Credit card issuers are on a rampage – cutting credit limits, increasing interest rates, and closing inactive credit card accounts. Though you don’t have much control over rising interest rates and decreased credit limits, you can keep your credit cards open by using them every once in awhile.
Why are creditors closing inactive cards?
Credit card companies don’t make any money on accounts that aren’t used. In fact, it costs them money. During this credit crisis, it’s risky for credit card companies to have unused credit cards on their books, because it’s hard to predict what you’re going to do with the credit card. You could decide to max out the card one day and never pay back the balance. In this case, it’s cheaper for the credit card company to just let you go.
Why should I care?
Having a credit card closed could lower your credit score. First, part of your credit score calculation considers the age of your credit – an older credit history is better. If your oldest credit card gets closed, it won’t be factored into your credit score. Your credit will seem younger, and your credit score will drop.
Another part of your credit score measures your level of debt by comparing your total balances to your total credit limits. The higher your credit card balances in relation to your credit limits, the lower your credit score will be. Having a credit card closed raises your ratio of balances to credit limits – your credit utilization – and lowers your credit score.
What can I do?
If your credit card has recently been closed, call your credit card issuer and request to have your account reopened. It helps if you’ve been a long-time, timely-paying customer.
Keep your credit card open by using it periodically and paying the balance off when the billing statement comes. By doing this, you’re letting your credit card know that you still appreciate and use the credit card.
Showing posts with label credit card rates. Show all posts
Showing posts with label credit card rates. Show all posts
Monday, December 29, 2008
Saturday, November 22, 2008
3 Ways to Keep a Low Interest Rate - Money Now! USA 11-17-2008
Your interest rate is important because it directly influences the cost of your credit card. When you carry a balance beyond the grace period, your card issuer applies a finance charge, which is essentially your interest rate multiplied by your balance. The higher your interest rate, the higher your finance charges will be.
Even if you start out with a low interest rate, it could increase. Sometimes interest rate increases are out of your control, like when the issuer raises your rate because of market conditions. Other times, it’s your actions that cause your interest rate to go up. Here are things you can do to keep a low interest rate.
Pay your credit card bill on time every month. All it takes is one late payment to have your credit card issuer enact the default rate on your credit card. Keep paying your credit card bill on time, even if it’s just the minimum payment. If your due date falls on a weekend or holiday, plan to have your payment arrive before the due date.
Keep your credit card balances low. Maxing out your credit card is another surefire way to get higher interest rate. Credit card issuers see high credit card balances as a risk. So, to compensate for your increased risk, they require you to pay higher interest on your balance. It’s a good idea to keep your balance below 30% of your credit limit at all times.
Don’t bounce your credit card payment. When you write the check for your credit card payment, make sure there’s enough money in your checking account to cover it. Not only that, should make sure other outstanding checks or debits aren’t going to deplete your account. Enrolling in your bank’s overdraft protection program can prevent bounced checks.
Make sure you’re managing your other credit cards, too. Many credit card issuers have a universal default clause that allows them to increase your interest rate even when you’re late on another credit card payment.
Your interest rate is important because it directly influences the cost of your credit card. When you carry a balance beyond the grace period, your card issuer applies a finance charge, which is essentially your interest rate multiplied by your balance. The higher your interest rate, the higher your finance charges will be.
Even if you start out with a low interest rate, it could increase. Sometimes interest rate increases are out of your control, like when the issuer raises your rate because of market conditions. Other times, it’s your actions that cause your interest rate to go up. Here are things you can do to keep a low interest rate.
Pay your credit card bill on time every month. All it takes is one late payment to have your credit card issuer enact the default rate on your credit card. Keep paying your credit card bill on time, even if it’s just the minimum payment. If your due date falls on a weekend or holiday, plan to have your payment arrive before the due date.
Keep your credit card balances low. Maxing out your credit card is another surefire way to get higher interest rate. Credit card issuers see high credit card balances as a risk. So, to compensate for your increased risk, they require you to pay higher interest on your balance. It’s a good idea to keep your balance below 30% of your credit limit at all times.
Don’t bounce your credit card payment. When you write the check for your credit card payment, make sure there’s enough money in your checking account to cover it. Not only that, should make sure other outstanding checks or debits aren’t going to deplete your account. Enrolling in your bank’s overdraft protection program can prevent bounced checks.
Make sure you’re managing your other credit cards, too. Many credit card issuers have a universal default clause that allows them to increase your interest rate even when you’re late on another credit card payment.
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