The Difference between Unsecured and Secured Credit Cards

The basic difference between the two types is that an unsecured credit card does not require you to put up a security payment, deposit or collateral of any sort. Your qualification is usually based on your financial history and status and the issuing company’s determination of your ability and likelihood of making payments on time. The secured credit card does require a security deposit. This option is usually for people with imperfect credit histories or with credit and debt problems of substance. This generally means that secure credit cards can be expected to have relatively high interest rates.

UNSECURED CREDIT CARDS
Most companies will issue unsecured credit cards to credit worthy customers based on their credit history and earnings potential. VISA and MasterCard are the two most convenient major credit cards since they are accepted at most establishments. American Express is accepted at many businesses now and in many cases is considered a great travel and business card. Discover offers a variety of unsecured credit cards with emphasis on rewards programs, cash back and other incentives like low interest rates.

The requirements for qualification for a credit card differ from company to company, and within companies, different types of cards may be offered based on a customer’s financial details. It is common for companies to charge relatively high interest rates (some percentage over the prime rate) for customers without the most favorable qualities. A number of credit card companies are now charging no annual fees for credit card accounts and this seems to be spreading. A common marketing feature and incentive is the low introductory annual percentage rate which a number of companies will offer new customers. Customers must understand that these rates have limited duration and it is advisable to find out how long the introductory rates last until the fixed annual rate kicks in.

Keeping up with your payments is very, very important. The great risk of lax management of a credit card is that late payments can initiate a number of punitive fees which can cause interest rates to skyrocket. It is therefore crucial that you pay attention to deadlines and keep track of your account figures. Unsecured credit cards come with credit limits based on the type of account. The best qualified candidates receive the highest credit limits.

SECURED CREDIT CARDS

These cards require a deposit with the issuing bank. This amount, to secure a credit card, is usually only in the hundreds of dollars. It is held as collateral while the bank issues credit of some percentage of the deposited amount. In many cases, the card is reported to the credit bureaus as a normal credit card. This allows the cardholder to establish a positive credit history over the duration. Based on good payment history over an extended duration, some banks will then issue the customer an unsecured credit card. Secured credit cards are often a tool for debt consolidation and credit management programs.

Three More Ways to Cut Spending Without Pain

Cutting spending doesn't have to be painful. It doesn't necessarily mean that we have to do without the things we want. There are plenty of places in our everyday lives where just being smart and careful will yield up some extra dollars.

I found another good article that looks at ways to save money now. Some of the following information was referenced from the August Consumer Reports magazine.

1. Cheaper Auto Insurance. Most people tend to stay with their car insurer for a long time, but they could be missing out on saving hundreds by shopping around once and a while. To find a better plan, start with the National Association of Insurance Commissioner's, www.naic.org, then click on NAIC States and Jurisdictions to find your state's insurance department. Here you can find comparative premium quotes based on standard customer profiles. Other sites to check where you can compare premiums include www.insweb.com and www.insurance.com

2. Cut your Credit Card balance. If you have a credit card balance, you're paying annual interest charges all the time. For example, a balance of $2,200 on which you pay 15.2% interest, means you are paying $28 per month. Eliminate that balance, and you'll save $336 a year. Of course, eliminating your balance is not easy, but here are the two most effective ways to tackle high interest charges:
a) Start paying more than the minimum immediately. A good rule of thumb is to pay at least double the minimum payment.
b) Take advantage of attractive balance transfer credit cards. To compare the best current balance transfer cards, some with 0% interest rate, check out www.CreditCardsPlus.com.

3. Be smart about buying food. According to the Department of Agriculture, the average family of four can cut down its grocery bill by $190 a month by shifting to a lower-cost mix of foods. That's a lot of money to save just by changing food-buying habits. You can adjust your habits by planning menus around sales on fresh poultry, fish, meat, dairy, and produce, and by making use of leftovers. Avoid costly prepared foods. And start shopping in lower-cost stores: Costco, Trader Joe's and Wal-Mart, to name a few.

Great Ideas to Stretch Your Dollars and Save Big Money

In scouring news sources looking for helpful financial information, I came across these ideas that we all might think about. I’ve already completed the first and second on the list!

To help stretch your dollars, here are five places to look for savings:

1. Bundle Up. If you’re dealing with separate companies - and separate bills - for your cable TV, phone and Internet service, think about bundling up. Many companies offer reduced rates if you purchase all three services at one time. There’s even a website, http://www.bundlemyservices.com/, that offers tips and comparisons for more than 20 companies nationwide.

You can call your local phone or cable TV provider and ask about lowering your rates by combining services. Take advantage of special deals and limited-time deals.
One warning: If you sign up for a limited-time offer, be sure to call and cancel or renegotiate before the rates jump back up.

2. Auto Insurance. If you’ve been with the same insurance company for years, it can pay to shop around for a better rate. Some state Departments of Insurance websites offer handy calculators that allow you to get general comparisons on basic annual premiums from dozens of auto insurance companies. The rates are not firm quotes but a general comparison of sample rates.

3. Credit Cards. Here are two ways to save, depending on whether you carry a credit card balance.
If you’re trying to pay off a monthly balance, pick up the phone. With so many credit card offers flooding mailboxes these days, there’s lots of competition. Ask your current card company for a lower rate, and if you get rebuffed, call again in another month or so, advises one credit card expert.

“Persistence pays off,” says Eileen Rector, spokesperson for CreditCardsPlus.com, a website that allows consumers to easily find and compare credit card offers and then apply online.
On a $5,000 balance, for instance, if your interest rate is lowered by three points-say, from 18% to 15%-you’ll save about $12 a month, or $144 a year. If you’re paying off the balance at $100 a month, you’ll knock off 15 months of payments and save $1,500.

Perhaps the biggest savings of all is sometimes the hardest: whittle down your credit card debt. Pay more than the monthly minimum to avoid paying excessive interest over the long term.
If you don’t carry a monthly balance, consider getting a credit card that pays you. Lots of companies, from Southwest Airlines to Home Depot to Golden 1 Credit Union, are dangling rewards cards to customers. Typically, for every dollar you charge, you accumulate points toward merchandise or services.
Some cards, like Discover More, offer cash back.

When choosing a rewards card, it’s crucial to look at the terms and conditions, especially on how to accumulate and redeem rewards. Some companies post it automatically to your account once a year; others require you to call in to request your cash back or risk losing it.
For more information visit http://www.creditcardsplus.com/ for a comprehensive listing and comparison of current credit card offers.

4. Major Purchases. Most of us don’t want to be shopping for a new fridge or washer/dryer, but if the old one dies, you have no choice. As with any major purchase, it pays to do some comparison shopping. Pick the model and features you want, then call or go online to compare prices at several appliance stores or retail outlets.

Also, check the manufacturer’s website, such as http://www.kitchenaid.com/, to locate discounts and rebates that might not be available in the store.
Another option: Some retailers, like Sears, have warehouse outlets where they sell discounted merchandise for anywhere from 20% to 60% off regular retail. Typically, it’s returned merchandise, discontinued models or those with slight dings or nicks-cosmetic blemishes that don’t affect the appliance’s durability or performance.

Thinking about buying an extended warranty for that new dishwasher or dryer? According to Consumer Reports, it’s not necessary. Unless you sleep better knowing you have extended coverage, most of the time the repairs won’t outstrip the cost of the policy.

5. Treasure Hunting. OK, it’s not really treasure but there may be a stash of cash just waiting for you to uncover. We’re talking about unclaimed property-old savings accounts, utility refunds, dividend checks, product rebates and other money that is rightfully yours. In many cases, long-ago deposits are sitting dormant in banks or safety deposit boxes.

In many states, financial institutions must turn over all dormant bank accounts, safety deposit boxes and the like that have gone untouched for three years or more.
It’s a big piggy bank waiting to be tapped. Each state is sitting on about thousands of unclaimed property accounts worth. You may visit http://www.unclaimed.org/ for a state-by-state listing of where to hunt for unclaimed property.

The Seven Best Tips to Improve Your Credit Score

I came across a great article that outlines information and tips to improve your credit score and ways to avoid common credit pitfalls. Having a low credit score (or FICO score) will hurt you every time when you go to apply for a credit card or for a loan of any kind. It’s plain and simple - if your credit score is low, you will be paying higher rates of interest. So it’s important to gain any knowledge you can to get your credit score in the best shape possible. I’ll summarize and share the 7 best tips and high points with you:

1. Late Payments (The number one and most costly credit mistake of all!)

Always make your payments on time. If you are late on an obligation that reports to the credit bureaus, your score will drop about 75 to 100 points. Timely payments account for 35% of your overall FICO score. This particular factor in your credit score is the biggest factor of all.

2. Balance Owed

If you have credit card debt, and the balanced owed vs. the allowed credit limit is more than 30%, your score is affected. The amount owed accounts for 30% of your overall FICO score. You should keep your credit debt well below 30% of the allowed credit limit.

3. Length of Credit History

Once you are granted some credit, the FICO score model looks at how long you have been in good standing with your credit. If you have a good history with your creditors, you can count on it helping your overall credit health. The length of your credit history accounts for 15% of your score.

4. Mix of Credit

By “mix of credit” we mean combination of credit cards, installment loans, auto loans, department store credit, etc. Mix of credit accounts for 10% of your FICO score according to Fair Isaac so you need at least 3 or 4 lines of different types of credit to get the best overall score.

5. New Credit

New credit accounts for 10% of your FICO score. The FICO score model does not like to see you applying for too much credit. Too many hard credit inquiries will affect your credit score. Be prudent and research and compare credit card offers before applying.

6. Identity Theft and Credit Monitoring

Make sure you are pulling a copy of your free credit report regularly. With the identity theft problem it is recommended to set up some type of credit monitoring with immediate alerts. So if something happens you will know about it quickly.

7. Co-Signing (just say 'no')

Co-signing is a big problem as well. We don’t recommend co-signing for anyone. If a family member or friend does not have the credit to buy, the best thing they can do to get credit established is to get a couple of secured credit cards. This is the fastest way to improved credit health. With a little history, usually 12 months of good payment history - the creditors will open the doors of credit.

Protect Your Identity

Prevent identity theft by taking precautions such as the following:

- Monitor the balances of your financial accounts for unexplained charges or withdrawals

- Order a copy of your credit report to check for new credit accounts in your name

- Avoid common passwords such as your mother’s maiden name, your birth date or the last four digits of your SSN

- Don’t give out personal information on the phone, through the mail, or over the Internet unless you’ve initiated the contact

- Remove mail from your mailbox promptly and shred receipts, medical records and any sensitive financial information

- Keep your Social Security card in a secure place and give your SSN only when absolutely necessary

- Limit the identification information and the number of credit cards that you carry with you

- Secure your computer by updating your virus protection software, firewall and operating system regularly. Avoid using an automatic log-in feature on your computer

To learn more about the FTC’s Privacy Policy, visit www.consumer.gov/idtheft

Understanding Your Credit Score

What is Credit Scoring?
Credit scoring is a system lenders use to help determine whether to give you credit. Information is collected from your credit report and your credit application to calculate your credit score.

A statistical program compares your credit information to those of hundreds of thousands with similar profiles. Based on this comparison, a score is generated which identifies the level of future credit risk you present to a lender.

In order to calculate a credit score, your report must contain at least one account which has been opened for six months or greater. In addition, the report must contain at least one account that has been updated in the past six months. This ensures that there is enough current information on which to base a score.