Tag Archives: credit

Credit card companies are watching your purchases

While I don’t recommend using credit cards to rack up debt, the unfortunate truth is that maintaining a credit history can be an important part of good finances. After all, your credit history is what determines interest rates and credit-worthiness for even “good” debts like mortgages and (sometimes) car payments. Even if you have a zero tolerance policy when it comes to all debt, your credit history can affect your car insurance rates, job search, and your ability to rent an apartment.

As the economy worsens, credit card companies are looking for excuses to cut spending limits or close accounts. Both of these actions can negatively affect your credit history.

Even if you’re a responsible credit card user, you may be using your card on monthly purchases or charging things just to maintain your credit activity and avoid account closure. Well, it turns out credit card companies could be watching even responsible purchases to weed out users who they deem a poor risk.

Last week, I read an interesting article outlining the top 10 purchases not to make on a credit card. According to the article, credit card companies are watching statements closely to look for “red flags” that may indicate borrowers are in trouble. The most surprising item on the list: bargain shopping. It turns out that using a credit card at a bargain store like Wal-Mart signifies to credit card companies that you may be in financial trouble. Also on the list: tires and other big ticket necessities, marriage counseling, and income taxes.

I don’t know about you, but we’ve definitely charged big ticket items like tires or plane tickets on a credit card just to keep the account active. Even though we have the cash, we make the purchase with a credit card to keep the account active and rack up rewards points, then pay it off immediately when the statement arrives. I had no idea that could lead credit card companies to take action that could negatively affect my credit score.

To me, this is just another reminder of why credit cards stink. On the one hand, they’re necessary to build and maintain a good credit history, but I absolutely hate being at the mercy of a credit card company even now that I don’t carry any consumer debt.

Why I’m using credit cards again


Tony and I have been credit card debt free since January of this year. But for the past couple of months, we’ve started using our cards again every month.

Don’t worry, it’s not what you think. We still don’t carry a balance, and we probably never will again. But we also don’t want to leave our credit cards with a zero balance for longer than a month or so right now.

I’m sure you’ve heard about credit card companies reducing credit lines or even closing unused accounts. By not using your zero-balance credit cards, you may be targeting yourself for account closure.

As much as I hate that it works this way, your credit history is tied pretty strongly to your credit card history — especially if you’re like me and you’ve never had a car loan or a mortgage.

I opened my first credit card at 18 years old. I didn’t open another one until I was 23 years old. If my first credit card account was closed, it would shave 5 years off my credit history. Since length of history is a factor in determining your credit history and score, it’s likely mine would take a big hit.

Even though we plan to live as debt free as possible, I’m not against the idea of holding a mortgage or another car loan someday. If I want to get a low interest rate, though, keeping my credit history healthy is crucial.

To ensure that my accounts stay open, I’m using them a little bit here and there. Using credit cards at all can be a little dangerous, so I’m very careful to set boundaries.

  • I never use them to purchase things that I want, only regular needs that I would be spending money on regardless (gas, groceries, and other necessary purchases).
  • I pay the balance as soon as I receive the statement.
  • I budget for these purchases just like any other purchase. This is crucial. I’m not using my credit cards to sidestep my budget. They’re just another way to pay for regular purchases.

It’s definitely a hassle, and I wish we could get away with not using them at all. But unfortunately this is a reality of our current economy. I want to protect my credit history and credit score so that when we’re ready, we can qualify for a low interest rate on our mortgage or (maybe) car loan.

Photo by andresrueda

Do you know where your money is going?

One thing I’ve learned from the mortgage and lending crisis — you can’t be too familiar with the terms and conditions of your loans, investments, and credit cards.

Now that we’re facing a credit crisis, it’s more important than ever that you’re familiar with the policies of your lenders and investment firms as some institutions are making changes to their policies.

Take some time this month to educate yourself on where your money is really going and whether you’re getting the best deal.


  • How much interest are you earning on your savings and checking accounts? What are your options for increasing your interest rate? (Consider moving your savings to ING Direct for a 2.5% interest rate.)
  • Are you paying monthly fees for your accounts? If so, it’s probably time to switch banks. There are many banks that offer completely fee-free accounts.
  • How much do you pay for ATM fees and other transactions? You may be surprised to find out how much you’ve been spending on certain transactions.

Credit Cards

  • Is your account still open? Some credit card lenders have started closing dormant accounts, so if it’s been a while since you used your card, check and make sure it hasn’t been closed due to inactivity.
  • What is your interest rate? This may have recently changed, so check your statement or call for the most current information.
  • What is your credit limit? It also may have recently changed, so make sure you know exactly how much it is. A lower credit limit can affect your credit score.


  • How much are you paying per transaction? If your fees are high, consider investing in lump sums less frequently to make the most of your fees.
  • If you’re paying high fees, consider moving your investments to no-load mutual funds through discount brokers or investment firms.
  • Take some time to check out the prospectus report for your investments. Is it time to change your portfolio?
  • How much time do you have until retirement? If you’re planning on retiring in 5 years or less, it’s time to move your investments out of the stock market and into low-risk bonds. If you’re young, now is a great time for stock market investments because prices are low and you have plenty of time for the market to rebound from its current state.

Mortgages and other loans

  • Are you eligible for refinancing or consolidation? If your credit is good, now might be a good time to consider refinancing for a lower interest rate.

It can be a pain to track down this information, but it’s worth it to know where you stand. Not only is it important to know where your money is going, but it’ll give you a chance to determine if you’re getting the best rates, fees, etc. As long as the market continues to fluctuate, I suggest you take stock of your finances every 3 months to make sure nothing has changed.

Starting the new year credit card free!

photo by b.franchina

This morning I sent my final payment to American Express. We’re officially credit card debt free!! In the past year, we’ve paid off almost $5,000 in credit card debt. I’m pretty proud considering how low our income was for a big part of the year. :)

Unfortunately, we still have quite a ways to go before we’re totally debt free — we have a combined total of about $60,000 in student loan debt. :( But we’re a lot better off than we were a year ago. Now I know what works, and I can apply the same principles to our student loan debt.

I’m hoping to have my $20,000 private loan paid off in 2 years. It’s a pretty lofty goal considering it took us a year to pay off less than $5,000 in credit card debt, but we have more income now and we’re getting better at frugal living.

The student loan debt is overwhelming, but I keep reminding myself that I once felt that way about my credit card debt. High balances and high interest rates made it feel impossible to get ahead. But I just kept sending those payments every month, watching the balance slowly decrease until it was manageable.

I’m looking forward to getting those student loans out of my life using the same method.

It sure wasn’t this hard to get the student loans in the first place …

This week I received the loan application and promissory note for my private student loan consolidation. According to the letter, I’ve been “conditionally approved.” If all of my paperwork is sent back correctly and verified, I’ll be actually approved. If I’m able to consolidate these loans, I’ll cut the interest rate and minimum payment almost in half. I’ll also have a shot at paying them down in less than 5 years.

First I need to send in a long list of documents, including a recent statement from the lender with all the loan information, my latest pay stub, a copy of my driver’s license and degree, and a copy of my marriage license since the original loan is still under my maiden name.

I was on hold for an hour Tuesday night trying to get some questions answered about the documents. The list they sent me wasn’t as clear as the one above.

Once I’ve submitted all of the documents, loan processing will begin. They will verify my employment, check my references, etc. They already ran a credit check to conditionally approve me, but they may run a more detailed credit check before the loan is officially approved.

As I go through this process, I can’t help but think back to six years ago when I first took out student loans. It was a lot easier. I filled out FAFSA, which qualified me for a certain amount of student loans. Then I filled out an application, signed it, and they sent me money. They didn’t ask me any questions about employment or monthly expenses. They didn’t even ask if I fully understood the loan.

I absolutely take full responsibility for my decision to take out these student loans. It was my mistake, and believe me, I’m paying for it now. My point is just that I was only 17 years old when I started my freshman year. Because I was turning 18 within a certain number of months, they allowed me take out loans even though I was a minor.

I understand that student loans exist to ensure that every student has the chance to attend college. That’s great. However, it seems to me that if you’re going to allow a minor or even an 18 year old to take out a loan that can never be discharged, not even in bankruptcy, there should be stricter safe guards in place to prevent predatory lending, especially since repayment doesn’t begin until four or five years later. How can an 18-year-old know if they’ll be able to afford a $300+ a month payment in four years? Most of them don’t even know what their careers will be.

Student loans made it possible for me to go to college. That’s nothing to snuff at. But if I had known what I was getting myself into, I would have borrowed a lot less money than I did. I also would have stayed away from private loans and stuck with low-interest federal loans.

Obviously, I should have known better. But I didn’t, and neither do a lot of 18-year-old kids. I remember thinking that it was a lot of money as I filled out the application. I also thought, “I won’t have to worry about this for another four years. By then I’ll be a college graduate, making a ton of money!” Ha. Yeah right.

I remember how I thought about money at 18, and I think about the other 18 year olds I knew. I can’t help but think, “No wonder so many people my age are in this mess.”

Finally on my way to paying down my student loan debt

Last night I called Chase to find out more information about consolidating my private student loan debt for a lower interest rate. I was hesitant to call. With the stock market rebounding yesterday, part of me wanted to wait another week or so to see if the credit market stabilizes a little.

The truth is I was just being a chicken. The economic crisis isn’t going anywhere in the next 6 weeks, so I figured I might as well get this out of the way to find out my options.

Not only do they still offer private loan consolidation, but I’m approved! I answered all of the questions over the phone, they ran a credit report, and approved me based on my credit score, income, etc. Now they’ll send me a loan application and promissory note, which I’ll sign and return with the necessary legal documents.

Honestly, just finding a lender who is willing to issue this type of loan was the hardest part. I’ve worked hard over the past year to raise my credit score, and it seems to be paying off. I doubt I could have gotten this loan in this economic market without a good credit score to back me up.

Depending on the interest rate they offer me, I could see a 50% decrease in my current interest rate. That’s going to translate into thousands of dollars by the time the loan is paid off. It will also mean a lower monthly payment. We’ll continue to send the amount we’ve budgeted for debt repayment ($325 a month plus additional snowflakes), but more of our payment will be going toward the principal instead of interest.

This is a huge relief. I’m hoping now that I’ll be able to get the loan processed without any kinks so I can finally start paying off this debt.

For the past 2 years these student loans have been the source of a huge amount of anxiety for me. They’ve been in voluntary forbearance, which means my credit score has not be adversely affected even though I’m not currently making monthly payments, but the interest has continued to compound. I hated that they were continuing to accrue interest, but I just couldn’t pay both my credit card debt and student loan debt at the same time under our previous financial situation.

I decided it would be best to put the student loans on the back burner so I could focus on getting out of credit card debt. Credit card companies aren’t as forgiving of missed monthly payments as student loan lenders, and they don’t offer voluntary forbearance. They also have higher interest rates.

Watching this debt grow as the interest has continued to compound and knowing that I’m not doing anything about it has been the hardest part. Now that I’m on my way to paying it down, I already feel a lot better. I can finally see the light at the end of the tunnel. I’ve managed to get out of credit card debt, which was once equally overwhelming, so I’m feeling encouraged.

I just hope it continues to go smoothly!

Credit crunch hits close to home

With only two payments left on my credit card debt, it’s time to get serious about paying down my ridiculous private student loan debt.

For the past year, I’ve been working hard to claw my way out of leftover debt from college. My first goal was to focus on my high-interest credit card debt. I can’t tell you how thankful I am that we’re almost completely credit-card-debt free just as the financial world is crumbling.

After paying down credit card debt, my next goal is high-interest private student loan debt. My plan was to lower my 8-12% interest rate by consolidating my high-interest private student loans at today’s lower rates. I planned to attack those loans for the next three years until only our low-interest federal debt was left.

I’ve been keeping an eye on two separate lenders for private loan consolidation: CitiBank and Chase. Since it takes about 6 weeks for processing and my forbearance period ends at the end of December, it’s now time for me to apply for these consolidation loans.

Last night I logged into CitiBank’s website to find out what information I would need to gather to apply this week. Unfortunately, it appears that CitiBank has stopped offering this type of loan in the past two weeks. I guess it’s not surprising, but it’s certainly disappointing.

Private student loan consolidation is still listed as an option on the Chase student loan web site. However their information hasn’t been updated since June. It’s highly possible that they’re no longer accepting new applications either. Sigh.

My credit score is excellent, so I’m hoping I’ll be able to find a company that’s still offering private student loan consolidation. Unfortunately, my timing couldn’t be worse. I need to find a lender before December at pretty much one of the worst times in history to get a loan. With lenders cracking down even on credit limits, this type of high-risk private student loan consolidation seems to be next to impossible to get even for people with high credit scores.

We’re currently devoting $325 a month to debt. Without consolidating to a lower interest rate, my monthly payment is about $300. Luckily, we have enough money in our budget to cover the payment as is, but I was hoping to cut our minimum monthly payment in half. If our minimum payment was only $160 and we continued to send $325+ every month, it would greatly reduce the amount of time it took to pay down the debt. If we could gradually raise that amount to $500 a month, we could pay off $20,000 in about three years.

Obviously, things could be much worse. Even if we have to keep the high interest rate for a little longer, we’re still better off than we were a year ago with $4,000 in credit card debt.

I’m grateful that we’re able to make ends meet and save a little money at the same time even as the financial market crumbles around us. It’s still a bummer. I had lofty goals to pay off my private student loan debt in the next three years. If we can’t get a lower interest rate, then that’s clearly not going to happen.

I’m calling Chase tonight to see if I have any options with them. If not, I’ll call my original lender and see if I can bargain for a lower interest rate. I’m hoping I’ll have some bargaining power thanks to my high credit score, but I’m kind of doubting it. With lenders cutting credit limits and saying “see ya” even to responsible borrowers to reduce their credit risk, I’m thinking they’ll be unlikely to take on a loan like this.

Just goes to show how much harder it is to achieve lofty goals in this crazy financial market …


Free (and I mean really free, no strings attached) credit score

This morning, Wise Bread shared a link to Credit Karma, a new site that offers free credit scores as often as you want. Unlike other services like FreeCreditReport.com, you don’t need to enroll in a service that later requires you to spend 20 minutes on the phone repeatedly telling an operator, “No, thank you. I’m quite aware of the benefits of your service, and I’d still like to cancel.” It’s really free, no strings attached, no credit card required.

It only takes a minute to sign up. You will need to enter your social security number for them to access your score, but I did some exhaustive research, and it’s about as secure as the Internet gets.

So if you’re curious about your score, head over and check it out!