Sunday, June 14, 2009

Take Some Credit

The current economy, the times we live in and now even the government, have forced the banks, retailers and credit card companies to change the rules when it comes to granting credit to the consumer. Now that they have changed the way they conduct business to operate smarter and mange the credit risk better, we as consumers must also re-evaluate how we use and pay our credit cards.

Credit is simply a risk. The creditors want to take as low a risk as possible to minimize loss and maximize profits. Credit scores are reportedly behaving 30-40 points less than what the credit bureau scores are actually reporting, it is harder and harder to get a low interest credit card or even a low rate from a current credit issuer. Meaning a 700 is behaving like a 670. 620 is behaving more like a 580 or 590. So your credit score isn’t even helping you as much as it was just a year ago.

So what can we do as consumers to minimize our expense and maximize our credit situation? Other than the obvious; pay off your balance as quickly as possible, stop using credit cards, closing accounts and/or cutting up the card(s), consolidating bills, etcetera, etcetera, but all this doesn’t make the balance go away any quicker and that which you owe. So what is one to do?

What can you do right now that would allow you to maximize your situation as a consumer and pay more towards the balance?

First, pay the bill as soon as it comes in. DO NOT wait until the due date. I am not talking about paying the balance in full, but pay the minimum (more if able) as early in your billing cycle as possible. The longer you wait each month to pay your bill, the more the creditor is making off you. Average Daily Balance is the reason. The earlier you make a payment, the lower your average daily balance, minimizing the average daily balance for that billing cycle, minimizes the money you give the creditor overall. Depending on the balance and the interest rate, this can be significant over time ~ month after month after month ~ and then if you are doing this with each credit card you have, the savings can benefit you more than you may realize. Even if it is minimal savings, every little bit helps these days and most would rather keep their money than simply give it away.

Second. Always, always, ALWAYS…. pay more than the minimum due. Even if it is $5.00, the more, the better for you, but always pay more than the minimum! This does 2 things; lowers your balance quicker and shows the creditors you can handle and support more than the balance you now have. Your benefit with paying more than minimum along with paying early in each billing cycle creates wiggle room for you and lowers the risk for the creditor.

Also, comparing rates, fees and benefits that cards have these days are essential in maintaining a smart, affordable credit profile. There are many sites that you can visit on the web that may provide you alternatives and allow you to compare credit cards that can benefit you now ... and in the future.

So take some credit for maximizing your credit situation.
Do what you can to minimize your loss and maximize your gain.

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