Credit Cards » Laura Agadoni

How Do Debit Cards Work?

Laura Agadoni — Wed, 27 May 2015 01:25:06 +0000

As more and more people use debit cards, a natural question many have is “How do debit cards work?” A nationwide study conducted in 2011 by TSYS, a global payment processing company, found that people preferred using debit cards more than any other payment type, including cash, which was the second most preferred payment method. People prefer debit cards because they are more convenient to carry than a wad of cash or a big checkbook is. Debit card transactions are also fast. If you’ve ever been behind a check writer at a grocery store, you appreciate the quickness of the debit card swipe. It’s also safer to carry a debit card; cash is often stolen.

Accessing Cash

You can get cash by using a debit or a credit card, but they are very different transactions. When you want cash and you use a debit card, you are withdrawing money you already have in your bank account. But when you want cash through your credit card, called a cash advance, you are taking out a loan. You must pay back the loan, and you will typically pay a high interest rate for the transaction, making getting cash from your credit card an expensive option. It costs you nothing to withdraw cash from your own bank using a debit card.

Debit Card Fees

Sometimes fees are associated with debit cards when you use them.

You pay a fee when you withdraw cash with your debit card at an ATM that is not associated with your bank. According to a Bankrate survey it costs you an average of $2.60 every time you use an out-of-network ATM. Your bank might also charge you for using an out-of-network ATM — an average of $1.53. If that happens, you spend $4.13 every time you withdraw cash from an ATM that is not your bank’s.
There are two ways to use your debit card for purchases: you can use your debit card as a credit card or as a debit card. Using your PIN means you run the card as a debit card, and signing the receipt means you run the card as a credit card. Some banks charge a fee when you use the debit card for purchases when you enter your PIN instead of signing for the card.
If you make a purchase using your debit card for more than what you have in the account, you will be charged a fee if you opted to have overdraft protection. The bank, in that case, would cover your overage, but it would charge you a fee for doing so. The median charge is $34, and most overages are for less than $25, according to the Consumer Financial Protection Bureau

Daily Withdrawal Limits

You can withdraw only a limited amount of money each day from an ATM using a debit card. Each bank has different limits, and different customers could have different limits, too. The usual limit is no more than $1,000 a day. And, of course, you cannot withdraw more than what you have in the account. So now, you should have your question of how debit cards work answered.

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Debit Cards Versus Credit Cards When Renting A Car

Laura Agadoni — Sat, 11 Apr 2015 13:22:22 +0000

If you are wondering which is better when renting a car between debit cards versus credit cards, credit cards are. Although you can usually rent a car with a debit card, most, if not all, rental car companies prefer customers to use a credit card. They are, after all, letting you drive away with an asset that’s worth at least $20,000 or so, and a credit card provides assurance that they can recoup money for any damages that might happen while you have the car. You might need to jump through some extra hoops to use your debit card, but if that’s all you have, and if you need to rent a car, it is possible. Here’s what you need to know.

Rental car policies vary. Some rental car companies are better about accepting a debit card than others are. It’s a good idea to conduct an online search for the most friendly companies. Rent A Wreck, for example, states on its website that most of its locations accept debit cards with the Visa or MasterCard logo. The bigger rental companies, such as Avis, might not accept debit cards in some locations. And if they do, there are usually certain restrictions.
You might need to prove you are traveling. Many car rental companies won’t rent to a local person with a debit card. They are typically afraid you might skip town with their car.
You might be subject to a credit check. If you have bad credit, you might not want to try to rent a car with a debit card, particularly at a major rental car company. Every time your credit is pulled, it shows up on your credit report, and too many inquiries can lower your score.
A rental car company might put a block or a hold on your debit card account for the rental cost plus some extra, typically $100 to $500. You won’t have access to your money during the holding period, which generally ends when you return and pay for the car. However, the holding period could last for up to 15 days after you pay, according to the Federal Trade Commission.
Debit cards don’t cover rental car insurance. When pondering debit card vs. credit card protection, credit cards win. Most major credit cards offer some type of car rental insurance. They typically cover damages that aren’t covered by your primary auto insurance policy. But a debit card offers no insurance. It’s a good idea to call your primary auto insurance provider for advice on whether to buy extra insurance from the car rental company.

There’s no question that renting a car is easier with a credit card, so if you have a choice between debit cards versus credit cards, choose a credit card. If you don’t want to deal with the hassles of trying to rent a car with a debit card, consider taking out a secured credit card, which works just like any other credit card, even at rental car companies. The only difference is that you must deposit money to the secured card, and that becomes your credit limit.

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Become An Authorized User On The Credit Card Of Your Parents, Spouse, Significant Other Or Friend And Maximize The Awesome Impact On Your Credit Score!

Laura Agadoni — Sat, 11 Apr 2015 10:26:50 +0000

Get valuable info about the practice of adding authorized users to credit cards for credit building and piggybacking. What it is, how and why it works

The post Become An Authorized User On The Credit Card Of Your Parents, Spouse, Significant Other Or Friend And Maximize The Awesome Impact On Your Credit Score! appeared first on Credit Cards.

What You Need To Know About Credit Cards And Debit Cards

Laura Agadoni — Thu, 09 Apr 2015 12:58:14 +0000

Credit cards, debit cards and prepaid cards look alike, but they are very different. The debit card, a card that looks like a credit card but that links to your checking account, has been around since the 1970s. It started to become popular when ATMs appeared throughout the country in the 1980s and 1990s. People like having a debit card because it allows them to withdraw cash from their bank accounts easily, and they can pay for items just by swiping their debit card at the register. A prepaid debit card might look like a debit card, but it is not the same because it does not link to a bank account. People have to put money onto the card to use it. Prepaid debit cards have been gaining in popularity in recent years.

Credit Cards, Debit Cards and Prepaid Debit Cards Are Not the Same

With both debit cards and prepaid debit cards, you need to have money to buy items. This is unlike a credit card where you are essentially taking out a loan by buying items and paying for them later.

Overdraft Protection

Because your debit card links to your bank account, you can opt for overdraft protection. That way, if you spend more money than what you have in your bank account, your bank can cover the overage. You would need to pay back the overage, and the bank charges a fee for this service. A prepaid debit card does not come with an overdraft protection option. You can use only the money that you have loaded onto the card and no more.

How a Prepaid Debit Card Works

When you open a prepaid debit card, you decide how much money to put on it. When you buy something with the prepaid card, the money you loaded onto it is subtracted from the balance. You can keep reloading the card as often as you like.

Benefits

Prepaid debit cards are ideal for people who do not have a checking account but who like to shop online, pay bills online, make hotel reservations, rent a car or do anything else that requires a credit or debit card.

You can have your paycheck deposited to your prepaid card, which is more convenient than cashing a check.

A prepaid card is also a good option for people with poor credit. You don’t have to qualify for a prepaid card because you load your own money onto it.

Prepaid debit cards make a nice gift card to give to someone.

Parents can use a prepaid debit card for teens as a tool to teach their kids how to manage their money. For example, a parent might want to give a prepaid debit card to his or her teenage driver to use for gas. The parent would load a certain amount of money for gas on the card for the month, and the teenager would then need to plan accordingly.

Fees

Fees are involved with prepaid cards. How much the fees are and what the fees are for vary. Typical fees associated with prepaid cards are for card activation, monthly maintenance, ATM withdrawal and ATM balance inquiries. Some cards waive some fees if your balance is high enough or if your paycheck automatically deposits to the card. Each card lists the fee details on the card or on the card packaging. Learn what they are before your choose one.

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Apply For Student Credit Cards And Build Credit

Laura Agadoni — Tue, 07 Apr 2015 12:45:37 +0000

There’s a catch-22 in the credit world regarding what happens when you apply for student credit cards: you need to have good credit to get a credit card or a loan, but you can’t establish good credit unless someone will give you a credit card or a loan. One solution to this seemingly paradoxical situation is the student credit card. This type of credit card allows students and young people to get a regular credit card even if they don’t have any credit history. This type of card is an excellent way to build credit for your future.

About Credit

You might not need credit now, except for school credit, but you will probably need it when you graduate. If you want to buy a car or a house, you need good credit to do that. Your credit score will become as important, if not more so, than your grade point average and your SAT scores were to get you into college. Everyone who loans money or rents homes or apartments looks at your credit score, a three-digit number that indicates how creditworthy you are. Student credit cards allow you to build credit while you are still in school, so if you are a student, you should consider applying for student credit cards.

How Your Credit Report Works

You get that three-digit credit score based on five factors of how you deal with credit: payment history, amounts owed, length of credit history, new credit and types of credit used. Lenders use this number to determine your student credit card eligibility.

Payment history, which refers to whether you paid your bills on time, counts for 35 percent of your score.

Amounts owed refers to how much of your available credit you use. Ideally, you would use less than 30 percent of your available credit. Otherwise, lenders might worry that you are overextended.

Length of credit history is where getting a card as a student can really boost your credit score: the longer you have a credit history, the better. That accounts for 15 percent of your score.

Both new credit and types of credit used count for 10 percent of your score. The first refers to how much new credit you apply for at once. It’s not good to apply for a lot at once. Lenders also like to see a variety of credit, such as installment loans, credit cards and a mortgage, for example.

Spend Small to Build Credit

The best way to use a brand-new credit card is to start small. Use your card only for purchases that you know you can pay off at the end of the month. You might want to buy only gas with it, or you might just want to use it for a small purchase at the grocery store. Showing that you use your card responsibly will raise your credit score.But don’t max out the card to go on a ski trip, for example. For one, maxing out your card lowers your credit score. And for another, if you can’t pay off the ski trip at the end of the month, you’ll have to pay interest on a trip long after you’ve skied down that last run. And if you are late with a payment, or if you find that you can’t pay for the trip, you will have damaged your credit score. Bad credit is worse than no credit.

Your financial future can start while you are still in school. You can be ahead of the game when you graduate if you use a student credit card responsibly.

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4 Ways To Apply For A Student Credit Card And Be Approved

Laura Agadoni — Mon, 06 Apr 2015 12:39:56 +0000

One of the rites of passage of being a college student used to beto apply for a student credit card and to then get that first (and often second, third and fourth) credit card. Before the Credit CARD Act of 2009, college students could easily get as many credit cards as they liked. Now, it’s often difficult for students to get even one credit card. But that’s OK. You don’t need to thoughtlessly run up a huge amount of debt anyway, which is what happened before the CARD Act. You probably can still get a student credit card if you know how. Once you do, remember to use it responsibly.

1. Check with Your Bank

If you have a checking or savings account at a bank or credit union, ask there about how to apply for a student credit card. It’s generally easier to get a credit card from a place you already do business with than it is to apply online or through a financial institution where you don’t have any history. Your financial institution probably wants to keep your business and to maintain a good relationship with you. Approving you for a credit card is one way to do that.

2. Look for Easy Approval Cards

If you can’t get a credit card from your financial institution, look elsewhere. Credit cards issuers often change their deals and terms, so you need to shop around and do some student credit card comparison before you apply for one. In 2014, two student cards gained a reputation for offering easier approval than most: the Journey Student Rewards Credit Card from Capital One and the Citi Thank You Preferred Card for College Students.

3. Control Your Inquiries

You need to consider how many times you apply for credit. Each time you apply for a card, the card issuer sends an inquiry to the credit bureaus. It’s understandable to havea couple of inquiries show up on your credit report when you are shopping for a student credit card, but too many inquiries signals to lenders that you might be a bad risk. They don’t know why you have so many inquiries, so they might assume that you were turned down for a card, or they might assume that you will accept all your offers, thereby possibly overextending yourself. Both reasons makea card issuer likely to turn you down.

Best Practice: It’s best to apply for a card only if you think you’ll be approved. It’s more difficult to be approved once another issuer denies you.

4. Get Your Parents Involved

Cosign:

If you can’t get a credit card on your own, ask one of your parents for help. Some credit card issuers allow cosigners, but not all do. As of 2014, Bank of America and Discover allowed cosigners. Card issuers that allow cosigners are more likely to approve you when you have one because if you default on a payment, the card issuer can get the money from your cosigner. You should not rely on your cosigner, however, because you will not learn how to use credit responsibly that way.
Piggyback:

Piggyback means becoming an authorized user on your parent’s card. When you do that, you merge your credit with your parent’s credit. This gives you an instant boost to your credit score, which should help you get your own credit after building a history on your parent’s card. A downside to doing this is that if your parent maxes out the card or makes late payments, it affects you, too.

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What Are Student Credit Cards, And How Do You Get A Student Credit Card?

Laura Agadoni — Sat, 04 Apr 2015 12:58:20 +0000

Student credit cards are geared especially for young adults who want to start using credit. Many students want to get a student credit card and benefit from having one. But it wasn’t too long ago, 2009 and before to be exact, that credit card vendors would set up booths all over college campuses and aggressively compete for the chance to get students to apply for their card. Sometimes they offered a free T-shirt or some other prize to get students to fill out the application. Credit card vendors were trying to gain long-term or even life long customers. The trouble was, many students were unsophisticated about credit cards and wound up in financial trouble.

A Safer Product

The Credit CARD Act of 2009, which went into effect in February 2010, set up rules to protect all consumers, and it included provisions for young people and college kids, making it more difficult to get a student credit card.The CARD Act made it illegal for credit card vendors to issue a card to anyone younger than 21 unless that person had a cosigner or could show proof that he or she could afford to pay back debt. Vendors also could no longer offer goods in exchange for filling out an application. If students are educated and understand how a credit card works, it can be a useful financial tool for them.

How Student Cards Differ

Because student cards are designed for students, they often have different terms than standard credit cards do. Many student card issuers approve student credit cards with no credit or if students have just a limited credit history, which applies to practically all students. Many students are establishing credit for the first time with a student credit card. This makes them a higher risk because credit issuers have no way of knowing whether the student will pay back what he or she charges.

Higher APR

When banks take on a higher risk, they typically pass on that risk to consumers in the form of charging them a higher annual percentage rate. Once students develop a credit history by paying back their credit card bills on time for about a year, they can ask the credit card issuer to lower the interest rate, or they can apply for a regular credit card that offers a lower rate.

Lower Credit Line

Another way student credit card issuers minimize their risk is to offer a lower limit, something like between$250 and $1,000. That way, if the student defaults on the loan, the bank won’t be out too much money. If students stay under their credit limit and pay their bills on time, typically for six months to a year, they might be eligible for a credit increase.

A Student Credit Card Can Work for You

Students usually have lots of expenses at college. Although credit cards are not the best vehicle for paying for tuition, they are useful for small purchases such as gas or an occasional pizza. If students start using their student credit card for small purchases that they can pay off each month and on time, they establish a good credit record, which can serve them well after graduation.

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Learn About Student Rewards Credit Cards

Laura Agadoni — Wed, 01 Apr 2015 12:53:51 +0000

Student credit cards, particularly student rewards credit cards, can be wonderful tools for young people to start building credit. Students will need credit when they are ready to apply for a job and when they are ready to rent or buy a home. Some student credit cards also come with rewards. It’s beneficial for students to shop around and to learn all the particulars regarding what each credit card offers before they pick one.

Check Out the Offers

Credit card offers change constantly. If you are in the market for a student credit card, you need to check out the offers just before you are ready to apply. Besides only looking at the student credit card rewards that credit cards offer, you need to look at the other terms too, such as what the interest rate is and the late payment fee and policy. Here are some interesting deals offered in 2014 that were good deals for students. You can use these as examples of what to look for when you are ready to shop.

Discover it Student Card

What’s impressive about the Discover it student card is the 2 percent cash back rewards it offers on gas and restaurants, up to $1,000, each quarter. All other purchases you make on this card earn you 1 percent cash back. This card has no annual fee, no penalty interest rate (some card issuers raise the interest rate if you make a late payment), no late fee the first time, no over-limit fee and no foreign transaction fee, which comes in handy if you will study abroad. You can also see your FICO score for free with each monthly statement. You pay 0 percent interest the first six months you have the card, and then the interest rate will be between 12.99 percent and 21.99 percent, depending on your creditworthiness.

Citi ThankYou Preferred Card for College Students

The Citi ThankYou rewards card lets you redeem points for gift cards, travel or cash back. You get 2,500 bonus “ThankYou” points if you spend $500 within the first three months you have the card. You get two points, instead of the standard one point, for every dollar you spend on entertainment and dining. The interest rate is 0 percent for the first seven months; it then switches to a variable rate between 13.99 percent and 23.99 percent. There is no annual fee.

Journey Student Rewards from Capital One

The Capital One Journey card is a good choice for students with fair or limited credit because, after making five monthly payments on time, you can gain access to an increased credit line. This rewards card lets you earn 1 percent cash back on all purchases with no limits and no expiration dates. If you pay your bill on time, you get a 0.25 percent bonus on the cash earned, making the rewards really 1.25 percent cash back. You also get a free credit tracker to monitor your credit score. The interest rate is 19.8 percent, and the card has no annual fee.

Tip: A student rewards credit card benefits you most when you carry no interest on the card. Any interest you pay negates your reward. Use your card only for what you can afford to pay off at the end of the month to reap the full benefit of your rewards card. If you know you will carry a balance each month, choose a card with the lowest interest rate you can get, even if that means getting a student card that offers no rewards.

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Credit Cards And Students Can Lead To Debt: Don’t Let That Happen To You

Laura Agadoni — Mon, 30 Mar 2015 12:49:43 +0000

Credit cards and students often go together because students and young people are far more likely to use plastic to pay for items, even for small purchases that cost less than $5, than they are to use cash. The opposite is true for senior citizens who greatly prefer cash to plastic, according to a 2014 CreditCards.com survey. There’s definitely been a culture change over the years, and there’s no denying that credit cards are convenient, but they can foster bad spending habits from the “out of sight out of mind” way people often think of money when they use one. College students who are inexperienced financially can wind up in trouble if they don’t have a plan for how to use credit wisely.

Credit Cards and Students Can Be a Dangerous Combination

A Time magazine article reported that people born between 1980 and 1984 carry about $5,500 more in credit card debt than their parents did at the same age. This is problematic, particularly if young people regularly spend more than what they earn just to get by. This often happens when students have a student credit card with no job.They will soon rack up so much credit card debt that they could still be paying it off as they approach retirement. Not only are young people getting into debt, they are paying if off slower than older age groups do, according to an Ohio State University study.

The Cost of Debt

If you know beforehand just how long it would take you to pay off your credit card debt, you might think twice about overspending. Let’s say you have a credit card and you used it during the month on various charges that totaled $1,000. Let’s also say the interest rate you pay on your card is 15 percent and your minimum payment is $20. If you never used your card again and just concentrated on paying off that $1,000 you spent in one month, and you make the minimum payment, it would take you about 6.5 years to pay it off, and you would have paid $579 in interest, more than half of what you spent.

Credit Report

If you miss payments or default on your debt altogether, a record of that behavior goes on your credit report and stays there for seven years. So a mistake you make at age 19 stays on your credit record until you are 26. If you want to take out a loan or rent an apartment during that time, you might be denied for being a credit risk. You might not get your dream job, either, if you have a bad credit report, because some employers might take that as a sign of bad character. If you are approved for a loan, you will probably have to pay a very high interest rate.

What You Should Do

It is beneficial to have a credit card. You can start establishing credit with one, and credit cards come in handy for emergencies. When you get your first credit card, take it easy. Don’t use it for a long-term loan, such as your student loan or for living expenses. Use it instead for small purchases that you can afford to pay off in full when you get your bill at the end of the month. If you did use your card for an emergency that you can’t pay off in full in one month, pay as much as you can. It’s never a good idea to pay only the minimum.

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A Credit Card Airline Miles Comparison That Tells You What You Need To Know

Laura Agadoni — Sat, 28 Mar 2015 16:30:17 +0000

Even if you already have your card you need a credit card airline miles comparison to tell you what you might not know. The biggest challenge to being a smart points and miles traveler is diversification. It might be easy for you to hoard American Airline miles but you never know when they’re going to have a massive devaluation or institute unfriendly changes to their frequent flyer program.

I like to protect against this possibility by holding miles and points among a wide variety of accounts. Transferable points networks like Chase UR and Amex MR are great but there are only so many Chase and Amex credit cards you can sign up for. Sometimes you need to look to smaller card networks and leverage multiple accounts to know how to use credit card reward points.

I like to apply for cards for me and my wife which enables us to get double the sign-up bonuses but it also means double the accounts. It’s easy enough to track our balances using Award Wallet but sometimes we need to combine or transfer points in order to get certain awards.

Top 5 Mobile Apps for Points Travelers

When you do a credit card airline miles comparison you’ll find that most programs won’t let you combine accounts, but they will usually let you make transfers to spouses, family members and people with the same address as you. Every program has its own rules but we’re going to break down some of the best tips and tricks for the top programs.

Credit Card Airline Miles Comparison : Breaking Up Purchases Between Two Accounts

The Barclaycard Arrival card is one of the most popular cash back earning cards in the market since it comes with a hefty 40,000 point sign-up bonus and you get 2% cash back on all purchases when redeemed for travel. I actually signed up for this card for my wife and I right before our last trip to Europe since it’s great for booking things like Airbnb stays when no major hotel chains are available.

When I paid for the stay, I made sure to break the charge into two separate charges: one on her card and one on my card so that we could each use the points on our card to pay. You can’t transfer points with Barclaycard (not even to a spouse) so make sure that you break up your purchases if you intend to pay with points.

Citi Thank You Points (TYP)

I typically redeem Citi points for car rentals or gift cards but recently they have added a slew of transfer partners making their points much more valuable. Citi TYP can be transferred to any other member but the points will expire if not used within 90 days. So if you decide to do a transfer with Citi TYP just make sure that you have a redemption in mind ahead of time.

Starwood Preferred Guest

SPG is a great transfer partner since they have over 30 airline partners. Most of their sign-up bonus offers hover in the 25,000 point range though so if you’re looking for a big redemption you’ll need to combine points with another account holder first. And according to SPG’s terms, members of the same household may transfer points freely so that big redemption could be within reach.

Amex Points Are No Longer Transferable

In the past, Amex was well known for its flexible transfer options. You could transfer points to nearly anyone’s frequent flyer account but that option is no longer available. There is a work around though since you can still transfer points to an authorized user’s account.

If you apply for an AU online, you will have to provide your AU’s social security number. But if you call in and add an AU, Amex may be more lenient with this requirement. One thing to watch out for though is that if your AU lives at the same address as you, the account can still be added to their credit report even without a social security number.

Watch Out With Chase Transfers

For many years now I’ve been making small transfers to other people’s frequent flyer accounts with my Chase UR points. Sometimes I’ve topped off a friend’s account and sometimes it’s been a family member. This has always been one of the best features of Chase UR.

But even though the Chase UR website physically allows you to make transfers to other people’s accounts, it is now technically against their terms of service to do this. Their current rules state that members are only allowed to transfer points to spouses and domestic partners. So be careful going forward since there have been reports of users getting their accounts shut down for aggressively transferring points. And when you decide to get a new card consider all of this as you do your credit card airline miles comparison.

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