Federal Reserve Releases New Statistics About Credit Cards

The new Survey of Consumer Finances from the Federal Reserve gives a concerning snapshot of the finances of average American family with growing debt and shrinking savings.

February 28, 2006 -- It is no surprise that American families are paying a growing debt bill with shrinking wages, leaving little room for saving. The new Survey of Consumer Finances from the Federal Reserve gives a concerning snapshot of the finances of average American family with growing debt and shrinking savings.

According to the survey, 46.2% of all families now carry a credit card balance. This is up from 44.4% in 2001. Households are also carrying higher balances; the mean balance is now $5,100 ($4,400 in 2001) and the median balance is $2,200 ($2,000 in 2001). The median income is currently $43,200 and the typical family's credit card balance is now almost 5% of their annual income.

"These households have probably gone through budget shock--as their balances have risen, the interest rates have also increased every few months and the minimum payment percentage has just increased," says Bill Hardekopf, CEO of Lowcards.com. "The average APR is now above 13%, so carrying that balance is getting very expensive. The average household is paying over $700 per year in interest for credit cards."

Reducing or eliminating credit card debt should be a priority for families who want to move beyond financial survival. The first step should be contacting the credit card companies and requesting a lower rate, especially if you have a good payment history but your rate is higher than 13%. This is a simple suggestion, but it works. Even if the rate is lowered only 2%, this extra money can be used to pay down the balance. If the credit card company turns down the first request, be persistent and call again in a month or two.

Another option is transferring your balance to a card with a lower interest rate. "If you expect to receive a tax refund or a bonus in the next year, transfer your balance to a card with 0% APR on balance transfers for 12 months. Extra money from tax refunds, gifts and bonuses can help significantly in paying down the balance," says Hardekopf.

Paying more than the minimum balance due, even an additional $20 per month, makes a big difference in paying down credit card debt. Paying off a $2,200 balance with a 13% APR and $55 minimum payment will take over 14 years and an additional $1,500 in interest. Increase the monthly payment to $75 and it will take only 36 months (3 years) to pay off the card and only $461 in interest.

Almost 25% of US households say their spending is now less than or equal to their income. "Many families are frustrated and overwhelmed by working hard only to see their debt grow instead of their savings," says Hardekopf. "This is a large group of people who are one late payment away from receiving punitive default rates of almost 30% on credit cards and other loans. If you are at the edge, default rates will be devastating. If your credit card bill comes at the end of the month when there is no money left, contact your credit card company to change your billing schedule to fit with your pay schedule."

The survey is not a discouraging picture for all families. While 74.9% of all families have a credit card, 42% of this group pays off their card each month. In most of these cases, the interest rate does not matter. This is a large group of people that will benefit from having a reward card like Blue from American Express that provides the widest variety of reward options available with no limit to the points earned.

“Every person who pays off their credit card in full each month should be using a credit card that gives a rebate or a reward,” says Hardekopf. “Otherwise, you are being economically foolish. Some of these cards pay you a significant cash rebate just for using the card.”

LowCards.com ( http://www.lowcards.com ) is an independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or billh@LowCards.com
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Credit Cards More Popular Than Checks

Americans now use automatic debit or credit card payments more than checks to pay their bills. While the convenience and payment schedules benefit customers, it is important to know how to cancel automatic payment arrangements. According to a recent story in the Wall Street Journal, consumers don't always understand the rules for stopping recurring payments. If automatic payments aren't canceled correctly, the debiting may continue on the account and it may be difficult to get the money back. Banks are sometimes unable to stop recurring credit card charges from a long-term contract such as a gym membership or a mortgage payment.

To cancel automatic payment, submit your request by phone and in writing to the merchant and bank or credit card company at least 3 days before the payment will be debited. Include your account number and how much is being charged (also include merchant name in letter to the bank/credit card company). If the charges appear after the account is canceled, you have 60 days after it shows up on the statement to dispute it.

If you run into difficulties with the account being debited after the it has been closed, contact your state's Attorney General's office, the Better Business Bureau or the Federal Trade Commission (FTC).

Credit Card Spring Cleaning

It is almost Spring, time for most Americans to clean out their homes and spruce up their yards. This is also a good time to give attention to credit card accounts and make sure they are in good shape. Since many households have multiple credit cards, it is easy lose track of how much you owe and how much credit you have left.

It is not enough to quickly glance at the bill just to see the minimum payment due without paying attention to the current APR or available credit. Credit card companies are now aggressively punishing accounts that go overlimit with far-reaching effects.

"If your cards are close to the limit or you use your card for a major purchase, it is too easy to forget how it will affect your balance," says Bill Hardekopf, CEO of LowCards.com. "Even if you go just $5 over your balance, you will receive a hefty fee, and possibly a much higher default APR and higher rates on all of your other credit cards. Getting a cash advance is especially dangerous because they it has a higher interest rate (typically 20%) that could quickly send your balance over."

Most credit card companies now charge $35-$39 for overlimit fees. The default rate is now as high as 30%, which most cards now apply if the account is overlimit only once. For cardholders with a $9,000 balance, that could add approximately $2700 in interest each year. The financial damage is even greater if other cards also raise the rate to default rates. For tight household budgets, the larger interest payments could be devastating.

In the next few months, many households will receive tax refunds. This is a great chance to pay down credit card balances and avoid overlimit situations. "Paying down your credit cards is the best way to use your tax refund. Reducing your balance also lowers the amount you have to pay in interest, accelerating your pace to pay off your credit cards," says Hardekopf.

If your account is consistently close to the limit or is in default, this will also cause problems on your credit report. People in these areas are perceived as higher risk and will receive a lower score and higher interest rates for any loans such as auto, credit card or mortgage. Higher interest rates can wreck a household budget.

LowCards.com ( http://www.lowcards.com ) is a website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or Billh@LowCards.com.

Selecting a Cashback Reward Card

Gas prices and energy bills are climbing higher again and many households are looking for ways to hold on to a little more money. One immediate solution is a cashback credit card that gives a 5% rebate on gas purchases. A household that spends $5,000 on gas each year can receive a $250 rebate by using this type of credit card.

Receiving cash back for purchases sounds like a good idea, but the trick is finding the card that will provide the most cash for specific credit card usage. Cashback cards can be a great perk for cardholders with very good credit who pay off their cards each month. Those who carry a balance at least several times a year should focus on cards with the lowest rates, not rewards.

"There are other rewards that may sound more exciting, but it is hard to beat a cashback card,” says Bill Hardekopf, CEO of Lowcards.com. “The rewards are straightforward and the cash earned can be used for anything and can help you get ahead by paying down other debt or earning interest. Cardholders are not restricted to using rewards only at specified merchants and they can receive rewards with fewer points, especially compared to airline miles."


Selecting the Right Card

Start with a strategy to select the right card. Will the card be used for every purchase from gas to vacations, getting the most cash possible, or will the card be used sparingly and the extra cash is a nice bonus? There are a variety of cashback cards available, but the rebate for most cards is 1% for general purchases and 5% on purchases made at standalone grocery stores, drugstores and gas stations.

Choose a card based on the amount charged each year. If the amount is over $10,000 then look for a card that doesn't have a maximum spending limit or a cap on the amount of cash you will receive each year. Some cards offer tiered pricing that benefits heavy users. Blue Cash from American Express is one of the better offers for those who charge $40-50,000. If you charge less than $6,500 per year, the rebate is only .5% on general and 1% on everyday purchases. Charge over $6,500 and the rebate increases to 1.5% on general purchases and 5% on everyday purchases. The spending limit is $50,000 but spending that much earns $685 in cash.

"If you put all spending on your credit card and pay it off each month, you could also take this to another level by maximizing your rebate on one card and then switching to a second cash reward card. However, I only suggest this for those with exceptional credit score and an almost perfect payment history," says Hardekopf.

For those who selectively use credit cards, look for a card with the highest rebate starting with your first purchase. However, if it will take more than two years to earn a significant reward, then the card may not be a good choice. There is always a chance that the reward program may change or end before points are redeemed.

Also select a card with no annual fee. Some cards waive the annual fee during the first year then charge an annual fee that is typically $35-$40. "Avoid the cards with annual fees because you will have to charge $3,500 each year to just cover the fee," says Hardekopf.

Redeeming cash rewards varies by company and most disclose reward distributions in their Terms and Conditions. "Do not assume they will automatically send a check each time you reach a point level. Some companies require that you pay attention to your statement and request your rewards. If you don't pay attention and don't request them, then they may eventually expire or you will forfeit them if you close the account."

Cashback cards seem like easy money for users but the credit card companies profit from them as well. "Their goal is to convert consumers to use cards for every purchase. Even if they will not make money from cardholder fees or interest, they will make money on the merchant fees. The merchants pay a fee to the credit card company for each swipe of a card," says Hardekopf.

LowCards.com ( http://www.lowcards.com ) is an independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or billh@LowCards.com

New Year's Resolutions for Your Finances

(Originally Published In December 2005)

It is time for New Year's resolutions. While skeptics may view this as a silly superstition for people who make promises they can't keep, it is actually a good time to charge up your willpower and make lifestyle improvements for the next year. One of the most important resolutions is getting serious about your financial shape. Monthly expenses are increasing and bankruptcy is now much more difficult, so many households will be in trouble if they don't take control of their finances.

· Create a plan to pay your bills and eliminate the chance of forgetfulness or a late payment. Late payments, especially for credit cards, can be costly and result in fees and an increase in your interest rate. Plan on posting your payment to take 3 days after it is received. An easy way to keep payments in order is to use online bill payment, even with credit cards.

· If your credit card bill now comes after your paycheck has already been spent, adjust the due date on your credit card. By paying your credit card bill first, you may have a chance to pay more than the minimum balance and start paying off your credit cards.

· Credit card interest rates are increasing and it is harder to get a low interest rate. If your balances are reasonably low, transfer them to a card with 0% intro for 12 months on balance transfers. If you don't add to your balance with new charges, this gives you a chance to pay off your card by next year’s holiday season.

· If you are one of the millions who recently declared bankruptcy, don't get a new credit card. Your interest rate will be high (20-25%) and if you run into debt trouble again, it will be more difficult to get a new discharge. "If credit cards helped get you into trouble the first time, they probably won't do you any favors the second time around," says Bill Hardekopf, CEO of LowCards.com. "If you must have a card for purchases, consider a pre-paid card. The fees are high, but you will not have the risk of running up a balance and paying the high interest rates that you will have with an unsecured credit card."

· Plan for higher minimum payments. If your minimum payment percentage hasn't already doubled, it probably will in 2006. While this takes more money out of your pocket now, it actually saves you money by reducing the amount of interest you will pay. If you have a little cash left over at the end of each month, pay even more on your balance.

LowCards.com ( http://www.lowcards.com ) is a website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or billh@LowCards.com.

Time To Budget for Holidays and Higher Credit Card Bills

(Originally published December 2005)

The Christmas shopping season is here and it is the time for consumers to make their holiday budget. Rising interest rates, changes in credit card terms, and higher gas and heating costs may leave little money for a generous Christmas.

"Now is the time to think about the credit card bill that will arrive in January. Not only have interest rates increased again, but many credit cards are doubling the minimum payments. If households do not plan ahead, they may start the new year with big financial problems," says Bill Hardekopf, CEO of LowCards.com. "Before you start holiday shopping, look at all of the bills that will be due, including a larger credit card bill and larger utility bills. The next few months could be tight, even for households that don't live paycheck to paycheck."

Increasing interest rates are creating higher payments for the 45% of households that carry a credit card balance. Last year, the average variable rate was approximately 12.83%. After a year of steady increases, it is currently 14.9%. "If you carry an $8,000 balance, you are paying an additional $166 per year for just interest payments. The interest payments will increase with additional rate hikes in 2006," says Hardekopf. "With each credit card purchase, ask yourself if the item is worth paying an additional 15% in interest and paying interest on it for years."

However, it is the increase in the minimum payment that may catch consumers by surprise. Most cardholders who carry a balance will pay twice as much toward their minimum payment than they did last Christmas. At the encouragement of the Office of Comptroller of the Currency, credit card providers are increasing their monthly minimum from 2% to 4%. This has already taken place with about 40% of the cards, but will occur with most of the remaining cards by the end of the year. The interest savings will be significant for cardholders. Paying a 2% minimum payment on an $8,000 balance ($160 per month) will take 448 months to pay off and cost an additional $12,789 in interest. Paying a 4% minimum payment on an $8,000 balance ($320 per month) will take 155 months to pay off and cost an additional $3,574 in interest.

"Obviously, raising the minimum payment is a good idea to help cardholders pay off debt and save on interest payments. Consumers just need to plan and adjust their budgets for higher payments. A good place to start is to control Christmas spending to what you can afford to pay for now," says Hardekopf. "The National Retailer Association projects that the average consumer will spend $850 this holiday season. If you put your spending on credit cards, use that number as an estimate and start saving now to pay off your cards by January or February."

LowCards.com ( http://www.lowcards.com ) is a website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or billh@LowCards.com.

New Reward Cards are Attractive for Many Cardholders

Rising interest rates and increasing credit card fees are creating concern for consumers, but there is good news for many who use credit cards. As competition increases so do rebates and rewards. Credit card companies are offering creative and useful rewards that will benefit cardholders who pay their card in full each month.

"Consumers who pay off their balance now have good choices in credit cards. This is also a good time to get a reward card because we are entering the Christmas shopping season with frequent credit card usage for many households," says Bill Hardekopf, CEO of Lowcards.com. "Consumers need to shop around to compare cards and decide which benefits they will actually use. If you pay off your card each month, the interest rate doesn't matter, so it doesn't hurt to get a little extra for the amount you charge each month."

Reward cards will provide some relief for consumers who feel helpless about rising gas prices Many cards now offer up to a 5% rebate on gas purchases. "For a household that spends $5,000 per year in gas, the rebate can save as much as $250 per year. That helps ease the pain," says Hardekopf.

Consumers can apply rebates toward home principal payments, college tuition and charities such as Make-A-Wish. "Credit card companies are attracting new customers by offering rewards that are actually beneficial, instead of the airline miles that accumulate but are difficult to cash in," says Hardekopf. "Some reward cards now offer unlimited points per year. For example, there is no limit to the amount of your rebate with the Citi Home Rebate Platinum Select Mastercard and it can be used on any mortgage. If you put most of your household spending on that card and carefully pay it off each month, the rebate could be very helpful."

If you are in the market for a car, some cards offer rebates that are good toward any vehicle you purchase or lease. They may be even more attractive since they can be applied toward the service or maintenance of your current car.

The cards with the least attractive offers are the original reward cards- the airline reward cards that still charge annual fees. These pure airline cards are now a poor choice for many users. Consumers should consider one of the more flexible cards available that offers a choice of airline tickets and a variety of other rewards with no annual fee and a lower interest rate.

Despite the tempting offers, rewards cards are not for everyone. "If you carry a balance and have an average to low credit score, pay careful attention to the APR you will likely receive. Most travel reward cards offer a domestic round-trip ticket at 25,000 points. That means charging $25,000 to earn the points. If you carry a balance at 15%, you are paying $3,750 for that ticket," says Hardekopf. "If you carry a balance, your goal should be get the lowest rate possible, not the most rewards."

"Credit card offers have become very competitive with bonus offers and expanded reward choices. It is almost overwhelming to shop around and compare cards. Lowcards ranks the cards based on interest rates, credit card terms and fees. It also brings to light details of the offers that may affect the cardholder such as maximim points earned per year, default rates, and who the card will benefit," says Hardekopf. "Lowcards make it possible to thoughtfully compare the maze of cards and rewards."

LowCards.com ( http://www.lowcards.com ) is a website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or Billh@LowCards.com

Credit Card Approval Rates Tighten Before Bankruptcy Law

The number of credit card applications that have been approved has dropped significantly in the last few months. The drop seems to be related to the new bankruptcy laws that go into effect on October 17. The new laws make it easier for credit card companies to collect on delinquent debt. The theory is that credit card companies want to hold off on approving people for cards until October 17 so that they can then approve them under the new law.

Bill Hardekopf, CEO of LowCards.com, says the drop in the approval rates has been very noticeable. "We saw the low approval rates starting in August and started to call other people in the industry and ask what they were seeing. It was the same story across the board. For some reason, all the credit card companies seemed to have tightened up on their approvals."

Hardekopf then consulted with Jerry C. Oldshue who is a board certified creditor's rights attorney at the law firm of Rosen, Cook, Sledge, Shattuck and Oldshue in Tuscaloosa, Alabama. Oldshue said that he had been hearing the same thing from debtors and creditors alike. "We discussed the trend here at the office and it started to make sense. The new laws will allow creditors a little more power in getting their money back even if a debtor files bankruptcy. It appears the industry started to tighten up on approvals after the bill was passed. By doing so, they could hold off approving high risk customers until the law goes into effect on October 17."

If you have been denied a credit card recently, you might want to apply once again after October 17. "We think the approval rates will come back up in late October and may be a little better than average now that the credit card companies will have this increased power under the new bankruptcy law," says Hardekopf. "Credit card companies are going to be willing to approve more people because they know they have a better chance at getting their money back even if the person declares bankruptcy."
LowCards.com ( http://www.lowcards.com ) is a website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or billh@LowCards.com.