How Can a Young Person Build Credit?

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What better way to spend Labor Day by pushing off the labor on someone else? Just kidding, but the following is a guest post by James. I'm particularly interested in this topic, because I want to help my kids build fantastic credit before they even head off to college. Fortunately, I've got a lot of years before that happens (but I know they'll go by quickly).

If you are young then you may have come across the problem of not being able to obtain credit because you have never had credit in the past. It can be really difficult to take that first step to getting a loan, or obtaining a credit card.

It’s easy to start giving up hope of ever obtaining the credit you need just to try and buy the larger essentials in life, such as furniture and kitchen appliances. You shouldn’t give up though; there are ways to improve your credit score. Some of them take a while to accomplish, and require patience. Some like Credit Tradelines provide a faster solution.

Things to remember when you’re trying to improve your credit

When you’re young you’re building your credit score from scratch. A major factor that contributes to your credit score is your payment history, and you won’t have one. This doesn’t mean that you are necessarily a bad risk for credit, just that there is no record of your reliability. One thing you often need when you’re trying to build a credit score is a lot of patience; it doesn’t happen overnight. Here are a few things to remember.

  • When you first apply for credit you shouldn’t make too many applications at once as this doesn’t reflect well on your credit score.
  • You should never apply for more credit than you know you can repay as doing this can lead to problems keeping up with your payments.
  • You should make sure that you keep a record of when your payments are due so that you don’t risk missing them.

Gradually building the credit you have, and making sure you pay on time, helps to build your credit score and improve your likelihood of obtaining new credit in the future.

A quicker way to improve your credit score

If you need credit urgently then spending time building your credit score may not seem as though it’s going to work for you. If this is the case, you may want to consider buying a seasoned tradeline. These tradelines are lines of credit that have a high credit amount with regular repayments and a low balance. Buying one means that you become an authorized user and the line of credit can be used when calculating your credit score, to improve it.

This doesn’t mean that you can’t still improve your credit score by gradually obtaining credit, and repaying it reliably. It just means that you have another option that enables you to make the process go faster. Seasoned tradelines are an excellent resource for people who have not built any credit as they provide an immediate base on which to build. You don’t have to spend an excessive amount of time trying to get the credit that you need. Whichever option you decide on, there are ways that you can improve your credit score no matter what age you are.

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Posted on September 7, 2015.

Make a $1000 a Year with Reward Credit Cards? Yes!

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I'm a strong believer in disciplined personal finance. Part of that discipline is having the self control to avoid superfluous spending on credit cards and paying them off every month.

I believe everyone can develop this discipline. If you need a carrot stick for motivation, this post (and $1000 a year) is for you.

Let's start with what's in my wallet:

Reward Credit Cards in my Wallet

Reward Credit Cards in my Wallet

Here's a breakdown of each card and why I carry it. I'm going to put them order of awesomeness, which is different than the picture above.

  • Fidelity Retirement Rewards - This card gives me 2% rewards on everything I spend. For those who are math-challenged that's twice as good as what you get from most rewards cards. This is the catch-all card, which we found particularly great for things like daycare. Though this card is supposed to make it easy to put the rewards into your retirement plan, Fidelity couldn't figure it out for me. Instead, I use the rewards for statement credit. You need to get around 25,000 in rewards points ($12,500 spending) to redeem at the 2% level, but the $250 statement credit is very nice.
  • American Express Blue Preferred - This gives me 6% cash at grocery stores (not Wal-Mart or Target). It used to not give rewards for my local military commissary, but they've finally fixed that problem. Though it has an annual fee, the 6% rewards on groceries more than cover it.
  • Chase Ink Business - This gives 3% cash back at restaurants, office supply stores, and home improvement stores (Home Depot, Lowe's, Ace, etc.) I don't know if you actually need to have a business to take advantage of this. I'll leave that as an exercise for the reader. Even though we try to keep our restaurant expenses down, the extra 1% over the Fidelity Retirement Rewards card is nice.
  • USAA Rewards Plus American Express - This gives 5% back on gas and at military bases. With gas at around $3/gal, that 5% makes it effectively $2.85/gal. If you drive a lot, it adds up quickly. My wife recently learned about the military base rewards, which was news to me. The strange thing is that many places on military bases won't take American Express.

    Now for the sad part... you probably need a USAA account to get this. Unfortunately USAA accounts are typically limited to members of the military and their families. If you are limited by this, keep reading, I've got something for you later in the article.

  • Amazon Visa - This isn't pictured above. Why? Because I don't keep it in my wallet. I signed up for it just to get the 3% rewards at Amazon. I added it to my Amazon account and then hid it away. Unlike American Express, don't leave home WITH it. With the other cards, there's no value to it.
  • Chase Freedom - This card gives 5% cash back on categories that rotate every quarter. Sometimes it's restaurants and beats out my Chase Ink card for value. A couple of quarters ago it was gas, which is almost useless given my USAA card above. Because this card is very hit or miss, it is low on totem pole. I don't like having to think about how it saves me money this quarter. I also don't like having to "activate" the rewards, even if it is as easy as a click on the web. Big demerits for relying on breakage, Chase.

Here are cards that deserve mention. I would carry some of them myself, if it weren't for a specific situation to me that prevents it or limits the value.

  • Citi Double Cash (MasterCard) - This card gives you 1% when you spend and 1% again when you pay in full. Because the assumption is that we pay in full, this gives the equivalent rewards as the Fidelity Retirement Rewards card above. The difference is that this is MasterCard and is useful a few more places that American Express is not. If you had neither, I would suggest this over the Fidelity card that I use. Since I already have the Fidelity card, it isn't worth it to me to make the move.
  • PenFed Platinum Cash Rewards - If you aren't eligible for the 5% USAA card, you can get a PenFed membership (it's relatively cheap and easy, just do a search with your favorite search engine) and get nearly 5% cash back on gas with this.
  • BJ Perks Elite - We tried to get this card, but got rejected despite our nearly a perfect credit score. Their explanation? Our debt-to-income ratio was too high for their liking. Because the BJ Warehouse membership was in my wife's name, she had to be the one to apply. I wonder if she low-balled our income perhaps leaving off what our three investment properties bring in? It is a mistake that I often make, because the income balances off our expenses. A credit check would bring up the debt and our reported income would seem low if we don't include that income.
  • US Bank Cash Plus - This card allows you get 5% on categories that you choose. They used to have utilities, which made it the only card would give 5% on such things. It looks like they have some useful things such as electronic stores (5% Best Buy, Apple, etc.), gym memberships, and cell phone. This card may save some people $50-100 a year with some of those categories.

    Unfortunately, I have to pass because you can only apply in a branch and they don't have any in New England from what I can tell. True story... while on vacation I tried to apply in a branch, but they couldn't send the card to a state that they didn't have a branch in. So as my British friends might say, I will politely invite them to "get stuffed."

  • PenFed Premium Travel Rewards - This gives you 5% on airlines. What I like best is that it isn't limited to any particular airline. My wife books the majority of our travel (it's usually for her work). I think she might have this credit card, but I'm not 100% sure. If not, we should get it on our list. We used to not travel much, but we are traveling a little more of late.
  • Discover - I'm thinking about this one. Like the Chase Freedom above with rotating categories, it might prove useful some quarters. I'm still stuck in the 80's thinking of when my mother got one of these cards and couldn't use it anywhere. I think it is mostly taken everywhere now, so it may be one of the next credit cards on my list to get.
  • Sam's Card - Sam's Club has the cheapest gas around for us, but it is still 20 minutes away from our house. When we are going by there anyway, we fill-up, but it isn't worth the trip otherwise. The downside is that Sam's doesn't take the USAA gas card mentioned above since it's American Express. If you lived close to a Sam's Club and used it to fill up often enough, it would be worth it to get this 5% card.

You'll notice that I don't have a lot of travel cards here. Some people do very well with them. We don't travel enough to save up tons of rewards points on every airline. We could choose one airline to pile up points in, but what if another airline is offering a better deal? I'd rather have the George Washington Points (commonly referred to as "cash") that I can use everywhere.

Also, some people rotate through credit cards to get the sign-up rewards. With some of them, you might be able to make a few hundred dollars per card in just a few months. The returns on those can be upwards of 15%! It's not terrible plan, but I like to keep a core set of cards and have them on autopay. This way I never have to remember to write a check or put a stamp on a bill... and I never get charged a fee.

So How Do I Save More than $1000?

I don't subscribe to a system of meticulous budgeting, so I'm going to give you estimates based on our spending for a year. And yes, I realize I could sign into 6 accounts and get year-end statements for more exact numbers. There's two things stopping me from doing that 1) Laziness and 2) Really not wanting to look at our spending on that Fidelity Rewards card (ouch!).

Day Care - $12,500 - Fidelity Rewards (2%) - $250
Groceries - $4500 - American Express Blue Preferred (6%) - $270
Restaurants - $3600 - Chase Ink (3%) - $108
Gas - $2000 - USAA (5%) - $100
Amazon - $1200 - Amazon (3%) - $36
Office and Home Improvement * - $300 - Chase Ink (3%) - $9
Miscellaneous (not in a category above)** - $15,000 - Fidelity Rewards (2%) - $300

The grand (estimated) total is... $1073!

* I often buy Home Depot Gift Cards at a 10-12% discount on using my Fidelity Rewards (2%) card. The combination is a far better deal than Chase Ink's 3% cash back. The only reason I spend $300 in the first place is when I forget to bring my Home Depot cards or shop at Staples where I don't have a gift cards.

** This may be a very low estimate. We manage three rental properties. Buying new appliances, kitchen updates, HVAC units add up quickly. If we were to get the BJ's card and the travel card some of this spending would move from this category to one making 5% increasing our total rewards a bit... maybe enough to hit $1100.

Maximize Your Points

This may seem obvious, but I try to get the highest percentage reward cards for a category. The magic number for many categories is 5%. Sometimes you get a 6% and sometimes you have to settle for 3%.. I never think about cards that offer less than 3% because I've got my Fidelity that earns 2% on everything to fall back on.

I've had most of these cards for years and years now. Spending with them is second nature to me. My wife likes to put a sticker with a reminder of the category on her cards. As I mentioned above, all of these are on autopay, so I just need to make sure I have the money in the bank, and the rest is automated. Not everyone's spending is the same, but I think that nearly everyone could easily make at least $500 a year with no additional work, simply with rewards on credit cards.

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Credit Cards

Posted on June 8, 2015.

Hack Your Credit Score

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Seven years ago, I got back from a Peer-to-Peer (P2P) Lending conference and realized there was an interesting way you could "hack" your credit score.

At the time, had a model that allowed people to bid down loans so that the borrower got the best rate that the market place had to offer. If you worked with a friend, you could give him $1000 and tell him to use the money to bid on your loan at 1%. You'd get that same $1000 back to you through the marketplace. You'd use that money to pay off the loan. In the end, you'd be paying 1% ($10) plus Prosper fees (0.5% at the time I think), but would be reporting that you've been doing an excellent job paying back the loan to the credit reporting agencies. You'd look very responsible and the cost wasn't that high.

Alas, Prosper's model changed and I don't think this is possible any more.

You might be able to do something similar to this hack at Lending Club, but the rates are predetermined by your credit score. So if you have bad credit, you aren't going to get a great rate and it will end up costing you more. It could cost you 10-12% if your credit is bad. Would it be worth $100-120? It's hard to say. One plus is that you wouldn't have to find a friend to bid it down. Just get a loan at the fixed rate that Lending Club sets and use the loan money to pay it back.

Hack Your Credit Score with a Store Card

It has been years since I applied for a store card. By "years", I think I might be able to say decades... as in two. It's probably close to that since I got a Structure card in college.

If memory serves and if what I hear on the street is true, it is still very, very easy to get a store credit card. It seems like stores throw them at you. Of course the terms on store cards are typically terrible. If you pay off your card in full each month, most (usually all) of those terrible terms don't come into play. However, you build good credit by showing a consistent record of paying debt on time.

Hack Your Credit Score with a Secured Card

If you have bad credit one way to re-establish good credit is with a secured card. It works a little like the P2P example above. You load a plastic card up with $500 in advance (notice that I didn't call it a credit card, since you aren't using credit, rather your own money.)

Secured Cards can be "bad things" with excessive fees and many consumer protection groups have gone after some. Bankrate has a good list of questions you should ask. I would focus on two:

1. What are the fees associated?
2. "Ask if the issuer will flag the report to the credit bureaus as a secured card. Consumer Action points out that such a flag could be a deterrent to rebuilding credit."

If the card is flagged as a secured card you may lose the benefit. That means you are paying the fees for nothing. Alternatively, you want to stay away from excessive fees in the first place.

I can't stress it enough that secured cards can be dangerous. I'd use this option only if I couldn't get a regular credit card.

Build Credit by Paying Your Rent

Building credit by paying your rent relatively new and I'm not sure how much it helps. However, it probably doesn't hurt. A bunch of companies have sprung up to provide this service. I did a quick search and I found Rent Track, WilliamPaid, and Rental Kharma.

I didn't look into all those companies, but one of my recent prospective tenants wanted to use a service called ClearNow. The company facilitates the payment of rent online. I agreed if he was willing to pay the $15 monthly fee they charge. They don't heavily push the building credit angle, but they mention it in a FAQ. It looks like you need to jump through hoops to get the reporting done.

I'm going to image that most companies work in a similar way. You pay a fee and the reporting is made. By now you'll probably notice the running theme. If you have bad credit, it is likely to cost you a few dollars to get into something that is going to improve it. Many people don't want to take the risk for free.

Check Your Credit

However, you decide to try to hack your credit, one thing you should do is look to make sure it is actually working. You can pay for all kinds of credit services, but Credit Karma gives you free credit scores. If you want to learn more, read my review.

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Posted on March 9, 2015.

Using Credit Cards to Repair Your Credit

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[Editor's Note: Sometimes I forget some of the basic levels of financial trouble that some people have. Today's article fills a gap in addressing how people can get good credit when they don't have good credit.]

Credit cards can be useful, but they can also be dangerous. Because they make lines of credit readily available, if you don’t have strong spending habits, it’s easy to spend yourself into a deep financial hole that can take years to get out of. If the hole is deep enough it will not only impact your current finances, it can also affect your ability to get future credit, and even affect your job prospects.

Because of the risks associated with credit cards, it might seem odd that some financial experts recommend that people with credit problems use credit cards to rebuild their credit. As strange as it sounds, the practice can actually work quite well as long as you do it properly.

Get a Secured Card

There are two main types of credit cards: secured and unsecured.

With a secured card, you have to make a deposit to your card and all or part of the deposit applies toward your credit limit. The deposit acts as collateral against you defaulting on your balance. If you do default, then lender keeps the deposit.

With an unsecured card, the lender simply gives you a credit limit and expects you to pay it back if you use it to make purchases. If you have a spotty credit history, it can be very difficult to get an unsecured card because the lender would need to be able to trust you.

Secured cards function just like unsecured credit cards. You can make purchases, you have to make monthly payments on the balance, and you will also have interest and finance charges. The most important part is that, just like a regular card, the credit card company reports your payment and spending history to the credit reporting agencies.

Secured credit cards are not the same as pre-paid debit cards. Prepaid debit cards essentially function like electronic checks and withdraw money from your checking or savings account. There is no credit involved, you don’t have to make monthly payments on the balance, and the bank does not report anything to the credit agencies. Debit cards give you some of the convenience of credit cards, but they won’t improve your credit score.

Determine How You Will Use the Card

In order to build your credit, you have to actually use the card and make regular payments. If you just sit it, it won’t prove to the creditor that you can be responsible. However, you don’t want to go nuts with your spending either. The amount of your deposit will put some limits on your spending, but if you don’t have a clear plan for how you will use your card, you could end up back in the same boat.

One suggestion would be to designate that card for a specific expense, such as your cell phone bill or gas or groceries. You would use that card solely for that expense and stick within a budget.

The point of having the card is to rebuild your credit, not to spend, so it’s a good idea to use an expense that you would normally pay out of your checking account, and which is much less than the credit limit on your card.

Pay Off the Balance Each Month

Although secured credit cards give you the option of making a minimum payment each month, paying the balance in full will go a long way toward improving your credit rating. If you can’t pay the balance in full, then you should at least make more than the minimum payment each month; and make sure you make those payments on-time, or even early. Even one late or missing payment can undo all of your hard work.

If you find that you can’t keep up with the payments, or that you are not able to pay off the total balance within three months, stop using the card until you can catch up and zero out the balance.

Keeping a balance on the card for long periods of time can actually hurt your credit, and it will also cost you more money in interest and fees.

Keep Track of Your Credit Report

Credit card companies report to all of the agencies every month. Sign up with a credit monitoring service so that you can keep track of your rating and see what the credit companies are saying about you. There are free services like Credit Karma, which are pretty much do-it-yourself; there are also companies that offer a range of credit services for a fee.

Whether you decide to go with a free service or a paid service, you should always check the consumer reviews of credit repair companies to see what their customers think of them. You should also check industry rating sites to see how they rank against the competition.

You can also contact the companies directly to get their list of products and services, and to determine if they offer what you need; some companies just monitor your credit report while others can actually work with you to help rebuild your credit.

Switch to an Unsecured Card

Once you have gotten the hang of using your credit card responsibly, and making timely payments, you can then graduate to an unsecured card. Some companies might even allow you to convert your existing secured card to an unsecured card, and might even refund all or part of your deposit.

Switching to an unsecured card shows the credit reporting companies that the lender trust you, which can raise your credit score.

Don’t let yourself fall back into old habits, however. Once you switch, you need to maintain the momentum and keep making wise spending decisions and paying off the balance.

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Last updated on March 10, 2015.

Clever Ways to Improve Your Personal Credit Score

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Your credit score has a huge impact on your financial status. Lenders use these scores to determine if you qualify for a loan, as well as the dollar amount of the loan and the rate of interest. Improving your credit score can lower your cost of borrowing by hundreds or thousands of dollars over the life of a loan. Here are some tips to improve your credit score.

Do the basics first

Make sure that you’re doing the basic steps to improve your credit. Start by taking a hard look at your current debt levels and spending habits. Create a monthly budget for yourself. The budget doesn’t have to be fancy- you can it write down on notebook paper.

To create a budget, review your recent bank and credit card statements. Look at the detail to determine where you’re spending. One easy way to cut down on spending is to reduce dining out. How much are you spending a month on that activity? If you have a plan to buy groceries and prepare meals, you’ll avoid eating out at the last minute.

This article explains that maintaining a savings account can help you repair and improve your credit score. A savings account shows potential lenders that you have financial self-discipline.

When you create that budget, include funds that go into savings each month. Make that savings account a priority. Investment professionals refer to this practice as “paying yourself first”. Set up an automated transfer from your checking account into savings each month.

Limit your credit use, and pay on time

Try to limit the amount of credit you use. Your budget will include the monthly payments you need to pay toward debt. The less debt you have (in total dollars), the lower your monthly payments will be. If your payments are a relatively small part of your budget, they won’t put a strain on your finances.

Make sure that you pay your debts on time. This article explains that payment punctuality and credit use levels account for 65% of the (credit) scoring equation. Not only do you need to budget the payments, you also need to pay them by the due date. Set up the due dates for your debts as an automated reminder on your phone or computer.

Find errors and follow up

As stated previously, your bank and credit card statements document your spending. Take a look at those documents when you receive them. Reconcile your bank account within 5 days of receiving the statement. Compare your credit card receipts with your card statement. If you find errors, follow up with your bank or credit card company quickly.

Individuals, as well as businesses, sometimes neglect this type of follow up. Say, for example, that your credit card firm posted your payment as being late. You can show that the payment was automatically sent from your bank account on time. The credit card company may be able to correct their records before reporting the late payment to any credit card bureaus.

Fixing incorrect data

If you find that incorrect credit information has been reported to a credit bureau, you have some options. Many credit repair companies, such as, offer consumers tips to help fix their credit on their websites. These firms can help you understand the credit reporting process, and how credit bureaus are obligated to remove inaccurate information.

Use these tips to improve your credit score. A higher credit score can sharply reduce your cost of borrowing for years down the road.

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Last updated on December 2, 2016.

Are You Friends With Your Checkbook?

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Who couldn't be friends with this guy?

Most of us strive to try to keep a budget each month. Everyone has fixed costs that have to be covered, such as the rent or mortgage, insurance, and food. Some people call these a "monthly nut", but I'm not a squirrel. I like to call these "necessary expenses" and have tracked them over time. For many people keeping to a budget was easier years ago. Nowadays, are a ton of electronic payment methods available. Their convenience makes spending money we do not have that much more tempting. Impulse buying becomes easier - all you have to do is swipe either your debit card or your credit card.

This can result in a well-planned budget getting out of the water. Maybe I'm showing my age, but I remember when people would write checks at the grocery store. It slowed everything down. As one of those "quick swipe" credit card people I found this really annoying.

Looking back on it today, I have to respect it a bit. Those people actually spent time balancing a checkbook, so they knew exactly how much money they had. It was a great system for accountability reasons. With today's credit cards a lot of that accountability is gone.

I have to admit that I'm not very good friends with my checkbook nowadays. I thought about it for a bit and here are some of the reasons why:

  1. I'm Lazy - I type thousands of words a day. It may sound crazy, but I barely know how to use a pen anymore. Adding an item to a grocery list is comical.
  2. I Don't Need the Accountability - I spend more than enough time thinking about money by writing for this site. In return this website gives me accountability.
  3. Checks can be Expensive - Last year I switched bank accounts. It's a long story, but since my tenants wouldn't get out when the lease was over, I had to stop accepting payment from them in order to evict them. However, they had the ability to automatic deposit money in my bank account, which allowed them to stay indefinitely... unless I switched bank account numbers.

    So I switched, but that required getting all new checks. It was well over $25 for 120 checks of the very most basic design. That's almost half the cost of a stamp, simply to use my own money. I decided to go home and order cheap checks online. It was much, much cheaper. Not only that, but the bulk pricing was much better my bank's.

Sorry Mr. Checkbook, but for now we'll just have to be occasional acquaintances.

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Last updated on August 20, 2014.

Fidelity, You Suck!

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I usually am not one to criticize in public, but sometimes trying to work behind the scenes simply doesn't produce an acceptable solution. When you are dealing with a big corporation, a single customer can't make a difference. They simply aren't going to change their system when one person encounters a problem. However, maybe, there's a chance this reaches enough people to make a difference.

Early in 2013, I got the Fidelity Retirement Rewards American Express credit card. As I always say about credit cards, they are a good tool if you use them right and avoid the fees and interest payments. This particular Fidelity card gives you 2% back on anything you buy if you cash the points into a Fidelity Retirement account. (I think they've also added a statement credit option if you do enough points, which is probably the better option.) Almost everyone give you 1% back, but 2% is pretty big, especially when we can use it to pay our day care bill. Some credit cards will give you more in certain situations, such as gas and grocery stores, but this is a great card, in theory, for all general purchases. Notice the emphasis on "in theory."

As it got to December, I decided it was time to cash in the points I had built up throughout the year to put in my Fidelity self-employed 401k plan. This is perhaps the most basic transaction one can do, except for the fact that Fidelity probably doesn't have too many self-employed 401k plan customers... at least in comparison to something like their Roth IRA ones.

The website made it very easy to redeem the rewards. I logged into my Fidelity account where I see my SEP-IRA, my self-employed 401k plan, and my Fidelity Retirement Rewards card. Clicking on the credit card brings you to a place where you can the usual stuff: statements, current balance, rewards, etc. I click on the manage rewards and redeem the points to go to my self-employed 401k plan. It's done in maybe 45 seconds... or so I thought.

Seven days later, I get an email:

"You are receiving this email notification because your recent request to redeem your WorldPoints® reward points and deposit them into an account of your choice could not be processed. As a result, the points you attempted to redeem have been reapplied to your WorldPoints® account.

We cannot guarantee that your selected financial institution will accept ACH or checks from FIA Card Services, N.A. on your behalf. It is your responsibility to ensure that deposits made do not violate the terms of your agreement with your financial institution. Following the transfer of your Cash Rewards from FIA Card Services, N.A. to your financial institution, FIA Card Services, N.A. will not be responsible or liable for the administration of this deposit."

Essentially this email is saying that it Fidelity can't guarantee that Fidelity will accept the transfer from Fidelity.

Wrap your head around that sentence for a minute. Done? Good.

I understand that the Fidelity credit card division is very different from Fidelity's brokerage division. In fact, Fidelity's credit card division could be run by American Express. However, from the customer's point of view, they've branded it all Fidelity and put them under the same website... it should work as one autonomous organization. If there's a problem doing the most basic thing, Fidelity should not try to intermingle these separate businesses.

The email continues stating that I shouldn't reply to it (thanks Fidelity for not giving me the easy option) and to call customer support.

I called customer support to try to find out what the problem is. At first they tried to tell me I was over 70 and half and thus they couldn't transfer money in. That was not only inconsistent with the response I received, but inconsistent with the date of birth they made me do at the beginning of the phone call. The person on the phone gave it another look and confirmed that it is true, it wasn't the problem.

He was stumped. He decided the best plan of action was to bring in the Fidelity Brokerage services on the line. That's where I was trying to transfer the money. That sounded like a great course of action because then we could look at the transaction from both sides. After an hour and half of back and forth, with me playing the middle-man, the two concluded that because I hadn't funded my self-employed 401k plan, the points couldn't be redeemed to that account.

They proposed a solution. I would need to deposit a single dollar into that account. I have thousands of dollars in my SEP-IRA, but I couldn't transfer from there because that's a different tax structure. This left me with two options:

  1. Drive 45 minutes to the nearest Fidelity office and give them a check to deposit. I would have to wait for the check to clear and then try again in a few days.
  2. Mail a check with a deposit slip. I would have to wait for the check to get there and be processed and then try again.

This seemed like a ridiculously ginormous roll of red tape. So I asked why they needed me to go through such lengths to give them a single dollar. Last I checked this is 2013 (well at the time I was trying to do it) and not 1983. This is really the best a huge company like Fidelity can do to satisfy it's own red tape? They couldn't tell me why.

I pressed the point multiple times. One of my biggest pet peeves is when people make up rules without a reason... or try to enforce rules without knowing why they are enforcing them. If they are going to make jump through hoops, I feel I deserve to know why. I'm not 5 and "just because" is not a valid reason.

You can't squeeze water from a stone, so I gave up looking for an answer from them. I went to Twitter to voice my dissatisfaction with their reasons. They responded back to me to direct message them. I replied that the problem was too long to explain over Twitter and that we should converse over email. They have a system set up for that, which was a pleasant surprise. Unfortunately they say that they'd respond in 24 hours and it's been more than two weeks. I tried to contact them and get their attention back to my question in case it slipped through the cracks, but still no response.

Twitter is another dead-end in getting an answer to why an account has to be funded and it was clear that I was simply just wasting more of my time.

I completed the deposit slip with my check for $1.00 and sent it off. (Between all the parties involved at this point, this policy has cost hundreds of dollars in lost productivity.)

Then I waited. About ten days later, I saw that my account had its shiny Washington in it. Also, the points that I tried to redeemed had worked their way back to my credit card. They said this could take 30 days, but I guess I was lucky to get happen to so quickly.

It was time to try again with a funded account. Online the redemption worked again... until 5 days later when I got the same email about it failing.

It was time for another call. This time Fidelity wouldn't have the excuse about the account not being funded. I knew I had my work cut out for me, so I took my card, my cell phone, and my dog for a walk. At least at the end of this, I'd be able to say we got some exercise.

After 48 minutes I got back home. We had walked through every side-street in my neighborhood. During that time, I explained the problem to the first tier of customer support, the second tier (a technician with more access) of customer support, and a third tier... who transferred me to a message saying that the party couldn't be reached, which resulted in Fidelity terminating my call. (Note to Fidelity: It is never a good idea to hang up on someone, especially with a message saying that's what you are going to do. At a minimum at least kick the call back to the person who tried to transfer it.) The hang-up coincided with me arriving at me door.

I called back to start from scratch yet again. In what was perhaps the most amazing string of luck in customer support history, I got the same first-tier customer support person I had talked to about an hour previously. He remember me and looked through the notes in my account (I had been telling the support people to take notes) and he saw that I had been transferred to dispute resolutions. I didn't know that... and he was amazed by it, because he knew this had nothing to do with a charge dispute.

With the help of his supervisor he looked into my account again, and found that there were two listings for my self-employed 401k account in their system. He said this is strange and in 5 years he's never seen it. He gave a suggestion of wiping both of them out and entering it fresh on his end. This, hopefully, would eliminate whatever the problem is with the transfer not going through. I explained that Fidelity shouldn't allow customers to create such problems and as a software engineer, I started to worry whether my money is really safe at an institution where the computer systems lack very basic error checking.

Nonetheless, we pushed forward with this solution. Will it work this time? I don't know. I have to wait up to 30 days for my credit card points to get credited back to my credit card to try again. One would think the points would be credited the moment they send the email about the transfer failure... I'll just chalk up to poor Fidelity software.

While I have resigned myself to letting this attempt play through, I feel compelled to mention that it is now December 26th and that it will be impossible for me now to get my points credited for the 2013 tax year. (I'm publishing this post well after I've written it. Due the upcoming birth of my son, I'm getting "ahead" of the game.) He apologizes for the delay and says that he understands it is inconvenient to not have points credited in a timely manner. I explain that it isn't a matter of convenience, but when you are dealing with adding funds to retirement accounts the dates that the deposits happen matter greatly for tax purposes. Such unnecessary long delays for points to be credited back to an account is yet issue that Fidelity needs to address.

Will I ever be able to redeem my Fidelity Retirement Reward points? Hopefully I'll have something positive to report around the time you are reading this.

Update: Well resetting the account didn't work. I got the same email back. Fortunately they've added an option that you can redeem for points for statement credit. The catch is that to get the 2% value, you have to cash in $50 at a time (I think, I don't have the chart handy). So rather than beat my head against Fidelity's terrible customer support for another 6 hours, I'm just going to use that. It's sad, because I'd really like to help Fidelity fix their system so that other customers don't have to go through what I went through.

Finally, I'd mention that the email support that they promised proved to be a dead end. They emailed me back once that they were looking into it, but never got back to me. I prodded them 3 or 4 times with return emails of "Hey how is this going?" Either their system isn't set up to take replies (or give me a link where I can reply on the web) or they've simply chosen to ignore me.

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Credit Cards

Last updated on January 25, 2014.

Credit Cards and Average Daily Balance Interest Calculation

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The following is a guest post from Bank Free Credit. Bank Free Credit provides tips, reviews, and information about banking, credit, and getting stuff for free. The site also has an extremely attractive WordPress theme that you may recognize.]

For over 20 years I've had credit cards... and I've never paid a fee. That statement was entirely true until this past month. I always use credit cards as a tool... a way to get a couple percent back on things that I would have bought anyway. Over the years, it's added up to thousands and thousands of dollars. This last month, I gave up some of that money, more than I expected.

Over the years, I've moved from a method of sending in a physical check to paying online. There are some pros such as saving the price of a stamp. The biggest pro though is setting up the credit card company to withdrawl money from my bank every month, so that I'm never late with a payment. I realize that it is potentially dangerous to give credit cards this kind of access to my bank, but I grant financial institutions some leeway on not robbing me blind. For the most part, the transactions are done by computers and they are infallible, right?

This has worked out extremely well and I highly recommend everyone automate their credit card payments this way. So how did I pay a fee? I signed up for two American Express cards around the same time, the AmEx Blue an AmEx Fidelity for their great rewards (that's a whole different article). I thought I had set up autopay on both cards, but it seems like one didn't fully go through. I firmly believe it was an error on my part where I probably set up the same card twice.

This lead to me to getting a bill with an interest charge on it. There was also the associated late fee (double jeopardy rules should apply). With a call, I was able to get AmEx to sympathize with me. They said they'd make it so that it never happened. My credit report wouldn't be dinged and the late fee would be taken away. I didn't realize until I looked at my next bill with an interest charge that interest charges weren't included in that. To get those removed, AmEx has to own up to making an error and they didn't.

The thing that I didn't understand is why I had an interest charge two credit card periods when I was about 3 days late in paying. When I discovered I was late, I even overpaid a small amount as a sign to AmEx that I was more than capable of paying. It turns out that there's a curious and unexpected thing that happens when you are late with a payment that spans over two billing cycles: both cycles are considered to be considered late. It doesn't matter that I paid off the balance in the cycle, by being late for one day it triggers the interest calculation. I would have thought that I'd have an interest charge for a pro-rated couple of days, but that's not the case.

The interest calculation is another curious and unexpected thing. The interest charged is based on the average daily balance of the bill. So even though I had paid in full, and even more than in full, future charges on that card for that billing cycle was raising my average daily balance and incurring interest on it. So if I had made a really big purchase like a $2000 laptop (to collect the reward points as I usually do) near the beginning of the cycle (after I had paid the balance down to zero) the interest calculation would use that daily balance and continue to penalize me. Doesn't seem to make sense that I could be penalized after paying balance in full, right? I guess some law-makers missed that one.

It makes me wonder if I can use this loophole to trigger and interest payment, give them so much money that I have a negative balance daily balance, and get the AmEx to give me a negative interest payment leading to a check in my favor. With my luck, they'll just consider a negative daily balance the same as zero (for that day) and I'll get charged the late fee, the interest for the day or two before the big payment to get negative took effect, and get my credit wrecked in the process.

Anyone else have a credit card, "A ha!" moment? Let me know in the comments.

This post deals with: ... and focuses on:

Credit Cards

Posted on August 21, 2013.

Choosing the Right Credit Card for Your Needs

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[Editor's Note: This article was written by Oliver Harding at providing the best voucher codes on the web.]

It really has never been easier for you to get your hands on a credit card; even those with the most embarrassing of credit histories can qualify for high-interest, small balance credit cards to help with rebuilding their rating.

With such a variety of cards on offer, how are you supposed to figure out which is the right one for you?

In this article we’re going to compile a checklist to help you choose the most suitable credit card, so grab some paper and a pen and prepare to take notes!

What Do You Want the Card for?

There are two questions to ask yourself initially:

  1. Do I really need a credit card?
  2. What do I want the card for?

Make sure you actually need a credit card before making than financial commitment, and from here, the card you decide on will depend largely upon what you plan on using it for.

Let’s say, for example, you want to carry your balances over from month to month; in this case you’d opt for a card with a low interest rate. On the other hand, if you’re confident you can clear the balance every month without fail, a charge card might be more suitable.

You should also think about interest rates applied to things like balance transfers as this can often differ from the rates applied to purchases.

Annual Percentage Rate (APR)

APR is simply the amount of interest which is applied to any balances you carry over beyond your grace period, which we will explore in a moment.

Again, make sure you’re aware of not just the APR as a whole but also how it may vary when applied to different things such as purchases and balance transfers; this can sometimes make or break the suitability of a card to your needs, so you should be very mindful of this.

Grace Periods

Grace periods are simple enough to understand; they refer to the time you’ll be given each month to pay off your balance in full before any interest or fees are applied.

The most common grace period is around one month but this can vary so be sure to check this with your lender before signing on the dotted line.

Credit Limits

Most of you are probably familiar with what a credit limit is, but there is a great deal of variance from lender to lender, and this can also be affected considerably by your credit score. This is why less solvent individuals are only able to gain access to limits of a few hundred dollars.

Make sure you maintain a full awareness of overlimit fees, which are the charges incurred when you spend beyond your credit limit. Some lenders with high overlimit fees will offer benefits in other areas, so be sure to weigh up the cost/benefit ratio and make sure you aren’t lumped with excessive hidden costs.

It’s best not to expect too much from your credit limit if this is to be your first credit card, but by settling your balance on time consistently, you’ll very quickly be able to up your limit to make larger purchases.

Go Compare

If all else fails and you’re still not sure where to find the best deal on a credit card, it’s always worth checking out one of the many comparison sites on the Web.

Pages such as and enable you to make a fair and objective analysis of each lender and the range of options they offer, and at the very least, this can be a great way of confirming your own decision before acting on it and signing up for a card.

This post deals with:


... and focuses on:

Credit, Credit Cards

Posted on August 13, 2013.

5 Mistakes People Accidentally Make That Hurt Their Credit

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[The following article was written by Logan Abbott. Logan is a personal finance expert with over a decade of experience writing for MyRatePlan Credit Cards. He is also the editor of]

I’ve been writing about personal finance and credit cards for years, and one of the countless pieces of information that I’ve gleaned is that the credit building process is largely misunderstood by a lot of people. Credit scores are important because they represent a huge factor when trying to make a large purchase that requires a loan. For example, if you are trying to take out a mortgage to purchase a home, or a loan in order to purchase a car, the first thing a creditor will look at is your credit score.

One of the most common queries I’ve gotten over the years from clients and friends alike centers around how to improve one’s credit score, and how to keep the score maintained once it’s at a healthy level. This post is going to explain the five most common pitfalls people encounter whilst trying to build their credit scores.

  1. Using more credit than you have available. Not surprisingly, going over your credit limit is the easiest way to harm your credit score. This happens more often to people with lower credit limits, but it can happen to anyone who is not paying attention to their spending. If you are prone to spending a lot without realizing it, I encourage you to start keeping track either with a pen and paper that you keep in your wallet, or with one of the many personal finance smartphone apps currently on the market (my favorite is Mint). Taking this one step further, the general rule for building credit is to use less than 30% of your available credit limit. So, if you have a $10,000 credit limit, then you would want to use less than $3,000 worth of credit per month.
  2. Paying late. Besides going over your credit limit, paying bills late is the second most common way that people hurt their credit scores. Any late payment to a creditor that reports to the major credit bureaus can and will hurt your score. This includes credit card bills, car payments, mortgage payments, cell phone bills, and more. In order to avoid paying your bills late, I recommend setting up direct deposit with your creditors so that they can automatically deduct the funds from your checking account. If you are not comfortable with this, then there are other ways to be alerted of impending bills such as setting up text or email alerts with your credit card company to alert you before bills are due.
  3. Applying for too many lines of credit all at once. Another common mistake that people don’t realize can hurt their credit score is applying for credit too many times within a small time-frame. For example, some people make the mistake of applying for a credit card that requires better credit than they have, and then get denied. Instead of finding out their credit score and then applying for a credit card appropriate for them, they go on an applying spree and get denied from several credit cards all at once. These multiple hard inquires on their credit score ends up dragging it down.
  4. Not monitoring your credit score. One of the easiest ways to make sure your credit score stays healthy is to monitor it constantly. I’m not talking about sitting at your computer staring at it all day, what I mean is signing up for a credit monitoring service such as Citi Identity Monitor. These services are generally very cheap or free, and will alert you if there are any changes to your credit score or identity theft attempts. In addition, many services provide customized suggestions on how to improve your credit score, and highlight which factors are currently dragging your score down.
  5. Closing really old credit card accounts. Many people don’t realize that your credit score draws from years and years of your credit history. If you close one of your old credit cards, then you are effectively wiping the positive factors associated with that account from your credit score, as well as shortening your credit history. In addition, closing an old credit card usually lowers your overall credit limit, which increases your utilization rate, which can also lower your score. If your old credit cards don’t have an annual fee, then there is really no point to closing the accounts. However, if you are being subjected to a high annual fee each year for a credit card you don’t use, then that’s a good reason to close the card.
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Posted on August 1, 2013.

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