Good Credit Not So Good?
November 4, 2009 · Print This Article
In a shocking turn of events, credit card companies have recently concocted a new scheme to make more money. Unlike in the past, when credit card companies could rely on a small percentage of their customers to pay a lot of interest for their profit, there are now too many customers who cannot pay anymore. The credit card companies are suddenly owed way too much, and they have lost billions as a result of the economy.
The new scheme is to charge “good” customers an annual fee. That’s right, if you are one of the remaining responsible customers who manages to pay off the bill in full religiously every month, you are in danger of being penalized for doing what you are generally encouraged to do.
From a financial perspective, paying off your bills each month is purely beneficial to you, not the credit card companies. They make their money mostly off of interest payments, and since you aren’t paying them any interest, they aren’t making any money off of you.
In fact, while most people are getting behind paying interest on the consumer debt they’ve accrued, if you charge items on your card and then pay off the bill in full at the end of the month, you’ve actually been leveraging the credit card company’s money instead of the other way around.
In other words, you were able to keep the money you would have spent until the end of the month, ostensibly to earn interest in your savings account or the stock market (though perhaps not so much in this economy), and as a way of earning incentives from the credit card companies like cashback rewards for all that stuff you charged.
The credit card companies recognize that people who don’t pay them interest are essentially a losing proposition, so in order to even the score, they’ve decided to “experiment” with the idea of charging an annual fee averaging $29 to $99 per year.
For the individuals who do pay off their balance every month, this is probably not an unreasonable sum to expect, but it does seem rather arbitrary to issue an annual fee that specifically targets those who pay off the bill each month. Even though these are not individuals paying a lot of money in interest, they have proven themselves to be reliable customers, and that seems like exactly what the credit card companies need in a time of uncertainty.
One of the main reasons for this new move is the pressure of new legislation in Congress that will seek to restrict the ways that credit card companies can charge their customers.
In a way, this is probably a noble gesture, as anyone who is suffering from consumer debt in an economy like this should avoid having even worse conditions sprung upon them. Doing this would undermine not only that individual’s financial integrity, but the integrity of what’s left of the economy as a whole. Nevertheless, it is troubling what happens if you disagree with the annual fee and want to cancel your card.
With the credit crunch still in full swing, credit card companies are simultaneously more likely to charge you more in interest and fees, and more likely to reject new applicants for a card. This is because the companies have to be careful about giving out credit to anyone who cannot demonstrate the ability to pay it back.
At the same time, though, they are mulling over the possibility of alienating the very customers who can and do pay off the balances each month. Fortunately for the loyal customer, credit card companies who do require an annual fee might still be willing to negotiate or waive the fee. Hopefully the benefits of being “good” customers don’t disappear in the months to come.
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Consumerist, you bitch and moan about people handing over their zip code at checkout or giving their receipt to a guy at Best Buy walking out of the store … but then you advocate offering up your credit line for piggybacking? C’mon now.
Anybody who has spent any amount of energy in their life protecting their credit should NOT piggyback… you’re just looking for regret.
Article by at 2010-07-31 03:43:28
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No. The ONLY way to help score a lot is if you request in writing that they promise to remove all mention of the debt from your credit report upon you making payment. Once they remove this (get it in writing, fax, whatever) your score will go up that day. If they do not remove it your score will go up slightly but it will take time and a paid "Collection" account will still be listed.
No. The ONLY way to help score a lot is if you request in writing that they promise to remove all mention of the debt from your credit report upon you making payment. Once they remove this (get it in writing, fax, whatever) your score will go up that day. If they do not remove it your score will go up slightly but it will take time and a paid "Collection" account will still be listed.
Build your credit score! (Don't we all?)
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You should have heard individuals say – ‘I got a great credit card deal’. So should you happen to be searching for a charge card at that moment, do you just go with what your friend has told you as a good charge card deal?
I don't think that it is true that if you have more credit you have a lower score. I have lots of cards (at least 8 or so) and I have a really high credit score. As long as you pay back what you owe on time, your score will be good. So, I wouldn't worry about it.
if you are getting turned down for cards, then I suppose your credit rating must be turning sour, and i have good guess why.
If you goal is to establish a good credit rating, then you are doing just about the exact opposite of what you need to do. Credit scores are based on the total amount of credit you have as a ratio of your total income. So for example, if you have one card with a credit line of $3000 (with an income of say, $25,000) your credit will be much better than having three cards with a total of $9000 (with the same income). Following me?
If you want to establish good credit, you need only one card that you use responsibly over a period of years. So, yes, it is good that you have a card, but there is no need to get others. You were likely approved for the first two on the basis of a fairly neutral credit score. Now that you have the theoretical capacity to go on a shopping spree bender with 2(!!) cards, the companies are more reluctant.
Advice: cancel the card that you have gotten most recently, and use the other card responsibly– paying your bill every month, on time. That's how you are going to establish good credit, not by filling up your wallet with lots of plastic.
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Theres no easy way to raise to raise your credit score, you can go years without borrowing credit but have a bad rating die to the fact that you have not borrowed, to improve your rating the best you can do is ensure the loans cards you have are paid on time and you dont into overdrafts etc too excessively. People fail credit scores but when we receive a failed credit score it is not immediate to why this has failed a number of things are because of it, nd as stated before this could be due to the fact that you have no credit or borrowing at all, its all very fickle!!
I tried the 37 Day credit program and it works. I was able to raise my credit score by 105 points in less than 30 days.
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Great question!
Here's a better idea. Instead of focusing your efforts on how to attain a higher credit score, why not ask the question that wealthy people ask themselves, "How can I build my net worth?"
Have you ever noticed that so many people in this country have plenty of credit cards and car payments, but don't have any actual money? That's because they are sending every dime they make to creditors. People with high net worths avoid credit cards and expensive car payments.
Building wealth is not that hard and it gives you peace of mind when emergencies pop up.
Check out these two great links from financial advisor Dave Ramsey for more information!! Good luck in your financial future!!
http://www.cbsnews.com/stories/2005/10/18/earlyshow/living/money/main951008.shtml
I always wandered if there was lyrics to that tune.
The advertisement for Free Credit score is not only lame but a fraud….It IS NOT FREE! Dolt.
Yooo having good credit makes life so much easier