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The Return of Layaway: The Old/New Competition for Credit Cards

The Return of Layaway: The Old/New Competition for Credit Cards

Layaway, a payment plan established by some retailers which allows purchasers to put items aside until they are fully paid off, is making a comeback from many larger retailers, especially for the holiday season. 
Layaway was a popular method before credit cards became easily obtainable and commonplace.  Now consumers, armed with the knowledge of the dangers of credit cards, can practice financial discipline with the help of retailers such as WalMart, Toys R Us, and Sears, which have all put layaway payment programs in place.  
While the practice of layaway does have costs for the retailer, as they must keep track of payments and hold the items within the store until they are paid off, a small fee is charged in order to make up for any losses.  Likewise, consumers may cancel their payments, however they will be subject to fees.  

What Does My Credit Card Numbers Mean

What Does My Credit Card Numbers Mean

What is a
Credit Card?

A credit card is a plastic card that enables an
individual to purchase goods, products or services by way of a credit line. The
available credit and the card itself are offered by a financial institution,
such as a bank or credit card company. 

These institutions will offer an
individual (with a satisfactory credit score) a credit card that is accompanied
by various terms and interest rates. The interest rates are based off the
individual’s credit score. Those with higher scores, meaning they are more
likely to meet the terms and repayment schedules in the agreement, will be
awarded with a lower interest rate and vice versa.
 

Credit Card Numbers

Credit card numbers are found on the front of the
credit card. These numbers represent the account number of the individual’s
line of credit. Credit card numbers are processed during a transaction, when
the buyer swipes his or her card through a reading machine (the seller can also
process the transaction by copying the credit card numbers and manually
relaying the information). 

The credit card numbers are then passed through an
interchange where a merchant will look up the individual’s credit account. As a
result, the credit card numbers act as the primary indicator to look up an
individual’s credit line. When processed, the credit card numbers will reveal
if the prospective buyer has enough available credit to make the purchase.

Credit card numbers possess an internal structure
and share a common number scheme. Credit card numbers are types of ISO/IEC 7812
bank numbers. They are typically 16 digits in length and consist of a
single-digit Major Industry Identifier. In addition to these codes, credit card
numbers also contain a variable length individual account identifier and a
single check digit that is calculated using an advanced algorithm.
 

The first digit of a credit card number is the
Major Industry Identifier. This number represents the category of entity which
issued the card. Different majority industry identifiers represent the
following issuer categories:

0-ISO/TC 68 and various future assignments

1-Signifies an Airline Company

2-Future industry assignments and Airline
companies

3-Travel and entertainment or banking/financial
companies

4-Banking and financial

5-Banking and financial companies

6-Merchandising and banking or financial companies

7-Petroleum and other future industry companies

8-Telecommunications, healthcare and other future
industry assignments

9-National assignment

How to Protect your Credit Card Numbers

Through the advent of the Internet and online
purchasing, the likelihood of fraud and other criminal activity generated from
the unauthorized obtainment of credit card numbers has, unfortunately, risen.
It is the responsibility of each cardholder to ensure that his or her credit
card numbers are kept private and protected.

The first step to protecting your credit card numbers
is signing the back of your credit card. This step, although simple, is an
authentication process that may prevent an individual from using your card. The
signature acts as a security check. 

When the card is used for purchases the
individual must sign the receipt to affirm the transaction. A responsible
seller will check the signature on the receipt with the back of the credit card
to ensure that the individual purchasing the goods is indeed the cardholder.
 

Never leave your credit card unattended. An
individual may purchase items (primarily online) solely by entering credit card
numbers, the CV2 code found on the back of the card and the expiration date of
the card.
 

When purchasing items online, make sure the
website you are using is secure. Those websites that are not secure may record
or even share your credit card numbers with third parties. Furthermore, never
respond to unsolicited e-mails that ask for your credit card numbers.

If you lose or have your card stolen, you must
immediately report the incident to your issuing financial institution.
 

Store Specific Credit Cards: Targeting Youthful Holders

Store Specific Credit Cards: Targeting Youthful Holders

Many of us have become familiar with the all too common “help” of a retail store employee informing us that we can save 15% on our purchase if we sign up with the store’s credit card.  However, while they may provide savings, many find that the percentage they save now may come at the expense of damaged credit and inflated rates later.  
Store credit cards are very similar to standard issued Visa or Discover cards, except that they are often attached with special offers and the promises of future discounts and rewards.  However, they also come with the same risks, as interest rates are often very large and spending limits tempting.  
Younger consumers, who may not understand the implications of credit card debt, are at risk of damaging their credit and becoming indebted for purchases that seem like a bargain.  Most, if not all financial experts, advise that younger consumers should stay away from such credit cards and focus on building their credit in much less riskier methods.  

Credit Card Act

Credit Card Act


What are new credit card rules?
The Credit Card Act of 2009 provided much needed reform to consumer credit cards which had subjected cardholders to unreasonable fees, soaring interest rates and arbitrary rules.  These rules took effect on February 22, 2010.
Reforms to rates, terms and fees
Minimum payments – credit card companies must display on their bill how long it will take for the consumer to pay off the balance is only the minimum payment is made every month.  Whenever the consumer pays more than the minimum balance, the leftover amount will go towards paying the next balance with the highest interest.  
Billing cycles – credit card companies may no longer charge retroactive fees for the previous billing cycle if there is not a valid reason such as disputed purchases or payments for insufficient funds.
Due dates – the new credit card rules dictate that the due date for monthly payments must be consistent every month and if the date falls on a holiday or weekend, the payment is due on the next business day, without penalty.
Change of Address – a credit card company changes its mailing address which in turn, leads to delays in processing cardholder’s payments, the card company may not charge late fees for sixty days after the change.
Interest rates – the new credit card rules ban retroactive interest rate hikes, with some exceptions.
An expressed introductory period ends; the law now requires this period to be at least six months.
The interest rate is variable.
The cardholder fails to comply with a debt consolidation plan.
The cardholder misses a payment for 60 days, even then, the rate must return to normal after the cardholder makes six months of on-time payments.
A military service member leaves active duty which no longer entitles the cardholder to a government mandated cap of 6% APR.
Most importantly, a credit card company cannot raise rates if the cardholder fails to pay balances on other accounts such as utilities or other credit cards.
“Over-limit fees” – usually a credit card is declined when it exceeds its limit.  Over-limit fees cover the balance, often with substantial fees.  The new credit card law lets consumers opt out of over-limit fees and ensures it can only be charged once per billing cycle.  The law also requires those than opt into the fees understand the amount to be charged and retain the right to opt out at any time.
Paying balances – the credit card company is now required by law to not charge additional fees for any methods of payment, unless it is an expedited service to avoid late fees.  Statements must now be mailed to the cardholder at least 21 days in advance.  Fees may not be applied until 21 days after any declared “grace period” has ended.
Subprime cards
Subprime cards have been known as “fee harvesters” as the holders typically incur several unforeseen fees which especially victimize individuals with poor credit worthiness.  Credit card companies can no longer charge upfront fees that exceed 25% of the credit limit.
Reforms to gift cards
The new credit card laws also contain provisions for gift and prepaid cards as well as gift certificates.  Unless the issuer specifically discloses it, these items cannot expire within five years.  Dormancy, inactivity and service fees are all expressly banned unless it is expressly disclosed and the inactivity exceeds one year.  In this case, only one fee may occur per month.
Youth credit reform
Issuing credit cards to persons under 21 is now banned unless there is an adult co-signer.  Alternatively, they may show proof that they have the means to pay back the balance.  Credit card companies may no longer solicit persons under 21 with prescreened credit card offers.
Colleges and universities must disclose all marketing and promotional relationships with credit card companies including contracts that disclose student and alumni information to credit card companies.  These disclosures are subject to inspection by the federal government.  
The new credit card laws mandate that credit and debt management courses become part of new student orientation at colleges.  Free offers may not accompany credit card promotions at or near (within 1,000 feet of) college campuses.  Colleges and universities are now required to limit the number and locations of credit card marketing events.
Disclosures
The new credit cards laws ensure that all fees, penalties and terms are disclosed and that there is at least 45 days notice of changes to credit card agreements.  They must also inform the cardholder of how long it will take to pay off their balance when making only the minimum monthly payment.  The Federal Reserve must collect electronic copies of all credit card agreements for public record.  The Federal Reserve also issues guidelines for card issuers to set up toll-free credit counseling and debt management assistance.
Credit reports
Consumers are entitled to one free credit report a year at AnnualCreditReport.com.  Other companies that offer free credit reports must disclose both visually and audibly that their credit report is not the “free one” provided by federal law.  
Opting out 
The right of consumers to opt out of significant change to their account is affirmed by the new credit card law and prevents opting out to be at the discretion of the card company.  Card companies that have account holder close accounts due to radical changes may collect the remaining balance over the next five years, charge a minimum payment amount that is up to twice the percentage charged before the change in terms or hold the former account holder to the same terms of the original agreement.  
Consumers cannot be punished for opting out of rate increases.  However, consumers are not allowed to opt out of minimum balance increases.  Consumers who are more than 60 days late on payments are also not allowed to opt out of rate increases

Credit Reporting Agencies

Credit Reporting Agencies

What are Credit Reporting Agencies?
Credit reporting agencies are companies that collect information about a person’s ability to handle credit. They can then sell that information to certain other businesses that can use the information to evaluate applications for insurance, employment, credit, or other allowed purposes.
These credit reporting agencies have sounds agreements with government agencies that allow them to receive and combine credit information from creditors who optionally provide the information. This combined information is then sold, sometimes by smaller reporting agencies to the consumer. This is most often done in the form of a credit report, which helps determine through a credit score the creditworthiness of an individual.
 A credit reporting agency issues credit reports that describe just how an individual manages any debts they may have and how they manage them. It can also discuss payments made and how much available credit they have they is not used and whether the individual has applied for loans.
Credit reporting agencies can collect information about:
Public record information (for example, bankruptcy or judgments)
Inquiries about credit record as well as names and companies who have inquired
Information on credit accounts, such as date opened, balance, account status, payment patterns, most recently activity of the account.
Credit reporting agencies do not collection information about:
Personal background or lifestyle
Racial or religious information
Medical history
Political preference
Criminal record
There are three major credit reporting agencies in the U.S.:
Experian
Equifax Credit
TransUnion
Under the Fair Credit Reporting Act, a federal act passed in 1970, a new amendment from 2003 states that all consumers can order a free copy of their credit report from each of these credit reporting agencies once a year. These credit reports can be ordered by mail, through the phone, or online. While it is possible to order all three credit reports from each credit reporting agency at once, it is also possible to order them separately.
By federal law, credit reporting agencies can only report information for a certain amount of years. For example, bankruptcies can be reported by credit reporting agencies for up to 10 years while other negative information can be reported for up to 7 years. However, negative information can be considered indefinitely when applying to a job paying more than $75,000, a life insurance policy worth at least $150,000, or any lines of credit for at least $150,000.
An individual can also request more information be reported by credit reporting agencies. For example, creditors sometimes do not file information to credit reporting agencies. This can be changed by asking the agency to add the information.
Furthermore, if there are any errors in the credit report, an individual can report the problem to the credit reporting agencies. They will then have to investigate the error and give a response to the individual within 30 days.

Free Credit Reports

 Free Credit Reports

How to get Free Credit Reports
A credit report gives information on an individual’s location, how the individual pays bills, record of lawsuits and arrests, and any history of bankruptcy. Credit reports can be used by businesses, employers, creditors, insurers, as a means of evaluation for various things such as employment, credit, or housing. The credit report contains three different reports from the three major credit bureaus.
Looking at a free credit report can help improve the chances affect getting a job or a loan at a certain percent of internet. Free credit reports can show an individual what their credit score is and how it can be improved.
Under the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act, everyone is entitled to free credit reports once a year. This law was created in order to provide individuals with a free copy annually of their credit report upon request, making them more aware of their financial position. Free credit reports can be obtained by providing a name, date of birth, address, and social security number. 
There are many different companies that advertise free credit reports, but only one is authorized by the government to give you the free credit report that you are entitled to receive annually. An individual can get a credit report online which has immediate access. It is also possible to call a toll free line or fill out an Annual Credit Report Request Form to order a credit report by mail. Requesting a credit report can take up to 15 days to receive, although it can take longer when backed up.
While everyone is entitled to just one free credit report a year, others can be obtained in the situation where a company takes actions against the individual, for example denial of employment, insurance or credit. An additional free credit report is given when an individual is unemployed or on welfare. If an individual needs a credit report but does not qualify for one, it can be purchased for up to $10.50.
There are certain actions that can affect a credit report negatively and cause a lower credit score. These things can be reported seven years such as an unpaid lawsuit, unless it is bankruptcy information which can be reported for 10 years. Certain information is permanent, such as criminal convictions, reports of an annual salary above $75,000, or applications for credit or life insurance above $150,000.
Any errors in the credit report should be reported by the individual to the reporting company, who will then work to make any corrections as necessary. The company should provide a written report and a copy of the credit report. The creditor must also be made aware of the error in order to prevent future erroneous reporting.

Credit Checks

Credit Checks

How Credit Checks Work


When applying for credit, lenders can inquire for a copy of an individual’s credit report from one of the major credit bureaus. These inquiries or credit checks can be listed on a credit report. While these inquiries may cause a credit score to drop, it will not change drastically. Sometimes, looking for a new credit line can mean a higher risk, but most credit scores do not get affected by multiple inquiries from mortgage, auto, or student loan lenders.
A credit check can be useful to determine an individual’s credit score, which many businesses, employers, creditors, and insurers use. The best way to go about doing a credit check is by getting a credit report. This provides information on an individual’s location, how the individual pays bills, record of lawsuits and arrests, and any history of bankruptcy. The credit report contains three different reports from the three major credit bureaus.
 A credit check can come in two forms. There is the soft pull which is just a basic credit check to determine a credit score. It is only use for informational purposes in order to find out a score. There is also a hard pull credit check, which results in more complicated reports. Lenders will often use hard pull credit checks for new accounts. These are the credit checks that can affect credit score.
The impression from applying for credit and having a credit check done will vary on a person to person basis based on their unique credit histories. For most people, one additional credit inquiry takes less than five points off. However, inquiries can show a greater impact with less accounts or a shorter credit history.
Large amounts inquiries also imply greater risk. An individual with at least six inquiries on their credit reports statically can be up to eight times more likely to declare bankruptcy in comparison to people with no inquiries. While inquiries can help assess risk, they play a minor part in doing so. How an individual pays bills and his overall debt burden as shown on your credit report is much more influential.
Performing a credit check through a credit report can help improve the chances of getting a job or a loan. Credit reports can show an individual what their credit score is and how it can be improved as opposed to jut a number.
Under the Fair Credit Reporting Act along with the Fair & Accurate Credit Transactions Act, everyone is entitled to free credit report annually from the major credit bureaus. This law was created in order to provide individuals with a free copy annually of their credit report upon request, making them more aware of their financial position. Free credit reports can be obtained by providing a name, date of birth, address, and social security number. 

Fix Credit Scores

Fix Credit Scores

How to Fix Credit Scores


There is no way to quickly fix credit scores since the process takes time to be successful. The best way to fix credit scores is to take care of it in a responsible way steadily over time in order or to repair credit history. Here are some tips for accomplishing that.
Fix Credit Scores: First Steps
Check a credit report: Free copies can be requested and will provide information used to calculate a credit score. There can be potential errors such as incorrect late payments or amounts owed. Any errors should be disputed and corrected through the credit bureau as well as the reporting agency.
Setting up payment reminders in order to prevent late payments, which can have a very harmful effect to a credit score. Banks will often provide this service through the online banking sections of their websites. Automatic payments are another possible way to avoid late payments.
Reduce owed debt by reducing credit card use, and having more effective payment plans.

Fix Credit Scores: Long Term Solutions
If there are no credit cards associated to an individual, a credit card can help to help show regular payments.
Showing payments to installment loans such as auto loans, personal loans, mortgages, or student loans can help fix credit scores.
Paying off credit cards and other revolving credit lines is also an extremely effective way to fix credit scores. It is best to show large gaps credit available and credit used. Typically it is ideal to stay below 30%. Two effective ways of paying off or down credit cards are by either paying the cards with the highest interest rates or those that are closest to their limits.
Instead of accumulating large balances on credit cards, using less than 30% or especially less than 10%. Balances are reported to credit unions so they should be kept as low as possible.
Verify limits to be sure the lender is not showing a lower limit. If a lender is doing this, the lender can update this information quickly upon request.
Keep older cards to maintain an older credit history, but make sure to use them occasionally otherwise the issuer may stop sending updates to credit bureaus, lessening its weight on a credit report.
If there is just one late payment, a lender may be willing to overlook and erase it from the record. Any requests must be made in writing.
Fix Credit Scores: Avoid these Mistakes
Don’t lower credit limits because it will lower the gap between available credit and balances, which can lower a credit score.
Avoid any late payments since they hurt good scores even harder than bad ones. They are not as damaging to an already bad score, but they should still be avoided.
Consolidating accounts may lead to a big balance on one account as opposed to smaller balances on multiple accounts, which can hurt credit scores.

Credit Fixes

 Credit Fixes

Helpful Credit Fixes


In order to do a credit fix, it is important to know how to avoid some scams and claims. Many companies will claim to be able to remove judgments, bankruptcies, bad loans, or liens from a credit file. Some companies may even claim to remove bad credit or make a new credit identity. 
According to the Federal trade Commissions, most of these are just scams. Even attorneys from the country’s consumer protection agency have yet to find a legitimate credit fix operation that has followed through on such claims.
Legally, no one is allowed to do a credit fix by removing timely and accurate negative information from a credit report, so it is important not to believe that these credit fixes will really work. The only thing that is allowed is removing negative information that is incomplete or inaccurate.
Here are some credit fixes that will help improve a credit score:
If the bad information on a credit report is the result from an outstanding debt, work to repay these debts as rapidly as possible. It is ideal to pay off debts that have the highest interest rates before those with lower interest rates.
If the debts are too overwhelming, a nonprofit credit-counseling organization may be helpful in making a plan to repay debts. A counselor can help consolidate debts and can talk to debtors to try to eliminate or reduce extra finance charges.
Attempt to maintain a lifestyle that can help with the credit fix. Make sure to make all payments for rent, mortgages, and utilities before they become late, maintain the same job and residence, and keep a savings and checking account. Furthermore, create and follow a budget.
Punctually paying off monthly credit card balances in order to avoid late fees is an effective credit fix to follow.
Cut off credit card use to avoid even more debt.
Setting up payment reminders in order to prevent late payments, which can have a very harmful effect to a credit score. Banks will often provide this service through the online banking sections of their websites. Automatic payments are another possible way to avoid late payments.
Pay more than just the minimum on the monthly payments.
Ask for a copy of a credit report and check for any errors. If there are, they should be corrected.
Avoid large purchases until paying off all the credit card debt.
Transfer the debt to a lower interest credit card.
Pay half the minimum twice the month to reduce the monthly average, which will reduce the finance charges that are assessed.
Close the newest accounts to make the average age of credit history older.

Discover the Workings of Credit Card Processing

Discover the Workings of Credit Card ProcessingWhat is a Credit Card?

A credit card is an alternative payment method to
cash, which enables a consumer to purchase goods or services on credit. Credit
cards are issued by financial institutions to those individuals who they deem
as fit or credit-worthy. The ability to obtain a credit card and the subsequent
rates or fees attached to the issuance is based primarily on an individual’s
credit history and score. 



The lower the score, the lower chance to receive a
credit card. If a financial institution grants a card to an individual with a
low score, it will invariably be met with high interest rates and complicated
terms.
 

The interest rates and fees attached to the
issuance are dependent on the individual’s expected ability to repay their
borrowed funds. When an individual purchases goods on a credit card they are
required to reimburse the issuing company the amount spent. If the full balance
is not paid each month the interest is applied and carried over to the
following billing period.
 

How does Retail Credit Card Processing Work?

When an individual purchases a good or service
from a retail store with a credit card, they simply slide the card into a
machine. Each credit card is equipped with a magnetic strip on the back. When
sliding a credit card through the machine, the magnetic strip will relay the cardholder’s
information to the retail outlet’s point-of-sale system. This step of credit
card processing enables the cashier to integrate the individual’s information
into their transaction.
 

In addition to using a machine to initiate the
credit card processing through the magnetic strip, an employee at the retailer
can also type the card information (the credit card number on the front of the
card) into their point-of-sale system. This form of credit card processing is
utilized for online purchases or for those transactions that do not involve a
card reader.
 

All retailers that initiate credit card processing
must sign up for a service that is linked with a merchant provider. Seller
transaction credit card processing systems send captured credit card data,
along with the data linked to the transaction, directly to the merchant account
provider. 


The merchant account provider then routes the information to a credit
card network interchange. This intermediary then connects banks and credit card
providers together to finalize the transaction.
 

Network Interchange involved in Credit Card
Processing



The merchant account must first route the
information through the network interchange to the holder’s institution. The
institution then checks the card’s balance against the transaction amount and
either authorizes or denies the payment. 



The next step in credit card
processing involves the credit card provider routing the information back to
the merchant account. When the information is relayed, the transaction will
either be rejected or finalized. In full, credit card processing takes as
little as two or three seconds.
 

Once the authorization for approval or denial of
payment has been received, the merchant notifies the seller of the result, who
then will notify the buyer. If the transaction involved in the credit card
processing is authorized, the merchant account provider sends the transaction
information back through the network interchange to the seller, who then
requests the funds to be transferred from the buyer’s credit card provider.