How to know if you are prepared to open up a Rewards Credit Card

Mar 15, 2016 by

How to know if you are prepared to open up a Rewards Credit Card

Reward credit cards have been popular for some time now. But they have really gone off the charts over the course of the past few years. Nearly every credit card issuer boasts some kind of rewards program now. Some will offer you the chance to earn gift cards. Some will give you airline miles or credits at hotel chains. Some even offer to give you cold hard cash back for every dollar you spend on certain types of purchases. These are all great incentives. And a rewards credit card can certainly prove to be beneficial to many consumers. There really is nothing like earning perks back for doing something that you would be doing anyway – spending money!

Despite the perks, though, these types of cards are not right for all people. Many rewards cards charge higher interest rates when compared to similar cards with no rewards offers. Some cards even charge high annual fee charges that may prove to be more costly than any rewards that you actually earn. However, like we said, rewards cards can be, well, rewarding. It’s all about making sure that you are in the right place in your financial life prior to getting one. So how do you know if you are ready to upgrade to a rewards credit card? Here are some key signs that show you can move on from a basic credit card to the rewards card of your choice.

You Are Ready for a Rewards Card if:

You Have the Household Budget Well Under Control

It is a great thing to earn benefits while you charge your expenses. However, you should not sacrifice your budgeting efforts in an effort to earn more, more, more. In other words, don’t start spending on your card like crazy so you can simply earn more rewards. If you have the ability to create a household budget, stick to it and you manage to put a bit of money into your savings every month, there is a good chance that you might be a good candidate to get a rewards card and to use it responsibly.

You always pay off Credit Card Balances in Full

The rewards that you earn are only really good for you if you carry a zero balance on your card. That way, the miles or cash bonuses that you earn actually outweigh any interest that you accrue on your purchases. If you are one of those people who always makes it a point to only charge as much as you can reasonably afford to pay off in full every month, and you always pay off every dollar that you charge when your bill comes through, then you may find that a rewards card is a great tool to help you get a little cash back or to earn miles for your next vacation.

You Have a Good Credit Score

There are tons of rewards programs available these days. The best, however, are usually reserved for people with good credit scores. It is also worth noting that if you do have a high credit score, you are probably pretty responsible with your credit, which is another plus. Before you fill out any applications to get a rewards credit card, make sure that you pull your credit report/score to find out where you stand right now.

Finally, only get a rewards card that offers you perks you will actually use. If you don’t travel frequently or perhaps don’t enjoy flying, then a card that offers airline miles is probably not right for you. Spend a little time shopping around and comparing rewards credit cards to find the card that offers the types of rewards that you will enjoy racking up.

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Federal Trade Commission Fines Payday Lending Company for Alleged Deception

Feb 2, 2016 by

Federal Trade Commission Fines Payday Lending Company for Alleged Deception

Companies and individuals that provide financial services to the people of this country – whether big banks or individually owned lending shops – owe it to consumers to be transparent in all of their dealings. We all know, however, that this is not always the case. There are always lenders that will be deceptive. It can be a big bank or the smallest of title loan companies, and the deception can be purposeful or possibly an oversight. The thing is, though, that the Federal Trade Commission (FTC), and other government watchdog groups are making it their collective mission to crack down on deceptive financial practices. Sure, it does seem to happen to alternative financial providers more often than big banks, but it happens nonetheless.

To illustrate this point, the FTC recently settled charges against two different payday lending companies. These charges allege that the lenders charged consumers illegally via inflated and sometimes undisclosed loan fees. The two companies are SFS Inc. and Red Cedar Services Inc. Each company had to pay $2.2 million. By doing so, they were allowed to jointly wave an estimated $68 million in fees to people that did not get collected.

These charges, when totaled up with some previous settlements, add up to a whopping $25 million that the FTC has collected related to this particular case against Red Cedar, AMG Services Inc. and SFS, along with various related lending operations. The case also allowed for about $353 million dollars in debt to be waived. The combined efforts have made this the largest recovery that the FTC has pulled of so far. And there is still pending litigation against some other defendants that will likely bring the total higher.

The Director of the Bureau of Consumer Protection, when asked about payday lending practices, said, “Payday lenders need to be honest about the terms of the loans they offer. These lenders charged borrowers more than they said they would. As a result of the FTC’s case, they are paying a steep price for their deception.”

The charges that kicked all of this off date back to April of 2012. These charges, which were filed in federal court, allege that the lending companies made misrepresentations about how much it would cost consumers to borrow money. This is considered to be a direct violation of the FTC Act. An example from this case was a time when Red Cedar, MNE Services and AMG Services used a contract which told the borrower they would have to pay $309 for a $300 loan. However, the borrower ended up being charged $975.

The defendants have also been accused of failing to disclose the actual annual percentage rates of the loans, along with other terms. This is being handled as a violation of the Truth in Lending Act. To make matters worse for the lending companies, they made preauthorized debits from the bank accounts of borrowers. This is a violation of the Electronic Funds Transfer Act. SFS and Red Cedar operated as lending companies under the names One Click Cash and 500 Fast Cash.

Lending Companies Should Keep These Kinds of Cases in Mind!

This case, like many others that the FTC and CFPB have been behind recently, should serve as a stern warning to lenders that there is always someone looking out for deceptive financial practices. The majority of payday lending companies out there make it a point to be straight with consumers. But it appears that those who don’t will have a heck of a lot of explaining to do; along with a lot of money to cough up.

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Considering a Different View on the Payday Lending Industry in Utah

Dec 1, 2015 by

Considering a Different View on the Payday Lending Industry in Utah

Recently, the Utah Department of Financial Institutions – an agency that regulates Utah state financial services of payday lenders, banks and other financial service providers – published an annual report to the public. Those who keep track of these sorts of things are very happy to announce that the laws revealed in the report allow a measure of protection for consumers and provide borrowers with choices when it comes to credit. However, there seems to be some bad data with a topic that means a lot to many people.

The report from the DFI stated that there were more than 45,000 short term (payday) loans that were not fully paid off after 10 weeks. In reality, these 45,000 loans are just a drop in the bucket when compared to the hundreds of thousands of payday advance loans that are given in Utah every year. The majority of Utah citizens are able to fully repay their loans within 10 weeks. Those who cannot – who only represent about 7 percent of total borrowers – were able to make use of state sanctioned safeguards that allow them to enter into a two month repayment plan that prevents interest from accruing.

The 10 week safety cap is considered an important piece of state legislature, and was passed not because of government watchdog groups or angry letters to editors of local papers, but was passed because of urgings from actual payday lending companies. The payday lenders are the only financial companies that have regulated interest cap limits. These safeguards help to prevent consumers from getting trapped in cycles of seemingly never ending debt.

You could wrack your brain all day long and not be able to come up with any other financial institution that allows their loans to stop accruing interest, and extends payback periods, without imposing additional costs on consumers. The majority of payday lenders in Utah are more than happy to offer this option to their customers, and consider it a unique perk that other financial service providers are unable – or even unwilling – to provide to their customer base.

It is sad, then, to learn that the allegations of “debt cycles” is not quite as accurate as one might think. New legislation is trying to force payday lenders to verify whether or not a person is able to repay their loans prior to approving said loans. You would think, if you listened to the opponents of payday lending, that the lenders are actually looking for the types of borrowers who are unable to pay them back. This would be silly, of course, because lenders are giving loans from their own funds, and surely want to get paid back in order to stay in business.

No matter how many articles get written that paint payday lending companies in a bad light, and no matter how much certain liberal parties would like to attack payday lenders, the fact remains that this industry is in favor – at least in the state of Utah – of policing itself and doing all that it can in order to assist the minority of consumers who are unable to pay back their payday loans within ten weeks. Of course, you won’t read about this sort of thing on most liberal, mainstream websites. But the truth is the truth, and the truth is that payday lenders are taking more risk than other lenders, while still showing more compassion to their customers than any other financial service providers in existence today.

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Credit Scores: Highs,Lows and Averages

Oct 20, 2015 by

Credit Scores: Highs,Lows and Averages

Every person in the United States has a credit score. As can be expected from such a wide cross- section of people, those scores are going to vary; sometimes quite a bit. Many people are aware of what constitutes a low credit score and what makes a credit score favorable. What folks may not be aware of, however, is how the numbers are put together, or how they can actually take steps to improve their own credit ratings. With all of this in mind, it is important to understand that there are some areas where lower credit scores are more common than in other areas.

As of the spring of last year, the average credit score in the United States was 669. That is a score that is okay, but not good enough to help people qualify for the best lines of credit or the most favorable interest rates. As you might have guessed, though, the credit scores vary quite a bit from one state to another. For example, in Mississippi (the state with the lowest credit score average) the score came in at 638. This is not a great average credit score for a state. Minnesota came in at the top, with an average credit score of 704. That is the kind of credit rating that helps people to qualify for favorable loan terms and rates on most loans or lines of credit.

Why so many low scores?

A major cause of lower credit scores in some states is that consumers are not as aware of what goes into building a strong credit score as they ought to be. Educating consumers about financial topics plays an important role in helping people to have higher credit scores. Having extra cash, however, is another important factor that must be considered. In Minnesota, the median income is an impressive $61,000. That is almost 2/3 higher than the $38,000 median income level in Mississippi. The disparity in income levels, for better or worse, makes a big difference when considering the average credit scores and financial stability levels from one state to the next.

The president of the Mississippi Council on Economic Education Selena Swartsfager said, “You’ll hear people say it doesn’t matter what you make, you just have to manage what you’ve got. I’m afraid that until we’re able to do something about the level of poverty that we have in Mississippi, we can train people all day long on what to do with their money, but if they don’t have any, then that’s an issue.”

Examining the Big Credit Score Picture

The financial difficulties faced by people in Mississippi definitely showed through when comparing the state to nearby states that had their share of financial difficulties; states, like Georgia and Louisiana. These three states currently have the titles to 10 of the 20 lowest credit score averages in major cities. The upper Midwest, however, was the center of all but one of the top 10 credit ratings in large cities. This data includes Minnesota, Wisconsin, the Dakotas and Iowa. Only Montana came in as an outlier, according to a recent report.

As difficult as it may be, every household has to take its own steps to recover from low credit scores. The most important thing that consumers can do to improve their credit ratings over time is to continue to make on-time payments on all of their loans, credit cards and other financial obligations. We will likely always see credit score disparities across the nation, but it is comforting to know that individuals can take steps to make their credit scores more favorable than they are currently.

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Official CFPB Poll Results Released to the Public

Aug 19, 2015 by

Official CFPB Poll Results Released to the Public

The Consumer Financial Protection Bureau (CFPB) was created as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB claims in its mission statement that it is here to, “…educate consumers, enforce federal consumer financial laws, and gather and analyze available information to better understand consumers, financial services providers, and consumer financial markets.”

Here are some of the core functions the CFPB is responsible for:

  • Take complaints from consumers
  • Author and publish rules to inform and protect consumers
  • Supervise businesses and enforce federal consumer protection laws
  • Educate consumers about financial topics
  • Research the financial behavior of consumers
  • Monitor markets and take note of new risks to consumers
  • Enforce laws that prohibit discrimination or unfair treatments in consumer finances.

With all of this information in mind, let’s take a look at the results of a recent survey.  This survey was given to 3,225 potential voters and 3,604 U.S. adults. It was conducted between June 5th and June 10th of 2015. Here are some of the findings of this survey:

73 percent of survey respondents believe that the CFPB should be held to the same standards as other federal agencies when it comes to anti-discrimination rules. 77 percent agreed that women with equal qualifications as men should be paid the same amount at the CFPB. 66 percent of survey respondents believe that the director of the bureau should be fired because of an incident where CFPB officials called a division with a large number of African-American employees the “Plantation” and another incident where a manager with the CFPB allegedly referred to an employee as an “expletive… foreigner.”

A mere 20 percent of survey respondents agree that the CFPB should be able to review consumer’s credit card information without direct consent and that the bureau should be allowed to collect information from credit card accounts to track how the average consumer spends money. 57 percent of responders completely disagreed with the 20 percent mentioned above when it comes to the CFPB accessing and using consumer credit card information.

The majority of respondents expressed a lack of confidence about the CFPB’s ability to safeguard credit card data. In fact, only 8 percent of respondents said that the CFPB’s collection methods were better than the NSA’s review of peoples’ text and phone records. 43 percent said that the CFPB’s snooping into credit card data is just as bad as the NSA spying on people.

Of the people polled, 68 percent disagree with the government being able to tell consumers how to make the best financial decisions and how to spend their money. 71 percent believe that it is the responsibility of consumers to decide whether they should take out loans and mortgages with unfavorable terms, as long as those terms were presented clearly in the loan documentation. 65 percent of the survey respondents said that consumers should be able to decide about payday loans, even if those loans feature high fees that borrowers must pay. There were only 25 percent of respondents who believe that the CFPB should be able to put restrictions on short term loans and other types of alternative financial products.

Whether or not the CFPB will take any of this survey information into consideration is anyone’s guess. However, the numbers clearly tell the story that consumers in this country do not want – or need – a watchdog group that is going to restrict their rights to the financial products that people prefer to use. Even if a loan features expensive fees, it is clear that consumers understand this fact and want the freedom to be able to choose those types of loans if that is what they consider best for their personal situations.

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Small Mistakes That Cause Big Problems for Your Credit

Feb 2, 2014 by

Small Mistakes That Cause Big Problems for Your Credit

There is probably not one person who wants poor credit. Not many people go around saying they do not care about their credit. There are some small mistakes that anyone can make that can cause big problems for your credit, you need to watch for them and avoid them.

The first mistake is to open too many accounts at one time. Every credit card that you apply for can and will show up on your credit report. This does not look good, the more you have on there the worse that it looks. Each application for a credit card does cost you three to five points on your credit score. They can even show up on your credit score for up to two years, although it only has a negative impact for about half the time that it shows up.

Missing even one payment is another mistake that can cost you big. Missing a payment can cause you to have a larger amount owed. The company that you owe can add late fees to your balance, and not only that the interest will still be adding up. It also looks bad on your credit score, causing it to fall up to one hundred points. Make sure that you are making your payments on time.

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Photo: Wikipedia

Before closing an old credit card account that you have had for years. If you are looking for a new line of credit then closing an old account is not a good idea. It can negatively impact your credit score. So make sure that you think long and hard before closing an old account. Try to look into your future to see if you can see yourself trying to acquire a new line of credit any time in the near future.

It is obvious for anyone who knows anything knows that it is not a good idea to max out a credit card. Maxing out a single credit card can really hurt your credit score. If you have to make a big purchase you will be better off splitting the cost between two different credit cards. Maxing out one will not only show up on your credit score but can impact your ability to get new lines of credit.

You need to make sure that you are checking your credit score at least once a year. The three major credit reporting companies will give you a copy of your credit report for free once a year. You need to make sure that you are checking your credit card for errors. Any errors that are on your credit report will affect you getting a new line of credit. If you find any errors make sure to report them to the company immediately.

If you have a bill that is unpaid and gets sent to a collections agency and do not pay it, it will seriously hurt your credit. There is no reason to ignore these bills, if you have to contact the collections company and set up a payment plan that you can afford. Most of these companies are going to be willing to work with you in order to get the money that is owed to the original company. So just call and see what they can do to work for you.

There are many small mistakes that can really hurt your credit. Your credit needs to be very important to you. You need to make sure that you are doing what is necessary to keep your credit in a good place. Having good credit can help your financial future, and having poor credit can truly hurt your financial future.

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