7 Perks of a Joint Credit Card

Applying or cosigning for a credit card with your loved one has its risks. The credit card and its activity appear on both of your credit reports, and you're both responsible for the balance. If your loved one has good financial habits, however, a joint credit card account comes with a lot of perks.

From helping you combine your finances to building credit and racking up rewards, a joint credit card is a great financial tool for couples. Here are seven reasons why you should open one.

1. Earn Credit Card Rewards Faster A credit card rewards program offers one of the fastest and simplest ways to earn freebies. If your card features this perk, you can earn points or cashback on every purchase. After you accumulate enough points, you can redeem them for merchandise, travel, statement credits, or cash. But even if you're earning one point or 1 percent cash back on every dollar you spend, it takes time to accumulate rewards. A joint credit card, on the other hand, helps you rack up more points.

Since you and your loved one will have access to the same credit line, you will have more opportunities to earn points. In this way, a joint credit card can be an excellent tool if you and your partner are planning a vacation and want to accumulate as many points as possible to redeem for free airline tickets, hotel stays, and more.

2. Boost Both of Your Credit Scores A joint credit card appears on both of your credit reports and affects both of your credit scores. This can be a good or bad thing depending on how the two of you manage the account. It might be your partner's responsibility to send payments each month. Just know that if he consistently makes late payments, your credit report will reflect this.

On the other hand, if you both manage the credit card responsibly by paying the bill on time and only charging what you can afford, both of your credit scores will benefit. A higher credit score means you'll be able to qualify for lower rates when applying for financing in the future.

3. Qualify for Credit Cards With Lower Rates

One in three U.S. adults says their households carry credit card debt from one month to the next, according to the 2015 Consumer Financial Literacy Survey prepared for the National Foundation for Credit Counseling. If you don't pay off your credit cards every month, it's important to find a card with the lowest rate possible. This reduces interest charges, allowing you to pay off balances faster.

Unfortunately, if you have less-than-perfect credit and apply for a credit card alone, you're not likely to get a low-rate card. The higher your rate, the more you'll pay in the long run. If you apply for a joint credit card with your partner, however, and they have excellent credit, you might qualify for a card with a lower rate and higher credit limit.

Your credit card company will evaluate both of your credit scores when determining whether to approve your joint credit card application. In some cases, one applicant's good credit history can compensate for the other applicant's fair or bad credit history.

4. You Are More Accountable for Purchases

If you have your own credit card and you're the only one managing the account, it's easier to overspend, purchase things you don't need, and ring up a huge credit card bill. When you share an account with your partner, there's an accountability factor.

"It just gives both parties a reason to pause a moment and give some extra thought before making a purchase. You know that another person will see what is being charged," said Joan Fradella, a certified family mediator at Divorce thru Mediation. "It causes you to think about whether you are being reasonable about your total charges compared to income."

When you're fully aware that another person will see every single charge you make -- and likely ask questions or become upset over unreasonable charges -- you're liable to be more responsible, forgoing impulse purchases and maintaining a reasonable balance.

5. Joint Credit Card Accounts Are Easier to Close

Nobody wants to think about death, but it's an unfortunate part of life. If your spouse dies, you might decide to close all of his or her personal credit card accounts after paying off the balances. But when you're not an account holder, shutting down an account for someone isn't as simple as calling the credit card company and making a request.

It's faster and easier to close a credit card account when you're a joint account holder. Marcia Noyes, director of communications at Catalyze, learned this lesson the hard way when her husband died in 2013. "With a joint credit card, one person can shut down the account when the other dies," she said. "Without it being a joint account, it takes an act of Congress -- death certificate, Letters of Testamentary and your information."

6. Manage Shared Expenses More Easily

If you share expenses with your spouse, such as groceries, entertainment, or recreation, using a joint credit card might be one of the best ways to track and split expenses down the middle. Since everything appears on the statement, you'll know exactly what was spent between the two of you. You and your partner don't have to worry about exchanging money or writing each other a check. Simply use the joint credit card and then pay off your share of the balance.

7. You Have Full Privileges and Access

Getting a joint credit card isn't the only way to share an account with someone. You can also add someone as an authorized user to one of your credit cards. This person can use your credit card account, and this account might appear on his credit report -- allowing him to benefit from your good credit habits. But since this person isn't a primary account holder, he doesn't receive the same privileges as a joint account holder.

He can't call the credit card company to inquire about balances, request a credit limit increase, ask for a lower rate or dispute a charge. A joint account holder, however, has full account privileges.

Some people might discourage you from getting a joint credit card account because of the inherent risks. But depending on your situation, a joint account can be financially beneficial. When opening your joint credit card make sure you understand the risks and benefits and only share a credit card if you trust that the other person will use the account responsibly.

4 Myths About Credit Cards That Should Be Retired

Until recently, it could be expensive and confusing for the average consumer to access their credit scores and reports. A side effect of this was a proliferation of rumors about the best way to manage credit. Like any good urban legend, it’s hard to know exactly where these got started. Since Credit Karma launched in 2008 we’ve heard a lot of them and have done our best to put them to rest.

One way that these myths can have an everyday impact on consumers is by influencing how they manage credit cards, the most common form of consumer debt. There are four major credit card myths that come up a lot and need to be retired, mistaken beliefs that can have the opposite effect on a credit score than some consumers imagine.

Carrying a balance helps your credit score

One of the most persistent myths about credit scoring is that it helps your score to carry a balance. The truth is you don’t need to pay a single penny of interest to have a great score. What’s worse, carrying a balance could actually be hurting your score. It is generally advisable to keep your credit card utilization rate (the amount of your credit limit you’re actually using) under 30 percent. Looking at data from Credit Karma members that pulled their credit profile in 2014, we can see that members with a utilization rate between 1 and 10 percent had the highest average credit scores – with scores falling away from the closer you get to 100 percent. Lenders want to see that you can use credit wisely, but if you’re using too much of your balance you’re seen as a higher risk. Using your credit cards each month and paying them off will show your creditworthiness and could help your scores.

Missing one payment isn’t a big deal

One of the easiest ways to potentially hurt your credit score is to make a late payment. Being more than 30 days late on just one payment can hurt your score significantly and late payments can linger on your credit report for over seven years. Your credit score is designed to be an indication to future lenders about how likely you are to repay debts in a timely manner, and your on-time payment percentage is an important factor in working that out. Try and develop a system that works for you, to put yourself in the best position possible to not miss a payment. Set up calendar reminders, enroll in auto bill pay, or take time to clear outstanding bills on payday. It’s not just your score that could get hit when you miss a payment, some cards also add on late fees and penalty APRs.

You should close cards you’re not using

If a card charges an annual fee, you might be better off closing it. But if there’s no immediate benefit to shutting it down, it could be in your best interest to keep it open. For a start, having more accounts open means a higher overall credit limit – assuming the temptation doesn’t result in you charging more to your cards – and could result in a lower credit card utilization rate, which credit scoring models take into close consideration. If you close an account but don’t curtail your spending, your credit utilization rate will go up and your score could fall. Closing a card can also lower the average age of your accounts. It generally isn’t as influential a factor on your score as utilization rates, but some credit scoring models only look at open and active accounts when calculating the average age of accounts and subsequently your score can take a hit, especially if you close a card that is significantly older than others.

Being an authorized user on somebody’s credit card has no impact on you

Becoming an authorized user on someone else’s credit card is a double-edged sword. You’re generally not legally responsible for the debt associated, but your credit score can be affected for better or worse since credit bureaus typically treat these credit cards as if they were your own. These cards can add years of positive credit to your report, but on the flip side, if the primary account holder misses a payment, you can miss a payment. If they have a high credit card utilization rate, you might as well. For many people, being an authorized user on someone’s account is seen as a pathway to building credit, but in the wrong situation, it can have the exact opposite result.

Source:https://blog.creditkarma.com/credit-cards/4-myths-about-credit-cards-that-should-be-retired/

10 Common Reasons Merchants Reject Your Credit Card

Did a rejected credit card leave you stranded at the point of sale? Knowing why this happens can help you avoid such mishaps in the future.

You’ve spent months scouring the Internet for the perfect washer-and-dryer combo to complement your newly renovated laundry room. Finally, you’ve located what appears to be the right match at a great price.

Suddenly the deal is off. Your credit card won’t go through, and you have no other immediate form of payment to use.

It’s happened to many of us, and it’s not always the result of financial irresponsibility.

Here are factors that could trigger a credit card rejection, along with tips to remedy the problem.

1. Maxed-out card

Exceeding your credit card’s spending limits can have negative consequences, both in the form of fees and denials.

It also can damage your credit rating because of the utilization factor, which accounts for 30 percent of your FICO credit score.

If you’re close to the limit, you can try to request an increase. But don’t use that as an excuse to go on a shopping spree and increase the height of your debt mountain.

2. Fraudulent purchases

If your credit card issuer suspects a fraudulent purchase is being made with your card — or if you have actually reported such fraud — it will prompt a freeze.

Such activity — real or suspected — also could result in the closure of the current account, followed by the issuance of a new card.

If your account is frozen, promptly contact your credit card issuer to validate the purchases.

3. Authorized user dropped from the account

Perhaps you have been an authorized user on a credit card account, but the person whose name is on the card has decided to revoke your rights. In such instances, you will be cut off from using the account.

You can also lose temporary access if the cardholder has reported the card as lost or stolen.

To avoid being caught off-guard, simply keep the lines of communication open with the person whose name is on the card.

4. Transaction holds

Transactions such as securing a hotel room or renting a car could result in a hold being placed on your account. If you are close to your credit card’s limit, the card could be rejected at a subsequent point of sale until you’ve paid the final bill and the holds are lifted.

To avoid running this risk, keep your balances low to maintain a large amount of available credit.

5. Foreign/international transactions

Foreign transactions can raise credit card companies’ suspicions about fraudulent purchases being made with your card, resulting in a freeze on your account. That can be true even if you are in the U.S. but making a foreign purchase online.

The solution? Before you travel, let your credit card company know that you will be far from home, including where you will be and when you will be there. And always alert them in advance about foreign transactions conducted online from the comfort of your own home.

6. Unusual purchases

If you make a purchase that seems odd based on your prior spending behavior, it may be flagged by the credit card company.

Two years ago during Black Friday, I headed to Saks Fifth Avenue in search of some goods whose prices were steeply reduced. My purchases came to $458. The card was quickly denied.

When I called the bank, it released the hold but told me that because I usually don’t shop at “high-end” stores, the bank figured my credit card information had been stolen.

Let your credit card company know if you plan to shop at a different type of store or to make a usually large purchase. At the very least, always have a backup way to pay.

7. Delinquent accounts

Ignore the balance due long enough and the magic plastic may suddenly lose all of its powers. Whether you suffer this fate depends on the issuer and your history with the company.

Other negative consequences that may result from not paying your bill include:

• Damage to your FICO score once the activity is reported to the credit bureaus.
• Lower credit limits if the issuer views you as a greater risk than before.
• Fees for late payments.
• A higher interest rate.

To avoid the risk of delinquency, set up payment reminders. If money is tight, reach out to the creditor to see if payment arrangements can be made or whether any additional remedies are available to you.

8. Card has expired

If you didn’t get a new card in the mail before your card’s expiration date, call your card’s issuer. It is possible you have been a victim of mail fraud.

Of course, it’s also possible that the card was mailed to you, and you mistook the envelope for a piece of junk mail before tossing it in the trash.

9. Transposed numbers

Sometimes you are asked to provide a ZIP code or the security code on the back of the card to confirm your identity at the point of sale. Mix up any digits, and rejection will follow.

You can always retry. But if you make too many errors it may prompt your credit card issuer to lock you out of using the card until you call to explain what happened.

10. Closed account

A credit card company can close your account for all sorts of reasons, and it doesn’t have to give you advance notice. CreditCards.com says:

Even if you’re not in default, an issuer can boot you at any time. The most common reason is that you’re not using the account often enough.

To lower the odds that your account will be closed, simply be a good customer. It’s a good bet that your card company will keep you if you use the card regularly and responsibly and always pay your bills on time.

Has your credit card been rejected at the point of sale? Tell us about it in our Forums. It’s a place where you can swap questions and answers on money-related matters, life hacks, and ingenious ways to save.

Source: http://www.moneytalksnews.com/9-common-reasons-your-credit-card-was-rejected/?all=1

How Is Credit Card Interest Calculated?

How is credit card interest calculated?

Paying credit card interest is painful enough. Figuring out how that interest is calculated? That’s almost as bad! The entire process is rife with complexity — and not always set in stone.

Still, if you’re carrying a balance on a credit card, you should know the science behind how much interest you’ll ultimately pay. This post aims to answer the question: “How is credit card interest calculated, anyway?”

How to Calculate Credit Card Interest

When you’re carrying a balance on your credit card, you probably focus most of your attention on your card’s APR, or annual percentage rate. Although that’s a decent way to figure out how much you’ll pay over time, it’s not the best.

Why? Because credit cards don’t add interest to your account annually as the name suggests – they actually charge interest every day.

This daily interest calculation is decided on using your cards DPR, or daily periodic rate. You can figure out your DPR by taking your APR and dividing it by the number of days in the year.

One caveat, though: Some banks divide by 365, while others divide by 360. Confused yet? We thought so.

Here’s an example that shows how it works:

Let’s say your credit card’s APR is 11%. Divide that number by 365, and you’ll discover that your daily periodic rate is 0.03%.

Here’s where things get even trickier. When credit card issuers charge interest using your DPR, they figure how much you owe using your average daily balance. This is because your credit card balance can vary widely throughout the month as you make partial payments or more purchases.

Here’s an example to illustrate how this works:

Let’s say you owe $500 on your credit card at the beginning of the month. Fifteen days after the new billing period begins, you charge another $500 on your card. Your card issuer determines your average daily balance for the month by multiplying each balance by the number of days you carried it, then combining them and dividing by the total number of days in the month:

($500 * 15 days) + ($1,000 * 15 days) = $22,500/30 days = $750

Using the daily periodic rate above, you’ll be charged $6.75 in credit card interest that month:

$750 * 0.0003 * 30 days = $6.75

How Is My APR Decided in the First Place?

No one wants to pay a lot of credit card interest, so it’s always in your best interest to choose a card with a low APR. The good news is, there is a wealth of credit card offers with low APRs, or even promotional 0% APRs, on the market. The bad news is, you may not always be able to qualify for them – at least not yet.

That’s because card issuers use your personal information and credit history to determine what type of interest rate they’ll charge you.

For example, those with good and excellent credit who have scored over 690 will generally qualify for cards with the most attractive rates. Meanwhile, those with a FICO score in the average, poor, or bad range (630 and below) may have trouble qualifying for cards with the best terms. Compare your FICO score to these credit ranges to see how your score stacks up:

• Excellent credit: 720 and up
• Good credit: 690 to 719
• Average credit: 630-689
• Bad credit: 300-629

If your score isn’t where you want it to be, take some steps to improve it over time. Above all else, those steps should include paying all of your bills on time, paying off as much debt as possible, and taking care of any delinquent accounts or inaccuracies on your credit report.

Once you do, credit reporting agencies will take note and adjust your score accordingly.

How to Avoid Paying Credit Card Interest

If you hate the idea of paying credit card interest on your purchases, one tried and true method will save you heartache every time. Pay your balance on time and in full every month, and you’ll never have to estimate an interest payment again.

That’s right; staying out of debt is the only true way to avoid paying interest on your purchases. Here are a few tips that can help you avoid paying interest altogether:

Set a reminder to pay your bill early: All credit cards offer a 25- to 30-day grace period where you won’t be charged interest on your purchases. Paying your bill in full before your due date can help you avoid paying interest altogether.

Only charge what you can afford to pay off each month: If you’re worried about overspending, only use your card for purchases you have the cash in the bank to pay for. One way to keep track is to carry a notebook in your pocket and write down each purchase you make on credit.

Take advantage of a 0% APR balance transfer offer: If you’re paying too much interest on a balance, you might want to consider transferring your balance to a different card with better terms. Some cards even offer 0% APR on balance transfers for a limited time.

Use your card only in emergencies: If you’re still worried you’ll overspend, it might be wise to save your credit card just for emergencies. For everyday purchases, stick to cash or use a debit card connected to your bank account.

Source:http://www.thesimpledollar.com/how-is-credit-card-interest-calculated/

7 Dangerous Credit Card Mistakes You're Making

Consumer credit makes buying the stuff we want and need easy and convenient. Credit can also bail us out of a jam, especially if our emergency funds aren't quite up to the task. Unfortunately, that convenience comes at a price. Aside from uncontrolled, in-the-moment spending, credit card use opens us to a variety of dangerous financial mistakes, some with long-term effects.

You probably already understand the dangers of running up those credit card balances, but here are few more dangerous mistakes you may be making, plus some tips on how to avoid them.

1. You only pay the minimum due. Banks use several formulas to calculate the minimum amount due each month. Most start with a percent or two of the outstanding balance and then add in any fees for late payments, exceeding the credit limit, and monthly interest charges. However it's calculated, simply paying the minimum will result in lots and lots of interest payments over time.

You can find out how your credit card issuer calculates the minimum payment by visiting your issuer's website. Your bank's site may also include a calculator that shows you how long you'll owe -- and how much interest you'll pay -- if you merely pay the minimum. If not, try this credit card debt calculator.

2. You pay late. According to FICO, which generates credit scores, payment history is the largest component of a credit score -- 35 percent of the score, in fact. This makes sense because lenders want to know how promptly borrowers have paid in the past, and nobody likes getting paid late. Late payments mean a lower credit score.

There's a second danger here as well. Late payments will result in late payment fees from your bank, which not only cost you a bit more (or a lot more, depending on your agreement) but may also boost your monthly minimum (again, depending on your agreement).

3. Your utilization ratio is too high. After payment history, FICO looks at the "amount owed," which makes up 30 percent of a credit score. The key calculation here is the borrower's credit utilization ratio, which is how much available credit you use. For example, if you have a card with a $5,000 credit limit and a $2,500 balance, your utilization ratio is 50 percent. In generating the score, FICO analyzes each account and the total of all your accounts.

A high utilization ratio can harm your credit score, which impacts your ability to secure loans on favorable terms. It also means you have less credit available for emergencies. High utilization ratios may also indicate some deeper financial difficulties. If yours is creeping up, it may be time to do some serious budgeting.

There is no hard-and-fast rule, but many personal finance experts advise consumers to keep their utilization ratio below 30 percent.

4. You don't read your statement. With more banks pushing us toward paperless billing and automatic bill pay services, it's getting easier to skip looking over the monthly statement. The first danger here is that you may overlook erroneous charges and pay for products and services you haven't actually bought. You may even miss that you have been a victim of identity theft or other forms of credit fraud.

A more subtle danger associated with ignoring the monthly credit card statement is personal finance complacency. When we don't review and monitor our spending, we stop being in command of our finances, making it that much more difficult to reach our personal finance goals, whatever they may be.

Set aside a few moments every month to review your statements, whether paper or digital and make it part of a monthly budget review routine.

5. You haven't read the fine print. Do you know how your credit card issuer calculates and applies interest? Do you know what the fees are for late fees or credit limit overages? What about fees for cash advances?

Your bank is required by law to make all of that information available to you (and more), in an easy to read and understand format called the "Schumer Box," after Senator Charles Schumer of New York, who championed the law.

Before you apply and sign up for any credit account, make sure you understand the key terms spelled out in the Schumer box.

6. You apply for too many accounts at once. Every time you apply for a credit card you trigger a credit score inquiry. A couple inquiries won't impact your credit score, but several inquiries in a short period of time will affect your score, although the effect is minor. Experian, one of the big three credit bureaus, notes that while minor score adjustments don't harm those with good or excellent credit, consumers with weaker scores are at greater risk. Even a modest reduction in score, combined with other risk factors, can make it harder to secure additional credit.

There is an exception: Multiple inquiries made while rate shopping home and auto loans within a 30-day period are treated as a single inquiry.

7. You take cash advances. If you look at the line item for cash advances on your Schumer box, you may be stunned by the interest rate of your bank charges. A May CreditCards.com survey found that the average for cash advances is 23.53 percent -- or 8.54 percent higher than the average rate for purchases. Some banks even charge as much as 36 percent for cash advances! But the dangers of cash advances mount. Unlike charges for purchases, most banks begin applying interest the moment the advance is taken -- and this is on top of the 5 percent fee most charge to execute the advance.

Needless to say, consumers are wise to avoid cash advances, lest they find themselves caught in a never-ending debt treadmill.

Will Getting Multiple Credit Cards Hurt My Credit Score?

As a credit card rewards enthusiast and credit expert, I am constantly asked the same set of questions. Not only do people want to know if credit card rewards are “real,” but they also want to know how pursuing them will affect their credit.

And it makes sense to be cautious. As we know, your credit score is an incredibly important component of your overall financial health. Without great credit, you may not be able to qualify for the best mortgage rates, borrow money to start a business, or get the best auto insurance rates. Meanwhile, an excellent credit score can help you accomplish all of those things – with the added bonus of qualifying for all of the best rewards credit cards.

In addition to general rewards questions, I also hear a lot from people who are afraid to push it too far. Once they get one rewards card they like, they worry that adding a new card will somehow hurt their score.

It makes sense to worry, but this is one case where the added stress is completely unfounded. Here’s the truth – you can have several rewards credit cards without wrecking your credit at all.

Here’s Why Having Multiple Cards Won’t Wreck Your Credit

In order to understand why having more than one rewards card won’t wreck your credit, you have to understand how your credit score is determined. As an example, let’s look at how FICO scores are calculated:

How a FICO score breaks down:

• Payment history: 35%
• Amounts owed: 30%
• Length of credit history: 15%
• Credit mix: 10%
• New credit: 10%

As you can see, the most important factor is your payment history. If you make your payments on time every month, you will fare well in this category no matter what.

The second category – amounts owed – is the other main category you should worry about. This compares how much money you owe in relation to your credit limits, a figure which is commonly referred to as your balance-to-limit ratio, or “utilization.” Here’s how credit reporting agency Experian describes this factor:

“Your balance-to-limit ratio, also known as your utilization rate, is calculated by dividing the total of the balances on your credit cards by the total of the credit limits on your credit cards. A high balance-to-limit ratio warns creditors that you may be experiencing financial difficulty or using credit to live beyond your means. A high utilization rate is a strong sign of credit risk, second only to your payment history.”

This is where things get interesting — and where having more than one card can actually help your credit score.

Since your utilization is based on how much you owe on your cards in relation to your credit limits, having more available credit means a lower utilization rate — and thus, a higher score — as long as you’re not carrying a higher overall balance along with it.

Meanwhile, if you pay your credit cards in full each month before your bill is due (as you should), your utilization will always be zero no matter how many cards you have. In that sense, having more than one card will have little impact on your credit.

How Hard Inquiries Impact Your Credit Score

One determining factor when applying for new cards that can negatively impact your credit score is “new credit,” which makes up 10% of your FICO score.

Each time you open a new account, you will gain a new “hard inquiry” on your report. A hard inquiry is a simple notation on your credit report that lets creditors know you applied for new credit.

Although a few hard inquiries aren’t causing concern, they may cause your credit score to drop temporarily. If you’re worried about how a new inquiry will affect your score, consider this advice from myFICO.com:

“First off, don’t sweat this too much; applying for new credit only accounts for about 10% of your FICO score, so the impact is relatively modest. Exactly how much applying for new credit affects you depends on your overall credit profile and what else is already on your credit report. For example, applying for new credit can have a greater impact on your FICO score if you only have a few accounts or short credit history.”

In other words, a hard inquiry may have little impact on your credit score at all, especially if you have an established credit history already.

Meanwhile, any negative impact you do experience should only be temporary. Still, to be safe, avoid applying for a slew of new cards in the weeks before you expect to take out a mortgage or car loan — you want your score to be at its absolute best in those circumstances.

My Experience with Multiple Cards

When my husband and I started pursuing credit card rewards four or five years ago, our scores were in the low 800’s. I track our credit scores on CreditKarma.com and, as of today, our Equifax and TransUnion scores are 810 and 790 (me) and 800 and 790 (my husband), respectively.

Since an excellent credit score is typically considered anything over 740, I’d say we’re doing quite well – and that’s in spite of the fact that we have dozens of rewards cards across our personal profiles and three separate businesses.

Our experience serves as further proof that having more than one rewards card will not wreck your credit. However, it is crucial that you always pay your credit card balances in full every month. A new rewards card or two may not hurt your credit, but letting yourself get into credit card debt can have lifelong consequences.

As always, tread carefully – and if you’re worried you’ll get in trouble, it’s probably best to avoid rewards credit cards altogether.

Do you have multiple rewards cards? How has having multiple cards impacted your credit?