When Does it Make Sense to Pay a Bill with a Credit Card?

Credit cards and debit cards both offer incredible convenience. With just a quick swipe or a linked account, a payment can be instantly processed. It seems like a no-brainer to use that convenience for taking the hassle out of paying bills. But, is it a smart idea to pay monthly bills with a credit card or debit card?

Choosing to pay a bill with a card can have a significant impact on your general financial wellness — for better or for worse. That’s why it’s important to consider the many variables of this decision before going ahead with it.

Let’s take a closer look at the pros and cons of paying monthly bills with a credit card or debit card.

The advantages of paying bills with a credit card or debit card

There are many reasons you may want to pay your monthly bills with a credit or debit card when possible. Here are just a few of the advantages of paying with plastic:

  • Automate monthly payments. Setting up automatic payments for monthly bills through a credit card or debit card will help ensure payments are always on time.
  • Build credit with a consistent monthly payment. Using a credit card for a monthly bill is a great way to amp up a credit score without running the risk of overspending. Just be sure to pay the bill in full and on time every time.
  • Earn rewards for money that needs to be spent anyway. Using a credit card that offers rewards for a bill that needs to be paid anyway will help to pile on those rewards points without overspending. Many debit and/or credit card issuers, [including Advantage One Credit Union’s [debit/credit] card], also offer attractive rewards for using the card to pay for specific expenses, including some monthly bills.
  • Enjoy consumer protection. Paying with plastic offers the consumer the advantages of purchase protection, zero or minimal liability in case of fraud, guaranteed returns and more.
  • Pay your bills quickly without the hassle of writing out checks and using snail mail. With a credit or debit card, paying a bill only takes a few clicks or phone prompts.
  • Budget easily. Paying with a credit or debit card makes for easy tracking of monthly spending.
  • Payments post promptly. Bill payments made via credit or debit card will generally post within one or two business days. Contrast that with a check that needs to be mailed out, delivered to the correct party and then deposited and cleared until the payment is finally processed.

The disadvantages of paying bills with credit or debit cards

Here’s the flip side of paying bills with plastic:

  • There may be fees for paying the bill with a credit card. Pay close attention to the payment options on every bill; some service providers charge a processing fee for paying with a debit or credit card.
  • It can make a difficult financial situation worse. For consumers who are already carrying a sizable amount of debt, it may not be the best idea to charge a monthly bill to a credit card. Similarly, it isn’t responsible to set up an automatic monthly payment through a debit card that is linked to an account that may not have enough money to cover the charge each month.
  • Credit utilization may cross the threshold to an undesirable rate. One of the key components of an excellent credit score is a low credit utilization rate. For consumers with a minimal amount of available credit, charging too many bills to a credit card can cause their score to plunge.
  • Interest may accrue. Consumers who cannot pay their entire credit card bill each month would be saddled with more accrued interest than they can afford if they choose to pay their monthly bills with a credit card.

Which of my bills can I pay with a credit or debit card?

You will likely not be able to pay the following monthly bills with a credit or debit card:

  • Mortgage
  • Rent
  • Car payments

These monthly bills can usually be paid with a credit card, but you may need to pay a fee to do so:

  • Car insurance
  • Home insurance
  • Health insurance
  • Taxes

The following monthly bills usually allow you to pay with a credit card or debit card, and without a fee:

  • Subscription services
  • Phone bills
  • Utility bills
  • Internet providers
  • Cable providers

Before deciding whether to pay a specific bill with a credit or debit card, it’s best to check with your provider to find out if this is a viable option and if there will be a fee attached for paying with plastic.

The bottom line

Sometimes, paying bills with a credit card or debit card makes perfect financial sense, but it sometimes does not. Before deciding which way to go on any particular bill, consider all the relevant factors detailed above to be sure you’re making the responsible choice.

Your Turn: Do you pay any of your monthly bills with a credit card or debit card? Tell us about it in the comments.

Learn More:
thesimpledollar.com
thebalance.com
creditkarma.com

Your Complete Guide to Using Your Credit Cards

Q: I’d love to improve my credit score, but I can’t get ahead of my monthly payments. SeptFeatured2020_credit-card-scam
I also find that my spending gets out of control when I’m paying with plastic. How do I use my credit cards responsibly?

A: Using your credit cards responsibly is a great way to boost your credit score and your financial wellness. Unfortunately, though, credit card issuers make it challenging to stay ahead of monthly payments and easy to fall into debt with credit card purchases. No worries, though; Advantage One Credit Union is here to help!

Here’s all you need to know about responsible credit card usage.

Refresh your credit card knowledge
Understanding the way a credit card works can help the cardholder use it responsibly.
A credit card is a revolving line of credit allowing the cardholder to make charges at any time, up to a specific limit. Each time the cardholder swipes their card, the credit card issuer is lending them the money so they can make the purchase. Unlike a loan, though, the credit card account has no fixed term. Instead, the cardholder will need to make payments toward the balance each month until the balance is paid off in full. At the end of each billing cycle, the cardholder can choose to make just the minimum required payment, pay off the balance in full or make a payment of any size that falls between these two amounts.

Credit cards tend to have high interest rates relative to other kinds of loans. The most recent data shows the average industry rate on new credit cards is 13.15% APR (annual percentage rate) and the average credit union rate on new credit cards is 11.54% APR.

Pay bills in full, on time
The best way to keep a score high is to pay credit card bills in full each month — and on time. This has multiple benefits:

  • Build credit — Using credit responsibly builds up your credit history, which makes it easier and more affordable to secure a loan in the future.
  • Skip the interest — Paying credit card bills in full and on time each month lets the cardholder avoid the card’s interest charges completely.
  • Stay out of debt — Paying bills in full each month helps prevent the consumer from falling into the cycle of endless minimum payments, high interest accruals and a whirlpool of debt.
  • Avoid late fees — Late fees and other penalties for missed payments can get expensive quickly. Avoid them by paying bills on time each month.
  • Enjoy rewards — Healthy credit card habits are often generously rewarded through the credit card issuer with airline miles, reward points and other fun benefits.

Tip: Using a credit card primarily for purchases you can already afford makes it easier to pay off the entire bill each month.

Brush up on billing
There are several important terms to be familiar with for staying on top of credit card billing.

A credit card billing cycle is the period of time between subsequent credit card billings. It can vary from 20 to 45 days, depending on the credit card issuer. Within that timeframe, purchases, credits and any fees or finance charges will be added to and subtracted from the cardholder’s account.

When the billing cycle ends, the cardholder will be billed for the remaining balance, which will be reflected in their credit card statement. The current dates and span of a credit card’s billing cycle should be clearly visible on the bill.

Tip: It’s important to know when your billing cycle opens and closes each month to help you keep on top of your monthly payments.

Credit card bills will also show a payment due date, which tends to be approximately 20 days after the end of a billing cycle. The timeframe between when the billing cycle ends and its payment due date is known as the grace period. When the grace period is over and the payment due date passes, the payment is overdue and will be subject to penalties and interest charges.

Tip: To ensure a payment is never overdue, it’s best to schedule a time for making your credit card payments each month, ideally during the grace period and before the payment due date. This way, you’ll avoid interest charges and penalties and keep your score high. Allow a minimum of one week for the payment to process.

Spend smartly
Credit cards can easily turn into spending traps if the cardholder is not careful. Following these dos and don’ts of credit card spending can help you stick to your budget even when paying with plastic.

  • Do:
    When making a purchase, treat your credit card like cash.
    Remember that credit card transactions are mini loans.
    Pay for purchases within your regular budget.
    Decrease your reliance on credit cards by building an emergency fund.
  • Don’t:
    Use your credit card as if it provides you with access to extra income.
    Use credit to justify extravagant purchases.
    Neglect to put money into savings because you have access to a credit card.

Using credit cards responsibly can help you build and maintain an excellent credit score, which will make it easier to secure affordable long-term loans in the future.

Your Turn
: How do you use your credit cards responsibly while keeping your score high? Share your best tips with us in the comments.

Learn More:
moneyunder30.com
npr.org
debt.org
creditcardinsider.com

 

How’s Your Credit?

Medium credit score displayed on a man's smartphoneGive your credit its annual review by ordering your free annual report from Annualcreditreport.com. Check your score and read through the report carefully to see if there are any suspicious charges, unfamiliar accounts or mistakes of any kind. If you find an error, be sure to dispute it and follow up on the mistake. You’ll want to close any inactive accounts as well, as they can drag down your credit file.

Keep that score climbing!

Your Turn:
How do you monitor your credit? Share your best methods with us in the comments.

A Guide To Opening Your First Credit Card

Young woman very happy about a paper statment that she is reading in her dining room in front of her laptop.Opening your first credit card is one of the rites of passage into genuine adulthood, but with so much conflicting information, it can all get confusing fast!

Let Advantage One walk you through the process to help you build a strong credit score and credit history that will serve you well throughout your life.

Choosing a credit card
The way people typically build a credit history is by opening a credit card. But ironically, many credit cards won’t accept your application because you don’t yet have that credit history!

You’ll need to build your credit history from the ground up, and many people make the mistake of starting with cards that offer a very low limit but will accept almost any applicants, such as those offered by Capital One or Credit One. We encourage you to stop by Advantage One to ask about the credit cards we offer our members. We specialize in helping those with limited or damaged credit get back on track. If you’re outside our Field of Membership, we’d strongly encourage you to consider a local credit union. You’re more likely to get the personalized service you need at this critical phase of your financial journey.

Don’t apply to just any card that’ll have you. Look for these features when making your choice:

  • No annual fees – You shouldn’t have to pay money to use your card. Sometime in the future, you may want to open up a high-perk card with an annual fee to match, but for now, just concentrate on building your credit score.
  • A low interest rate – For your first credit card, you likely won’t be offered a really low interest rate, but that doesn’t mean you should be taken for a ride. Shop around for a card offering a reasonable rate, maybe only slightly higher than the average rate. If you can find one with a reasonably low fixed interest rate, even better.
  • Incentives for good behavior – Why not earn brownie points for playing by the rules? Look for a card that offers incentives, such as a bonus points, a grace period or no foreign-transaction fees.

Credit card dos and don’ts
Once you’ve opened your card, or cards, make sure you use them to build and maintain that excellent score. Follow these guidelines and you won’t go wrong:

Do …

  • Pay your bill on time each month.
  • Check your credit score monthly.
  • Review your statements for suspicious activity.
  • Keep your cards in a safe place.
  • Accept offers of a higher line of credit.

Don’t …

  • Pay just the minimum balance due each billing cycle.
  • Open new cards just before taking out a large loan, like a mortgage or auto loan.
  • Use all of your available credit.
  • Allow unsecured websites to save your card information.
  • Share your card information with anyone.

Your Turn:
Did you recently open your first credit card? Share your best tips on the process with us in the comments!

SOURCES:

https://www.google.com/amp/s/www.forbes.com/sites/lucymueller/2018/03/14/the-no-fear-guide-to-getting-your-first-credit-card/amp/

https://www.nerdwallet.com/blog/11-credit-card/

https://www.magnifymoney.com/blog/college-students-and-recent-grads/a-beginners-guide-to-using-a-credit-card499639894/

4 Ways To Finance A Home Renovation

family renovating their houseHome Equity Line of Credit
A Home Equity Line of Credit (HELOC) is an open credit line that is secured by your home’s value. HELOCs offer flexible terms and lower upfront costs than most other loans.

Home Equity Loan
A Home Equity Loan (HE) allows you to borrow a fixed amount of cash, which you receive in one lump sum. However, upfront fees can be high.

Credit cards
Credit cards can work for minor touch-ups, but funding bigger projects this way can leave you with steep interest payments and end up costing much more than planned.

Personal loans
Personal loans are short-term loans that sometimes have high interest rates and upfront fees.

Do your research and talk with us at Advantage One to help find the best option for your needs.

Your Turn:
How did you fund your home renovation? Share your choice with us in the comments!

Credit Card Fraud In Fives

Businessman enters credit card number on a laptopNo one wants to be the victim of credit fraud. Aside from the stolen money you may never recover, victims of fraud can be faced with an enormous hassle. That hassle involves the closing of accounts, putting a fraud alert on your credit and a huge ding on your credit history, which can be difficult to fix.

Whodunnit? When we’re talking about credit card fraud, everyone’s pointing fingers at everyone else.

Consumers tend to blame the credit card issuer, but the vulnerability usually lies with the point-of-sale terminal. Tampering with a credit card reader takes just a few minutes and can be done with an inexpensive device that’s available on Amazon. In addition, there are lots of other ways your information can be skimmed, none of which point to a security deficiency with your credit union or credit card company.

Thankfully, there are steps you can take to prevent and recognize credit card fraud before it happens. Read on for all you need to know about credit card fraud in 5 lists of fives.

5 ways your card can be frauded

  1. It’s physically lifted from your wallet.
    The old-fashioned pickpocket is still a very real threat. Invest in a secure wallet and/or purse and always keep your card inside.
  2. A restaurant or bar server skims it.
    When you hand over your card to a dishonest server at the end of a meal, you give them a few minutes to skim your card while it’s in their possession.
  3. A terminal you use is compromised.
    Payment terminals can be tampered with and rewired to transmit your information to scammers. This is especially common in pay-at-the-pump gas stations.
  4. An online breach puts your information on the black market.
    After a company you use suffers a breach, your personal information may be up for sale on the dark web.
  5. Your computer’s been hacked.

Once a scammer gets inside your computer, they have full access to all of your sensitive data.

5 signs a terminal’s been compromised

  1. The security seal has been voided.
    Many gas stations have joined the war against credit card crimes by placing a security label across the pump. When the pump is safe to use, the label has a red, blue or black background. When it’s been breached, the words “Void Open” will appear in white.
  2. The card reader is too big for the machine.
    The card reader is created to fit perfectly on top of the machine. If it protrudes past it, it’s likely been tampered with.
  3. The pin pad looks newer than the rest of the machine.
    The entire machine should be in a similar condition.
  4. The pin pad looks raised.
    If the pin pad looks abnormally high compared to the rest of the machine, the card reader may have been fitted with a new pin pad that will record your keystrokes.
  5. The credit card reader is not secured in place.
    If parts of the payment terminal are loose, it’s likely been compromised.

5 times you’re at high risk for credit card fraud

  1. You lost your card.
    If you misplaced your card – even if it was eventually returned to you – there’s a chance your information has been skimmed.
  2. You’re visiting an unfamiliar area.
    When patronizing a business in an unfamiliar neighborhood, you don’t know who you can trust.
  3. A company you use has been breached.
    If a business you frequent has been compromised, carefully monitor your credit for suspicious activity.
  4. You shared your information online with an unverifiable contact.
    If you’ve willingly or unwillingly shared sensitive information online and you’re not certain of the contact’s authenticity, you’ve likely been frauded.
  5. You downloaded something from an unrecognizable source.
    Have you accidentally downloaded an attachment from an unknown source? Then your computer has likely been compromised and you’re at risk for credit card fraud.

5 ways to protect yourself against credit card fraud

  1. Check all card readers for signs of tampering before paying.
  2. Never share your credit card information online unless you’re absolutely sure the website you’re using is authentic and the company behind it is trustworthy.
  3. Check your monthly credit card statements for suspicious activity and review your credit reports on a frequent basis.
  4. Use cash when patronizing a business that’s in an unfamiliar area.
  5. Don’t download any attachments from unknown sources.

5 steps to take if your credit card has been frauded

  1. Lock the compromised account.
    Dispute any fraudulent charges on your compromised accounts and ask to have them locked or completely shut down.
  2. Place a fraud alert on your credit reports.

  3. Consider a credit freeze.
    This will make it impossible for the scammer to open a line of credit in your name.
  4. Alert the FTC.
    Visit identitytheft.gov to report the crime.
  5. Open new accounts.
    Begin restoring your credit with new accounts and lines of credit.

At [credit union], we’ve always got your back! Call, click, or stop by today to ask about steps you can take to protect your information from getting hacked.

Your Turn:
Have you ever been a victim of credit card fraud? Share your story with us in the comments.

SOURCES:

https://www.thebalance.com/how-credit-card-skimming-works-960773

https://www.thebalance.com/more-at-risk-of-credit-card-fraud-960780

https://www.makeuseof.com/tag/credit-card-fraud-works-stay-safe/

http://gizmodo.com/home-depot-was-hit-by-the-same-hack-as-target-1631865043

Look Before You Pump! Be Careful When You Use Your Card At The Gas Station

Two young ladies filling up car at gas stationHow many times a month do you fill ‘er up? It’s a mindless chore, but did you know it can also be the beginning of a financial nightmare? Gas pump skimming is an old crime that’s made a comeback – and your debit card may be at risk.

Every day, 29 million Americans pay for fuel using a credit or debit card. However, compromised pumps with skimming devices installed by scammers have recently been found in several states.

Since these skimmer devices are almost invisible, they can be really difficult to spot, enabling them to easily capture the information of up to 100 cards a day! And, thanks to Bluetooth technology, the criminal doesn’t even need to return to the scene of the crime to collect the data their skimmer has obtained; it can all be done remotely from as far as 100 yards away.

Yes, EMV-enabled technology has become more commonplace, but gas stations were given until 2020 to update their payment systems. This makes them even more vulnerable to such hacks.

Protect yourself against this heinous hack by arming yourself with all you need to know about card skimmers.

How it works
Hackers choose their gas pumps wisely. They usually opt to outfit the one that is farthest from the on-site convenience shop. This way, their activity is out of the range of any security cameras at the shop’s entrance. The hacker will then place a skimming device on top of the pump’s card reader. It will usually be identical to the existing reader, with only a few and hard-to-spot differences.

Sometimes, hackers may place a skimmer inside the pump itself. This task can be done in less than a minute. The hacker can then leave the area and access all the data being collected by the skimmer, with no one being the wiser.

Choose your payment method wisely
You may consider giving yourself extra protection by using a credit card or cash to pay at the pump. A credit card may be compromised just like a debit card, but you can easily dispute fraudulent charges made on your card. Depending upon your financial institution, your debit card may offer minimal purchase protection.

If you want the safest payment method, cash is a good bet. However, remember that cash cannot be replaced if lost or stolen.

How to spot a skimmer
If you don’t like the idea of carrying around wads of cash, you can still protect yourself against skimmers. Use caution while at the pump, and learn how to spot a skimmer. If something looks suspicious, move on to the next pump and report your findings to the local police as well as the gas attendant on duty.

4 ways to spot a skimmer:

  • Use your eyes. Check out the card reader very carefully. Do the numbers on the PIN pad look raised? Do they look newer or bigger than the rest of the machine? Does anything look like it doesn’t belong? Is the fuel pump’s seal broken?
  • Check the tape. Many gas stations place serial-numbered security tape across the dispenser to protect their pumps from skimmers. If the tape has been broken, or there’s no tape on the dispenser at all, it may have been compromised.
  • Use your fingers. Feel the card reader before sliding your card into the slot. Do the keys feel raised? Is it difficult to insert your card? These are both red flags that the card reader may have been fitted with a skimming device.
  • Use your phone. There are several free anti-skimming apps you can install on your phone, such as Skimmer Scanner. Using these apps, you can scan a card reader for a skimming device and get an alert if one is detected. You can also check your phone’s Bluetooth to see if any strange letters or numbers appear under “other devices.”

General card safety
It’s always a good idea to practice general safety when using a card to pay at the pump.

Choose the pump that is closest to the store and always cover the number pad with your hand when inputting your PIN. If you haven’t yet updated to a chip card, now’s the time to do so. It’ll offer you an extra layer of protection. It’s also a good idea to periodically check your account statements for suspicious charges.

Your Turn:
How do you pay at the pump? Why do you choose this method? Share your thoughts with us in the comments!

SOURCES:
https://budgeting.thenest.com/problems-using-debit-cards-gas-pumps-23710.html

https://www.creditcards.com/credit-card-news/gas-pump-atm-skimmers.php

http://news4sanantonio.com/news/local/skimming-devices-found-on-pumps-at-northwest-side-gas-station

Protecting Yourself Against Card Cracking Scams

Person in front of screen selecting fraud  prevention iconIn a recent scam targeting cash-strapped millennials, fraudsters are once again cashing in on people’s naivety and goodwill. Only this time they’re using social media to make it happen.

What makes the scam especially cruel is that fraudsters specifically look for victims who are short on funds, such as students with large loans hanging over their heads, struggling single parents or young professionals searching for a job. People who are desperate for cash also prove to be desperate enough to believe almost anything that will help them earn them a quick buck. Unfortunately, this vulnerability, coupled with the broad reach and easy plundering that scammers are granted by using social media, has made card cracking more successful in luring victims than many other scams.

Card cracking scams start with an innocent-looking social media post that appears like the dozens you scroll through every day. The post may show up on the victim’s Twitter feed, Facebook page or on Instagram, and it will always showcase some form of quick cash. It might be an easy-to-win contest with a huge reward for the winner. It can be a dream job that will instantly be yours – as soon as you follow the instructions. It may even be a complete giveaway, such as a cash bonus or a gift card that you’ll be granted just for sharing some information. If you click on the embedded link, you’ll be asked for your checking account information, your PIN or your online banking credentials.

Once the scammers have this information, they can do any number of things with their prize, from withdrawing large sums of cash from your account to using your debit card number for a massive shopping spree. They may even help themselves to funds you have in your account, such as a paycheck or student loan.

In another iteration of card cracking, scammers will tug on victims’ heartstrings, claiming their personal accounts are frozen and they have no access to money. They’ll ask the victim to allow them to access the victim’s account for simple transactions such as depositing checks. Once the checks are in, the scammer will cash in on the amount, and a few days later, when the check bounces, the scammer will be long gone. This variation is sometimes played out in person, on college campuses.

In yet a third scheme, card crackers promise victims a cut of fraudulent funds if the victim allows them to use their account. Victims often rationalize this crime by assuring themselves that they’re not actually playing a part in the fraud. Of course, they will still be held accountable when the scammers are busted.

Sadly, falling victim to a scam can be especially harmful for a millennial who is just beginning to build their credit history.

Don’t be the next victim. Here’s how to protect yourself from card cracking:

1.) Never share personal information with a stranger
You’ve heard it a thousand times, but this rule cannot be overstated. Never share sensitive information with a correspondent whose identity you can not verify with absolute certainty. You wouldn’t think of giving your checking account number to a solicitor you met on the street; why would you share it with a stranger online?

Of course, victims of card cracking and similar schemes believe the scammers are legitimate. That’s why it’s important to authenticate a web address, company or offer by asking for a street address or phone number. Additionally, by educating yourself about these scams, you’ll be able to spot one immediately.

2.) When it’s too good to be true, it usually is
Remembering this rule of thumb will go a long way toward helping you recognize scammers. Free or easy money exists only in fairy tales. Don’t believe the Facebook post that promises you’ll land that dream job you’ve been searching for if you only hand over your account passwords. Ignore the offer for a free gift card and don’t believe the sob story about frozen accounts leaving people penniless.

3.) Never cash a check for someone else
You are not a credit union or a check-cashing business. If someone approaches you in person or online and asks you to cash a check for them, politely refuse. Unless you would trust this person with your life, there is no reason to believe their tale is legitimate or that their check will be honored.

4.) Report suspicious activity
If you notice any suspicious activity on your account, report it immediately. You may have fallen prey to a card cracking scam and you don’t even know it!

Scammers may be smart, but you can be smarter. When you’re educated, alert and aware, you’ll be able to spot most scams before it’s too late.

Your Turn:
Have you recently spotted any card cracking scams on your social media platforms? Share what tipped you off in the comments!

SOURCES:

http://info.rippleshot.com/blog/what-you-need-to-know-about-card-cracking
https://www.google.com/search?q=card+cracking+scam&rlz=1CDGOYI_enUS753US753&oq=card+cracking&aqs=chrome.1.69i57j0l3.10532j0j7&hl=en-US&sourceid=chrome-mobile&ie=UTF-8
https://www.nextadvisor.com/blog/2016/07/18/know-about-card-cracking-scams/

Should You Cancel a Credit Card with $0 Balance?

The downsides of cancelling a credit card are usually not worth itCollage of overlapping credit cards
Many consumers are tempted to limit their debt by closing one or more credit cards as a result of the steady rise of the cost of living and credit card interest rates. However, though there are many reasons to close a credit card, there are ultimately even more and better reasons not to.

Adverse effect on credit score
If you care about maintaining a good credit score, you should avoid closing a credit card even if you have fully paid off the balance. This is because your credit score is based on a number of different factors that will almost all be adversely affected by closing a credit card.

“An account closure could wind up hurting your score because it eliminates the available credit line associated with the card and could easily skew your…credit utilization. It could also lower the age of your credit report, which may affect your score over time,” warns Jeanine Skowronski, credit card analyst and reporter for Bankrate.com.

According to FICO™, the United States’ biggest credit scoring service, 10 percent of your credit score is determined by credit mix. The more diverse the mix of your credit types, the better, so you should especially avoid cancelling a credit card if it is your only one or one of just a few.

Another 15 percent of your credit score is determined by the length of credit history. Because of this, you should take care not to close your oldest credit card. “Lenders tend to view borrowers with short credit histories as riskier than borrowers with longer histories,” writes LaToya Irby, credit and debt management expert, in a May 2017 article for TheBalance.com. “Closing your oldest credit card won’t impact your credit score immediately. But, once the credit card falls off your credit report several years down the road, you might see an unexpected credit score drop.”

More importantly, 35 percent of your credit score is determined by your payment history. If the credit card you want to close has a long and good history, closing it will hurt your credit score significantly. “If you have a good payment history on a card, then it is a good idea to leave that card open. This is especially important if you have a poor history with other cards or forms of credit,” says Chizoba Morah, contributor for Investopedia.com.

Debt and identity theft
Limiting debt and preventing identify theft are among the top two reasons people might decide to close a credit card. According to Morah, “When people feel they are spending too much money and cannot resist the lure of the credit card, they close the account.”

Furthermore, Morah adds that “by closing a credit card, they can lessen the chances that their identity will be stolen,” a risk that is increasingly at the front of people’s minds given the increase in identity theft in recent years.

While these are legitimate reasons to cancel a credit card, there are alternative methods to tackling these without incurring penalties on your credit report.

Alternative methods
There are a couple of steps you can take to keep a credit card open while making it very difficult to use it, thus limiting the aforementioned temptation and risk of identity theft. One step is to remove your credit card information from any online retailer that still has it, such as Amazon, so that it can never be unintentionally used by you or the retailer.

Another step is to destroy the physical credit card itself so that there is no risk of losing it or having it stolen. “If you have an inactive credit card or a card with a high balance, cut it up instead of closing it so that the history remains on your credit report but you won’t accumulate more charges on it,” advises Morah.

Ultimately, the negative consequences of canceling a credit card more than offset the potential benefits, especially as these benefits can be explored via alternative means. Unless the credit card you want to cancel is very new, mostly unused and one of many other credit cards, you are likely better off leaving it open.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Should You Save Your Credit Card Information Online?

How to protect your information when shopping on the internet
Woman using a tablet to make an online purchase using a credit card
It seems all too common these days to hear about major breaches at retailers that leave consumers’ credit card numbers and personal information vulnerable to identity thieves. In perilous times, it feels tenuous enough using a credit card to complete purchases in-store, let alone online. If you shop online frequently, the question of whether it is safe to store credit card information online for the purposes of faster and easier check outs is a valid one that can be approached a number of ways.

Assume the worst
In an April 2014 article on NerdWallet entitled “Should I Save My Credit Card Payment Information on Retail Websites?”, website contributor Lindsay Konsko states the obvious in a blunt fashion: “[Y]ou must understand that anything you put on the internet should be considered completely unsafe and available to the public. No matter how much a website boasts about its security, it may still be vulnerable.”

You can save your credit card information with retailers if you shop there frequently enough that it might warrant it, but you should only do so fully understanding the level of risk involved. Some retail outlets like Amazon.com provide two-step authentication to protect your information and help you spot when someone might be attempting to access your account, but even then, it is not entirely protected from the possibility of data breaches.

Consider the alternatives
CNET Senior Editor Lexy Savvides recommends protecting yourself from the possibility of having your credit card information stolen from an online retailer by considering instead the option of shopping online with a prepaid card. According to Savvides, prepaid credit cards are advantageous in that they can help curb impulse shopping and can easily be reloaded (for a small fee), but arguably the biggest advantage that they provide online shoppers is that “even if the card’s details are compromised somewhere along the chain, there is a limit to the amount of money that can be taken.”

Be proactive
The reality, as unfortunate as it may be, is that there can be no guarantee of the complete safety of your credit card information. Having said that, it is within your power to determine how much risk you face. Savvides notes that you should only enter credit card information when checking out online if the website has an https connection and “a padlock or another digital security certificate to ensure that you are only entering your details on a site that encrypts the transaction end-to-end.”

Savvides also recommends being attentive when it comes to monitoring transactions. Konsko notes that most credit card companies offer fraud protection and low or zero liability for fraudulent charges, but it is not always guaranteed that a credit card company will notify you when a charge goes through even if it is unusual. As such, frequent or even daily monitoring of your balances and transactions can be key to shutting down identity thieves before they have an opportunity to do any major damage.

Savvides notes that credit card companies like MasterCard and Visa offer secondary levels of security to protect your credit card information by requiring a private code or password before completing a purchase. Before deciding whether you feel comfortable storing your credit card information with a retailer online, make sure that your credit provider will protect you in the event of having that information compromised. When it comes to credit, it is always better to be safe than sorry.

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