Archives for October 2009

Your Password is Easy to Guess

If you do any type of online financial transactions, whether you shop online, pay bills, or manage accounts, then you need good online passwords and you need to change them often. Here are some Do’s and Don’ts:

Don’t use passwords that are easy to guess like “welcome,” or “abc123.” And, don’t use passwords that are easy to research, like birthdays, phone numbers or addresses. It should be impossible for people to guess your password just by knowing you.

Do use a random combination of numbers and letters (both upper and lower case). Don’t use some personal association that’s easy to remember, because, no matter how clever you think you’re being, it will probably be easy to guess. You can learn to memorize a random number. After all, you know your phone number and social security number, and those are random.

Do change your passwords often. There are actually services out there that will steal your email password for a fee. They market themselves as private investigators, catching cheating spouses or business partners. If you use the same password for all your accounts, this puts you at great risk. Changing your password often won’t stop hackers, but it will make their work more difficult and expensive.

Do You Share the Credit Card Equally?

If you share a credit card account with someone else, you are either an authorized user or a joint credit card user. Knowing the difference can help protect your credit score.

If you’re an authorized user, it means you can use the credit card account, but you’re NOT responsible for the payments. You have a card with your name on it, but you’re not the “card-holder.” The account won’t appear on your credit report, so it won’t help, or hurt, your credit score.

In the past, parents could add a child as an authorized user. This helped the child start his credit history, making it easier to get that first car loan or student loan. Because of some abuse, credit reporting agencies stopped monitoring authorized users. It’s now more difficult for children to begin building their credit history, but not impossible.

If you’re a joint credit card user, you and the other person were considered equally when you applied for the account. You are both responsible for the payments and the account will show up on both your credit reports. Joint card-holders should make a habit of reviewing bills and payments together to help protect you both from mistakes or fraud.

New Credit Card Rules

Have you heard about the new credit card rules? Credit card companies must give you more time to review statements and rate changes, which helps you make better decisions when dealing with debt.

Statements must now be mailed at least 21 days before the due date. Credit card companies make a good profit from late fees and rate increases. To increase the amount of late payments, they began billing closer to the payment due date, sometimes forcing you to pay within a week. This allowed them to add fees and raise rates based on payment history. The new rule allows you a standard billing cycle to review your statement and remit payment.

Second, creditors must now notify you within 45 days of a rate change. This is better than the previous 15 days notice. The rule change gives you a chance to accept or decline the offer, and gives you time to shop for a new credit card company.

The rest of the Credit Card Act will go into effect next year, hopefully with more consumer protections. Remember: if you owe creditors a balance that can’t be paid in full each month, you give them power over your financial health.

You Won’t Get Far With Those Rates

Reader Question: My credit balance is $3,000.00. What will happen if I only make minimum payments each month?

A credit card minimum payment is usually about 1.5% to 2.5% of your balance. That’s a very small amount. Since I don’t know your interest rate, I’ll do calculations based on a 12% interest rate. In your case, that would be about $45 per month.

If you are paying the minimum payment it will take you a really long time to pay off your credit card in full – at $45 per month it will take you 411 months or 36 years. This is assuming that you will not be making any additional charges.

Credit card lenders make their money from the interest they charge you. Your objective is to pay as little interest as possible. When you pay your credit card balance in full each month you save yourself a considerable amount of money.