PayPal encouraged me to pay with my bank account rather than my credit card as I was setting up a subscription payment last night.  When I first setup the subscription in PayPal it defaulted to use my bank account as the funding source.

I wanted to switch it over to use my credit card just in case the subscription payment was due and there was no cash in the bank account.  In my case it wouldn’t be that I didn’t have the cash, it just might be in another account.  So rather than have the payment not go through, I set it up to use my credit card as a funding source.  Plus that buys me another few weeks of time I can hang onto my money before I actually have to pay for it.

When I attempted to change my funding options from bank account to credit card, PayPal prompted me with the message below:

You’re choosing not to pay with a bank account. Please note that both bank account and credit card payments are sent instantly, and account numbers are never exposed to the merchant.

 

You’ll also find that transactions paid with a bank account:

 

    * Will not accrue credit card finance charges.
    * Let you stay in control of spending and avoid credit card debt.

 

No matter how you pay, you get 100% protection against unauthorized payments sent from your account.

 

Do you want to make this payment with your bank account?

I went ahead and choose the credit card option but thought it was interesting that PayPal is discouraging the use of credit cards and encouraging paying with cash using this approach.  Perhaps it’s to avoid paying fees to the credit card company for processing?

I’ve been to plenty of brick and mortar businesses where they don’t take credit cards to avoid the fees but whatever the reason, this is the first time I’ve ever seen something like this online before.  Have you ever had a business or payment processor encourage you to use cash over credit online?

Personal budgeting can be a different process for each person.  When I talked about how personal budget tracking can save you money, I used an example of how my employer saves money by tracking each piece of paper we print.

I showed how the act of tracking each job before it’s printed and assigning it to part of the budget causes us to more careful with what we print. I ended my discussion with two questions.

• Are you tracking your spending against your budget?
• What system do you have in place to monitor your expenses?

Personal Budgeting Styles

The example I gave was of a very detailed tracking system and Plonkee brought up the point that such precise tracking wouldn’t work well for her:

“I don’t know – there’s a limit to how much tracking is worthwhile. I’m not very detail oriented and would struggle to keep up with anything that was in depth. I prefer to give myself allowances. I can spend whatever I like, on whatever I like, but the total budget for *frills and frippery* is limited each month.”

I definitely understand where she’s coming from, in a financial confession earlier this year I admitted that I hate budgeting.  Of course ctreit sounds like he feels the opposite when he shared how he budgets and tracks his spending:

“When we track our expenses, we are very diligent. We include every single dollar we spend. After all, even the afternoon candy bar for 75 cents adds up to 20 bucks or so in a month. There is one big benefit when we track our expenses: we become very careful about spending money because we don’t want to face the music at the end of the month if we spend money stupidly. I for one would not want my wife to reprimand me for foolish spending.”

Our Credit Card Tracking System

I think each person has their own personal budgeting style that works best for them.  For example, when I asked, “are you tracking your spending against your budget?” the answer could be that you sit down with your credit card statement at the end of every month and see where you spent your money and how it compares to what you had budgeted.

We charge everything on our credit card, our system for monitoring our expenses is to leverage the technology of American Express and Visa to track and categorize each expenditure.  Then we can can download the transactions into Quicken to categorize anything that was missed and compare it against our budget.

I don’t what makes different budgeting styles fit better with one person or another.  I suppose it’s partly your personality and partly how you were raised to manage and think about money.  So regardless of what system for tracking and monitoring your expenses you use, the important thing is that you have and use a system at all.  If you have one, great.  If not, here are some tools for tracking and monitoring you can play around with to see what fits you best.  Credit cards for spending and tracking and personal finance software for monitoring and analysis.

Credit Cards

• American Express True Earnings
• Discover More Card

Personal Finance Software

• You Need a Budget
• Quicken Online
• Wesabe

Improving your credit score isn’t something that happens overnight but by following the suggestions below you should be able to raise your credit score over time.

Don’t Pay Your Bills Late

Your payment history is the most heavily weighted factor that goes into your credit score so make sure you’re at least making your minimum payments.  If those are more than you can afford sometimes the companies you owe money to are willing to put you on an extended payment plan.

Maintain Low Credit Card Balances

The next most important factor making up your credit score is the percentage of your available credit that you borrow.  If you’re constantly using up over 30% or 40% of your credit available you will be deemed a higher risk.

Build Credit History

The average age of your credit accounts is the next biggest component of your credit score.  If you add a bunch of new credit and cancel old cards this will drag down the average age of your credit accounts and your credit score along with it.

Use a Mix of Debt

This matters because companies look at the different types of debt that you have and weigh some more heavily than others.  For example, your credit card debt carries more weight than your mortgage or car loan.

Reduce New Credit Lines

Credit reporting agencies Experian, Equifax, and TransUnion monitor for attempts to open new lines of credit.  Each time a lender does a hard pull on your credit report that credit inquiry is noted and the more you have the worse an effect it can have on your credit score.

Identity theft probably isn’t the primary concern of most college students heading off to school this fall, however, college campuses can be big targets of identity theft.  With so many people living together in such close quarters it can be a hot spot for thieves and dishonest students to take advantage of other unsuspecting students.

If you’re going away to school for the first time or returning for another year, it’s extremely important to take certain precautions to keep your identity and money safe. Here are a few tips to help you avoid identify theft.

Set a password on your computer, lock your computer when away from it.

This is easy to do, and it will deflect most common computer users. Although, if your computer is stolen by a decent computer hacker, they’ll be able to get past the screen saver password so don’t store passords to your online bank accounts or other sensitive information on your computer. Make sure that you never leave your computer unattended in public such as the library, student union, or cafeteria. When you leave your laptop in your dorm room you could even stash it out of plain site.

Avoid revealing too much personal detail on social networking sites.

Every piece of information that identity thieves can gather about you is another clue to stealing your identity.  Seemingly harmless pieces of information individually (birthday, address, phone number, etc) can add up over time and eventually make you a victim of identity theft.

Not only is this good for your security, but can also protect your future career. Remember, everything you post on Facebook, Twitter, or MySpace could end up being seen by the wrong people at the wrong time. Use social networking wisely, and don’t post pictures that might compromise your reputation or give off the wrong idea about you.

Don’t let anyone borrow your credit or debit cards.

This might not sound like something you’d ever think about doing, but you’ll be running across dozens of “mooches” at school. They might ask you, “Hey man, can I just borrow your card to order a pizza, I’ll give you the cash”, but don’t trust them unless you are really close to them. Don’t give out your credit card number or debit card number to anyone, write it anywhere, or store it anywhere on your computer.

Don’t open a tab on your credit card and forget it.

I’ve never done this, but I’ve come close! You never know who might be working behind the bar and if they’ll abuse your card if you leave it there overnight. Make sure your designated driver reminds everyone to close out their tabs. If you’re walking home or taking public transportation, write a note on your hand to remind yourself.

Call right away if credit card stolen or lost.

Do not wait until the next morning if you think you lost or had your credit card stolen. Credit card companies have 24 hour customer service, and it will be much easier on yourself and the credit card company if you report it right away. Even if you end up finding it a couple of days later, it’s better safe than sorry, and you’ll receive a new card usually within a week.

You aren’t personally responsible for an unauthorized credit or debit transaction, but you can make a much stronger case that it wasn’t you if you report it as soon as you think it’s been lost or stolen.

Don’t keep cash in your dorm room, use debit card instead

Identity theives take your identity so they can steal money.  If you just leave your money lying around, they can just skip the identity part and go right after your cash. It’s not that you don’t trust your roommate (or maybe you don’t), but when you aren’t there, your roommate could be bringing in all kinds of people to the room that you’ve never met before. It’s always a good idea to keep your cash on you or better yet, use a debit card for most transactions.

If you’ve never had your identity or credit card stolen in the past, let me assure you it can drain a lot of your time and money trying to get the situation straightened out. Here are some more identity theft tips to help protect your money and your credit.

The credit card interest rate scammers have been calling me about once a month for the last few months.  I’ve been trying figure out what their angle is and each time they call I get a little more information out of them. 

They’ve simplified their inital automated call.  Now instead of talking about President Obama and credit card companies they simply say:

“This is your 2nd and final notice to lower your interest rates.  You should have gotten the first notice in the mail, this is your last chance to lower your rates. Press 1 to lower your interest rates now, Press 3 to be removed from our special list.”

They’re also a little more specific about who they’re after since they follow the intro up with:

“To qualify for lower rates you must have at least $4000 in credit card debt. Press 1 to speak with a representative, Press 3 to be removed from our list.”

So of course I pressed 1 to see what dirt I could dig up on them. A real person actually answered this time, here was our conversation (her questions are in bold, followed by my responses)

Hi, this is Alicia.  Did you press 1 to lower your interest rates?

Yes, I’m sorry what company are you calling from?

I’m Alicia with Universal Card Services.  Let me ask you a few questions. Do you owe more than 2500 in debt?

Yes

How much credit card debt do you have?

$5000

Are your interest rates above 12%?

Yes

How many credit cards is the debt spread across?

Two cards

Are you in good standings on those credit cards? Are you paying your bills on time?

Yes

Are you over credit limit on either of those cards?

No

Congratulation, you qualify for lower interest rates!  I just need to get some basic information.  What is correct spelling of your first and last name?

At that point I hung up.  I had already fibbed about having credit card debt just to keep her talking and wasn’t fast enough on my feet to make up a name, address, etc.  Next time I’ll have a fake name and address ready so I can dig further.

I did a search on Universal Card Services online and did find a reference on the Business Week site:

“Universal Card Services, LLC, was formerly known as AT&T Universal Card Services. The company is based in Jacksonville, Florida. As of April 2, 1998, Universal Card Services, LLC operates as a subsidiary of Ctibank South Dakota N.A.”

According to the Business Week site the company is located in Florida. The calls I’ve been getting have been coming from a 419 area code (Ohio) but of course they could still be coming from a Florida based company.  It could also be that some other company is falsely using the name of Universal Card Services just to cover their spammy phone calls.

They’ve called the last three months in row so I imagine I’ll be getting another call next month and I can dig deeper to find out who they are and what they’re trying to sell me.

The new credit card rules that were signed into law as part of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act a few months back will certainly offer some help to consumers in their effort to manage credit card debt.

Before we cover some ways that the new bill can help you with payment policies and interest rates, we have to remind you of one thing. Although the new rules will change the way credit card companies increase interest rates and set their payment policies you still want to pay off your credit card debt as soon as possible.  Recent changes to the major credit score system, FICO scores, penalize cardholders who keep high balances on their cards more extensively than before.

Good news for parents worried about their kids and plastic

According to United College Marketing Services, a company that markets credit cards to college students, the average college student receives between 25-50 credit card solicitations per semester. 

The new law will, among other things, keep credit card companies from offering free merchandise to college students in exchange for signing up for a credit card account from an offer made on or near campus. It will also keep issuers from sending new cards to students who haven’t actually applied for cards.  Hopefully this will reduce student debt and be a good thing for college graduate credit scores.

More time to pay

The law states that issuers will have to give customers “a reasonable amount of time” to make their payments on monthly bills. When the law goes into effect, cardholders will now have due dates at least 21 days after they are mailed or delivered.  The current requirement is only 14 days. 

Double-cycle billing to end

Some issuers actually calculate finance charges for a current month’s bill based on days in the previous billing cycle as well as the current one, which racks up the finance charges. That will stop once the new law starts.

You might see your rate go up, but at least you’ll get notice

In the first year you have a card the credit card company needs to give you all the terms that will apply to your card in that first year, and they’ll have to hold your rate steady unless you’re more than 30 days late in making payment.

For any card account held after that one-year anniversary, issuers can raise your interest rate as long as they give you 45 days’ notice and any increase can only apply to new balances recorded after the start date of the new rate.
 
Your payment will go to high-interest debt first

If you have credit card balances at different rates on a single card, your payments are typically applied to the lowest-rate balance meaning your higher-rate balances will continue to accrue interest at that higher level.

Once the law kicks in, the credit card companies will have two choices – to either apply your payment to the highest-rate balance or to divide the payment proportionally to each rate level. It might be worth a call to your issuer after the law becomes effective to find out which system they’re using.

More disclosure on minimum payments

If you’re making only minimum payments on credit card debt, it’s like keeping your balances frozen indefinitely. Credit card issuers will have to tell cardholders how long it would take to pay off the entire balance if users only made the minimum monthly payment.

Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest.

Fee relief for subprime cards

Credit cards awarded to people with subprime credit typically offer low spending limits with very high fees to the extent that some users may spend half their balance on fees alone. Under the new law, the initial fees can be no more than 25 percent of the card’s credit limit, and in the first year, no more than 50 percent of the original credit limit can be used to cover fees.

Keep in mind that these provisions will likely come as a cost to more conservative users of credit. To make up the shortfalls in revenues these changes will bring, experts expect issuers to raise annual fees and cut back on credit card rewards programs, particularly for customers who pay off their balance each month.

This post about the new credit card regulations is produced in association with the Financial Planning Association (FPA), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning.

When I went to recycle an old box of Honey Nut Cheerios last night a small silver package fell out of the container.  Now I’m sure my wife would have just thrown it away without opening it but I’m a sucker for free stuff (even if it’s a toy in a box of cereal) so I peeled open the plastic.  I was certainly surprised to see what was what looked to be a Discover credit card! 

I flipped the card over and read the back; turns out it’s a cash card, ours is loaded with $5.  I went to the website listed on the back and typed in my card number and special code to activate it.  According to the instructions, it can be used anywhere Discover is accepted.   It says to have the cashier ring up the card as credit, not debit. Apparently one in 10 boxes of certain General Mills cereal has one of the “prizes inside” and the amounts range from $5, $10, $20, $25.

I’ve never gotten a credit card in a box of cereal before, I’m used to seeing cheapy little toys that end up getting stuck in the vaccuum cleaner, so this was a cool surprise.  It’s only $5 but it’s enough to buy another two boxes of cereal : )

Have a good weekend, here are some money articles you might want to check out:

• Frugal Dad has some car maintenance tips
• Lazy Man’s wife shares a sad story about her parents
• Generation X takes a reader question about credit as an emergency fund
• The Digerati Life looks at a sane way to plan a wedding
• Million Dollar Journey has some tips on simplifying budgeting
• Brip Blap ponders financial behavior
• Suns Financial Diary takes a look at credit reports
• My Dollar Plan says goodbye to Microsoft Money

These credit card scammers won’t leave me alone!  Just over a month ago I wrote about an automated phone call I received regarding credit card interest rates and the same exact call came through again today.

A fembot named Jamie gave me the same spiel, this time I caught a few more details.  Once again she referenced how credit card companies have been told to lower rates by the president, then claimed to be calling from the “interest rate reduction department” to help me lower my credit card interest rates.

This time when she said, “Press 1 to lower your interest rate”, I quickly pressed the button so I could see what it was all about.  After a long pause, I was transferred to another automated message which started off by saying something along the lines of, if you don’t want to be called again hang up and your name will be taken off the list.

I hung on, curious to hear what scam they were running.  Then the recorded message said if I wanted more information on lowering my interest rates to leave my name and phone number and someone would call me back as soon as possible.

Unfortunately, I blew my “investigation” right there by just hanging up.  I didn’t want to give out my personal info to any scammers but looking back, they already have my phone number and I could have easily left a fake name just to get a call back.

Sorry I didn’t think faster on my feet, I would have liked to have gotten to the bottom of what exactly they’re after and shared it here, but I choked.  Who knows, they’ll probably call back in another month and this time I’ll be ready with an alias : )

Applying for and using a credit card during college can help you to start building your credit history. Managing your use of the credit card and making the payments are two keys to building a good credit history that will benefit you in the future. Of course, a credit card is just the beginning when building your credit history but it is a good place to start if you can pay off your balance in full each month.

How to get approved for a card

One factor that goes into credit card approval is having a source of income. Having a job, even if it’s part-time, is one source of income. You may receive money from other sources that you can also include on the credit card application. The bottom line is that credit card companies want to extend credit to consumers who have the ability to repay what they use.

If you don’t have any income, Mom or Dad can also help you get started with you first credit card. See if they are willing to add you as a card user on one of their accounts. The benefits of getting a credit card this way is twofold. First, it provides you with a credit card to use, so it teaches you how to manage your money. Second, it helps you to build your credit so you’ll be able to qualify for other types of loans and credit in the future.

Good credit card options and things to watch out for

If you’ve even perused the credit card possibilities out there, you know that there a myriad of options available. So how do you know which are the best credit cards for a college grad?

No annual fees. The first thing you want to look for in a credit card is one that doesn’t charge an annual fee. While cards with annual fees offer additional benefits, there are plenty of credit card companies that do not require an annual fee for you to have the card. This is an added expense that a recent grad doesn’t need.

Cashback options. Cashback rewards are not as generous as they once were but they can still add up over time with cards like True Earnings American Express or American Express Blue Cash.

Travel rewards. Whether it’s airline credits, hotel rewards, or cash back on gas purchases, look to see what travel rewards the card offers.

0% intro rate. Recent grads have needs such as getting their first apartment outside of college, which may also mean a need for furniture and other housewares. You’re also taking on your first career job so this may mean some new business clothes. If you find a credit card with zero percent interest or a low interest rate at the start of the card like Discover More, you can make these purchases with your credit card without paying interest. The key is to not charge more than you can afford to pay off before the intro rate adjusts to its normal (and higher) interest rate.

Annual fees, rewards, and introductory rates are three things to consider when looking for a credit card; you should thoroughly read the terms and conditions before applying for any card.  Remember, introductory rates can be beneficial but they can also be a hindrance. If you don’t pay off the balance before the intro rate runs out the interest rate adjusts to what usually equals double digits—creating payments you can’t afford to make.

Using a credit card helps you to start building your credit history. Using the card responsibly and making your payments on time are two factors in building a good credit history that can benefit you in the future.

Your credit score is probably one of the most frequently used and misunderstood numbers in your life. Trying to figure out how to improve your credit score can be frustrating, in fact, there’s enough information about credit scores to fill a whole book!

Liz Pulliam Weston shares a little about the updated version of her book, Your Credit Score, Your Money & What’s at Stake, as a follow up to the FNBO Direct Pay Yourself First challenge.

Here was my question for Liz. Your last book, “Your Credit Score, Your Money & What’s at Stake“, is an in-depth look at how a consumer’s credit score can impact their finances. You recently came out with an updated version to address issues people are experiencing due to the recession and credit crunch.  What are the most important updates that people should be aware of regarding their credit?

Credit card companies are slashing credit limits, which can have a negative impact on your score. If you have good credit, it’s important to push back against these limit cuts.

I also recommend people start diversifying their credit, just like they diversify their investments. If all your credit cards are with a single issuer, you’re at the mercy of that issuer’s policies

Tomorrow we’ll take a look at my last question for Liz. I know a lot of people have lost their jobs or are struggling financially due to the bad economy. She shares her thoughts on what changes she would make to stretch her dollars if she suddenly lost her job.