Why You Shouldn’t Freak Out If You Miss a Payment Due Date

Uneasy woman doing her accountsThe due date for your mortgage loan payment slipped past without you sending a check to your lender. Or maybe you didn’t have enough money in your checking account to send an on-time payment to your credit card provider.

Don’t panic. Your financial misstep might not hurt your credit score just yet.

Missed payments are a sure way to send your three-digit credit score plummeting by as many as 100 points. This financial mistake will remain on your credit report for seven years.

But late payments aren’t immediately reported to the three national credit bureaus of Experian, Equifax and TransUnion. Often, lenders and credit providers won’t report missed payments until they are at least 30 days late. This means that even if you miss your initial due date, you can still avoid a hit to your credit score by paying before 30 days pass. But first consider these variables.

Late Isn’t Always ‘Officially’ Late

Whitney Fite, president of Angel Oak Home Loans in Atlanta, said that most mortgage loans today come with a 15-day grace period. Your mortgage might be due on the first of the month, but lenders won’t assess a late fee unless you fail to pay by the 15th of the month. This late fee will vary by the size of your loan, but could be about $100.

Credit card companies will also charge late fees if you miss your payment. Those fees vary, but what might hurt more is when your card provider increases your interest rate to the penalty rate. Under rules spelled out in the Credit CARD Act of 2009, your card provider can impose a penalty interest rate if you become more than 60 days late on your payment. These penalty rates are a true punishment, often running as high as 29 percent.

But as long as you pay your mortgage, auto loan, or credit card payment within 30 days of its due date, most lenders won’t report a missed payment to the credit bureaus. This means that your credit score itself will not be harmed.

Fite warns that you need to be careful when paying after the official due date on auto loans, mortgages, or credit card payments. If you wait too long to send in your check, you might be tempting fate and you might find yourself facing a late fee or credit hit after all.

“It can be a dangerous game to squeeze out a few extra days with the grace period,” Fite said. “Any delay by the mail carrier could result in the lender receiving the payment after the 15th and late fees being assessed.”

Actually Late Can Hurt, However

If you can, be sure to send in that payment before the 30-day grace period ends. A single reported missed payment can lower your score by 100 points or more, especially if you had a relatively unblemished credit history before your missed payment.

You don’t want a low credit score. Lenders today rely on these three-digit scores to determine how much interest you’ll pay on loans and credit cards. If your score is too low, you won’t even qualify for loans or credit.

Lenders consider a FICO credit score of 740 or higher to be a strong one. If your FICO score is under 640, you might struggle to qualify for loans or credit cards, and when you do qualify, you can expect to pay high interest rates on the money you borrow.

Some missed payments are more damaging to your score than others.

“Recent late payments on mortgages are more damaging than late payments on other consumer loans,” Fite said.

Unwanted Calls

You might not have to be 30 days late to begin receiving unwanted collection calls, too. Fite said that some lenders will begin making collection calls shortly after the first of the month. He said that almost all mortgage lenders will begin calling about missed payments on the 10th or 12th of the month.

So if you don’t want to hear from collection agencies? Make those payments on or before your due date. And it goes without saying that paying your bills on time — every time — is always the best policy.

Credit Card Users Suffer Fatigue From the Rewards Game

Credit cardA recent poll bears out something I already believed to be true and am happy to see: Consumers are finally losing their enthusiasm for airline and other affinity credit cards.

Bankrate (RATE), an aggregator of financial rate information, reports that its Money Pulse survey found that cardholders “express little enthusiasm for accumulating extra rewards.” In fact, half the respondents said they wouldn’t care if their card stopped offering loyalty rewards altogether.

Affinity cards, for the uninitiated, are credit cards offered by a bank and co-branded with another company, such as an airline or hotel, that often allow cardholders to collect miles or points for every dollar spent. Critics say the cards prod consumers to spend ever more money so they can collect points toward perks such as free air travel, reduced hotel rates or preferential treatment at travel destinations. Who wants out? People like Dick Martin, a retired information systems supervisor from Moses Lake, Washington. Frustrated by blackout dates, high mileage requirements for award tickets and an annual fee, he recently cut ties with his plastic.

“There were too many blackout dates,” Martin says. “The points required for any flight were quite high, and I also paid $70 per year for the privilege of having the card.”

Milton Kidd, a retired professor from Washington, D.C., says he felt strung along by his airline-branded affinity card. He paid a $79 annual fee and obediently collected miles for years. But when he finally had a chance to book a seat from Portland, Maine, to Tallahassee, Florida, his airline told him he needed to buy more miles. He had to redeem all of the miles he’d earned and pay the airline an additional $326. “The entire thing was a rip-off,” he says.

Kidd is allowing his remaining miles to expire and has cut up his card.

Only a limited number of customers actually benefit from these payment systems in a meaningful way over the long term, experts warn. You’re probably not one of them.

But ending the relationship isn’t easy. Travelers are sometimes bound to their cards by irrational fears, Web sites that extol the virtues of point-collecting and, of course, by the debt they’ve accrued by overspending.

Even when travelers know the cards overpromise rewards and have the potential to damage their personal finances, they still don’t want to give them up, says Thomas Nitzsche, a spokesman for ClearPoint Credit Counseling Solutions, a nonprofit agency offering consumer credit counseling. They don’t want to lose the ability to earn more miles or the elusive “free” ticket. Nearly half of ClearPoint’s clients at least initially refuse to part with their mileage-earning credit cards, he says. The biggest reasons: unfounded fears that their existing rewards will be deleted or their credit rating will be affected.

“It’s something close to addiction,” Nitzsche says. “In some cases, clients just leave with our advice and then come back months later when the cards are completely maxed out or defaulted and closed by the creditor.”

Did he just say “addiction”? Yes, and it’s not hyperbole. Michele Paiva, a psychotherapist and neuromarketer in Downingtown, Pennsylvania, says compulsively collecting miles is akin to drug dependence. (Neuromarketing is the study of consumers’ cognitive responses to marketing stimuli, such as lower prices or promotions.) “An affinity card creates a false sense of relationship, of being special,” she explains.

My experience with reporting about these cards as a consumer advocate supports both Nitzsche’s and Paiva’s assertions. After my first column on the topic appeared, I was surprised by a barrage of e-mails from angry cardholders who criticized my story with playground insults.

Many of them appeared to be coming from the readers of several small travel blogs, whose publishers were understandably angry. After all, they were pocketing generous commissions from credit card companies for each new customer they referred, and my stories were bad for business. Even more disturbing was that some of these bloggers had been cited as travel experts by colleagues in the media.

The mainstream view on affinity cards varies. Some industry-watchers say cardholders can win the game by learning the system and paying off their cards every month. “Those who always pay their balances in full and on time will usually come out ahead,” says Jason Steele, a credit card expert atCompareCards.com, who says he is not compensated by credit cards for his advice.

“But that’s only about half of all cardholders.”

Credit card companies employ hundreds of lawyers and MBAs to ensure that the revenue is much greater than the rewards you receive.

Others say an affinity card is worth it only if you’re a frequent business traveler on an expense account — and even then, it can be risky.

“Credit card companies employ hundreds of lawyers and MBAs to ensure that the revenue is much greater than the rewards you receive,” says K. Alexander Ashe, the chief executive of Spendology, a company that develops budgeting apps. Even in the hands of an experienced user, it’s easy to inadvertently carry a balance, such as when there’s a delay in getting a reimbursement from your employer. “Many credit cards accrue interest on a daily basis,” Ashe warns.

Matthew Coan, publisher of the financial website Casavvy.com, says travelers such as Martin and Kidd can’t be blamed for signing up in the first place. “People get excited when they get the offer for a branded card and feel like they need to take advantage of it,” he says. The catch — that the rewards cards carry a higher interest rate and fees than comparable payment systems — tends to get buried in the fine print.

“If you decide to carry a balance on your branded card, then the interest that you pay will greatly outweigh any rewards that you will be earning,” Coan says.

Of course, talk like that is probably considered blasphemy in the Church of Miles, but facts are facts. Unless you pay all your bills on time and have time to master the complex rules of this game, you’re better off without these cards.

9 Times It’s Smart to Be in Debt

Couple paying interior designer with credit cardIt’s never advisable to rush out and take on debt, but there are times when it actually makes sense not to pay off debt.

Debt, it turns out, can be a kind of friend, even if it’s just that flaky friend who can’t really be trusted. You see, all debt is not alike. Some of the worst kinds, such as unsecured credit card debt, can wreck your budget, but even there, you have cases where it won’t and could even work to your advantage. Other kinds of debt might seem imposing with those big red “Past Due” stamps but pose less of a threat to your financial future.

Here’s a guide to handling that debt — rather than bemoaning your inability to pay it all off — either by slowing down the payment process or leveraging or reorganizing what you owe in clever ways. These are the nine instances where it might make sense not pay off debt.

1. Leveraging Zero Percent APR Credit Cards

Many zero percent APR credit cards have hit the market, and the idea behind them is great if you’re part of the credit card industry: Lure customers in with a low-low introductory rate, and then make money off them when that rate expires and a new high interest rate soars into the double digits. While there are many dangers to treating a zero percent card properly — from having new store purchases accrue at a high interest rate to overlooking the balance transfer fees — there’s a way to play this game and win.

Many zero percent offers have 12 months or more of interest-free financing — even 18 months isn’t uncommon. Keep in mind that if you tap the full amount available, you’ll typically have a 3 percent fee to pay ($300 on $10,000). The idea here is to find a safe investment with a rate of return that will far outpace the transfer fee — while taking advantage of the special offer’s time frame. So if you’re lucky enough to find a $10,000 investment with a 10 percent rate of return, and can liquidate the investment after a year, you’ll have $1,000 in your pocket against the $300 you paid in transfer fees, while still paying off your credit card balance.

The only caveat — and it’s a big one — is to make those minimum payments every month so you don’t lose the zero percent perk. Then when the promo rate is finished, cut up the card and go in search of another similar offer. “If you are responsible and do not have a lot of debt, you can use this feature as a short term gap to fund something,” said Bijan Golkar, senior adviser and principal at FPC Investment Advisory in Petaluma, California. The only caveat — and it’s a big one — is to make those minimum payments every month so as not to lose the zero percent perk. Golkar cautions: “If you are not disciplined, do not even think about it.”

2. Negotiating Medical Provider Debts

The decision to pay here depends on several factors including the medical provider, the amount of the debt and whether or not interest charges are applied. In many cases, especially with private practitioners, bills do not accumulate any interest, so it makes no sense to pay them off in full when you may have other high-interest debts sucking at your wallet.

That said, you don’t want collection agencies flagging you down. In March, the three major credit bureaus — Equifax, TransUnion and Experian — also agreed not to report bad medical debts until after a 180-day waiting period. “This provides time for insurance to pay their portion and patients to pay their bills or work out a payment plan to pay them,” says Todd Antonelli, managing director of Berkeley Research Group in Chicago. “When payment plans are devised and agreed to, this debt will not show up on your credit reports preventing one’s ability to take out a loan, get a credit card, buy a car or a home.”

Negotiate directly with the medical provider whenever possible to get a minimum payment schedule set up, and always see whether you can negotiate payment charges on a sliding scale — so that $90 an appointment, for example, is reduced to $70 an appointment. This is common practice in disciplines such as psychology.

3. Fighting the Meter

In America’s cash-strapped cities, a proliferation of red-light cameras and parking meter tickets has created a near epidemic of frustrated, frightened motorists. The sight of a ticket stuck to your window is enough to churn your stomach, but the next time you get one, use your head instead. Dispute every ticket you possibly can, because there’s no telling how many will get thrown out by a judge or lost in the bureaucratic maze.

The Expired Meter website, for example, has become a big hit in Chicago, where motorists are taught how to fight back; many of the strategies here can be used in other cities as well. Every time you fight a ticket, you automatically delay the debt due without accruing a single cent of interest and penalty — and you might just get off the hook.

4. Holding on to Mortgage Debt

Hurry up! Convert that mortgage from a 30-year loan to a 15-year loan! Your mortgage payments will skyrocket. But you’ll pay a lot less in interest charges, and you’ll own your home twice as fast. Sounds smart, right? Not so fast.

Assuming you live in an area where home prices are appreciating rapidly, the opposite strategy is more profitable. If a $300,000 home appreciates to $500,000 in five years, you’ll get a much bigger return on investment a dollar when you actually put less money into paying your mortgage, not more. The uptick in local prices will still create gobs of new equity, and lower mortgage payments will give you breathing room to enjoy your home instead of being a slave to it.

5. Keeping up Low-Interest Car Payments

In recent years, low interest rates on car loans have been a boon to consumers, with some dealerships still offering zero percent promotional financing. If your interest rate is low, most of your payments will go directly into paying off the car as opposed to interest. And in this case, the debt is secured, meaning that the car acts as collateral to the loan money. If it’s a long-term loan with low interest — a five-year loan for example, which has an interest rate as low as 2.49 percent — then please, pay off the car slowly to take advantage of the favorable rate.

6. Declaring Bankruptcy

If you find that bankruptcy is the one option you face due to your mounting debt, there’s little sense trying to make a goal line stand. Virtually all of the 910,000 personal bankruptcies that were filed in 2014 were either Chapter 7 or Chapter 13 bankruptcies, according to the United States Courts website. What’s the difference? With a Chapter 7, the debtor’s nonexempt assets are gathered and sold, with the proceeds used to pay off creditors. Certain possessions are exempt, but this varies widely from state to state. It takes three to four months to complete a Chapter 7 bankruptcy and obtain a discharge.

With a Chapter 13 — also known as a “wage earner’s plan” — individuals with regular income repay all or part of their debts. Under this chapter, debtors propose an installment plan to creditors over three to five years. It also offers individuals an opportunity to save their homes from foreclosure by catching up on delinquent mortgage payments over time. You must make all mortgage payments that come due during the Chapter 13 period on time. But if this bankruptcy succeeds in restructuring your debt for a smaller amount, you could come out paying off less in the end.

7. Using Credit Counseling and Negotiation

If you are looking at $20,000 in credit card debt, for example, making minimum payments at 19.99 percent APR is the equivalent of spinning your wheels: The minimum payment will barely make a dent in the balance due. But nonprofits such as Money Management International can take on such cases and help you negotiate new payment plans with your creditors — and at lower rates.

If you think this is a viable option — especially after having positive conversations with a nonprofit counselor — then you won’t want to keep throwing good money down the drain just to keep up on the high-interest hamster wheel. You may even be able to negotiate a short break period where you take some time before resuming payments. In the short term, you can also try calling credit card companies directly to negotiate a lower interest rate.

8. Borrowing From Parents

Borrowing from your parents can be painful. And for sure, the idea here is not to borrow from your parents and stiff them, for hell hath no fury like the Bank of Mom and Dad when it has been scorned. You might, however, find your parents to be strong allies in your attempt to get rid of debt.

If you owe $5,000 on a high-interest credit card, be proactive. Go to them with a short review of how you accumulated the debt. Tell them that every penny of their $5,000 loan would go to zapping the high-interest card — not even a slice of pizza or a can of beer would be deducted. Then you might try proposing repayment of only half the loan, with the other half taken out in grunt work. Does the house need painting? Can you perform basic home repair tasks or help out with a major family project? The barter system works well in scenarios where cash is short but the ability and willingness to pay back in other forms is not.

9. Letting Moldy Oldie Debts Lie

Some debtors will go after you with all the ferocity of a jet-powered hellhound, but even jet engines run out of fuel after a time. Again, this is not so much a way to game the system, as to start afresh. Federal law requires that credit-reporting companies remove most debts from your credit report after seven years from the time it became delinquent. Since the debt has already done its nefarious deed and put a dent in your credit score, by making a payment you only reaffirm the debt and reset the clock giving the debt collector more time to go after your cash.

Rental Car Insurance From Your Credit Card

A Dollar Thrifty Car Rental center.Q. I’m going to rent a car when traveling for Thanksgiving. I understand that my credit card will provide rental car insurance. How does this coverage work? –E.S., Hanover, Pennsylvania.

A. Your own auto insurance policy most likely covers rental car damage and liability, up to the same limits as for your own vehicle, and that insurance kicks in first. But your credit card can fill in the gaps, such as the deductible. The coverage varies by card issuer and requires certain steps.

All Visa, Discover and American Express cards and some MasterCards, provide rental car coverage. To qualify, you must reserve the rental car with the same credit card you use to pay for it. You must also decline the rental company’s supplemental insurance and collision damage waiver.

The card company may limit coverage to 15 or 31 days, and it may not cover cars rented in certain countries, according to Card Hub, which provides credit card rates and other information. Most card companies don’t cover trucks, and American Express doesn’t cover some full-size SUVs, such as Chevy Suburbans and Tahoes, GMC Yukons and Ford Expeditions.

7 Best Rewards Credit Cards for Holiday Shopping

Row of Credit CardsFrom presents for the kids to special food for family get-togethers, holiday traditions have the potential to put a significant dent in your wallet. However, you can take the sting out of that spending by earning rewards for every purchase.

Rewards credit cards come in many flavors, with some offering cash back and others providing miles or points that can be redeemed for travel, gift cards or merchandise.

U.S. News spoke to four credit experts to learn which cards they recommend consumers use this holiday season. They say shoppers shouldn’t only worry about which card they select, but to also focus on how to maximize rewards.

“I’m a strong believer that rewards cards are best used by people who pay off their balance each month,” says Jason Steele, the credit card expert at CompareCards.com. If you fail to pay off your balance, you could get charged interest that will negate any rewards you earn.

Online shoppers should also always visit their card’s website to look for special offers before making a purchase. “A credit card bonus mall is an online portal that allows you to get extra points or cash back on your online purchases,” says Sean McQuay, a credit card expert for NerdWallet. “But remember, the consumer has to use the card associated with that bonus mall to take advantage.”

Beyond that general advice, McQuay and Steele say it helps if you are swiping the right card for you. Here are their picks for the best rewards cards for holiday shopping, along with those of Bethy Hardeman, chief consumer advocate at Credit Karma, and Jill Gonzalez, credit card analyst for WalletHub.

Best rewards credit card for online shopping: Chase Freedom

Any rewards credit card can be used online, but Hardeman, Steele and McQuay all single out the Chase Freedom card as a particularly good choice this holiday season.

The card offers 5 percent cash back on categories that change quarterly. This quarter’s bonus retailers include Amazon, a go-to destination for many holiday shoppers, as well as Zappos, diapers.com and Audible. “[The current bonuses] are very helpful for those who like to do shopping online with ease and convenience,” Hardeman says.

For all other purchases, Chase Freedom offers 1 percent cash back. Plus, you get a $100 bonus if you spend $500 in the first three months after you open your account.

Best rewards credit card for in-store shopping: Blue Cash Preferred from American Express

If you’d rather shop in stores, Steele recommends using the American Express Blue Cash Preferred card.

The 3 percent cash back you get for department store purchases is nice, but the 6 percent offered at supermarkets is even nicer. “While you may not think of supermarkets as a place for gifts, you can find a lot of gift cards there,” Steele says. You can either give those gift cards as presents, or use them to buy presents at other retailers.

You may need to register for cash back promotions on the American Express website, and the supermarket cash back offer is limited to $6,000 in purchases. Other card perks include a $150 statement credit after you spend $1,000 on your card in the first three months and a 0 percent APR in the first 15 months.

Best rewards credit cards for cash back: Discover it and U.S. Bank Cash+

For those who split their shopping between online and brick-and-mortar retailers, the Discover it and U.S. Bank Cash+ cards are two solid options.

The Discover it card offers 1 percent cash back for most purchases with the exception of three bonus categories that rotate quarterly. For the current quarter, cardholders can get 5 percent back at Amazon, department stores and clothing stores. “It also offers one of the best bonus malls in the industry so it’s an awesome choice for shopping online for the holidays,” McQuay says

The bonuses are even better if you use Apple Pay, Steele says. Currently, Discover it offers 10 percent cash back for up to $10,000 of in-store purchases made with the mobile payment service through the end of the year. New card members also receive double cash back for their first 12 billing cycles, which means you could earn a whopping 20 percent cash back before 2016.

For those who’d prefer a Visa to Discover, the U.S. Bank Cash+ card offers 5 percent cash back on two categories of your choice, on the first $2,000 in purchases. You can also earn 2 percent cash back on one category, such as gas or groceries, that you select. On top of that, you get 1 percent back on all other purchases.

Hardeman likes the card because it allows consumers to evaluate where they will spend the most and select the appropriate categories.

Best rewards credit card to help you stay out of debt: Citi Double Cash

The Citi Double Cash card gets a nod from McQuay as having one of the highest flat cash back rates in the industry. Users get 2 percent cash back on all purchases, with no rotating categories to worry about.

However, the catch is the card gives you 1 percent when you make a purchase and 1 percent when you pay your bill. For those tempted to carry over some debt into the new year, the card’s structure could provide a little motivation to pay off the balance ASAP.

Best rewards credit card for big spenders: Chase Sapphire Preferred

If you have a long gift list, the Chase Sapphire Preferred card could be a good choice, according to Gonzalez.

New account holders who charge $4,000 in the first three months receive 40,000 bonus points, worth $500 of travel through Chase. The card also offers other perks for travelers, including 2 points per dollar spent on travel expenses and restaurants, point transfers to eligible frequent flyer and hotel rewards programs and a 20 percent discount on travel redemptions.

The card is free for the first year but charges a $95 annual fee after that.

Best rewards credit card for those with average credit: QuicksilverOne from Capital One

Not everyone has stellar credit and for those with a few dings on their record, Gonzalez recommends the QuicksilverOne from Capital One. “It is a bit easier to get your hands on,” she says.

The card has a $39 annual fee and doesn’t offer any upfront bonus like the Chase Sapphire Preferred, but it does come with 1.5 percent cash back on all purchases. Not too shabby for a card that may be willing to approve customers who wouldhave their applications rejected elsewhere.

Before you start applying for cards, check your credit score to find out whether you should start with a card like QuicksilverOne or if you can apply for a more lucrative account. Hardeman points out too many applications at once could drop your score. “You don’t want a bunch of inquiries on your report and nothing to show for it,” she says.

3 Real Life Reasons to Get a Credit Card Right Now

young woman  shopping online...A recent survey indicates that just 61 percent of millennials have at least one credit card. This makes some sense given that new laws about marketing credit to people under the age of 21 have gone into effect in recent years. But now that most millennials are in their young adulthood, we should expect to see those number rise in the coming years. At least I hope so!

Credit cards get a bad name and it’s not entirely undeserved. Some credit is designed to get people caught up in a never ending cycle of borrowing and repayment. We all know someone buried in debt, with little hope of ever digging their way out. Having grown up in the post-Recession world, many millennials are paranoid about taking on debt of any kind.

The thing is, some debt is necessary to build the kind of financial life that most of the readers of this post will want to have. One of the best ways to move in this direction is to have one or more credit cards. Doing so can help you in the following ways.

1. You need credit to borrow money in real life situations. There are some financial advisers in pop culture (who will remain unnamed) who recommend that their listeners never get a credit card at all. Instead, these talking heads talk about the power of cash and spin stories about buying new cars with briefcases of big bills. Almost nobody can live out this fantasy. Most of us start with very little money and very little income. To make necessary purchases in life (a car, a house, a business expense), we’ll have to borrow.

Unless we’ve demonstrated to creditors that we have the ability to pay our debts back responsibly, we’ll be unlikely to find a lender to give us money. Those that do give us a loan will likely charge us very high interest rates, just in case we don’t pay back the loan. After all, we have no credit history to show that we’re honest and trustworthy with borrowed money. A credit card is a simple way to show that you can handle a little bit of credit. You don’t have to spend more money just because you have a credit card. Open the account, use it, pay it off quickly, never carry a balance if you can help it and you’ll start to build immaculate credit which will result in cheaper money for those times when you absolutely need to borrow.

2. A credit card gives you another way to approach spending. While it’s important to spend less than you earn, there are times in life when you’ll need to spend on credit. Maybe you work for yourself and you’re waiting for an invoice to be filled, but you’ve got to pay your electric bill. Maybe you need to reserve some money in your bank account while you cover an unusual purchase with your credit card.

Furthermore, there will come a time when you’ll have an emergency you need to cover (you’re broken down on the side of the road, you need to change your flight at the airport, you need to break up your emergency room bill into a few monthly payments rather than a lump sum). Personal finance can get complex and anyone serious about it has found times when a credit card comes in handy. You should always pay off a balance as fast as possible, but there are some times in life when a credit card is indispensable. If you have a solid emergency fund in place, this plays really well with the convenience of credit card spending.

3. Credit cards give you rewards when you use them. Credit card companies like when you use their product. It’s how they make their money, so the more you spend, the better for them. This is why they provide rewards for big users. Rewards have been known to ensnare people in debt cycles, but if you use a credit card for necessary purchases, then pay it off with cash, you can get all the benefits of good rewards with none of the downsides. For people who like to travel internationally, like to eat at awesome restaurants, or enjoy seeing sporting events in person, this is a great method to take advantage of the best perks. Do some research about a credit card that kicks off rewards for stuff you’re interested in. This might be a good first card for you.

You don’t have to use a credit card even if you open up an account. Simply having a credit account open for a long time works wonders for your credit score. So, at the very least, simply open up a single credit card, put it in a box and never think about it again.

Secured credit cards are another way to open up a first credit account without fear of going into debt. Whatever you choose, having a credit card that you don’t use is better than nothing. Read up, sign up and enjoy the benefits of your own credit card. It’s part of being an adult and it’ll help you a lot in the future if you use it right.

Will You Be a Credit Card Fraud Victim This Holiday Season?

Senior woman looking horrified at computer monitorThree letters may spell trouble for you in the frantic shopping season that is about to explode: CNP, which stands for Card Not Present. That — obviously — is how online merchants process payments (unlike, say, a local pizzeria, they never see or touch the plastic). And at least some experts are predicting an explosion in CNP over the holidays.

CNP fraud is going up three times faster than card present fraud, said Julie Conroy, a banking expert at consulting firm Aite Group.

That was expected, kind of — but the fast velocity of growth is much brisker than had been anticipated. And, said Conroy, expect to see still more: “We see steady growth for CNP fraud.”

The trigger event happened Oct. 1 when both merchants and card issuers were supposed to — by edict of MasterCard (MA) and Visa (V) — be ready for so-called EMV cards, aka chip cards. The plus of a chip card is that it dramatically cuts down on card counterfeiting. With mag stripe cards, card printers were plentiful and cheap, as was card stock. Anybody with a stolen credit card number could print out a new card and be in business thieving at a local merchant. Not so with EMV, where the chip technology introduces complexities that, so far, seem beyond the ability of crooks, certainly of run-of-the-mill criminals, to manufacture counterfeits.

So they turn to online shopping where the chip plays no role, because — again — the online merchant never sees or touches the plastic.

Just about very fraud expert had predicted a spurt in CNP fraud post Oct. 1, but Conroy is saying CNP started exploding before Oct. 1, and the theft has just kept on surging.

She’s not alone. ACI Worldwide, a global provider of electronic payment and banking solutions, has said its data show a 28 percent spike in card not present fraud, which ACI attributes to the deployment of EMV.

Branden Williams, a vice president at large credit card processor First Data (FDC), said there’s worse to come. According to him, First Data expects the real explosion of CNP fraud to happen next holiday season, not this one. That’s because for now criminals have plenty of retailers that aren’t yet EMV compliant (he estimated that maybe 80 percent of terminals aren’t).

Even so, Alisdair Faulkner, chief product officer at security company ThreatMetrix, predicted: “We expect to see a dramatic spike in CNP over the holiday season. For many retailers a large amount of profits come in a short period. Businesses find it hard to scale fraud detection systems.”

The crook’s hope: his stolen credit card will escape notice in an avalanche ofcredit cards used, say, on Black Friday.

Multiple experts also said they believed the top online retailers — think Amazon (AMZN) — are well prepared for the surge in CNP fraud attempts. But small- and mid-sized online retailers, not so much. Crooks may find the going easy with the smaller fry.

Understand: this puts you in the crosshairs. Thieves have at their disposal hundreds of millions of stolen credit card numbers — from Target (TGT), HomeDepot (HD) and other breaches — and they are putting those numbers to use making Card Not Present purchases online. Yes, you are protected against loss, especially with credit cards (protections are weaker for debit cards), but you have to notice a fraudulent transaction and report it. This is no time to get negligent about reading credit and debit card statements. Double down on that chore, because the criminals are doubling down on their thieving.

Is there more you can do? Said Chris Strand, an EMV expert with security firm Bit9+Carbon Black: “It’s up to us to be proactive. The bank may or may not be. We can take control.”

How? Jim Wang, who blogs at WalletHacks, offered a clever tactic. He gets instant notification from a credit card whenever a CNP transaction occurs. He said American Express (AXP) offers that. “For other cards that don’t offer CNP alerts, I turn on security alerts via email for transactions over $10,” Wang added. “It might sound like a lot of notifications but the emails arrive shortly after the transaction, so I always remember the purchase that triggered it.”

Isn’t that a lot of work? It is. But know this: trying to clean up credit trashed by identify theft criminals is a lot more work. More advice — a labor-saving tip from multiple experts — is save time in the holiday season by using just one credit card for the bulk of our purchases. That makes it all the easier to stay on top of what’s happening inside your credit.

How to Avoid 5 Costly Credit Card Traps

Man Sitting With Laptop And Credit Card Shopping OnlineWhen used properly, credit cards are extremely valuable personal finance tools. Credit cards can offer four big benefits:

1. Responsible usage of a credit card is the easiest way to build a good credit score. Despite widespread myths, you don’t need to go into debt to have a good credit score. If you use less than 10 percent of your available credit and make your payment on time and in full every month, you will build an excellent credit score over time without paying a dime of interest. Having a good score can help you get the best mortgage and auto insurance rates. In addition, credit scores are used by auto insurance companies in most states to determine your rate.

2. Using a credit card for purchases provides you with much better fraud protection than a debit card. According to Peter Dean, the CEO of Optimizing Risk, the Fair Credit Billing Act only limits your liability to $50 if you report unauthorized use within two days. After two days, your liability increases to $600. After 60 days, you have unlimited liability. With credit cards, the liability is always capped to $50, and most credit card issuers waive that for marketing purposes.

3. Credit card companies offer a grace period. That means you will never pay interest if you pay your statement balance on time and in full. You are effectively able to borrow money at zero percent every month.

4. You can earn rewards or airline miles with a credit card. It is easy to find a cash back credit card that pays 2 percent unlimited cash back. But you can even find cards with better earn rates. A study by MagnifyMoney has found cards paying 3 percent or more in certain categories.

Despite all of these benefits, credit cards can become incredibly expensive when not used properly. Here are the five biggest credit card traps to avoid.

1. You spend more than you should. Credit card companies typically issue limits that are multiples of your monthly gross income. If you make $3,000 a month before taxes, you should not be surprised to receive a credit limit of $6,000 or more. Credit card companies just need to ensure that you can afford to pay the minimum due every month, which is typically 2 percent of the balance. With big limits, it is easy to spend more than you should. Countless studies have shown that people spend more when they use plastic instead of cash. If you don’t have the self-discipline to spend only what you can afford to pay in full every month, you can end up in debt very quickly.

2. You pay a much higher interest rate than you should. Interest rates on credit cards are not low. The average interest rate oncredit cards is 14 percent, and for people with lower credit scores the rate can be much higher. Personal loans typically have much lower rates than credit cards. You can find some of the best personal loan providers at MagnifyMoney.com, and rates start as low as 4.05 percent.

3. You use your credit card for a cash advance. A cash advance can be very expensive on a credit card. You will typically be charged a fee for the cash advance, which is usually around 5 percent (or a minimum of $10). So, if you take out $500 you would be charged $25 right away. In addition, you wouldn’t earn rewards and interest accrues immediately. There is no grace period. Finally, there is a separate cash advance rate that is much higher than a purchase rate.

4. You use your credit card for overdraft protection. Mistakes can happen, and having overdraft protection can be a useful insurance policy. However, linking your credit card can make it a very expensive insurance policy. Most banks would charge you twice. First, the checking account would charge an overdraft transfer fee of $10 to $12. Second, the credit card would charge a cash advance fee, because the overdraft would be treated as a cash advance on the credit card. That means interest would accrue, at a higher interest rate, immediately. It is far better to link a savings account for overdraft protection. Even more importantly, you should just make sure you build a buffer in your checking account. With savings account interest rates so low, you would likely be better off keeping that money in your checking account to avoid an overdraft fee, rather than earning 0.01 percent in your bank’s savings account.

5. You pay late. Late fees on credit cards can be shockingly high, typically $30 or more. And you only need to be a day late for most credit card companies to charge you the fee. The good news is that your credit score will likely not be impacted, because most credit card companies only report delinquencies after you are 30 days late. However, you will be wasting a lot of money. Just automate your monthly payment to avoid the fees. If you do become 60 days or more late, your interest rate can increase to a punitive rate, which is usually around 30 percent.

If you are responsible, and have self-discipline, a credit card is a wonderful tool that makes it easy and safe to pay all over the world. But if you can’t control your spending, a credit card can become dangerously expensive quickly. Make sure you have an honest assessment of yourself before you decide whether to swipe or carry cash.

Big Changes Coming for Your Credit Card Perks

woman taking credit card out of ...
As you pack for a trip or set foot in a mall over the holidays, take a close look at the benefits that come with your credit cards. Many issuers are shuffling the lineup of perks they offer to customers.

Discover has dropped several travel-related benefits from its suite of perks for cardholders, including travel assistance, emergency roadside assistance, travel and baggage-delay insurance and lost-luggage insurance. Sears MasterCard removed the collision damage waiver for rental vehicles, insurance that many cards supply to cover bills for damage to a rental car. Travel assistance, roadside assistance and purchase assurance (insurance for damaged or stolen items bought with the card) also disappeared — and Bank of America (BAC) is discontinuing the same three benefits on its MasterCard Better Balance Rewards cards.

Many changes are in response to 2014 alterations to the core benefits that come with all standard, gold and platinum cards carrying the MasterCard logo, says Edgar Dworsky, founder of ConsumerWorld.org, a consumer-resource site. That means more cuts could be coming as banks evaluate their offerings. Watch for letters from your card issuer notifying you of revisions.
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At the same time, card issuers are adding or refreshing other benefits that you may find more appealing. At a time when data breaches dominate headlines, MasterĀ­Card (MA) includes assistance for identity-theft victims among its core benefits, and Discover (DFS) provides the ability to freeze and unfreeze your account online or through an app, in case you lose your card. Several issuers, including Barclaycard, Citibank (C), Discover and Pentagon Federal Credit Union, provide free FICO credit scores to at least some cardholders. Wells Fargo offers up to $600 in coverage for cell-phone damage or theft if you pay your wireless bills with one of its cards.

The tantalizing cash-back and miles offers that issuers dangle to attract customers in a competitive rewards-card market are replacing less-popular benefits, says Matt Schulz, senior industry analyst for CreditCards.com. New customers who open a Discover It card by the end of 2015 get double cash back after a year.

Regularly review the perks that come with your cards, even if it’s just once a year. “You may find that you’re using the wrong card for certain benefits or missing out on a valuable benefit you didn’t realize you had,” says Gerri Detweiler, director of consumer education for Credit.com. In a series of studies on card benefits among major issuers, credit card research site CardHub.com found that cards from Discover and Chase (JPM) had the strongest price-protection benefits (reimbursement for the difference if you find a lower price on a purchased item). American Express had the best extended-warranty policy, and American Express (AXP) and Visa (V) had superior car-rental insurance coverage. The Chase Sapphire Preferred card had the best general coverage for travel insurance.

Make sure you understand the ins and outs of each benefit your card offers. Price protection is typically available up to 60 or 90 days after a purchase, for example. Rental-car insurance usually covers only fees that your personal auto insurance policy doesn’t, and only if you decline the collision damage waiver that the rental-car agency offers you.

Is the Force With the New Star Wars Credit Card?

Force Friday: May The Force Be With Shopping District In SeoulAs fans all over the world eagerly await the December release of “Star Wars: The Force Awakens,” we are continuously reminded that the global Star Wars phenomenon isn’t just about movies.

Sure, it all starts with the movies, which have earned billions of dollars at the box office. However, it extends far beyond the movie theater. There are novels, comic books, video games, lunchboxes, clothing of all shapes and sizes, breakfast cereals, action figures, bobbleheads and even a Darth Vader refrigerator — all of which you can buy with a Star Wars Visa credit card. But is this card something that Star Wars fans should add to their collection or something they should avoid like a confrontation with Darth Vader? Let’s break it down …

The card is part of Chase’s Disney Visa card program and is available in three different Star Wars-themed designs: one featuring Darth Vader, another with Yoda and another with R2-D2 and C-3PO. It also comes with rewards aimed toward fans of the films, including:

  • 10 percent off purchases $50 or more when you use the card at the Disney Store or DisneyStore.com. (Reminder: In 2012, Disney bought Lucasfilm, the company that created the Star Wars franchise under founder George Lucas.)
  • 10 percent off select Star Wars merchandise purchases $50 or more at select locations at Walt Disney World in Florida and Disneyland in California.
  • An “Imperial Meet ‘N’ Greet” at Disneyland or Disney World with Darth Vader himself. (Just make sure you don’t make him mad while you’re there.)

Some details with the card vary based on which version you get. You can get the Star Wars designs on either the Disney Rewards Visa card or the Disney Premier Visa card. Some of the differences between the two include:

  • The premier card comes with a $100 statement credit after you spend $500 in the first three months. The rewards card offers a $50 statement after your first purchase.
  • The premier card has a $49 annual fee, while the rewards card has no fee.

The APR — 15.99 percent — is the same on both versions of the card, as is the introductory offer of zero percent interest on purchases for six months.

But is it worth applying for?

The Verdict

No credit card is a great fit for everyone. It’s all about finding a card that matches your lifestyle, and the Star Wars card is no different.

If you’re a huge Star Wars fan, and you’ve got a trip to Disney World or Disneyland in your immediate future, the card might work for you. It’d be fun to have the Dark Lord of the Sith on your card. The APR is reasonable. The discounts can help you save when you’re buying your new Kylo Ren lightsaber or your Lego Millennium Falcon. Plus, an Imperial Meet ‘N’ Greet sounds like good geeky fun. However, I would suggest getting the rewards card rather than the premier card. Even though the sign-up bonus is bigger with the premier card, the $49 annual fee makes that bonus a little less powerful.

For everyone else, I’d say you’d be better off shopping around. Today’s credit card marketplace is so crazy competitive that — if you have good credit — you should be able to find cards that can give you more bang for your buck. Here are some that I’d recommend:

  • Discover it: Discover will double all the cash back you’ve earned at the end of your first year. That means if you’ve earned $200, they’ll double it to $400. They also offer 5 percent cash back on purchases in rotating categories (including Amazon.com through the end of the year) and 1 percent cash back on everything else. Unlike the Star Wars card, there’s no annual fee. In addition, there are no late fees for your first late payment, and they promise that paying late won’t raise your APR. Other perks of the card include free monthly FICO scores and zero percent APR on purchases and balance transfers for 12 months. The card’s standard APR is 10.99 to 22.99, depending on your credit score.
  • Chase Freedom: From the same bank that brought you the Star Wars card comes this cash back card. It offers a $150 bonus after you spend $500 in purchases in the first three months and doesn’t come with an annual fee. As with the Discover it card, you earn 5 percent cash back on purchases in rotating categories (including Amazon.com through the end of the year) and 1 percent cash back on everything else. Plus, you pay zero percent interest on purchases and balance transfers for 15 months. Once that introductory period is over, APRs range from 13.99 to 22.99, depending on creditworthiness.
  • Citi Double Cash: This card gives you 1 percent cash back when you buy and 1 percent cash back when you pay — meaning you’re basically getting 2 percent cash back on every purchase. That’s one of the higher rates on the market and can help compensate for the fact that there’s no sign-up bonus with the card. However, there’s also no annual fee, no categories to opt-in for and no caps. Its APR range (12.99 to 22.99) is comparable to the Chase Freedom card, and its 15-month zero percent offer is identical to that card.

In short, there are better options out there than the Star Wars Visa card. Even though the card isn’t exactly from the Dark Side, you’d still be better off shopping around.