Christmas On The Card

While some shoppers look for Christmas savings others are ringing up holiday debt. Area credit counselors say many people spend beyond their budget during the holiday season, causing problems for those who have trouble paying their bills.

Credit counselors say there are several things people can do to stay within your budget. First, avoid using your credit card at all costs. Second, look for discounts, sales, and other bargins to keep cost slow. Third, just like Santa make a list and stick to it. Finally don't be a last minute shopper, when you shop at the last minute your budget goes out the door.

Karen Atwood is the Executive Director of the Consumer Credit Counseling Service of Northeast Iowa. She says people also need a plan when shopping. "Unless there is a plan to spend a certain number of dollars when you get to the shopping center you'll spend whatever you have. You'll go beyond that."

Many people don't feel the effects of a Christmas spending spree until January or February. Counselors say that's a bad time of year to have extra bills with heating costs on the rise.

How your credit card habits affect your credit score

Question: I have excellent credit and usually don't carry a balance on any credit cards because I pay the entire credit card balances every month.

This keeps the low or zero introductory rate offers coming my way on a regular basis. If I decide to sign up for one of these credit card offers, I will generally pay off the entire balance just before the introductory balance is due to expire. Is there anything wrong with this approach? Is it helping or hurting my credit score? Also, does having several credit cards with zero balances have any negative impact on my credit score? How many is too many? If I use these cards once a year to keep them active and pay off the entire balance by the due date, am I hurting or helping my credit score? Jamileh.

Answer: Each credit score is based entirely on the credit information in a person's credit report at the moment it is calculated. But according to Craig Watts, public affairs manager at the Fair Isaac Corp., people who faithfully pay their entire credit card balance every month are often surprised to see a balance -- not a zero balance, but a dollar balance -- for that account on their credit report.

This occurs because creditors usually report to the credit bureaus every month the same account balance that they communicate to card holders in their monthly billing statement. "While paying off the entire balance every month is great discipline and avoids interest charges," says Watts, "it is more important for a person's FICO score to keep reported usage low on any credit cards."

In other words, for a higher FICO score -- Fair Isaac created the formulas that calculate many credit scores; therefore, the term FICO score -- consumers should keep their monthly bill low on every credit card, since that balance is likely to be the same information that is reported to the credit bureaus.

Watts also advises that opening a new credit account often will lower someone's credit score slightly, since each new account correlates, at least statistically, with increased risk of future credit delinquencies. Typically the person's score recovers over the next few months because scores improve steadily in response to on-time credit payments and low account balances.

It won't hurt your score to have credit cards with zero balances - as long as you never use the cards. At the same time, however, you also are not helping your FICO score because the FICO score is based on your credit activity, both positive and negative.

Finally, there is no single "right" quantity of credit cards for all consumers since everyone's situation is different. "Someone who is just starting out managing credit could represent a high risk to lenders simply by opening two or three credit cards in the first year, whereas someone with a long track record of responsible credit use might not raise any lender eyebrows by opening two or three cards in a year," says Watts.

The FICO score uses similar logic when assessing the risk represented by the quantity of open credit card accounts on the person's credit report. Your last question "describes rather neatly the kind of credit usage that typifies people who have very high FICO scores," according to the Fair Isaac spokesman. "Such consumers often have a long credit history of maintaining few accounts and using them sparingly, with low account balances and no missed payment deadlines."

By Lew Sichelman at http://www.marketwatch.com/

Charges on credit cards

You think the only purchase you made with it the previous month was at the gas station. Do you know what rights you have regarding fraudulent purchases on a credit card in your name? If these problems have not happened to you yet, you are lucky.

These are common situations credit card users face every day. It can help you to know before something like this happens to you what your rights are. What your responsibilities are in the matter. When You Are Not Satisfied with Purchase One of the benefits of using a credit card to make purchases is the additional protection they provide if you make a purchase that you are unsatisfied with. Maybe you used a credit card to pay the contractors who were hired to repair your shower leak.

There is still water on the bathroom floor. You are not satisfied with the work they completed. The problem is. Your first step is to contact the contractor. The merchant is more than happy to replace a broken item. If for some reason the merchant decides they are not going to do anything to correct the situation.

Charges You Didn’t Make Did you know that federal law is involved in helping limit credit cardholder’s responsibilities for charges on credit cards that they did not make themselves? There is a process you should follow to get it resolved as quickly and painlessly as possible.

Call the credit card company and explain the charges that were not made by you. They will give you instructions as to what to do next. You should take the time to find and review all of your recent credit card statements in case there were other charges that you may have missed. The credit card company will most likely ask you to sign a form to confirm that you were not the one who made the charges in dispute.

The Latest On Credit Card Debt

If you're carrying a huge credit card debt, then you're not alone. The latest figures from debt education charity Credit Action shows that UK consumers are carrying an average of £4,508 of debt on credit cards, car loans, overdrafts, retail finance and unsecured personal loans. And this debt is costing an average of £3,204 a year in interest payments.

But that's not all. The same figures show an average UK debt of £26,747, which rises to £50,918 when you take mortgages into account. The Citizens Advice Bureau puts the average debt of its clients at 17.5 times the average monthly salary. That's a lot of debt.

The situation is not helped by the junk mail offering new credit from credit card providers. It was recently estimated that people were getting more than 13 offers of new credit a year, whether they had financial problems or not.

The answer to the rising tide of debt – and let's not forget that the average British credit card debt is twice that of the average West European – has been an increase in the numbers of people opting out of repaying debt altogether.

There has been a significant increase in the numbers of people taking out individual voluntary arrangements (IVAs) to say goodbye to most of their debt. People like these because their interest is frozen, a payment is agreed and then at the end of five years most of the debt is written off. There are even some who are going for bankruptcy. Research from debt consultancy Thomas Charles showed that the number of people seriously considering bankruptcy had increased by more than 27 per cent in the last quarter to 1.4 million.

And what about those of us who slog along trying to repay the debt? Well, we're likely to experience the fallout in terms of higher bank charges and stricter approaches to bad debt. This is already happening and some pundits are predicting that the rise in bad debt could spell the end of free UK banking.