How to Cash in Rewards Points Posted by: Staff Writer | May 22,2008

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More About Credit Card Rewards Points

Many cardholders may not even realize that their credit card has a rewards plan.  There is a misconception about credit cards that only rewards cards have rewards points: airline cards, gas cards, or other types of rewards programs.  The truth is that most credit cards do have some type of rewards program, so it’s a good idea to check and how many rewards points you’ve built up.  

What’s the best way to cash in those rewards points?  Should you literally cash them out so you put cash in pocket?  Should you put that money right back into the credit card to pay off the balance?  If you’re currently seeking out a good rewards plan, these answers will help you narrow down your choices among the large number of rewards cards available. 

Selecting a Rewards Program

First, you have to find a good rewards program for your needs.  Do you fly a lot?  Do you drive a lot?  Do you just want cash back for purchases?  It’s important to look at the big picture.  Don’t just go by rewards points alone.  Any advantages in rewards points could be offset by a high APR or other high fees.  Likewise, a card with a low APR may have a skimpy rewards program.   So a rewards card should be based on this criteria:

1.    The percentage back for each purchase, such as 1 point for every dollar spent, or better.
2.    A lack of restrictions, such as a minimum for cash back or blackout dates for airline miles programs.
3.    A low APR
4.    Limited fees for both using the card and how rewards points are calculated.  

The ideal situation is find a credit card that has a good rewards program and low fees.  It’s important to narrow down exactly what type of rewards program you need and then compare 5-10 cards of that type.  A low APR is very important because people with rewards cards tend to spend more on credit purely as a way to build up rewards points – especially those with airline miles cards.  Using the card should never pose to great an expense or else the bonus from rewards points will be canceled out be increased costs. 

Cashing Out Rewards Points

Now that you have your rewards cards, you have to use it wisely.  Most rewards cards have double points for purchases at certain locations, such as a certain hotel chain or gas station.  A note: this should also factor into your rewards program of choice, as the rewards program should cover businesses you frequent.  You could have several different rewards cards that you use at different types of businesses.  

The process for cashing out rewards points is pretty straightforward: Just make a simple call to your credit card issuer and request the points to be cashed out.  They’ll let you know of any cash back minimums or expiration dates, if applicable.

The easiest place to do this is online, where you may then be prompted to go to a web-based store where the rewards points can be used for different products.  You could also choose to be sent a check for cash back points or to use that money to pay your balance.  For airline miles points, you will be given a voucher, depending on the number of airline miles you have accrued.

How to Stop Pre-Approved Credit Card Offers Posted by: Staff Writer | May 22,2008

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Pre-Approved Credit Card Offers

We all get them, sometimes on a daily basis: pre-approved credit offers filling up the mailbox.  Not only are they an environmental issue because of all that wasted paper, pre-approved credit card offers are also an identity theft threat.  One method for stopping identity theft is to shred your sensitive financial paperwork, including pre-approved credit card offers. A better way would be to stop these pre-approved credit card offers from arriving entirely.  

In the past, people would wait for these credit card offers to arrive in the mail to apply for a new credit card.  With the prevalence of online credit card search engines, this is no longer necessary.  Adding that to the fact that “pre-approved” does not necessarily mean that you will be assigned the same card advertised in the mailer and there’s no overwhelming reason to have these credit card offers filling up your mailbox. 

Stopping Pre-Approved Credit Card Offers

There are a couple of options for this process:

1.    Contact the main credit bureaus – Experian, Equifax, and TransUnion – and inform them that you want to opt out of receiving pre-approved offers.  Draft a letter which includes your name, address, phone number, and Social Security number.  
2.    Contact Innovis.  This is a wild-card credit bureau put together for the sole reason of compiling lists of consumers for marketers.  Complete the letter mentioned above.    

If you’re wary of mailing out your Social Security number, call this number instead: 1-888-5-OPTOUT.  When you call OPTOUT:

1.    Select option 2 to permanently opt out of credit card mailings.  
2.    However, if you don’t want to stop offers on a permanent basis, option 1 will stop credit card offers for two years.  

You will still have to give over your Social Security number if you call this number, but some find this preferable to sending letters to the four credit bureaus individually. 

How to Lower the APR on a Credit Card Posted by: Staff Writer | May 22,2008

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Lowering the APR on Your Credit Card

For most credit cardholders, the APR is the most important part of the credit card, aside from credit limit.  People look to the APR before they look at the annual fee or other types of fees.  This makes sense but it is not entirely advisable.  For example, a card with a low APR may have higher fees, or vice versa.  You may end up spending extra money even if the card has a low APR.

Even so, having a low APR is very important and there’s nothing to suggest that a card’s APR is set in stone.  Hopefully you’ll be able to have the holy grail for credit cards: low APR, low fee, and high credit limit.  Here’s how to solve one edge of the equation. 

Requesting a Low APR

The first thing you have to consider when negotiating an APR is your standing with the credit card company.  If you’ve defaulted time and again, it would be unsurprising if the credit card issuer refused to lower your rate.  However, if you are a cardholder in good standing – over a significant period of six months or longer – than you are in a good place to negotiate an interest rate.  Here are the steps:

1.    Call up your credit issuer.  You want to talk to a representative.  
2.    Request to have the APR lowered.  The representative will check your current credit standing – including payment history and the amount above the minimum for each payment.  
3.    It is not a bad idea to suggest that you will either a.) Cancel out the card if you are not given a lower rate or b.) You have found another issuer that has a lower rate.  This will help you barter for a lower rate.  
4.    If the first representative is unable to help you, ask to talk to an account manager who may be of better assistance.  Let the manager know that you are a cardholder in good standing.  

Hopefully, this will be enough to negotiate your APR to a lower level.  You may be told, “Check back in six months.”  This will often be the case if you’re holding a particularly high balance on the credit card. 

A Balance Transfer Credit Card

Another option for getting a low APR on a credit card is to apply for a totally new card.  A balance transfer card will transfer a portion of the balance for a low introductory balance transfer rate.  Normally, a balance transfer card will have an introductory rate of 0% APR.  You must look into a card that has a low APR after the introductory rate expires.  

In addition, it is crucial that you do not put any new charges on the balance transfer card.  New purchases will have a different APR than the balance transfer rate.  
Paying this interest may negate what you save from the transfer.  Generally, it’s a good idea to leave the balance transfer card alone and to not use it for new purchases.  

If you are wary of taking on the responsibility of a new credit card, you should at least make an attempt to negotiate a new APR on your current card.  You may be surprised how effective a simple phone call to your credit card issuer can be.  

How to Cancel a Credit Card Posted by: Staff Writer | May 22,2008

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Canceling Your Credit Card

You might want to cancel a credit card for a number of reasons, but it’s not so cut and cry as calling up your credit card company and saying, “Cancel me.”  This is the case if your card has been lost or stolen, but if you just want to cancel a credit card to open up a separate account, you have a few different considerations. 

When You Shouldn’t Cancel a Credit Card

1.    You cannot cancel a credit card if you are carrying a balance.  Don’t think that canceling a credit card will cancel out the balance as well.  You need to clear a card of a balance before you cancel it.  If you do try to cancel a card with an existing balance, you could be met with an elevated interest rate as a form of penalty.
2.    That said, you should think twice before canceling an old credit card account for one specific reason: your credit rating.  A credit rating is based on longevity, not just if you pay your bills on time.  If you cancel a credit card account from years before, it can have an adverse effect on your rating.  For this reason, keeping an old account open is not a bad idea.  

To add to #2: if that old credit card account has a terrible list of fees and a very high interest rate, you may very well want to cancel it.  Just keeping around a card with an empty balance will not do wonders for your credit rating.  The way to get value out of an older card is to use it and pay off the balance.  However, keeping a balance on a card with an unattractive credit rating may be more trouble than it’s worth, so you may be justified in canceling out the card and starting over. 

Steps for Canceling a Credit Card

If you do make the decision to cancel a credit card, the process is pretty straight forward.  Here are the steps:

1.    Contact your credit card company.  
2.    Tell them to cancel the card and to notify credit bureaus of the cancellation.  

That’s it.  You can do this over the phone or online if applicable.  It’s generally not necessary to write a separate letter requesting a cancellation.

Talking to a credit card representative is your best bet because you could use a cancellation could give you leverage for negotiating new rates on the card.  Saying something like “I won’t cancel the card if you lower my APR or raise my limit” could work.  There’s no guarantee, but a credit card company wants to keep your business so threatening a cancellation can give you some leverage.