Archive for December, 2009
Building Credit from Scratch: Your First Credit Card
December 25th, 2009 | 
Author: If you are trying to rebuild your credit or are just starting out and have no credit history whatsoever, getting approved for your first credit card can seem like an insurmountable task. If you have applied for several credit cards and keep getting turned down, do not worry. A change in strategy will put plastic in your wallet before you know it.
One of the most common mistakes that people make when applying for credit cards is applying for the wrong card. Major credit cards such as Visa, Master Card, Discover and American Express are very difficult for the first-time card holder to get. Finance cards, on the other hand, are much easier to get. Finance cards are credit cards that are issued through a store or franchise and can only be used at that business. Finance cards include cards issued by Target, Wal-Mart or Best Buy, etc.
Granted, finance credit cards do not carry as much weight on your credit report as major credit cards, but they are a great way to start out. If you find it difficult to get a finance credit card, a secured credit card might be your best bet. Secured credit cards are especially helpful if you have bad credit.
Secured Cards
A secured credit card is a card that is issued to you in exchange for a deposit in the amount of all or part of the credit limit. It may sound ridiculous to pay $500 to get a $500 credit card, but a secured credit card can be a major boost to your credit standing. Why? If you get the right card, a secured credit card can have as much impact on your credit report as a major credit card.
When you apply for a secured credit card, you should be sure of two things: that the card will report your credit limit no matter how low it is and that the card will not show up as a secured credit card on your credit report.
Getting a card that reports the credit limit is very important. This is due to the way that credit scores are calculated. In order to score well, your debt ratio on revolving accounts should be less than 25%. This means that a card with a $1000 credit limit should carry a balance of $250 or less. If your secured card does not report the credit limit, credit reporting agencies will use the total amount charged as the credit limit. This will make it seem like your debt ratio is 100%.
It is also extremely important to make sure that your card will look like any other major credit card on your credit report and not look like a secured credit card. If your credit card company reports your card as secured, your credit score will be negatively impacted.
Getting your first credit card can seem impossible, but it is not. If you go about it the right way and apply for the right types of cards, you will be approved before you know it.
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Putting Out With Business Credit Cards
The small business credit card market presents financial institutions with a really good business opportunity. Those banks that do offer small business credit cards noted that business owners are spending more and more every month and that they carry higher annual balances than the average personal credit card holder. This holds the promise of higher fees and interest revenue.
Generally, the business credit card carries credit limits that are double the amount of the average personal credit card. But where the personal credit card is almost pushed to the maximum on its credit limit, the business credit card’s outstanding balance is normally only about 75% of the credit limit. In spite of this, the risks on small business remain high. This is the reason why most business credit card issuers are very careful when processing and approving start-up businesses’ applications for business credit cards.
In one bank that issues business credit cards, about four fifths of their business credit card holders have been in business for at least three years. Although this particular bank places a strong focus on developing their small business customer base, they have come to realize that there are higher risks associated with extending credit to small businesses. If you think about it, when in a bind, it would only be natural for people to default on payments towards their business credit cards before they default on personal credit cards. No one would want to impact their personal credit rating, although they might be willing to suffer some negative points on their business credit.
For this reason, most business credit card issuers will require that the business and the owner of the business accept joint liability for debt repayment on the business’ credit cards. Although there may be some initial grumbling about the personal liability involved, most business owners end up agreeing to this term, because the resultant access to cash and the ability to separate personal and business finances, are of great value to them. Business owners also understand that securing a business credit card early on in the life of the business, helps it to build its credit track record; and that the sooner a track record is established, the sooner the business will be able to carry the business credit card’s liabilities on its own.
Small business credit cards are convenient for travel and entertainment expenses. That is to be expected. But besides these, small business owners use their business credit cards to stock supplies, to supplement their inventory of products, and to cover other daily expenses.
For a time, the interest rates on small business credit cards were much higher than personal cards, as banks relied on traditional risk calculation methods and the absence of competitive pressure. That is not the case anymore. Business credit cards offering zero percent interest rates and reward rich incentives are advertised widely. According to issuers, the uptake is high. After all, business owners mind their costs, and low interest rates and affordable fees will always be key selling points.
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A Bad Credit Card That May Be Good For You
Millions of people use credit cards all around the world. A huge chunk of those users made mistakes when dealing with their credit cards. The consequence of the errors is costly. The cost may not just be in money but in your credit score and you reputation as well, not mention that financial difficulties are one of the leading causes of divorce.
A lot end up in debt and most of the time these are the people who rant about the credit card being the devil. But fact of the matter is, this is not the case. When used properly, credit cards are very good financial tools.
Credit cards are not necessarily just for people who have large sums of money to use. There are some cards even for the financially challenged, and these are called the: “Bad Credit Cards.”
A bad credit card is just precisely that: a card with a very bad or low credit limit.
There are two types of credit cards: there is the secured and the unsecured credit cards.
Unsecured credit cards are the accounts that are free from the limits of a bank account. The limit of credit is up to the bank’s discretion and not up to the size of the bank account. If the bank thinks that a person is deserving of a bigger credit, then it will be given.
This is the usual type of credit cards in the market and is fairly popular among the card shopping people. These are also the cards known to be more respected by other companies. These are also the cards known to send people to a very deep debt.
This is the type of credit card that should be avoided if the applicant is already in a financial mess.
The secured credit cards are the bad credit cards. These cards are grounded on the size of the account a person has. For example, if a person has a $1,000 balance, then that is all the credit a person is going to get. If there is a point where the balance reaches $0, then the person should go and “re-fill” the account.
The bank limits the credit to the money already present to avoid overspending, thus preventing even deeper debt. This will monitor the expenses of the person and will help the development of a financial recovery for some.
These credit cards are also known as “pre-paid credit cards” for there is only a fixed amount that can be used and the holder is the one who puts it there.
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Secured Credit Cards That Report
If you’re one of the millions looking to rebuild your credit out there, you may want to resort to a secured credit card. If you’re already familiar with the cards, that’s great! If you’re not, I’ll give you a quick cliff note version.
A secured card is just like a regular credit card but you’re going to have to place a deposit on the account before you can use it. Whatever you put on the card is what your credit limit will be. For example, if you place $500 on the card, you can only spend $500. The nice thing about these cards are that you still pay your bills like you would with a regular card but if you don’t pay your bill on time, they will dive into your account and take what they need.
The nice thing about these types of cards is that most of them do report to the credit card bureaus. You have to remember that if they don’t report to the bureaus, you’re not going to be able to build your credit up. There are scams out there that you want to look out for such as a card without a major logo. If the card doesn’t have a Visa or MasterCard logo, you’ll want to skip over it right away because you’re most likely asking for trouble.
How do I know if it’s reporting to the bureaus?
This question is fairly simple to answer. What I tell people when they are looking for a card is to call up the credit card company first. What you want to do is ask them all the questions you have and of course, they are going to give you answers that you need. If they don’t report to the bureaus, once again, look for another card because it won’t be worth your time.
If you don’t want to call up and wait on hold, I don’t blame you, who does? The next step you’ll want to take is by looking at the credit card application itself. Look at the points and see what the card offers. Any good secured card is going to point out that they report to the main bureaus. Many people are in the same boat that you are. They want a card that helps them build their credit. Why would they want a regular card that does absolutely nothing for their finances?
Most of the cards that you find online do report but once again, as long as you follow the tips above, you won’t have a problem finding a good card. You just want to make sure that the card has low fees and you can use it at just about any location. As long as it has the major logo from Visa and MasterCard, you’ll be fine. If it doesn’t, again, look for another card. There are a ton of cards out there. Check with your local bank, online and other places. As long as you do your research, you’ll have no problem finding the perfect secured credit card.
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Prepaid Credit Cards: Limiting Exorbitant Expenses
The disparity in the income groups isn’t something unknown, and that is reflected in their spending habits as well. But the growing demands of the contemporary lifestyle give more importance to usage of credit cards which can’ be afforded by all. However, it has emerged as a more convenient way to make use of the monetary resources for personal or business needs. If you are looking for an option that could let you spend only up to a limit, then prepaid cards could fetch you some relief.
Prepaid credit cards let you to spend the amount that you desire to use for your purchases without exceeding the limit. A set of amount is paid onto your card that defines the credit limit for it as well. It works similar to mechanism of a debit card on which you spend only what to the exhaustion of the resources. Usage of a prepaid credit has several advantages to it including the fact that even bad creditors can avail it without any apprehension.
These cards can be reloaded at anytime, when you have exhausted the monetary resources on it. Prepaid credit cards offer an ideal option for students, who have to spend on education expenses such as stationery and many more. It is beneficial for even the parents who want their children to mange their credit at the same time want to keep a check on their spending habits to avoid debts. In fact, if you are thinking of a gift, then these cards would serve as an ideal surprise for your loved ones.
Opting for a standard credit card may have certain stringent criteria that you may be able to fulfill. But availing these cards, as no such rigid criteria to follow, and can be used as the usual plastic money. To avail these options, you can browse through the internet to find an appropriate services provider.
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Posted in prepaid credit card | 
Tags: Cards, Credit, Exorbitant, Expenses, Limiting, Prepaid | 
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