What is Credit Card Churning? Dangers and Benefits

Credit card issuers have consumers right where they want them, lending money at high-interest rates and earning money from many different fees. Even reward cards benefit the issuers, because all the additional perks and rewards they provide are covered by the increased merchant fees, which essentially means the credit card company offers you extra money to incentivize you to spend, and then demands this money from the retailers.

It’s a good gig, but some consumers believe they can beat the credit card companies and one of the ways they do this is via something known as credit card churning.

What is Credit Card Churning?

Many reward cards offer sign-up bonuses to entice consumers to apply. Not only can you get regular cash back, statement credit, and air miles, but you’ll often get a reward just for signing up. For instance, many rewards credit cards offer a lump sum payment to all consumers who spend a specific sum of money during the first three months.

Credit card churning is about taking advantage of these bonuses, and getting maximum benefits with as little cost as possible.

“Churners” will sign up for multiple different reward cards in a short space of time, collect as many of these bonuses as they can, clear the card balance, and then reap the rewards.

Does Credit Card Churning Work?

Credit card churning does work, to an extent. Reward credit cards typically don’t require you to spend that much money to receive the sign up bonus, with most bonuses activated for a spend of just $500 to $1,000 over those first three months. This is easily achievable for most credit card users, as the average spend for reward cards is over $800 a month.

If you have good credit, it’s possible to sign up to multiple credit cards, collect bonus offers without increasing your usual spend, and get everything from hotel stays to free flights, cash back, gift cards, statement credit, and more.

However, it’s something that many credit card companies are trying to stop, as they don’t benefit from users who collect sign-up bonuses, don’t accumulate debt, and then pay off their balance in full. As a result, you may face restrictions with regards to how many bonuses you can collect within a specified timeframe. 

What’s more, there are several things that can go wrong when you’re playing with multiple new accounts like this, as all information is sent to the credit bureaus and could leave a significant mark on your credit report.

Dangers of Churning

Even if the credit card companies don’t prevent you from acquiring multiple new credit cards, there are several issues you could face, ones that will offset any benefits achieved from those generous sign-up bonuses, including:

1. You Could be Hit with Hefty Fees

Many reward credit cards have annual fees, and these average around $95 each, with some premium rewards cards going as high as $250 and even $500. At best, these fees will reduce the amount of money you receive, at worst they will completely offset all the benefits and leave you with a negative balance.

Annual fees aren’t the only fees that will reduce your profits. You may also be charged fees every time you withdraw cash, gamble, make a foreign transaction or miss a payment,

2. Your Credit Score Will Drop

Every time you apply for a new credit card, you will receive a hard inquiry, which will show on your credit report and reduce your FICO score by anywhere from 2 to 5 points. Rate shopping, which bundles multiple inquiries into one, doesn’t apply to credit card applications, so credit card churners tend to receive many hard inquiries.

A new account can also reduce your credit score. 15% of your score is based on the length of your accounts while 10% is based on how many new accounts you have. As soon as that credit card account opens, your average age will drop, you’ll have another new account, and your credit score will suffer as a result.

The damage done by a new credit card isn’t as severe as you might think, but if you keep applying and adding those new accounts, the score reduction will be noticeable. You could go from Excellent Credit to Good Credit, or from Good to Fair, and that makes a massive difference if you have a home loan or auto loan application on the horizon.

Your credit utilization ratio also plays a role here. This ratio is calculated by comparing your total debt to your available credit. If you have a debt of $3,000 spread across three credit cards with a total credit limit of $6,000, your credit utilization ratio is 50%. The higher this score is, the more of an impact it will have on your credit score, and this is key, as credit utilization accounts for a whopping 30% of your score.

Your credit utilization ratio is actually one of the reasons your credit score doesn’t take that big of a hit when you open new cards, because you’re adding a new credit limit that has yet to accumulate debt, which means this ratio grows. However, if you max that card out, this ratio will take a hit, and if you then clear the debt and close it, all those initial benefits will disappear.

You can keep the card active, of course, but this is not recommended if you’re churning.

3. You’re at Risk of Accumulating Credit Card Debt

Every new card you open and every time your credit limit grows, you run the risk of falling into a cycle of persistent debt. This is especially true where credit card rewards are concerned, as consumers spend much more on these cards than they do on non-reward credit cards.

Very few consumers accumulate credit card debt out of choice. It’s not like a loan—it’s not something they acquire because they want to make a big purchase they can’t afford. In most cases, the debt creeps up steadily. They pay it off in full every month, only to hit a rough patch. Once that happens, they miss a month and promise themselves they’ll cover everything the next month, only for it to grow bigger and bigger.

Before they realize it, they have a mass of credit card debt and are stuck paying little more than the minimum every month. 

If you start using a credit card just to accumulate rewards and you have several on the go, it’s very easy to get stuck in this cycle, at which point you’ll start paying interest and it will likely cost you more than the rewards earn you.

4. It’s Hard to Keep Track

Opening one credit card after another isn’t too difficult, providing you clear the balances in full and then close the card. However, if you’re opening several cards at once then you may lose track, in which case you could forget about balances, fees, and interest charges, and miss your chance to collect airline miles cash back, and other rewards.

How to Credit Churn Effectively

To credit churn effectively, look for the best rewards and most generous credit card offers, making sure they:

  • Suit Your Needs: A travel rewards card is useless if you don’t travel; a store card is no good if you don’t shop at that store. Look for rewards programs that benefit you personally, as opposed to simply focusing on the ones with the highest rates of return.
  • Avoid Annual Fees: An annual fee can undo all your hard work and should, therefore, be avoided. Many cards have a $0 annual fee, others charge $95 but waive the fee for the first year. Both of these are good options for credit card churning.
  • Don’t Accumulate Fees: Understand how and why you might be charged cash advance fees and foreign transaction fees and avoid them at all costs. The fees are not as straightforward as you might think and are charged for multiple purchases.
  • Plan Ahead: Make a note of the bonus offer and terms, plan ahead, and make sure you meet these terms by the due dates and that you cover the balance in full before interest has a chance to accumulate.
  • Don’t Spend for the Sake of It: Finally, and most importantly, don’t spend money just to accumulate more rewards. As soon as you start increasing your spending just to earn a few extra bucks, you’ve lost. If you spend an average of $500 a month, don’t sign up for a card that requires you to spend $3,000 in the first three months, as it will encourage bad habits. 

What Should You do if it Goes Wrong?

There are many ways that credit card churning could go wrong, some more serious than others. Fortunately, there are solutions to all these problems, even for cardholders who are completely new to this technique:

Spending Requirements Aren’t Met 

If you fail to meet the requirements of the bonus, all is not lost. Your score has taken a minor hit, but providing you followed the guidelines above, you shouldn’t have lost any money.

You now have two options: You can either clear the balance as normal and move onto your next card, taking what you have learned and trying again, or you can keep the card as a back-up or a long-term option. 

Credit card churning requires you to cycle through multiple issuers and rewards programs, never sticking with a single card for more than a few months. But you need some stability as well, so if you don’t already have a credit card to use as a backup, and if that card doesn’t charge high fees or rates, keep it and use it for emergency purchases or general use.

Creditor Refuses the Application

Creditors can refuse an application for a number of reasons. If this isn’t your first experience of churning, there’s a chance they know what you’re doing and are concerned about how the card will be used. However, this is rare, and in most cases, you’ll be refused because your credit score is too low.

Many reward credit cards have a minimum FICO score requirement of 670, others, including premium American Express cards, require scores above 700. You can find more details about credit score requirements in the fine print of all credit card offers.

Your Credit Score Takes a Hit

As discussed already, credit card churning can reduce your credit score by a handful of points and the higher your score is, the more points you are likely to lose. Fortunately, all of this is reversible.

Firstly, try not to panic and focus on the bigger picture. While new accounts and credit length account for 25% of your total score, payment history and credit utilization account for 65%, so if you keep making payments on your accounts and don’t accumulate too much credit card debt, your score will stabilize.

You Accumulate Too Much Debt

Credit card debt is really the only lasting and serious issue that can result from credit card churning. You’ll still earn benefits on a rolling balance, but your interest charges and fees will typically cost you much more than the benefits provide, and this is true even for the best credit cards and the most generous reward programs.

If this happens, it’s time to put credit card churning on the back-burner and focus on clearing your debts instead. Sign up for a balance transfer credit card and move your debt to a card that has a 0% APR for at least 15 months. This will give you time to assess your situation, take control of your credit history, and start chipping away at that debt.

What is Credit Card Churning? Dangers and Benefits is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

United Airlines Travel Bank No Longer Works for American Express Airline Credit

Beginning January 14th, United Airlines Travel Bank purchases no longer work to trigger the American Express airline incidental credit, according to reader ChurningExperiences and various data points on Flyertalk.

They switched the category of the purchase from “special service ticket”, which was considered by the AmEx system as an incidental charge, to “gift certificate” which is not. Purchases made January 14th and beyond will not get credited. Purchases made on the 13th an earlier were credited.

Major bummer, lots of people were using this. Hopefully everyone used up their airline incidental credits immediately in early January when it was still working.

Source: doctorofcredit.com

4 Credit Cards with No Spending Limit

Life can be unpredictable, and you never know exactly what you may need to spend money on tomorrow. In these situations, you may suddenly need more spending power on your credit cards than you previously anticipated. Fortunately, there are credit and charge cards that allow you to make the charges you need.

If your credit score is good enough, you might be able to score an “unlimited credit card”—one without a preset spending limit. That’s not a free pass to go on a months-long shopping spree, of course, as these credit cards technically do have some limitations. But they can be a flexible way to manage your finances, especially if you manage large monthly expenses or travel a lot. Find out more about credit cards with no limits below and whether one might be right for you.

What a No Limit Credit Card Really Means

The phrase “no limit credit card” is a bit misleading. Technically, all credit cards have limits. It’s not in the interest of lenders to allow card holders to drive up balances with no end in sight.

When people talk about unlimited credit cards, then, they usually mean one of two things. First, they could mean a credit card with a very high limit—one you’d be unlikely to hit in the normal course of spending if you’re regularly paying off the card. These types of cards include exclusive invitation-only “black cards.”

Second, and more commonly, they mean cards with no preset or published limits. Cardholders on these accounts are given a limit that’s unique to them, and it’s based on factors such as creditworthiness, income, and how long you have had an account. The credit limit might even fluctuate as you demonstrate continued or increased creditworthiness.

How to Determine if No Limit Credit Cards Are Right for You

Typically, these cards require good or excellent credit, so they aren’t something everyone can qualify for. The most exclusive cards with no preset spending limits are available only to individuals who receive an invite.

Cards with especially high credit limits or extremely flexible limits may also not be the right choice for someone who is in financial distress or already struggling to manage debt. It’s an unfortunate paradox that if you really need the larger credit line, you might be at greater risk of running up the credit card balance and digging yourself deeper in debt—and therefore unlikely to be approved for the larger credit line.

Need a card for fair or poor credit? We’ve got you covered.

Find a Card

Alternatives to No Limit Credit Cards

If you don’t have great credit, you might want to consider a different option, such as a balance transfer card. If your credit is good enough, you can get a balance transfer card with a preset limit that lets you transfer high-interest debt and pay it off faster at 0% interest for a specific period of time.

If you’re doing well financially and would like the flexibility of a credit card with a high limit without the temptation of ongoing debt, you might consider a charge card. Charge cards are a type of credit card—often with high limits—that you have to pay off each billing cycle.

4 High Limit or No Limit Credit Cards to Consider

If a high limit card does sound like a good idea, you’ll want to research available options and choose the best one for your needs and preferences. Here are four to consider.

1. Chase Sapphire Preferred

Chase Sapphire Preferred® Card

Apply Now

on Chase’s secure website

Card Details
Intro Apr:
N/A


Ongoing Apr:
15.99% – 22.99% Variable


Balance Transfer:
15.99% – 22.99% Variable


Annual Fee:
$95


Credit Needed:
Excellent-Good

Snapshot of Card Features
  • Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 toward travel when you redeem through Chase Ultimate Rewards®
  • 2X points on dining at restaurants including eligible delivery services, takeout and dining out and travel & 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for travel through Chase Ultimate Rewards®. For example, 60,000 points are worth $750 toward travel.

Card Details +

  • Type: Rewards credit card
  • Credit Needed: Excellent,Good
  • Ongoing APR: 15.99% – 22.99% Variable
  • Signup bonus: 60,000 bonus points if you spend $4,000 in the first three months—that’s $1,000 in travel credits because points are worth even more if you use them on travel.
  • Rewards: Earn 2 points for every dollar spent on qualified travel and dining, and 1 point per dollar for all other purchases.
  • Annual fee: $95

Once you’re approved for the Chase Sapphire Preferred card, Chase will designate a credit access line for your account. However, you are permitted to exceed the account on a case-by-case basis. And when you do exceed this amount, you will not be charged an over-limit fee. The decision to allow you to charge beyond your credit access line is based on your payment history, your income, and other factors.

2. American Express® Gold Card

American Express® Gold Card

Apply Now

on American Express’s secure website

Card Details
Intro Apr:
N/A


Ongoing Apr:
See Pay Over Time APR


Balance Transfer:
N/A


Annual Fee:
$250


Credit Needed:
Excellent-Good

Rates and Fees

Snapshot of Card Features
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months.
  • Earn 4X Membership Rewards® Points on Restaurants worldwide, including takeout and delivery.
  • Earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Dining Credit: Earn up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub, Seamless, The Cheesecake Factory, Ruth’s Chris Steak House, Boxed, and participating Shake Shack locations. This can be an annual savings of up to $120. Enrollment required.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.

Card Details +

  • Type: Rewards
  • Credit Needed: Excellent,Good
  • Ongoing APR: See Pay Over Time APR
  • Signup bonus: 60,000 Membership Rewards® points if you spend $4,000 on eligible purchases with your new card within the first 6 months.
  • Rewards: Earn 4X Membership Rewards® points at U.S. supermarkets or at restaurants, including takeout and delivery, and 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • Annual fee: $250

The American Express® Gold card is a card with a high-limit. With its Pay Over Time feature, this Amex card allows eligible charges of $100 or more to be carried across statements with interest. Other charges are due each month. You also get up to $120 in dining credits a year by earning up to a total of $10 in statement credits monthly when you pay with the Gold Card at Grubhub, Seamless, The Cheesecake Factory, Ruth’s Chris Steak House, Boxed, and participating Shake Shack locations. This can be an annual savings of up to $120. Enrollment required.

3. Mastercard Black Card

Mastercard® Black Card™

Apply Now

on Luxury Card’s secure website

Card Details
Intro Apr:
N/A


Ongoing Apr:
14.99%


Balance Transfer:
0% introductory APR for the first fifteen billing cycles following each balance transfer that posts to your account within 45 days of account opening. After that, your APR will be 14.99%.


Annual Fee:
$495 ($195 for each Authorized User added to the account)


Credit Needed:
Excellent

Rates and Fees

Snapshot of Card Features
  • Patented black-PVD-coated metal card—weighing 22 grams.
  • 2% value for airfare redemptions with no blackout dates or seat restrictions. 1.5% value for cash back redemptions. Earn one point for every one dollar spent.
  • 24/7 Luxury Card Concierge®—available by phone, email and live mobile chat. Around-the-clock service to help you save time and manage tasks big and small.
  • Exclusive Luxury Card Travel® benefits—average value of $500 per stay (e.g., resort credits, room upgrades, free wifi, breakfast for two and more) at over 3,000 properties.
  • Annual Airline Credit—up to $100 in statement credits toward flight-related purchases including airline tickets, baggage fees, upgrades and more. Up to a $100 application fee credit for the cost of TSA Pre✓® or Global Entry.
  • Enrollment in Priority Pass™ Select with access to 1,300+ airport lounges worldwide with no guest limit. Includes credits at select airport restaurants for cardholder and one guest.
  • Cell phone protection for eligible claims of up to $1,000 each year. Plus additional World Elite Mastercard® benefits.
  • Annual Fee: $495 ($195 for each Authorized User). Terms and conditions apply.

Card Details +

  • Type: Rewards/Cash Back
  • Credit Needed: Excellent
  • Ongoing APR: 14.99%
  • Sign up bonus: n/a
  • Rewards: Earn redemption cash back in the value of 2% if you redeem on airfare or 1.5% if you redeem for cash back.
  • Annual fee: $495 ($195 for each Authorized User added to the account)

One of three products offered by Luxury Card, the Mastercard Black Card is truly luxurious. There is no official minimum starting limit for this card—but that flexibility comes with a cost. The annual fee is steeper than many can afford, but the card comes with $100 in airline credit and $100 in TSA Pre-check application credit every year, Exclusive luxury travel perks, and around-the-clock access to a concierge. It also includes a full range of traveler perks. Coupled with the rewards, this card can pay for itself when used by frequent travelers.

4. American Express Blue Cash Preferred Card

Blue Cash Preferred® Card from American Express

Apply Now

on American Express’s secure website

Card Details
Intro Apr:
0% for 12 months on purchases


Ongoing Apr:
13.99%-23.99% Variable


Balance Transfer:
N/A


Annual Fee:
$95


Credit Needed:
Excellent-Good

Rates and Fees

Snapshot of Card Features
  • Earn a $250 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months.
  • 6% Cash Back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%).
  • 6% Cash Back on select U.S. streaming subscriptions.
  • 3% Cash Back at U.S. gas stations and on transit (including taxis/rideshare, parking, tolls, trains, buses and more).
  • 1% Cash Back on other purchases.
  • Low intro APR: 0% for 12 months on purchases from the date of account opening, then a variable rate, 13.99% to 23.99%.
  • Plan It® gives the option to select purchases of $100 or more to split up into monthly payments with a fixed fee.
  • Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit.
  • $95 Annual Fee.
  • Terms Apply.

Card Details +

  • Type: Cash Back
  • Credit Needed: Excellent,Good
  • Ongoing APR: 13.99%-23.99% Variable
  • Sign up bonus: Earn a $250 statement credit after you spend $1,000 in purchases on your new card within the first 3 months.
  • Rewards: 6% cash back at U.S. supermarkets and some streaming services, up to $6,000 per year, then 1%; 3% cash back when spending at gas stations or on public transit; and 1% cash back on other purchases.
  • Annual fee: $95

The American Express Blue Cash Preferred® card comes with a lot of standard Amex benefits. There’s no overlimit fee, and its “Plan It” features allow you to create monthly payment plans with a fixed finance charge each month, rather than the ongoing APR.

No Limit Credit Cards and Your Credit Score

Paying on time and keeping your balance low is as important with these types of cards as with any other card. But you also need to consider your revolving credit utilization. Since these cards may not have a set or published limit, it’s important that you understand what the actual limit is and how it’s being reported. Check your credit report to see what limit is being reported so you know whether your credit utilization is high. Charge cards may not affect your utilization rate at all.

If you really want to dig in to your credit reports and the factors affecting your credit scores, consider signing up for ExtraCredit. ExtraCredit lets you access this information from all three credit bureaus whenever you want. That helps you best manage all of your debt, whether you have an unlimited credit card or not.

Sign Up Now

At publishing time, the Chase Sapphire Preferred, American Express Gold, Mastercard Black, and American Express Blue Cash Preferred cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply for and ultimately sign up for either of these cards. However, this relationship does not result in any preferential editorial treatment.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

The post 4 Credit Cards with No Spending Limit appeared first on Credit.com.

Source: credit.com

Should you get a corporate credit card?

Whether your employees fly a lot and need a card to reserve plane tickets or they purchase lumber or office supplies for the company at the store, getting them a company credit card is often a great way to keep track of expenses and make it easy for them to purchase what’s needed.

For many entrepreneurs, a small business credit card is the best solution. Many are designed to reward the types of purchases that employees typically make in a small firm.

However, for larger small businesses, getting a corporate credit card, like the ones big corporations issue to employees, often makes sense.

See related: How to get a business credit card

What is a corporate credit card?

Corporate cards are generally available only to larger small businesses, meaning those with at least several million dollars in annual revenue. A company may have to submit a federal tax ID and undergo an audit of its financials to qualify.

For example, the One Card from Capital One requires its users to have a minimum annual card spend over $1 million. Cards are issued to the company itself (rather than any individual) and require that you submit your tax ID and require an audit of company financials before approval.

Similarly, the One Card from J.P. Morgan is available to businesses that spend between $1 million and $9.9 million per year. The bank can also match companies that spend $20 million or more on travel with corporate credit cards.

Once an account has been opened, the company is responsible for paying the balance in full each billing cycle and managing spending of each cardholder. However, it is also the company that reaps any rewards the card may include, including statement credits or travel perks. In the case of the One Card from Capital One, businesses earn competitive rewards up to 1.5X net purchases.

Corporate credit card pros and cons

The biggest perk attached to corporate cards is the ease of tracking employee spending. Rather than having employees make personal charges and submit expense reports or receipts for reimbursement, the company can easily manage spend limits, track budget needs and manage fraud risk. Most corporate cards offer detailed analytics all in one system about where and how company money is being spent.

Since these cards are sometimes more complex, corporate cards often come with their own designated customer service representative who can help resolve any issues quickly. These representatives are usually on-call 24/7 and have an intricate knowledge of each company’s individual needs.

Pros

  • Simplified tracking and analysis of work-related purchases
  • Benefits and rewards help the company directly
  • Dedicated or on-call customer service representative
  • Prevents employees from trying to make personal charges on a company card with clearer visibility and better spending controls than most business cards

Cons

  • Additional cardholder fees can add up quickly
  • Not an option for smaller companies
  • Tough application process
  • Employees can’t earn their own rewards by using a personal card and getting reimbursed

See related: Managing employee cards on your credit card account

How corporate cards differ from small business credit cards

Both corporate and small business cards offer conveniences such as the ability to set limits on employees’ spending and to restrict spending to certain categories. Most also offer features that make it possible to track expenses easily.

However, corporate cards come with certain benefits that small business cards don’t offer – and vice versa.

Availability

Unlike corporate credit cards, business cards are available to any-sized business – even entrepreneurs just getting started on their own. The application process is much less intensive and usually doesn’t require an audit of company finances.

Responsibility for the debt

Business cards are issued to an individual and the company (unless it is a sole proprietor), and even if additional cards are added for employees, the business owner is responsible for managing payments.

Typically, a small business owner must personally guarantee a small business card, though some small business cards come with joint and several liability, where the owner shares liability with the business. With joint and several liability, a creditor can pursue either the business or the owner for a debt.

With most corporate cards, the company is generally liable for the debt on employees’ cards, which is a big advantage in many owners’ eyes. When the company guarantees the debt, the owner is not held responsible if, for instance, the company fails without paying its bills.

Some corporate cards also offer what’s known as individual liability. That means the employee must stay current on paying the bill in the short term and request reimbursement upon filing an expense report. This is less common than it used to be. It’s not necessarily ideal for employees, who may not have the cash available to pay for large charges until their expense report is processed.

Credit CARD Act doesn’t apply to business or corporate accounts. But many card issuers grant those CARD Act protections anyway, as a matter of practice. Nevertheless, don’t take anything for granted. Before using your corporate or business card, familiarize yourself with its rules.

Credit impact

While corporate cards are typically used for work-related travel and accommodation, business cards can be used to make all sorts of work purchases, including supplies or merchandise. This allows even small businesses to build a great credit profile. By using a business card to make larger payments, business owners can avoid racking up charges on their personal credit cards while steadily building their business credit.

With small business cards, employees are considered authorized users. As a result, their card activity may be reported to credit bureaus.

For some employees, this is a drawback. For instance, if they have put expenses from a costly business trip on their card, they may find their credit utilization is high enough to affect their personal credit. That could be a problem if, for instance, they are applying for a mortgage.

In contrast, with a corporate card, card usage does not affect employees’ personal credit. That is a big plus from an employee’s point of view.

See related: Should I wait until my business is more established to get a credit card?

Cost

Small business credit cards tend to have fewer fees, including no additional charge for employee cards with cards such as Capital One Spark Cash for Business the Ink Business Unlimited® Credit Card from Chase.

Corporate cards generally charge for this and may charge as much as $100 a year or more. This is because they often offer more robust features, like access to a specific sales rep or access to enterprise software for filing expense reports.

Of course, if you run a larger small business, the extra benefits may be worth it. It all depends on the needs of your business.

Should you get a corporate card for your business?

While corporate cards offer a wide range of great benefits such as easy expense tracking, dedicated customer service representatives and no liability for individual employees, they are typically only available to large corporations with millions in annual revenue.

If you own a small business, a business credit card can help steadily build a credit history for your company. Business cards can also help you make large purchases to pay off over time.

Source: creditcards.com

Tips to Consolidate Credit Card Debt

Tips to Consolidate Credit Card Debt

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

If left unchecked, extensive amounts of credit card debt can cripple your finances. The good news is there are many ways to handle debt, though each requires a dedicated effort on your part. But if you can manage to consolidate credit card debt, you will reduce your burden relatively quickly. In the process, you’ll avoid the exorbitant interest rates that accompany most credit cards. Below we take a look at some of the most effective techniques you can use to make this goal a reality.

Find Out Your Credit Score

Before you can work on improving your credit and minimizing your debt, you have to know where you currently stand.

Many credit card issuers allow cardholders to see their FICO® credit score free of charge once a month, so check out if any of your cards include that free credit score. The three major credit bureaus – TransUnion, Experian and Equifax – also give out free annual credit reports. If that’s not enough, websites like Credit Karma™ and Credit Sesame provide a free look at your credit score and reports as well.

It is vital to review your credit report with a fine-tooth comb to ensure the accuracy of the information. If you find errors be sure to let the credit bureau in question know so the issue can be eradicated as soon as possible.

Zero Interest Balance Transfer Cards

Although it might seem counterintuitive to apply for another credit card to lessen your debt, a zero interest balance transfer card could really help. These cards typically include an introductory 0% balance transfer Annual Percentage Rate (APR) for six months or more. This ultimately allows you to move debt from one account to another without incurring more interest. However, once the introductory offer concludes, any leftover balances will revert to your base APR.

These offers aren’t totally free, though. Most cards also charge a balance transfer fee that’s usually between 3% and 5% of the transfer. Even with this initial payment, you will almost always still save money over leaving your debt where it stands currently.

If you want to consolidate credit card debt, here are three different balance transfer credit cards you could apply for, with varying introductory interest rates and transfer fees:

Balance Transfer Credit Cards Card Intro Balance Transfer APR Balance Transfer Fee Chase Slate 0% APR for first 15 months; then 16.49% to 25.24% Variable APR, depending on your creditworthiness No fee for first 60 days; then $5 or 5% of each transfer, whichever is greater Citi Double Cash Card 0% introductory APR for 18 months from date of first transfer when transfers are completed within 4 months from date of account opening; then 15.49% to 25.49% Variable APR, depending on your creditworthiness $5 or 3% of each transfer, whichever is greater BankAmericard® credit card 0% APR for first 15 billing cycles; then 14.49% to 24.49% Variable APR, depending on your creditworthiness No fee for first 60 days; then $10 or 3% of each transfer, whichever is greater Take Out a Personal Loan

Tips to Consolidate Credit Card Debt

The thought of taking out another loan probably doesn’t sound too appetizing to consolidate credit card debt. But a personal debt consolidation loan is one of the speediest ways to rid yourself of credit card debt. More specifically, you can use it to pay off most or all of your debt in one lump sum. That way, your payments are all merged into a single account with your lender.

The APR and length of the offered loan and the minimum credit score needed for approval are the main factors that should go into your final decision on a lender. By concentrating on these three components of the loan, you can map out what your monthly payments will be. As a result, you can more easily implement them into your financial life.

Applying for a personal consolidation loan can have a detrimental effect on your credit. Unfortunately, most institutions will run a hard credit check on you prior to approval. However, many online lenders don’t do this, which might ease your mind depending on the severity of your debt situation.

These loans are available through a wide variety of financial institutions, including banks, online lenders and credit unions. Here are a few examples of some of the most common debt consolidation lenders:

Common Debt Consolidation Lenders Banks Wells Fargo, U.S. Bank, Fifth Third Bank Online Lenders Lending Club, Prosper, Best Egg Credit Unions Navy Federal Credit Union, Unify Financial Credit Union, Affinity Federal Credit Union Auto or Home Equity Loan

If you own assets like a home or car, you can take out a lump-sum loan based on the equity you hold in them to consolidate credit card debt. This is a great way to reuse money you paid toward an existing loan to take care of your debt. When paying back your auto or home equity loan, you’ll usually pay in fixed amounts at a relatively low interest rate. Even if this rate isn’t great, it’s likely much better than any offer you’d receive from a card issuer.

Equity loans are technically a second mortgage or loan, meaning your house or car will become the loan’s collateral. That means you could lose your house or car if you cannot keep up with your equity loan payments.

Create a Budget

Tips to Consolidate Credit Card Debt

To build a budget, you first need to figure out your approximate monthly net income. Don’t forget to take into account taxes when you’re doing this.

You can then start subtracting your variable and fixed expenses that are expected for the upcoming month. This is where you will likely be able to identify where you’re overspending, whether it’s on food, entertainment or travel. Once you’ve completed this, you can begin cutting back where you need to. Then, use your surplus cash to pay off your debt one month at a time.

It shouldn’t matter if you’re dealing with substantial credit card debt or not. A monthly spending budget should always be a part of how you manage your finances. While this is likely the slowest way to eliminate debt, it’s also the most financially sound. At its core, it attempts to fix the problem without taking funding from an outside source. This should leave very little financial strife in the aftermath of paying off your debt.

Professional Debt Counseling

Perhaps since you’ve found yourself in serious debt, you feel like you want professional help getting out of it. Well the National Foundation for Credit Counseling® (NFCC®) is available for just that reason. The NFCC® has member offices all around the U.S. that are certified in helping you consolidate credit card debt.

These counselors won’t only address your current financial issues and debt. They’ll also work to create a plan that will help you avoid this situation again in the future.

Agencies that are accredited by the NFCC® will have it clearly displayed on their website or at their offices. If you’re not sure where to look, the foundation created an agency locator that’ll help you find a counselor nearby.

Borrow From Your Retirement

Taking money early from your employer-sponsored retirement account obviously isn’t ideal. That’s means borrowing from your retirement is a last-ditch alternative. But if your credit card debt has become such a handicap that it’s affecting all other facets of your life, it is a viable option to consolidate credit card debt.

Because you are technically loaning money to yourself, this will not show up on your credit report. Major tax and penalty charges await anyone who has trouble making payments on these loans though. To make matters worse, if you quit your job or are fired, you’re typically only given 60 days to finish paying it off to avoid incurring a penalty.

Tips To Consolidate Credit Card Debt

  • If you take the time to come up with a budget, don’t let it go to waste. While you might find it tough to stick to, especially if you’re trying to cut back, it is the best way to manage your money correctly. Even if a budget becomes habit, stay vigilant with where your money is being spent.
  • Although a financial advisor will cost money, he or she might be able to help you keep your finances in check while ultimately helping you plan for the future as well. However, if this isn’t an option for you financially, stay on track with your NFCC® debt counselor’s plan.
  • There are so many ways to gain access to your credit score that there’s virtually no excuse for not knowing it. It doesn’t matter if you do it through one of the top three credit bureaus, FICO® or one of your card issuers. Just remember to pay attention to those ever-important three digits as often as possible.

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Photo credit: ©iStock.com/Liderina, ©iStock.com/ferrantraite, Â©iStock.com/cnythzl

The post Tips to Consolidate Credit Card Debt appeared first on SmartAsset Blog.

Source: smartasset.com

Credit 101: What Is Revolving Utilization?

Aerial view of a young woman with brown hair contemplating her revolving utilization. She has a pen in her mouth and an open notebook on her desk.

According to Experian, the average credit score in the United States was just over 700 in 2019. That’s considered a good credit score—and if you want a good credit score, you have to consider your revolving utilization. Revolving utilization measures the amount of revolving credit limits that you are currently using, and it accounts for a large portion of your credit score.

Find out more about what revolving utilization is, how to manage it, and how it impacts your credit score below.

What Is Revolving Credit?

To understand revolving utilization, you first have to understand revolving credit. Revolving credit accounts are those that have a “revolving” balance, such as credit cards.

When you are approved for a credit card, you are given a credit limit. If you have a credit card with a limit of $1,000 and you use it to buy $200 worth of goods, you now have a $200 balance and an $800 remaining credit limit.

Now, if you pay that $200, you again have $1,000 of open credit. If you pay $150, you have $950 of open credit. But your credit revolves between balance owed and how much open credit you have available to use. How much you have to pay each month—known as the minimum payment—depends on how much your balance owed is.

Other forms of revolving credit include lines of credit and home equity lines of credit. They work similar to credit cards.

What Isn’t Revolving Credit?

Unlike revolving credit, installment loans involve taking out a lump sum and paying it back in an agreed-upon fashion over a set term of months or years. Typically, you agree to pay a certain amount per month for a certain number of months to cover the amount you borrowed plus any interest.

With an installment loan, the amount of your monthly payment is determined by your loan agreement, not the balance due. Common types of installment loans include vehicle loans, personal loans, student loans, and mortgages.

What Is Revolving Utilization?

Revolving utilization, also known as “credit utilization” or your “debt-to-limit ratio,” relates only to revolving credit and isn’t a factor with installment loans. Utilization refers to how much of your credit balance you’re using at a given time.

Here’s how to determine your individual and overall credit utilization:

  1. Look at your credit reports and identify all of your revolving accounts. Each of these accounts has a credit limit (the most you can spend on that account) and a balance (how much you have spent).
  2. To calculate individual utilization percentage on an account, divide the balance by the credit limit, and multiply that number by 100.
    1. $500/$1,000 = 0.5
    2. 5*100 = 50%
  3. To calculate overall utilization (all revolving accounts), add up all of the credit limits (total credit limit) and all of the balances (total spent) on your revolving accounts. Divide the total balance by total credit limit, and multiply that number by 100.

If you have a credit card with a $1,000 credit limit and a balance of $500, your utilization rate is 50%, for example. For the same card, if you have a balance of $100, your utilization rate is 10%.

When it comes to your credit score, revolving utilization is typically calculated in total. For example:

  • You have one card with a limit of $1,000 and a balance of $500.
  • You have a second card with a limit of $4,000 and a balance of $400.
  • You have a third card with a limit of $3,000 and a balance of $600.
  • Your total credit limit across all three cards is $8,000.
  • Your total utilization across all three cards is $1,500.
  • Your revolving utilization is around 19%.

How Can You Reduce Revolving Utilization?

You can reduce revolving utilization in two ways. First, you can pay down your balances. The less you owe, the less your utilization will be.

Second, you can increase your credit limit. If you apply for a new credit card but don’t use it, you’ll have more open credit, and that can reduce your utilization. You might also be able to ask your credit card company to review your account for a credit increase if you’re an account holder in good standing.

Find the Right Credit Card for You

What Is Revolving Utilization’s Impact on Your Credit Score?

Your revolving utilization rate does impact your credit. It’s the second-largest factor in the calculation of your credit score. Your utilization rate accounts for around 30% of your score. The only factor more important is whether you make your payments on time.

Why is credit utilization so important to your score? Because to lenders, it can say a lot about you as a borrower.

If you’re currently maxed out on all your existing credit, you may be struggling to pay your debts. Or you might not be managing your debts in the most responsible fashion. Either way, lenders might see you as a riskier investment and be less inclined to approve you for loans or other credit.

How Do You Know If You Have a Revolving Utilization Problem?

Sign up for Credit.com’s free Credit Report Card. It provides a snapshot of your credit report and gives you a grade for each of the five areas that make up your score. That includes payment history, credit utilization, age of credit, credit mix, and inquiries. The credit report card makes it easy for you to see what might be negatively affecting your credit score.

You can also sign up for ExtraCredit, an exciting new product from Credit.com. With an ExtraCredit account, you get a look at 28 of your FICO scores from all three credit bureaus—plus exclusive discounts and cashback offers as well as other features—for less than $25 a month.

Sign Up Now

The post Credit 101: What Is Revolving Utilization? appeared first on Credit.com.

Source: credit.com

How Long Does It Take To Get a Credit Card?

Generally speaking, it takes seven to 10 business days to get a credit card once you’re approved. The specific amount of time can vary as many factors throughout the process affect how fast you receive your card. Getting approved can happen in a matter of seconds or days, depending on what kind of card you apply for. Whether you apply online or in person may also affect how fast you’ll receive your credit card in the mail.

How Long Does It Take to Get My Card in the Mail?

The longest step in getting a credit card is waiting for it to come in the mail. Shipping time frames can vary depending on which credit card you apply for. Here are the average time frames of many popular credit card companies today:

  • American Express: seven to 10 business days
  • Wells Fargo: seven to 10 business days
  • Discover: three to five business days
  • Capital One: seven to 10 business days
  • Bank of America: seven to 10 business days
  • Chase: three to 5 business days
  • Citi: seven to 10 business days

Unfortunately, the time it takes for the credit card to go through the mail can be impacted by many factors out of your control. You may get your card sooner than stated above, or later if there are external mail carrier issues.

How to Get a Credit Card Right Away

Unfortunately, most credit cards aren’t made available to you the same day you apply. Even though you can get approved for a card almost instantly, you must still wait for the card to come in the mail. However, credit card companies sometimes offer options to help speed up the process.

Most banks offer expedited shipping if you need your card delivered faster than usual. Depending on what type of card and bank you apply with, they may charge you an extra fee for this option. Some banks will make things easier for you by giving you your credit card number right after approval. This allows you to start making purchases while waiting for the physical card to arrive. American Express typically allows this with all of their cards to increase their user satisfaction.

What to Do If You Haven’t Received Your Card Yet

If you notice that you haven’t received your card after some time, reach out to your bank or credit card company. By reaching out, you minimize the risk of the card getting lost or stolen. Your bank may also be able to provide you with a temporary card while they sort everything out. Not all lenders, but if they do they may charge you an additional fee.

How To Apply for a Credit Card

To get a credit card, you must first apply either online or in person for approval. Receiving the credit card itself and waiting to be approved are two separate steps. Therefore, the time it takes to receive your card can vary from person to person.

What Do Creditors Look for in Applications?

Credit card applications typically ask for your personal information as well as your financial background. To determine your financial background, they’ll ask for your Social Security number and source of income.

Your Social Security number will allow the creditors access to your credit report. After close evaluation, you’ll either be approved or declined for the card. When looking at your report, creditors typically pay close attention to data such as your debt-to-income ratio, hard inquiries, and any delinquent accounts you may have.

What Do Creditors Look for In a Credit Report?

Your debt-to-income ratio refers to how much of your card’s limit is spent. Consistently using too much of your limit may cause creditors to view you as more of a high-risk borrower. Similarly, too many hard inquiries can make you seem risky. Finally, a delinquent account is another red flag. This shows that you may not have been paying off your credit card bills on time. Lenders won’t be as willing to approve you for a credit card if you have a history of account delinquency, as it’s not a good sign for them that you’ll be a reliable borrower.

Some credit card companies pre-approve users who they think may be a good fit based on a soft version of their credit report. A soft version of your report gives lenders a glimpse of your financial background, but won’t affect your credit score. When your report shows that you meet a few requirements, they’ll send a card in the mail for you to use if you apply. Receiving the card in the mail doesn’t mean that you are automatically approved. It just helps speed up the process of getting a credit card. Pre-approving users is a way companies market their cards to users, in hopes of them applying later on.

How to Build Credit With a Credit Card

When you use a credit card, you build credit simultaneously. The way you manage and use your card can have either a positive or negative effect on your credit score.

How Long Does It Take to Build Credit?

If this is your first time using a credit card, then you are most likely building credit from scratch. Building a credit score doesn’t happen overnight. It usually takes about six months or so to build enough credit to have a credit report. Beginning early can be of great benefit to you down the line. A major factor in the calculation of your credit score is the length of your credit history. The longer you’ve spent building your credit, the more of a positive impact it can have on your score.

Ways to Keep Your Credit Score Healthy

When using a credit card, it can pay off in the long run to follow some best practices. You can do this by having a good understanding of what exactly factors into your credit score. The following are good habits to establish for maintaining a healthy score:

  • Make on-time payments to avoid a delinquent account.
  • Aim to only use 30 percent of your credit limit at a time to show you can manage your card wisely.
  • Avoid applying to too many cards or loans in a short time, as it can result in a hard inquiry. Too many hard inquiries can be the reason you are getting declined for your financial requests.
  • Stay on top of monitoring your credit score and report, so you can identify any mistakes before it’s too late to fix.

Buildig Credit Best Practices

While the most common time frame for getting a credit card is seven to 10 days, it can vary from person to person. If this seems like a long time, try reaching out to your bank. They may be able to expedite shipping or give you access to your credit card number in advance. Each credit card lender is different, so it’s important to do your research before applying. Take a look at our guide on the best credit card offers to help start your search.

The post How Long Does It Take To Get a Credit Card? appeared first on MintLife Blog.

Source: mint.intuit.com