The issue of sending your young one off to college is a very tickling one as you maybe worrying about him or her handling themselves properly and any good parent would naturally worry. But the worries can be cut by completely as a prepaid card does this for you.
Maybe you are one of the parents who feel that getting a credit card for your ten is not a very good idea but a charge card maybe the perfect solution as these have the overdraft feature. But some of these teen due to a lack of experience with a credit card they end up creating some very high bills before even realizing that they have done so. So to prevent these types of occurrences can be avoided by using a prepaid card. Because the ten can only spend the amount of money that is on the card you can easily track there spending habits and therefore see how much they are really spending. When you are using a regular charge card for your teen to kind of go to college and handle his responsibilities on his or her own this may leave the parent in a very sticky situation.
A recent study shows that when most of the college students have charge cards they tend to do more unnecessary spending and therefore this can be a big head ache for both the parent and the student. In the case of your name being on the credit card which your teen holds then you would be in some serious problems.
Colin Scott is a credit card expert. For more great tips on no annual fees visit http://www.CardsForPoorCredit.net/.
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The answer is it is true. Credit card companies are informing credit card holders that their interest rate will increase, an annual fee will be assessed, or both of these changes will occur.
While a consumer’s first instinct is to opt out of the card and take a lower interest rate on the balance due, that action will cause decreases in the score. I know this doesn’t seem logical. Consumers think if they pay the balance off at a lower rate for five years, they will be saving money, and they believe it is the smarter choice. But there are consequences that may cost them more money in the future.
With the new credit card rules that went into effect in February 2010, when the opting out offer is given and the consumer chooses it, the score will drop up to 60 points. Opting out means the card will close, whether there is a balance or not. The closing of the account is where the damage to the credit score occurs. The score will drop up to 60 points and a line of revolving credit will be lost. The credit score will be affected for at least a year. If the consumer has minimal credit to begin with, their credit score could be hurt indefinitely.
We are not accustomed to viewing credit as an investment portfolio, but that is exactly what credit card holders need to do. Prior to closing any accounts, the balance of the entire “portfolio” should be considered.
The more credit someone has, and the different types of credit one has, the higher the score and the more valuable the credit portfolio becomes. We do see exceptions to this rule one out of every 3,000 so it is best to follow the majority rule. When credit is closed or inactive, it can be harmful to a credit score.
Why? There is less transparency in viewing the consumer’s ability to manage varied credit. Less activity is viewed as higher risk and the score drops. If old credit is closed, it can be removed after two years of inactivity. Old credit is a treasure to the credit score. Once it drops off you can lose up to 100 points depending on the whole portfolio of credit.
There are other consequences of opting out of a credit card. You need to consider when the balance will have to be paid back. The new rules place a limit on when the balance needs to be paid and demands that it be paid in up to five years.
For example, if a consumer owes $10,000.00 and they opt out, the minimum payment will automatically be recalculated and will be spread out over the five year period. The financial consequences are that the consumer must be ready to pay a higher minimum payment, if necessary. Therefore it is important to think all of these ramifications through before taking the plunge and opting out. There could be more negative outcome than positive in opting out or closing a credit card in the majority of cases.
So remember, once a credit card is closed, whether opting out or just closing the account, the credit score is going to drop. If the credit card is reopened or a new card is applied for, the score will drop even further. Opening new credit reduces the score up to 60 points as well.
Tracy has been a successful business owner for over 25 years. Tracy founded North Shore Advisory, Inc. because she saw firsthand how much misinformation there was in the field of Credit. Her expertise, educational seminars, and individual consulting services have helped thousands of people and businesses conquer credit problems, reach great financial goals, and achieve the success they deserve. She works with Bankers, Brokers, and CPA’s across the country, showing them how their clients can position themselves for the mortgage, business loan, and financing process to get the lowest rates and save money.
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