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Credit Card Rewards – What you Should Know

Approximately 34 million Americans were late in making their credit card payment in the past year. As if that’s not bad enough, the default rate in 2009 is at its highest since 1991. It all points to the fact that consumers simply do not have enough money to pay back their debts. These days, missing a payment or two seems inevitable for a variety of reasons.

However, while many consumers recognize that they would need to pay higher interest payment and penalty fees, they fail to realize that they are also damaging their credit card score and even sacrificing their credit card rewards. In the last several months, consumers are heavily preoccupied with asking questions about fees, interest rates, and due date of their bill. One aspect they overlook is the rewards program offered by their card issuer.

Rewards might not be an issue for first-time card holders who don’t know better. But for individuals who had been using it for vacations, household appliances, and special occasions, loosing reward points can come as a big blow to their lifestyle. In a research conducted among major credit card companies like Citibank, Bank of America, American Express, and Capital One, it was revealed that institutions will revoke any points you earn during a billing cycle in which your account was delinquent.

Discover Cards is particularly harsh because it revokes all reward points you earn if your account is delinquent for two months. American Express is likewise strict but it revokes points on a case-by-case basis. The rules may seem harsh but what’s even worse is that all major credit card issuers reserve the right to modify the terms of the agreement at any time, for whatever reason they choose. They can even cancel the program at any time. So while consumers can now avoid the loopholes when it comes to interest payments, they are still at the losing end when it comes to rewards.  Some of the new credit card laws will prevent the issuers from making changes to your account without prior notice.

New Credit Card Laws – New Details

It is no secret that the new credit card legislation will have a drastic effect on how banks and other financial institutions operate their business. The changes on your account can be likened as a double-edged sword. On one hand, certain changes can help you manage debt easier and attain debt management help. On the other hand, the new laws may also be confusing to consumers who are used to seeing the same charges on their bill every single month. To help you better manage your credit card charges; below are specific changes that had been implanted:

Interest Rate – in many banks, the annual percentage rate (APR) on existing balances will not increase if you pay late or exceed the credit limit. It will only increase if to the default rate if you fail to pay for the new transactions when it is due. It is also important to take note that consumers are encouraged to review their account periodically to determine if their APR should be lower than it is.

Grace Period – the grace period for repayment is more generous with the passing of the new credit card legislation. It can potentially help you reduce the amount of finance charges you need to pay. In addition, overlimit fee will no longer be charged. Be sure to check the terms of your card for further details.

Payments – the amount you pay in excess of the minimum payment due will now be applied to the highest APR balance first. This is a welcome change from previous practices because it helps you pay off high APR balances a lot sooner.

Payment Processing Time – another important change to the new bill has to do with the payment processing time. Mailed payments can now be processed on the same day as long as the banks receive it before their cut-off time.

Improve My Credit Score – Revisited

A few weeks ago, we provided a list of blogs that can potentially help you improve your credit rating. With the credit score situation becoming worse for many Americans today though, we decided to revisit this topic to let you in on the latest news, tips, and strategies you can implement in order to achieve a better financial well-being.

First and foremost, it is important to recognize that in certain cases today, the decline in your credit score isn’t exactly your fault. A lot of it is caused by external factors including the changes in legislation. This may seem like an inevitable event but reading the blogs below can help you gain a better understanding of your situation so you will be in the position to improve it:

Jim Wang @ Bargaineering provided 7 practical tips on how you can compare credit reports and improve your rating. If you’ve been reading up on the topic before, you probably already know the gist of the blog’s content. It basically talked about disputing inaccuracies, paying debt, and the strategies you need to implement with regards to opening and closing accounts.

Jack @ Family Finance Help entered a helpful post titled “Best Way to Improve Your Credit Score after Bankruptcy”. Even though this post is specifically targeted towards individuals who have experienced the devastation of bankruptcy, some of the insights are applicable to ordinary Americans. The blog also talked about treating bankruptcy as a last resort.

If you’re interested in fixing your credit scores quickly, then reading an entry from Protect Life may be useful for you. Whether you’re buying a new home, a car, or trying to get a student loan, it is important to be sure that your credit rating is acceptable to the lender. Otherwise, you might need to deal with high interest rates and get buried under debt.

Credit Card Charge-Offs – Moody’s Records a Spike

According to the Moody’s Investors Service, there is a spike in credit card charge-offs last August. The Moody’s Credit Card Index recorded a jump in charge-offs to 11.49 percent during that month from 10.52 percent in July. This is up by 6.8 percent from one year ago. Will Black, the senior vice president of the organization said that “August had traditionally begun a seasonal period when delinquency rates start to rise, and this August is no exception.”

The delinquency rate seen last August is a reversal of the earlier trend of declining charge-offs in the previous months. In addition, Moody said that the charge-off rate may not be at its peak yet; it projects that it will be at its highest next summer at 12 to 13 percent. This figure is influenced, to a large extent, by the increasing unemployment rate which at this point stands at 9.7 percent. A lot of Americans today are struggling to achieve debt relief. It is expected that unemployment will peak at around 10 to 10.5 percent in the middle part of 2010.

The rise of charge-offs for the month went with a rise in the delinquency rate of nearly 5.8 percent. It should be noted that the increase this August was influenced by the rise in overdue balances in the last 30 to 60 days. Black further stated that “More increases should continue as back-to-school and holiday expenditures compete with credit card payments.”

Charge-offs is the annualized percentage of the total outstanding credit card balances that have already been written off as uncollected. It provides banks, consumers, and the public a gauge of what to expect in the coming months. Moody’s Credit Card Index relies on credit card information from 300 individual credit card-backed securities which covers around $410 billion in credit card receivables.