Niche Credit Cards Being Dropped

Niche credit cards are the credit cards that are issued in conjunction with another company, such as Starbucks, Home Depot and other large companies. Credit card companies are offering fewer and fewer of them these days.

Do you have any credit cards from companies like Starbucks, Geico or other companies that you don’t see in the credit card business? If so, you may not have those cards for long.

Credit card companies are starting to do away with specialized niche cards that they once pitched to customers when the credit market was much better than it is now. The latest niche card to get the ax is the Starbucks Duetto Visa Card which was launched by J.P. Morgan Chase in 2003. However, it did not attract enough customers to make the card worth keeping so now it is getting the booth. Chase has recently nixed other specialized credit cards for companies like Avon, New Jersey Devils, the University of Maryland, the NHL, Detroit Pistons, NBA and the Orlando Magic. Other credit card issuers are doing the same thing due to the lack of popularity among the niche credit cards. Bank of America only issues about 4,400 affinity cards which are sold through various channels like social groups, college alumni associations and charities. BofA typically issues about 5,000 of those cards. Citigroup has also cut back on the cards that it offers. It recently stopped offering the co-branded Home Depot Rewards card and the company is currently debating with its contract with the Zale Corporation because Zale wants out of the contract early and Citigroup wants to charge a $6 million early termination fee.

According to Megan Bramlette, a managing associate with the Auriemma Consulting Group, credit card issuers are focusing on the cards that make the most money and work best in the hands of customers. When the economy was good, card companies wanted to fill the pockets of consumers with as many credit cards as they could with various logos to make them fun. These cards offered rebates, rewards and discounts to consumers, but they have now become to expensive as credit card companies have tried to reduce costs due to the recent number of huge delinquencies and other problems.

But you won’t see all of those co-branded cards come to an end just yet. Chase is keeping some of its more profitable niche cards, like the Continental Airlines and Marriott International ones as well the one recently offered in conjunction with the Hyatt Hotels. These types of cards tend to be the most profitable because customers use them frequently for their opportunities for free trips and hotel stays.

Do you have several credit cards that are co-branded with other companies? If so, are you affected by any of these changes? Will these new developments change any of your spending habits?

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

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Three Ways to Kill Your Credit

Three Ways to Kill Your Credit

Discussing tips and strategies to maintain a positive credit score, and to avoid the common pitfalls!

Banks are becoming even more wary of extending consumer credit - that means your credit score is becoming even more crucial.  Credit scores affect whether you can get credit and what you pay for credit cards, auto loans, mortgages and other kinds of credit. For most kinds of credit scores, higher scores mean you are more likely to be approved and pay a lower interest rate on new credit.  Want to scare off your lender?  Follow these five suggestions and you'll be set!

Closing Credit Card Accounts
Closing Credit Cards holds the number one spot on this list - that's right, it has the potential to damage your score worse than Missing Payments.  If there were ever a wolf in sheep’s closing as far as credit mistakes go, it’s this one.  So called “industry experts” such as mortgage lenders suggest that you close credit cards as a strategy to increase your credit scores to qualify for home loans. However, there are two major reasons not to close credit cards that you no longer use:

  • They will eventually fall off your credit reports –Information on your credit reports has to follow certain rules as far as how long it can remain on the report. In most cases credit information will remain on your credit filesfor no longer than seven years from the account’s Date of Last Activity or “DLA.” Your DLA will continue to update each month so long as the account remains open. So, an open account will never reach the seven-year mark because each month your DLA updates to the current month. However, once you close the account your DLA will cease to update and the clock begins ticking. Eventually the account will be removed permanently from your credit reports.
  • You will hurt your “utilization” measurements –This is significantly more important than your closed accounts eventually falling off your credit reports. Revolving Utilization is the amount of your revolving credit card limits that you are currently making use of. For example, if you have an open credit card with a $2,000 credit limit and a $1,000 balance then you are 50% “utilized” on that account because you’re using half of the credit limit. This measurement is almost as important to your credit scores as making your payments on time. If you had a second open, but unused, credit card with a $2000 credit limit and a $0 balance then your aggregate revolving utilization is 25% because you have $4000 in credit limits and $1000 in balances. $1000 divided by $4000 is .25 or 25%.

 Missing Payments

This is an obvious pitfall to look out for - credit scores take into account your credit history to see how you have managed your current and past debt obligations.  This is considered a strong indicator of your future behavior, i.e. missing payments down the road.  Obviously, the most powerful predictor of future late payments is - you guessed it - your past late payments!  There are 2 important ways that missed payments will damage your score:

  • How Frequent Are Your Late Payments?   If you miss payments frequently then you will be penalized much more severely than someone who misses payments infrequently. Missing payments every once in a while indicates that you are a responsible consumer but you may have problems with finding the time to make your payments. Or, perhaps the bill was lost in the mail or you were out of town on travel when the bill came due. The point is that you are not making a habit of missing payments. Don’t start.
  • How Severe Are Your Late Payments?  The severity of your late payment also plays a big part in your credit scores. This not only makes statistical sense but also common sense. Consumers who have missed payments by only a few weeks and then bring their payments up to date are going to score better than consumers who have payments that are 90 days past due or worse. If you have late payments it is in your best interest to do all that you can to bring them up to date.

Settling with your Lender on Past Due Accounts

"Settling” refers to the lender accepting less than the amount you owe on an account.  For example, if you owe a credit card company $10,000 but you can’t pay them the full amount then they will likely make you a deal for less than that full amount.  They have “settled” for less than the full amount, which is likely much less than you contractually owe them.  Although this sounds like a good idea for you, the lender will actually report this to the credit bureaus as a negative item.  This remaining amount is called the “deficiency balance”.  A deficiency balance is considered just as negatively by credit scoring models as any other severe late payments.  If you can arrange a deal with your lender so that they will NOT report the deficiency balance then that will be your best course of action.  If they will not agree to this then you have to figure out a way to pay them in full or your credit will suffer for 7 years.  Be sure yto consider your overall financial situation and the alternatives before spending the time on settling your account.

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

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What Does Last Night's Vote mean for your Student Loans?

Last night, the House passed the most sweeping Student Loan legislation in decades - we'll discuss how this effects students.

Last night, the House passed legislation considered to be the most significant change to college student lending in a generation. Called the student aid initiative, it would overhaul the student loan industry, eliminating a $60 billion program that supports private student loans with federal subsidies and replacing it with government lending to students.  

So what does as this mean for you?
By ending the subsidies and effectively eliminating the middleman, the student loan bill would generate $61 billion in savings over 10 years, according to the nonpartisan Congressional Budget Office.   The largest beneficiary will be the Pell Grant Program.

The amount directed at Pell grants would drop from $40 billion to $36 billion, and a portion of the smaller amount would go toward closing an unexpected shortfall in the grant program, oversubscribed because of the recession. The annual Pell grant would rise to $5,975 by 2017 from the current $5,550, and for the first time, it would be linked to the consumer price index. In the original House bill, the Pell target was $6,900. Democratic leaders say that without a massive infusion of cash, the maximum grant could be scaled back by more than half to $2,150 and at least 500,000 students could be dropped from the program. So if this legislation did not pass, you could see major cuts to the Pell grant program, effectively denying the hundreds of thousands of students who rely on the Pell grant program to go to school.

Given the opportunity to receive larger grants for college, you will have a smaller financial burden during and after school.  In addition, you will have more spending and saving possibilities with your current funds.  Visit the Savings Rates and CD Rates sections at Best Cash Cow to learn about the best savings options:

The remainder of the funds will be distributed to the following educational institutions: Community colleges would get $2 billion, down from $10 billion in the original bill. More than $20 billion in initiatives for early education, K-12 school modernization and student loan interest-rate reduction would be eliminated. But a $2.6 billion investment in historically black colleges would survive. The new bill also includes a $1.5 billion initiative that would cap a borrower's monthly loan payments at 10 percent of income, down from 15 percent.

So there’s your answer: it completely depends on your political views and financial situation.  Wait – that’s no answer  Stay tuned for more legislation!

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

Advertising Disclosure: This site may be compensated for hosting offers.