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CNN Live Saturday
"Dollar Signs": Getting The Most Out Of Your Credit Cards
Aired November 01, 2003 - 16:31 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JONATHAN KARL, CNN ANCHOR: Welcome to "Dollar Signs," where we help you get the most out of your money. Today, however, we're going to help you get the most out of your credit cards. With the holiday shopping season just around the corner, we want to alert you to ways your credit cards can handle double duty, getting you a bonus why working for you.
Todd Mark with Consumer Credit Counseling Service is here from Atlanta. And Jennifer Voitle, who use credit cards to get lots of freebies is adding her expertise from New York.
Jennifer, let's start with you -- we're going to have, obviously calls and emails and everything else, but I want to start out -- I understand you are somewhat of an expert of getting free things from your credit cards, using all those points and special offers. Do you always use credit cards?
JENNIFER VOITLE, USES CREDIT CARDS FOR FREEBIES: I use credit cards whenever I can. In fact, any time I have to pay cash, it's a tragedy to me, because I'm not getting any reward from cash or checks.
KARL: So, what is it? what can you accumulate? Is it just a matter of getting points for airlines or is there something more here?
VOITLE: Points for airlines, points for free hotel stays, you can get cash back, you can earn gas. For the holiday season, you mentioned, if people are going to be shopping at Toys R Us, Chase has a card that's targeted just for that. They could earn points towards rebates at Toy R Us. You can earn pretty much anything you want. If you don't want the airline miles, those can be converted into other merchandise such as the "Wall Street Journal," which I'm getting free from airline miles.
KARL: So Mark, how well can somebody do, looking into this holiday shopping season get free stuff from these credit cards.
TODD MARK, CONSUMER CREDIT COUNSELING SERVICE: As Jennifer said, there's so many things you can get as rebate on your card, it's not just miles anymore or travel goodies anymore. You know, you can have money put into your stock fund. You can actually have money that would be contributed to a 529 college savings plan. You can even have your points or whatever you accrue and have it donated to your favorite charity. But my personal favorite is having the cash back going right into my pocket.
KARL: Well, there you go. Of course, there's always some risk from credit cards. And we have an email coming in from Jackie in New York City looking at some of the offers and low interest rates. She writes, quote, "I got a great rate offer with a creditor and transferred my costly balances to the new card. However, some months later, surprise, increased to 17.99 percent and the bank said, they had the right to the increase. How can I avoid this scenario in the future?"
I mean, this happens, right, these teaser rates that turn into something quite different -- Todd.
MARK: Well, Jackie, I'm so sorry to hear that. You have to read the fine print when you're signing up for one of these deals. When you're doing a balance transfer, generally they will give you a teaser rate, whether it's 3, 6 months, even 12 months. And, of course, at that point it will go up.
You need to know is it tied to the fixed rate? Is it a variable rate that goes up and down with the market. You need to know what that's going to be.
And what are the fees involved with the balance transfer. Sometimes folks don't realize there's massive fees that are put on top of that. Not to mention the biggest trap, say you have a low interest rate with your balance transfer, but any other charges you make in between there, you're not paying a dime on that until that balance transfer is paid off. So, those new purchases might be on higher interest rate.
KARL: So, if I read that fine print and I see I can avoid the balance transfer fees, can I go from low rate to low rate to low rate, kind of running out the teaser rates and then switching before it goes up?
MARK: Absolutely. We call that juggling. You know. It's not a great way to manage your finances, but in the short term, if you can go from one teaser to another, it works, but in the long-term it has to be hurting your credit score, because you'll be opening up line after line which will decrease your score and means you won't get approved the next time.
One of these moments you'll find yourself trying to transfer a balance again, you'll be like Jackie finding yourself at 17.9 percent and nobody will take you. At that point, you have to pay the 17.9.
It doesn't have to end there. Jackie, as you learned. Most credit card companies can up your rates with 15 days notice in writing. They can put it up to 25 percent. I'd love to see you pay that off as quickly as possible, Jackie.
KARL: We have a phone call from Joan in Alabama. Joan, your question.
CALLER: Well, I had a similar question. I've been getting all of these offers for 0 percent for six months. I was particularly interested because one was from my insurance company, and I had my car insurance with. And you can earn points that helps with your premium for your car insurance. I usually pay most of my balances in full at the end of each month, but for the past few months I've been accumulating some, so I've been thinking of transferring those two balances to this other for six months, and then when I pay that off, even if I paid that off every month, do I still get the points?
KARL: Jennifer.
VOITLE: I want to defer to the expert.
KARL: Okay, Todd.
MARK: Well, Joan, absolutely. Once you transfer that over, as you're paying it off, whatever points you accrue -- every credit card is different. In this deal, it might be you're getting points on whatever balance you carry from month to month. It might just be on whatever you transfer over in the first place.
You need to understand exactly what the points you're accruing are based upon. Remember, some credit cards will actually only give you the rebate or extra points if you carry a balance from month to month. I'm so proud to hear, Joan, you sound like the person that does pay their balance off in full every month. I'd like to see you get those credit cards paid off as quickly as possible.
KARL: Jennifer, let me ask you, don't these points offered by credit card companies sometimes encourage people to do stupid things. I hear about them buying things they wouldn't necessarily buy because they want more points. It seems to me, not a very sound economic decision to take on more credit card debt for the sake of getting more points.
VOITLE: That's exactly right. You really do have to practice good budget management. I tell people, I try to practice it myself, to only charge strategically. I personally don't carry a balance, I charge it to get the points or miles and pay it off. I know people that owe 35 and $40,000 in credit card debt. That's -- you can't -- you really have to do an economic handles, as you say.
KARL: At the end of the day, the credit card companies wanted to you have big balances so you're paying huge interest rates, huge penalties there. They're not just out there to give you free things, they're out to make money obviously. We'll take a quick break. Your calls and e-mail messages next on "Dollar Signs." And of course, you can still send us your questions at dollarsigns@cnn.com or you can call in at 1-800-807-2620. We'll be right back.
(COMMERCIAL BREAK)
KARL: Welcome back to "Dollar Signs." We're talking to Todd Mark and Jennifer Voitle about all the perks you can get from your credit cards. And we've got a call now. We have Lloyd on the phone from Florida with a question, Lloyd.
CALLER: Yes. Earlier this year I went bankrupt and I'm trying to reestablish my credit. Where can I get a secured or unsecured credit card without paying a fee at this time.
MARK: Lloyd, have you already started looking?
CALLER: Beg your pardon?
MARK: Have you already started looking? I hope you're not looking to see what's in your mailbox, right?
CALLER: No, I'm looking around.
MARK: There's a couple of Web sites I want to you check out, especially if you're just getting over your bankruptcy, trying to reestablish your credit. Two Web sites, one is, Bankrate.com. B-a-n- k-r-a-t-e.com, the other one is cardweb.com, C-a-r-d-w-e-b.com.
And whether it's just for you, Lloyd, looking to get secured cards or cards for people with sub-prime credit or anybody looking for the best credit card with the best rebates. You go on and you go on your card locator. And they'll say.
They'll say, are you a person with good credit? Bad credit? How many credit cards do you have? And what are you looking for? What's most important? Are you trying to avoid application fees, annual fees, looking for grace periods, lowest interest rate? Look for those things.
You'll be looking specifically, Lloyd, probably for a secured card. I don't want to see you go for one of these credit cards with a 20 percent interest rate just because you have damage in your credit card history. Maybe start with a secured card. Charge a little bit every month, pay it off on time in full every month and make sure the secure card you're with is with major bank that will report it to the credit bureaus. There's no sense in trying to build your credit history if it's not getting reported.
KARL: Let's take an e-mail from Frederic in Montana. He writes, "we use our card to pay our phone bill. Recently the phone company started charging $3.75 for the convenience charge of using the phone pay service. I thought merchants were prohibited from adding fees to credit card payments. What's the bottom line? And why do the consumers get it in the end?" Jennifer, do you have an answer to that?
VOITLE: Well, again, Jonathan, like you said before, if you're going to get a reward, there is a fee. This time, it's just not hidden.
KARL: Todd, how common is this?
MARK: It's funny. I think, it's Australia just passed a law saying it's okay to pass on transaction fees to customers. Blatantly by saying these are you fees, you'll be tacked on 1, 2 percent on top of your bill. I hope that never happens in the United States. You have to look at the phone company you're dealing with and say, if you don't want me to pay with my credit card, what are the other options? You wanted me to do e-bill pay? Send it the old snail mail way and put a stamp on it.
There's got to be a way you're not going to be hit with a convenience fee.
KARL: All right. We've got a phone call from Haviva (ph) in Arizona. Your question?
CALLER: Yes. I tried to apply for a credit card and I've been denied, because I don't have no credit reference, and I don't have any credit at all, so how do I start any credit?
MARK: All right. Haviva. You don't have bad credit in the peace, you just have no credit, right?
CALLER: Yes. I've been declined because of that reason.
MARK: All right. The credit card companies look at you as a high risk, because they don't know what sort of a risk you are, so they're just assuming the worst, I hate to sate like that.
What you should do is the same thing we recommended for Lloyd. Get yourself a secured card with a bank that will report to your credit bureaus what your payment history is all about. And charge a little bit every month. Pay it off on time in full every month. And before you know it you will get pre-approved from regular credit cards in the mail.
KARL: All right, we've got an email now from Tom in Ontario. He writes, "I received a credit card application from a company advertising a 3.99 percent rate if I get their card and transfer my current credit card balance to my new card. Is it better for me to get their card, or should I get a loan from my bank and pay off the current credit card balance? (The balance is only $2,000)."
You can get some really low line of credit loans from your bank. What should he be doing? Jennifer?
VOITLE: That's a tough question. I mean, in general I don't usually advocate going into debt to pay off debt. You only owe $2,000. But if you think you could pay it off within that initial teaser period, it might be worthwhile. I mean, it depends on what you're paying right now.
KARL: OK. We have another e-mail, Elliott in Texas writes, "My wife and I are debt free recently. However, we think we should have 1 or 2 cards left for emergencies, e-commerce, etc. How do we decide which ones to keep, obviously interest rates, annual fees and service charges will all be a factor in our decision, but what other considerations would we take into account?" Todd?
MARK: Well, first off, congratulations or becoming debt-free. That is fantastic. We love to hear that. So, what you need to consider when you're canceling out cards, remember with your credit score on your credit report, it's actually impacted by the length of your credit history. So, if you go ahead and start canceling credit cards you've had for 15 or 20 years, your scores going to drop.
Hopefully the cards that you've had the longest, coincidentally, will have the lowest interest rate. I mean, obviously interest rate is going to be extremely important. But you don't want to go canceling cards that you've had for a while and are contributing to a good score. So, at that point, go by interest rate see annual fees, any sort of other fees, late fees, balance transfer fees, which cards you're most happy with, with a grace period. Hopefully maybe the cards you're keeping will give you great rebates, whether they're miles, cash back, trips, et cetera, et cetera.
KARL: When you say they finally gotten out of credit card debt -- we don't know how long it lasted -- they finally got out of credit card debt. Shouldn't they only do those cards that can give the miles and points if they can be disciplined to pay off that debt and not carry those balances.
MARK: Absolutely. Once somebody climbed over the hurdle and paid off the debts, nothing would be worse if they went to old habits and started charging things they couldn't pay off anything at the end of the month. Use your credit card like you would a charge card, as you would writing a check or paying cash. Only spend what you can afford to pay off at the end of the month. That's the bottom line.
KARL: OK, another email. Amy in Troy, New York writes, "I have two credit cards and the companies keep upping my charge limit. I prefer to keep both limits around $10,000, as I cannot imagine ever needing more than that. Is there any way to force these companies to cap my spending limit? With stories about identity theft, it just makes sense." She raises and excellent point point. If you keep getting a bigger and bigger limit, if you get your card stolen, you will be in a lot of debt. Jennifer, what can they do?
VOITLE: She does have a really valid point, but these days, with so many customers able to access their accounts online, the identity theft, while it is a real problem, I have friends that have suffered from that. Just keep track of your balances, at least weekly, if not more frequently.
Of course, as you know, you're limited to a $50 -- usually a $50 loss if you report the theft right away. It can be a nightmare, the identity theft, of course.
KARL: Todd, can you request from these companies, hey, I don't want a bigger limit. I know you're trying to do me a favor, I don't want a bigger limit?
MARK: Absolutely, Amy. You don't have to accept when they try to raise your limits. Just call them up and say, I'm really happy where I am. I don't want to have the temptation available that says I can go out on a big spending spree so keep my limits where they're at. Remember, your credit available also has an impact on your credit score. It's better to have two credit cards with a $20,000 total limit like you have as opposed to one with $50,000 limit and say there's more risk in your future.
KARL: All right, more of your calls and email messages after the break. We'll be right back.
(COMMERCIAL BREAK) KARL: Welcome back to "Dollar Signs." Are you getting the most out of your credit cards? Jennifer Voitle says she never uses a credit card without getting a reward. And Todd Mark says, if you're paying your balances off every month there's no reason you shouldn't be reaping extra benefits.
Now we have calls and emails. Right now a call from Virginia. Lita, you have a question.
CALLER: Yes, I have a question. I have applied for two different credit cards from two different companies. One gave me the credit card and the other company denied me. Does that have to do with their credit practices or how does that usually work?
MARK: Lita, you're probably, if you're applying for a bunch of credit cards at the same time, that will be taking down your credit score all at once. Maybe the first one was processed before you hit their cutoff line, the second one they said, too many applications for credit. Let's turn her down.
What your credit score does is judge your risk. If the credit companies think you're applying for a bunch of credit cards all at once. They would be think why would they be doing that if not to go on a big shopping spree. That's probably why you got turned down.
KARL: Did you apply for both at the same time?
CALLER: No, there was probably a week or so difference.
MARK: Lita, that is the same time, basically. You need to watch applying for multiple lines of credit at the same time?
KARL: Which one turned you down, the first one or second one?
CALLER: The second one turned me down.
KARL: There you go. They probably saw your first credit application over your limit. Thanks for your question.
Let's take an e-mail now. We have Steve in Upland, California with a question. He says, "I have my own business. If I am unable to pay off both my personal credit card (5 percent) and my business credit card (12 percent) am I better off paying off my personal side since the interest isn't deductible, but the business one is.
OK, we have a consumer and a tax question here. Todd, you want to take that one?
MARK: Absolutely. Well Steve, congratulations on having your own business. But you know, you can declare bankruptcy for your business versus declaring bankruptcy for yourself, if it ever came to that situation. Obviously, I'd rather you keep yourself whole.
So, if you've got to make the choice of what do I pay off first? Pay off on your personal cards first and hopefully your business will come around where you can support the debts that you're accruing for your business. And of course, as you said, those interests are tax deductible whereas the Interest on your personal credit cards are not.
KARL: All right, we have time for one more phone call. This one comes from Robert in Florida, your question.
CALLER: I'm calling to find out, I have several, maybe ten credit cards. And I don't carry a balance, but on maybe two. Does it hurt my credit score to have so many open accounts? Should I close some or not?
MARK: Robert, in the short term, don't worry about closing your cards, because closing them could hurt your score, because it will raise up the amount of balance you would have versus available limit. It sounds like you don't have to worry. You pay off all your bills on time every month?
CALLER: No. I have maybe a $3,000 balance or so.
MARK: If you wanted to, you might want to close a card or two, because 10 is quite an amount. I don't know what the balances are on each card, but if you want to improve your credit score, the best thing to do is pay down that $3,000 debt and you'll be looking great.
KARL: So, Jennifer, how many credit cards do you have open?
VOITLE: Just two. I think two is the perfect number. I have one affiliated with my favorite airline and another one with my hotel, my favorite hotel.
KARL: OK. Well, Jennifer Voitle, Todd Mark thank you very much for joining us with good and very practical advise. Have a good weekend.
"PEOPLE IN THE NEWS" is coming up next. Thank you.
END
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Aired November 1, 2003 - 16:31 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JONATHAN KARL, CNN ANCHOR: Welcome to "Dollar Signs," where we help you get the most out of your money. Today, however, we're going to help you get the most out of your credit cards. With the holiday shopping season just around the corner, we want to alert you to ways your credit cards can handle double duty, getting you a bonus why working for you.
Todd Mark with Consumer Credit Counseling Service is here from Atlanta. And Jennifer Voitle, who use credit cards to get lots of freebies is adding her expertise from New York.
Jennifer, let's start with you -- we're going to have, obviously calls and emails and everything else, but I want to start out -- I understand you are somewhat of an expert of getting free things from your credit cards, using all those points and special offers. Do you always use credit cards?
JENNIFER VOITLE, USES CREDIT CARDS FOR FREEBIES: I use credit cards whenever I can. In fact, any time I have to pay cash, it's a tragedy to me, because I'm not getting any reward from cash or checks.
KARL: So, what is it? what can you accumulate? Is it just a matter of getting points for airlines or is there something more here?
VOITLE: Points for airlines, points for free hotel stays, you can get cash back, you can earn gas. For the holiday season, you mentioned, if people are going to be shopping at Toys R Us, Chase has a card that's targeted just for that. They could earn points towards rebates at Toy R Us. You can earn pretty much anything you want. If you don't want the airline miles, those can be converted into other merchandise such as the "Wall Street Journal," which I'm getting free from airline miles.
KARL: So Mark, how well can somebody do, looking into this holiday shopping season get free stuff from these credit cards.
TODD MARK, CONSUMER CREDIT COUNSELING SERVICE: As Jennifer said, there's so many things you can get as rebate on your card, it's not just miles anymore or travel goodies anymore. You know, you can have money put into your stock fund. You can actually have money that would be contributed to a 529 college savings plan. You can even have your points or whatever you accrue and have it donated to your favorite charity. But my personal favorite is having the cash back going right into my pocket.
KARL: Well, there you go. Of course, there's always some risk from credit cards. And we have an email coming in from Jackie in New York City looking at some of the offers and low interest rates. She writes, quote, "I got a great rate offer with a creditor and transferred my costly balances to the new card. However, some months later, surprise, increased to 17.99 percent and the bank said, they had the right to the increase. How can I avoid this scenario in the future?"
I mean, this happens, right, these teaser rates that turn into something quite different -- Todd.
MARK: Well, Jackie, I'm so sorry to hear that. You have to read the fine print when you're signing up for one of these deals. When you're doing a balance transfer, generally they will give you a teaser rate, whether it's 3, 6 months, even 12 months. And, of course, at that point it will go up.
You need to know is it tied to the fixed rate? Is it a variable rate that goes up and down with the market. You need to know what that's going to be.
And what are the fees involved with the balance transfer. Sometimes folks don't realize there's massive fees that are put on top of that. Not to mention the biggest trap, say you have a low interest rate with your balance transfer, but any other charges you make in between there, you're not paying a dime on that until that balance transfer is paid off. So, those new purchases might be on higher interest rate.
KARL: So, if I read that fine print and I see I can avoid the balance transfer fees, can I go from low rate to low rate to low rate, kind of running out the teaser rates and then switching before it goes up?
MARK: Absolutely. We call that juggling. You know. It's not a great way to manage your finances, but in the short term, if you can go from one teaser to another, it works, but in the long-term it has to be hurting your credit score, because you'll be opening up line after line which will decrease your score and means you won't get approved the next time.
One of these moments you'll find yourself trying to transfer a balance again, you'll be like Jackie finding yourself at 17.9 percent and nobody will take you. At that point, you have to pay the 17.9.
It doesn't have to end there. Jackie, as you learned. Most credit card companies can up your rates with 15 days notice in writing. They can put it up to 25 percent. I'd love to see you pay that off as quickly as possible, Jackie.
KARL: We have a phone call from Joan in Alabama. Joan, your question.
CALLER: Well, I had a similar question. I've been getting all of these offers for 0 percent for six months. I was particularly interested because one was from my insurance company, and I had my car insurance with. And you can earn points that helps with your premium for your car insurance. I usually pay most of my balances in full at the end of each month, but for the past few months I've been accumulating some, so I've been thinking of transferring those two balances to this other for six months, and then when I pay that off, even if I paid that off every month, do I still get the points?
KARL: Jennifer.
VOITLE: I want to defer to the expert.
KARL: Okay, Todd.
MARK: Well, Joan, absolutely. Once you transfer that over, as you're paying it off, whatever points you accrue -- every credit card is different. In this deal, it might be you're getting points on whatever balance you carry from month to month. It might just be on whatever you transfer over in the first place.
You need to understand exactly what the points you're accruing are based upon. Remember, some credit cards will actually only give you the rebate or extra points if you carry a balance from month to month. I'm so proud to hear, Joan, you sound like the person that does pay their balance off in full every month. I'd like to see you get those credit cards paid off as quickly as possible.
KARL: Jennifer, let me ask you, don't these points offered by credit card companies sometimes encourage people to do stupid things. I hear about them buying things they wouldn't necessarily buy because they want more points. It seems to me, not a very sound economic decision to take on more credit card debt for the sake of getting more points.
VOITLE: That's exactly right. You really do have to practice good budget management. I tell people, I try to practice it myself, to only charge strategically. I personally don't carry a balance, I charge it to get the points or miles and pay it off. I know people that owe 35 and $40,000 in credit card debt. That's -- you can't -- you really have to do an economic handles, as you say.
KARL: At the end of the day, the credit card companies wanted to you have big balances so you're paying huge interest rates, huge penalties there. They're not just out there to give you free things, they're out to make money obviously. We'll take a quick break. Your calls and e-mail messages next on "Dollar Signs." And of course, you can still send us your questions at dollarsigns@cnn.com or you can call in at 1-800-807-2620. We'll be right back.
(COMMERCIAL BREAK)
KARL: Welcome back to "Dollar Signs." We're talking to Todd Mark and Jennifer Voitle about all the perks you can get from your credit cards. And we've got a call now. We have Lloyd on the phone from Florida with a question, Lloyd.
CALLER: Yes. Earlier this year I went bankrupt and I'm trying to reestablish my credit. Where can I get a secured or unsecured credit card without paying a fee at this time.
MARK: Lloyd, have you already started looking?
CALLER: Beg your pardon?
MARK: Have you already started looking? I hope you're not looking to see what's in your mailbox, right?
CALLER: No, I'm looking around.
MARK: There's a couple of Web sites I want to you check out, especially if you're just getting over your bankruptcy, trying to reestablish your credit. Two Web sites, one is, Bankrate.com. B-a-n- k-r-a-t-e.com, the other one is cardweb.com, C-a-r-d-w-e-b.com.
And whether it's just for you, Lloyd, looking to get secured cards or cards for people with sub-prime credit or anybody looking for the best credit card with the best rebates. You go on and you go on your card locator. And they'll say.
They'll say, are you a person with good credit? Bad credit? How many credit cards do you have? And what are you looking for? What's most important? Are you trying to avoid application fees, annual fees, looking for grace periods, lowest interest rate? Look for those things.
You'll be looking specifically, Lloyd, probably for a secured card. I don't want to see you go for one of these credit cards with a 20 percent interest rate just because you have damage in your credit card history. Maybe start with a secured card. Charge a little bit every month, pay it off on time in full every month and make sure the secure card you're with is with major bank that will report it to the credit bureaus. There's no sense in trying to build your credit history if it's not getting reported.
KARL: Let's take an e-mail from Frederic in Montana. He writes, "we use our card to pay our phone bill. Recently the phone company started charging $3.75 for the convenience charge of using the phone pay service. I thought merchants were prohibited from adding fees to credit card payments. What's the bottom line? And why do the consumers get it in the end?" Jennifer, do you have an answer to that?
VOITLE: Well, again, Jonathan, like you said before, if you're going to get a reward, there is a fee. This time, it's just not hidden.
KARL: Todd, how common is this?
MARK: It's funny. I think, it's Australia just passed a law saying it's okay to pass on transaction fees to customers. Blatantly by saying these are you fees, you'll be tacked on 1, 2 percent on top of your bill. I hope that never happens in the United States. You have to look at the phone company you're dealing with and say, if you don't want me to pay with my credit card, what are the other options? You wanted me to do e-bill pay? Send it the old snail mail way and put a stamp on it.
There's got to be a way you're not going to be hit with a convenience fee.
KARL: All right. We've got a phone call from Haviva (ph) in Arizona. Your question?
CALLER: Yes. I tried to apply for a credit card and I've been denied, because I don't have no credit reference, and I don't have any credit at all, so how do I start any credit?
MARK: All right. Haviva. You don't have bad credit in the peace, you just have no credit, right?
CALLER: Yes. I've been declined because of that reason.
MARK: All right. The credit card companies look at you as a high risk, because they don't know what sort of a risk you are, so they're just assuming the worst, I hate to sate like that.
What you should do is the same thing we recommended for Lloyd. Get yourself a secured card with a bank that will report to your credit bureaus what your payment history is all about. And charge a little bit every month. Pay it off on time in full every month. And before you know it you will get pre-approved from regular credit cards in the mail.
KARL: All right, we've got an email now from Tom in Ontario. He writes, "I received a credit card application from a company advertising a 3.99 percent rate if I get their card and transfer my current credit card balance to my new card. Is it better for me to get their card, or should I get a loan from my bank and pay off the current credit card balance? (The balance is only $2,000)."
You can get some really low line of credit loans from your bank. What should he be doing? Jennifer?
VOITLE: That's a tough question. I mean, in general I don't usually advocate going into debt to pay off debt. You only owe $2,000. But if you think you could pay it off within that initial teaser period, it might be worthwhile. I mean, it depends on what you're paying right now.
KARL: OK. We have another e-mail, Elliott in Texas writes, "My wife and I are debt free recently. However, we think we should have 1 or 2 cards left for emergencies, e-commerce, etc. How do we decide which ones to keep, obviously interest rates, annual fees and service charges will all be a factor in our decision, but what other considerations would we take into account?" Todd?
MARK: Well, first off, congratulations or becoming debt-free. That is fantastic. We love to hear that. So, what you need to consider when you're canceling out cards, remember with your credit score on your credit report, it's actually impacted by the length of your credit history. So, if you go ahead and start canceling credit cards you've had for 15 or 20 years, your scores going to drop.
Hopefully the cards that you've had the longest, coincidentally, will have the lowest interest rate. I mean, obviously interest rate is going to be extremely important. But you don't want to go canceling cards that you've had for a while and are contributing to a good score. So, at that point, go by interest rate see annual fees, any sort of other fees, late fees, balance transfer fees, which cards you're most happy with, with a grace period. Hopefully maybe the cards you're keeping will give you great rebates, whether they're miles, cash back, trips, et cetera, et cetera.
KARL: When you say they finally gotten out of credit card debt -- we don't know how long it lasted -- they finally got out of credit card debt. Shouldn't they only do those cards that can give the miles and points if they can be disciplined to pay off that debt and not carry those balances.
MARK: Absolutely. Once somebody climbed over the hurdle and paid off the debts, nothing would be worse if they went to old habits and started charging things they couldn't pay off anything at the end of the month. Use your credit card like you would a charge card, as you would writing a check or paying cash. Only spend what you can afford to pay off at the end of the month. That's the bottom line.
KARL: OK, another email. Amy in Troy, New York writes, "I have two credit cards and the companies keep upping my charge limit. I prefer to keep both limits around $10,000, as I cannot imagine ever needing more than that. Is there any way to force these companies to cap my spending limit? With stories about identity theft, it just makes sense." She raises and excellent point point. If you keep getting a bigger and bigger limit, if you get your card stolen, you will be in a lot of debt. Jennifer, what can they do?
VOITLE: She does have a really valid point, but these days, with so many customers able to access their accounts online, the identity theft, while it is a real problem, I have friends that have suffered from that. Just keep track of your balances, at least weekly, if not more frequently.
Of course, as you know, you're limited to a $50 -- usually a $50 loss if you report the theft right away. It can be a nightmare, the identity theft, of course.
KARL: Todd, can you request from these companies, hey, I don't want a bigger limit. I know you're trying to do me a favor, I don't want a bigger limit?
MARK: Absolutely, Amy. You don't have to accept when they try to raise your limits. Just call them up and say, I'm really happy where I am. I don't want to have the temptation available that says I can go out on a big spending spree so keep my limits where they're at. Remember, your credit available also has an impact on your credit score. It's better to have two credit cards with a $20,000 total limit like you have as opposed to one with $50,000 limit and say there's more risk in your future.
KARL: All right, more of your calls and email messages after the break. We'll be right back.
(COMMERCIAL BREAK) KARL: Welcome back to "Dollar Signs." Are you getting the most out of your credit cards? Jennifer Voitle says she never uses a credit card without getting a reward. And Todd Mark says, if you're paying your balances off every month there's no reason you shouldn't be reaping extra benefits.
Now we have calls and emails. Right now a call from Virginia. Lita, you have a question.
CALLER: Yes, I have a question. I have applied for two different credit cards from two different companies. One gave me the credit card and the other company denied me. Does that have to do with their credit practices or how does that usually work?
MARK: Lita, you're probably, if you're applying for a bunch of credit cards at the same time, that will be taking down your credit score all at once. Maybe the first one was processed before you hit their cutoff line, the second one they said, too many applications for credit. Let's turn her down.
What your credit score does is judge your risk. If the credit companies think you're applying for a bunch of credit cards all at once. They would be think why would they be doing that if not to go on a big shopping spree. That's probably why you got turned down.
KARL: Did you apply for both at the same time?
CALLER: No, there was probably a week or so difference.
MARK: Lita, that is the same time, basically. You need to watch applying for multiple lines of credit at the same time?
KARL: Which one turned you down, the first one or second one?
CALLER: The second one turned me down.
KARL: There you go. They probably saw your first credit application over your limit. Thanks for your question.
Let's take an e-mail now. We have Steve in Upland, California with a question. He says, "I have my own business. If I am unable to pay off both my personal credit card (5 percent) and my business credit card (12 percent) am I better off paying off my personal side since the interest isn't deductible, but the business one is.
OK, we have a consumer and a tax question here. Todd, you want to take that one?
MARK: Absolutely. Well Steve, congratulations on having your own business. But you know, you can declare bankruptcy for your business versus declaring bankruptcy for yourself, if it ever came to that situation. Obviously, I'd rather you keep yourself whole.
So, if you've got to make the choice of what do I pay off first? Pay off on your personal cards first and hopefully your business will come around where you can support the debts that you're accruing for your business. And of course, as you said, those interests are tax deductible whereas the Interest on your personal credit cards are not.
KARL: All right, we have time for one more phone call. This one comes from Robert in Florida, your question.
CALLER: I'm calling to find out, I have several, maybe ten credit cards. And I don't carry a balance, but on maybe two. Does it hurt my credit score to have so many open accounts? Should I close some or not?
MARK: Robert, in the short term, don't worry about closing your cards, because closing them could hurt your score, because it will raise up the amount of balance you would have versus available limit. It sounds like you don't have to worry. You pay off all your bills on time every month?
CALLER: No. I have maybe a $3,000 balance or so.
MARK: If you wanted to, you might want to close a card or two, because 10 is quite an amount. I don't know what the balances are on each card, but if you want to improve your credit score, the best thing to do is pay down that $3,000 debt and you'll be looking great.
KARL: So, Jennifer, how many credit cards do you have open?
VOITLE: Just two. I think two is the perfect number. I have one affiliated with my favorite airline and another one with my hotel, my favorite hotel.
KARL: OK. Well, Jennifer Voitle, Todd Mark thank you very much for joining us with good and very practical advise. Have a good weekend.
"PEOPLE IN THE NEWS" is coming up next. Thank you.
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