  • Ally money market
  • Non-IRA online savings
  • Interest checking accounts

The good news is all of these accounts are free to open and require no minimum balance.

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How Cash Back Works

You can redeem cash back in two ways. First, as mentioned, you can request deposits into an Ally Bank account. Or you can apply cash back as a credit to your statement. You need to build a cash back balance of at least $25 before you qualify for redemption.

The Fine Print

There are no caps (like 2% back on the first $2,000 per quarter) or revolving opt-in bonus categories to worry about.

Your purchases only count if the store has a merchant code for gas or groceries. Otherwise, it’s a default 1% cash back – even if you purchased gas or groceries.

Where the Ally CashBack Credit Card does have some red flags is the program termination policy. If your account is cancelled for any reason, by you or Ally Bank, you forfeit the cash back balance. Ally Bank also reserves the right to change terms or cancel the cash back program. If this occurs, you may give up your balance.

To avoid losing out on money, keep the card in good standing and cash out whenever you hit the $25 mark just in case Ally Bank should change its terms in the future.

How to Get the Most Value from the Cash Back Program

It goes without saying, you get the most benefit from this program when you deposit cash back into an Ally Bank account to earn the extra 10%. If you don’t have an Ally money market, non-IRA savings or checking account, you’ll need to open one and keep it in good standing.

To give you an idea of how much you can earn with the Ally Deposit Bonus, here’s an example:

Say you spend $6,000 per year on groceries and gas. That’s $120 cash back at 2%. With the extra 10% Ally Deposit Bonus, you’ll earn another $12 for a grand total of $132 for the year.

Keep in mind, the 2% category is unlimited and the 10% Ally Deposit Bonus applies to both cash back categories, 1% and 2%.

Pros and Cons

Pro: No annual fee. You earn cash back without paying for it.

Con: Merchant code restrictions. You won’t be able to shop for gas or groceries at wholesale or superstores for the max cash back. Before shopping at specialty food stores, you should double check the merchant codes to see if your purchases will be eligible for 2% cash back as well.

Pro: No cap. There’s no limit on how much you can earn or revolving opt-in categories to dictate what you can and can’t spend on to get cash back.

Con: An Ally Bank deposit is necessary for the bonus. If you’re new to Ally Bank, you’ll need to open two accounts with Ally (one for the credit card and another to make the cash back deposit) in order to earn the most from this card.

Pro: The sign on bonus. Besides the deposit bonus, there’s an introductory special. You only need to spend $500 within 3 months to get $100 which is easily doable. The $500 doesn’t have to just be on gas and groceries to be eligible for the $100 bonus.

Who Will Benefit Most from the Ally CashBack Credit Card

The Ally CashBack Credit Card makes the most sense if you already do banking with Ally. In this scenario, you won’t need to go through the extra step of opening up an account to get the bonus.
However, if you don’t own a car or do most of your grocery shopping at Wholesale stores – then this may not provide you with the best bang for your buck. Citi Double Cash and Fidelity both offer the ability to double your rewards on all purchases and not just niche categories.

Ultimately, even with the sign-on bonus and the extra 10% deposit bonus –  the 2% on groceries and gas may not be the most remarkable pay off you can find in a cash back card depending on your spending habits. Check out our roundup of top cash back cards in each category for alternatives.

 

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Credit Cards

How to Make a Payment on Your Citi Costco Credit Card

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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.

Citi Costco Card

Confused about how to set up online payments for your Citi Costco credit card? You may be on a wrong, and confusing, landing page when trying to set up your online profile.

Here’s a step-by-step guide to setting up your new Citi Costco card account:

If you’re Googling the term “Pay my Citi credit card”, or something similar, you could be inclined to click on the link for “Citibank®: Online Bill Payment”.

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This is NOT the right page. This will take you to Citi’s option to sign up for Online Bill Payment or eBills. This is a separate service and not actually where you sign up to pay your Citi credit card online.

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Here’s what the right landing page looks like:

Click the button that says “REGISTER”. You’ll be prompted to enter your card info and set up your account.

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Next: Set up your payment account

Once you’ve registered, click ahead to your account page. There, you can set up a payment account from the options on the left.

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From there, it’s easy to link a checking or savings account to the account in order make your payment.

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Now you’re ready to pay off your credit card!

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Building Credit, Credit Cards

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

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Credit Limit Increase with Barclaycard

Credit card companies don’t usually ask your permission to increase your credit limit. Instead, you’ll get an email, letter in the mail or an alert the next time you log into your account stating your limit is going up. This often comes as a reward for your months or years of healthy credit behavior (like paying your card on time and not maxing it out). However, the real reason credit card companies want to increase your credit limit is to try to lure you into overspending, which of course means you won’t be making those payments in full anymore and will then start owing interest. So why would anyone choose to request a credit limit increase? There is one good reason.

How to increase your credit limit with American Express and Capital One

Why increase your credit limit?

The best reason to increase you credit limit is so you can lower your credit utilization ratio and improve your credit score. This only works if you don’t increase your spending habits to match your credit limit increase. Remember, you don’t want to spend more than 30% of your total available credit limit. So, maybe you’re still fairly new to credit and your first credit card has a $1,000 credit limit. You probably spend more than $300 a month for regular expenses, so requesting a credit limit increase would be helpful. You wouldn’t change your spending habits, but it would allow you to put more on your credit card without having high utilization.

Another reason to ask for a credit limit increase is to help you cover a planned expense, like purchasing a washing machine for your home, that would otherwise put you near your credit limit.

Lower utilization correlates to a higher credit score

Utilization is the second largest factor that’s used in determining your credit score. First is payment history at 35% and then utilization at 30%. That means 65% of your score is determined by just two of the five total factors – the other three being: diversity of credit, length of credit history and new credit.

The lower your utilization, the better it looks. Even though credit card companies may be trying to lure you into overspending, other lenders don’t want to see that you always max out every line of credit extended to you. This is why it’s important to try to keep your utilization ratio (the amount of credit you actually use compared to the amount available) at 30% or less. Yes, that means utilization counts for 30% of your credit score and you should keep your utilization ratio at 30% or less.

What makes a bank decide to increase your credit limit?

You can’t just magically increase your limit without the approval of your credit card company. The bank will take some time to check your past use of existing credit, see if you still have a clean credit report and ask for your annual income. Sometimes the bank does check this information proactively (minus asking for your annual income) and decides to just increase your limit on its own. If that hasn’t happened, here’s how you can request a credit limit with a Barclaycard.

How to request a credit limit increase from Barclaycard

Most credit card companies allow you to request a credit limit increase online, such as American Express (Chase does require a phone call). This article will overview how to request a credit limit increase from Barclays in just a few simple steps after you login to your account at BarclaycardUS.com.

Step 1

After you’ve logged in, click on “Services”.

 

Step1

Step 2

Next, click on “Request credit line increase” within the pop-up menu.

Step2

Step 3

Once the new page loads, select “Request a credit line increase” from the menu.

Step3

Step 4

You’ll be taken to a page where you need to fill in your information to request a credit line increase. You’ll have to enter the additional credit you desire along with information about your occupation, employer, employment history, and income. You’ll also have to verify your phone number at the bottom before submitting your request. Verifying your phone number gives Barclaycard permission to contact you via phone at the number you verified.

Step4

If you’re not tech savvy, you can also request a credit limit increase by calling Barclaycard’s customer service at 1-866-603-7217.

  • Don’t spend more than 30% of your total available (new) credit limit.
  • You won’t be able to increase it again for 3 months or 6 months if you asked for a credit limit decrease.
  • You can try again in a month if you were rejected for a requested limit.

Your credit limit was increased. Now what?

Now that your limit was successfully increased it’s more important than ever to be diligent about your spending. Keep that that utilization ratio at 30% or less and always pay your card on time and in full.

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Won’t impact your credit score

Credit Cards, Identity Theft Protection, News

Banks Aren’t Losing Sleep Over Credit Card Fraud. Neither Should You.

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Credit Card Fraud

Infomastern via Compfightcc

Banks are willing to tolerate some credit fraud losses in order to maximize sales.

Mention fraud in any group of friends, and you are bound to hear someone tell a breathless story about their credit or debit card getting “hacked.” After all, the Justice Department says about 7 percent of U.S. adults are hit with ID theft – mostly card fraud – every year. That number might be even higher. A survey of MagnifyMoney readers found more than 22% had dealt with credit card fraud before.

Dealing with fraudulent charges can certainly be a hassle. Changing your account number at all the places where you use automated payments — from Netflix to Hulu to the electric company — can take some time, and you risk a late fee if you screw up.

Here’s the thing no one in the financial system likes to talk about when it comes to fraud: just how little banks—and even merchants—care about fraud.

“Banks don’t lose sleep over it, so neither should you,” says Gartner fraud analyst Avivah Litan.  “Sure, [getting hacked] is upsetting, but consumers should be very relaxed, because they’re almost always going to get all their money back.” To be sure, nearly 100% of our readers received full refunds after their credit cards were hacked.

Banks and merchants could dial up their security systems so tightly that fraud would be nearly eliminated. But they don’t, because that would only make it tougher for legitimate customers to spend money. When fraud security is too tight, legitimate consumers would inevitably get tangled up in the security checks. Merchants and banks would lose sales and irritate customers. In the end, they’d rather tolerate some losses in order to maximize sales.

That’s not to say banks and merchants do nothing to protect their customers. Most use a variety of systems they employ to sniff out potential fraud.  If you are an online shopper and have ever tried to ship something to an address that differs from your card billing address, you’ve probably encountered these fraud checks. Many involve scores, not unlike credit scores, that work like this:

A transaction that involves an international credit card shipped to an unusual address for a small but valuable item would get a high fraud score;  an item purchased repeatedly by a customer and sent to their known address would get a low score. Companies make their own decisions about how much risk to take — how high a fraud score they allow — before stopping transactions.

It’s a tricky calculation, but Litan says some banks are willing to set the dials so low that they only detect 65 percent of fraud.”They’re not going to get in the way of their consumers,” she said.  “That’s just the way they do it. It’s not like they don’t have fraud protection. They just aren’t going to tune it as tight as they can.”

Here’s a recent example that shows just how laissez-faire banks can be about fraud.

Remember when the Target credit card hack began a wave of database thefts that led to hundreds of millions of credit card account numbers being compromised?

Many banks, knowing that criminals had these stolen numbers, didn’t even bother to cancel associated cards and issue new ones. Instead, it became common practice to put the accounts on a watch list, and only cancel them once actual fraud incidents arose.  That generally gave the criminals one or two bites at the apple before a hacked account was shut down.

That being said, more critical transactions, sure as cash wire transfers, often come with tougher fraud standards, requiring up to 99 percent fraud detection.

The bottom line:

The next time you fret about fraud, or see an ad for a service trying to sell you fraud protection, remember that there’s no need to be hyper-vigilant. Your liability is capped in most cases at $50 as long as you report the theft quickly, and most banks waive that, too.

Take reasonable steps to avoid credit card fraud: Don’t use your credit card at a suspicious website.  Check your statements every month for fraudulent charges.  But don’t lose sleep over it, because banks aren’t.  Save your digital anxiety for far more serious hacking incidents like the theft of healthcare data or a ransomware attack against your hospital.  Those hacks involve far more valuable personally identifiable information, like Social Security numbers or health conditions, that you can’t simply cancel and reissue. Recovering from that kind of hack can be a lifelong ordeal, rather than a simple phone call. So, don’t sweat the small hacks.

What to do if you’ve been hit with credit card fraud:

MagnifyMoney has published a free Credit Monitoring and Identity Theft Guide. This guide can help you create a strategy to reduce the risk of identity theft happening, to identify fraud as soon as it does happen and to make it as easy as possible to resolve any fraud that does happen on your account.

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Building Credit, Credit Cards, News, Pay Down My Debt

The Perfect Credit Score Isn’t Really 850

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fico score

Do you really need an 850 credit score to get the best rates?

Most people assume that in order to get the best treatment from lenders, you need to have perfect credit. Across both of the most common credit scoring brands, FICO and VantageScore, that highest score is 850 out of the now-standard range of 300 to 850.

But the truth is that while it’s nice to boast that you’ve maxed out your credit score, it’s almost impossible to achieve the magical 850. It’s also entirely unnecessary. There is no lender or credit product that requires you to have a credit score of 850 in order to be approved.  There is no lender or credit product that requires you to have a credit score of 850 in order to earn the best terms. In fact, your credit scores can be 90 to 130 points off the maximum and still result in your getting approved for the best deals from mainstream lenders.

To put it bluntly, 850 doesn’t buy you anything but bragging rights.

Case in point, according to Informa Research, which tracks interest rates by credit scores on a daily basis, the lowest rates offered on various mortgage related loans are being offered to people with scores at or higher than 760. And, the lowest rates offered on various auto loans are being offered to people with scores at or higher than 720.

The quest for a perfect 850 is often given different fictitious monikers like “Triple-A Credit” or “A+ Credit”, when in reality there is no such designation in the world of consumer credit scoring.  Your credit “rating” is the number, whether it’s an 850 or a 525.

Earning the ever-elusive 850 credit score requires that you have a statistically perfect credit report that indicates you are completely void of any sort of credit risk. But again, this is unnecessary and you will do just fine with 760 or better, which is a much easier target to hit.

How to get to 760

A score of 760 doesn’t require perfection. You can even have derogatory entries (like a missed payment) and still get there. It just requires that these negative marks are older and limited. You can even have a balance on your credit card and still score at or above 760. Your best bet is to use 10% or less of your card’s credit limits.  That means no more than a $1,000 balance for every $10,000 in credit limits across all of your cards.

The other targets are harder to hit because they’re not entirely in your control.  For example, the older your credit history is the better you’re going to score. Since you can’t exactly control time, this will be one of those areas where you’ll do better organically as time passes.

Account diversity is also a tough one to control. People will score better if they’ve got a record of managing different types of accounts, such as credit cards, student loans, auto loans, and mortgages. Nobody will (or should) go out and buy a car or a house just to benefit their credit scores. This is one of the metrics where you will improve as time passes and you build a history of auto loans and mortgages.

If all of this seems too complicated then let’s make it really simple. If you pay all of your bills on time all the time, apply for credit only when you actually need it and use credit cards sparingly then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so.

Still obsessed with hitting 850?

If you are still obsessed with credit score perfection then there are some milestones that are going to need to be met and maintained.

A perfect payment history. Your credit report is going to have to be void of any negative information, and there are no exceptions. If you’ve got derogatory entries like late payments, liens, judgments, collections, defaults and the like then an 850 is not in the cards for you.

A low utilization rate. Utilization plays a big role in your score and it can be a little confusing. Essentially, credit scoring models look at your total statement balances across all your cards and compare it to your total available credit limit. They don’t even give you bonus points if you pay that balance off in full each month. They simply look at how much your balance comes out to with each billing cycle. The lower your total statement balances are, the better off you are score-wise. To get the perfect 850, don’t even think about carrying a balance on your cards. You need to be at or close to zero percent.

You’ve shown a long history of good behavior. If you apply for credit too often, have limited credit score information or have a young credit report then you’re not going to max out your score. You can’t open a bunch of accounts in a short period of time without hurting your scores. It reduces the average age of your credit and it also means a hard credit inquiry on your account, which can also ding your score. Again, this is no big deal if you’re shooting for the ideal credit score of 760 (or in the neighborhood of that) but it can certainly hurt you on your path to 850.

Have more questions about your credit score? Send us an e-mail at info@magnifymoney.com. 

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Won’t impact your credit score

Credit Cards

New Costco Credit Card Not Working? Here’s What to Do:

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New Costco Credit CardFlickr/Mujitra

Costco found itself in hot water with customers this week over issues with its new Citibank-backed rewards credit card. 

Even for one of the largest retailers in the country, breakups can be messy. After successfully divorcing itself from longtime credit card partner American Express, Costco was prepared to start fresh with Citibank this week. As of Monday, Costco officially stopped accepting all Amex cards, which meant replacing its Costco True Earnings Card from American Express with a new Costco Anywhere Visa credit card from Citibank.

Some 11 million shoppers who previously owned Costco’s Amex credit card should have received the new Citi card sometime in May or June and could use them beginning June 20. Folks were probably eager to use the new card, which boasted better cashback rewards than Amex’s previous offering.

That’s not exactly how things went down. By mid-week, complaints had flooded Costco’s social media pages, with customers airing one of two main grievances: they either didn’t receive their new Citi card or their new card wasn’t working. The company’s customer service lines were overwhelmed by the number of calls, resulting in frustrating delays, although a spokesperson said Thursday that call volume was slowly returning back to normal.

Bill Bauman of Phoenix, Ariz. was among hundreds of customers who took to Costco’s Facebook page to complain Thursday when he was unable to use his Citi card. A Costco agent told him to call American Express, he said, but the American Express agent he spoke with gave him conflicting information about when he would have full access to his new Citi account.

“I have been told it should be fixed by today, be fixed by Friday or be fixed in early August,” Beauman said in his post. “I was also told by an AMEX supervisor my account would never be transferred but another one insists my account is in transition and will process by August.”

It’s unclear what exactly went wrong. MagnifyMoney has reached out to Citi, Costco and Visa and has not received a response yet. American Express spokesperson Elizabeth Crosta told MagnifyMoney in an email that the problems are not related to any work on their end.

“Given the change in card issuer, we successfully migrated all of the customer data to Citibank to meet the June 20 conversion date,” she said. “Any conversion related issues are not American Express issues.”

What to do if you’re unable to use your new Costco Citi card:

Use any other Visa-backed credit card in your wallet. Costco now accepts any Visa card, so save yourself a headache and don’t touch your new Citi card until these issues are squared away. We’ve done the hard work for you and found out which rewards card is best to use at Costco.

Email is better than phone. Costco recommends emailing them at costcocare@costco.com with your 12-digit membership number, your phone number and an brief explanation of the issues you’re having.

Use social media. If all else fails, companies are quite good about responding to complaints on Twitter and Facebook. @AskCiti @AskAmex @AskVisa You’ll have to go to Costco’s Facebook page and leave a comment, as they have no active Twitter account.

What to do about your old Amex account:

For starters, take a look at the FAQ page for Costco users on American Express’ website.

Any rewards you earned should be transferred over to your new Citi account. Your remaining balances should be transferred over as well. If you have received a bill statement from American Express, then you should pay that bill directly to American Express. If there are any charges on your old Amex card that you wanted to dispute, you’ll have to call the number on the back of your new Citi card.

Have a question for us? E-mail us at info@magnifymoney.com 

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