A lot of people make financial mistakes that they wish they never committed. However, making unwise decision is a fact of life and individuals need to deal with the consequences of their action. Financial mistakes are usually reflected in a person’s credit history. It will enable them to take loans from banks and other institutions at a reasonable price.
Financial know-how should start when a person is quite young. The problem is, young people usually don’t know what their getting into when it comes to spending. That’s the reason why there is a recently passed policy that stops credit card companies from issuing cards to individuals below 21 years of age or until they can show proof of income. Young people with co-signers who can vouch for them can also apply for a credit card. In this week’s weekly round-up, we compiled a list of blogs that talks about the new regulation, provides tips on how to start your credit history right, and how to fix the financial mess you got yourself into:
Mary @ Mint Life updated readers about what’s happening in the credit scoring industry in the blog post “Reading, Writing, and…Credit Scoring?” The article is focused on helping kids develop their financial sensibilities to make better choices in the future. Aspects of money management for kids such as opening a savings account are discussed. In addition, kids today face more challenges because of the financial crisis so their credit score is more important than ever.
Ryan @ The Better Credit Blog wrote an article titled “10 Ways to Get the Upper Hand When Dealing with a Debt Collector”. It is a fact that most people experience being at the end of the phone line when a debt collector is calling. This situation is difficult for most people and this article talks about the issues people need to deal with. For one, collectors are trained to play with your feelings and emotions. Look at the call at this light to get an upper hand.
Finally, Ilyce from Think Glink posted the article “Credit Reporting Agencies and Your Debts”. It basically sums up how credit reporting agencies come up with your credit score. It is written in a Q&A format and provides some relevant information for readers.
It has been stressed many times over by the Federal Trade Commission (FTC) and many consumer-advocacy organizations: credit reports should be, and is, free. Despite their efforts though, there are still a number of unscrupulous companies that want to seek to abuse consumers. These firms also divert consumers away from a government-backed site where they can get easy access to their free online credit report.
Even one of the credit bureau, Experian, has gotten the ire of FTC because of their Freecreditreport.com. The site has been under the FTC’s watch for some time now because they mislead people into believing they need to pay a certain fee to get their credit report. Additionally, another one of their tactic is to use the report as bait so that people will sign up to the $14.95 a month service that alerts members to changes in their status.
The government itself has not taken an active stance in discrediting the service, which is fast becoming a $1 billion niche. Currently, the biggest player in this niche is Experian. The company’s market share is over twice that of its three competitors. Experian spent $54 million on television advertising to attract the attention of this market.
The main issue with credit monitoring services is that most don’t actually need it. Most people who have signed up often do so unwittingly. Basically, all a credit monitoring service will do is provide consumers with updates about their credit files. While the service can be beneficial for identity theft victims, it is only a waste of money for the vast majority. Most individuals don’t modify their accounts drastically, and when they decide to, they are typically aware of what it will do to their credit rating. If any errors occur on the report, checking it and reporting to the appropriate credit bureau is often enough. The greatest use for these monitoring services that I found was when I was taking actions to improve my credit score. I was able to monitor my progress and see how my actions directly impacted my score.
When it comes to money, no one can make all the right decisions all the time. Most people have done things they later regretted, especially when it comes to credit card debt. It may be a simple thing like getting charged $3 for withdrawing cash from an out-of-network ATM machine or a big mistake like maxing out your cash advance option without any apparent means to pay for it.
Some mistakes are easily resolved while others take years to sort out. Whatever the case, blunders happen when it comes to money management. The important thing is to understand the severity of the transgression. So in this article, we will score common mistakes on a scale of 1 to 10 based on its impact on your finances:
Paying Past Due Date: 5.5
Credit card issuers are never happy with late payers. Because of this, they have severe penalty charges and charge high interest payments for individuals who pay past the due date. In addition, some issuers even report your transgression to the credit bureaus so your credit score will suffer as well. If you’ve been an on-time payer in the past, some companies may let it slide. Just make sure to call them and ask them to waive the interest fee as well.
Paying the Minimum: 5
Generally, credit card companies earn the most from slow payers. Paying only the minimum might not affect your credit score but you might end up paying more on the interest than the principal. This is not a good practice because it keeps you in debt for a lengthier timeframe.
Missing a Payment: 9
This is one of the worst mistakes you can commit if you have a credit card. You will be slammed with high interest rates, penalty fees, and other charges. As if that’s not bad enough, your credit score will also take a huge hit. Because of this, you will need to pay more when you take out a loan next time. In essence, missing a payment is a no-no. Pay the minimum at the very least.
The Senate has passed a new credit card legislation designed to stop abuses in the industry. Consumers will particularly benefit from this measure because of unfair rate increases, provisions in small print, and fee traps will no longer be permitted. In addition, there will be greater accountability required in the credit card industry.
If you have been burned by a credit card company in the past, you can relax. With the new measure, you can start using your credit card again without fear that you will be mercilessly charged penalties, finance charges, and other types of fees without your previous knowledge or consent. This week’s round-up of blogs focus on posts that talked about the new credit card measure and how it will affect your finances.
Jim Manzi @ National Review Online wrote an interesting article titled “Credit Cards Don’t Kill Credit Ratings, People Do“. Essentially, he cited the reasons why bad credit should be attributed to individuals, not financing institutions. It is still an individual’s own responsibility to oversee their personal finances by determining how much they can afford to spend. Credit card companies are simply the medium that lets them borrow money.
Jennifer Freeman @ Think Glink wrote a short blog post “Credit Cards: Changes in New Credit Card Legislation“. Here, she discussed about what the average consumers can expect from the new bill that has been passed. The blog post was particularly inclined towards outlining the benefits of the new legislation. At the end, she posed a question about what readers think will happen with this law being implemented.
Ismat Mangla @ CNN Money outlines the effects of the newly revised legislation on credit cards for the ordinary consumer. The post entitled “What Credit Card Legislation Means to You” was especially helpful in identifying the areas in which the law will make the most impact on your life.
Bart Narter @ Celent Banking Blog stated his musings about the new credit card legislation in his post “Credit Card Legislation“. His blog post gives an unbiased view about how this law will affect the banking industry and consumers alike. While consumers will benefit from exorbitant penalty fee, credit card companies will suffer because they cannot appropriately penalize irresponsible cardholders. The blogger calls for a compromise.