The shredder at my house is busy these days, destroying the constant stream of credit card offers. The offers promise zero percent balance transfers. Waived annual fees. 40,000 bonus miles. Convenience checks for whatever I desire. The offers are tempting, but there's usually a catch. A balance transfer fee. An annual fee that kicks in after the first year. You get the picture.
Credit experts say card offers are hitting the mailbox at rates not seen in a long while. Some offers are so-called "preapproved" card offers designed to net new customers. Others are rich balance transfer offers intended to convince existing cardholders to pick that card for the next purchase. "Issuers are finding some better times out there," said Bill Hardekopf of Lowcards.com, citing lower delinquency rates and overall credit card balances as two reasons for the improved environment. Plus, with fewer consumers carrying a credit card balance, issuers have to make up lost profit in the form of fees. In other words, they need to figure out ways to get consumers to use their credit cards more.
I tend to ignore all credit card offers. We have plenty of revolving credit. But the offer from USAA, our main bank, offering zero percent interest for 15 months without any fees or glaring catches was too good to pass up. With it we accelerated our kitchen remodeling project and will soon have cabinets that actually close and a new sink to replace the one that literally was designed for an RV.
Before we borrowed the money, I read every last bit of fine print not once but twice. We called to make sure we weren't missing any terms or conditions that would cost us in the long run. We looked at our overall financial picture to make sure we could realistically pay the money back in time. And we developed a plan to pay off the debt a month before the zero percent interest offer expired.
Paranoid? Not at all. The Consumer Financial Protection Bureau (CFPB) put out a bulletin earlier this month warning credit issuers to be more transparent when marketing promotional APR credit card offers: "The bureau has observed that certain solicitations for these types of offers risk being deceptive."
The bulletin said offers don't always state clearly that continuing to use the card after initiating a zero-percent offer could mean paying interest on any new purchases until the entire balance is paid in full. "Consumers may incur charges that they do not anticipate — and fail to save the money that they expect," the CFPB bulletin said. Bottom line: Be vigilant if you're planning to take advantage of credit card offers or risk being victim to gotchas.
Free credit scores (really)
I can look up my credit score every day if I want to. No strings attached. A growing number of people have that option as more credit card companies are offering free credit scores to cardholders. So far, Barclaycard, Discover and First Bankcard offer free FICO scores. Capital One offers a TransUnion credit score and a tool that simulates how different actions would affect your score. U.S. Bank provides an Experian credit score.
Free credit reports have been available to consumers for years. But not free credit scores, which are used by lenders to assess creditworthiness. Without access to a free score from a financial institution, a score will cost you nearly $20.
Having access to credit scores is especially important in an era when security breaches are the norm. "Consumers will become more educated and notice fluctuations in credit scores faster," said Gerri Detweiler, director of consumer education for Credit.com. Fluctuations could be a sign that your credit has been compromised. Maybe credit accounts are being opened or balances are being racked up in your name. A drop in a credit score should prompt a check of your credit report at annualcreditreport.com.
Credit scores also come in handy to assess credit health in advance of applying for a mortgage or any other type of consumer loan. Just be sure you know which credit score your lender plans to use since scores are all calculated in slightly different ways.
Chip, pins and security breaches
High profile security breaches at big-box retailers appear to be the norm. If you aren't interested in switching to cash, never fear. You will never be liable for more than $50; most banks won't charge you a penny if your card's been stolen. My cards have potentially been compromised too many times to count.
It's disconcerting, but fortunately these incidents have not had any major effect on my life. The good news is that security breaches have prompted some card issuers to adopt more secure credit card features on a swift schedule. Expect to see chip and PIN cards replacing your plain old magnetic stripe cards by 2015. I received my first chip and PIN card this summer. Apple Pay, the new payment service that comes with the newly announced iPhone 6, also includes features that make it more difficult for hackers to get away with your credit card number.
What's on your mind about credit? Tell Kara: Kara@KaraMcGuire.com
Kara McGuire is a consumer strategist for CEB and author of "The Teen Money Manual."
FAQs
If you frequently receive credit card offers in the mail, you're not alone. Card issuers do this to expand their customer base and reach a wider target audience. These are called prescreened offers as the company has identified you as a prime candidate for a card.
How many credit cards should I have to get an 850? ›
Total accounts: You need 21+ accounts to score "Excellent." If you have 20 cards and low utilization, you're seen as more responsible to the credit agencies.
How many credit cards should an 18 year old have? ›
Credit scoring formulas don't punish you for having too many credit accounts, but you can have too few. Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time.
Is 7 credit cards too many? ›
There is no right number of credit cards to own, and owning multiple cards gives you access to different rewards programs that various cards offer. Owning five cards, for example, would give you a bigger total line of credit and lower your credit utilization ratio.
How do I stop getting so many credit card offers? ›
You can stop receiving unsolicited "preapproved" credit card offers by having your name removed from the credit reporting agency mailing lists. Call (888) 5-OPT-OUT (that is, (888) 567-8688) or visit OptOutPrescreen.com.
Is it a good idea to opt out of credit card offers? ›
Safeguarding Your Identity From Credit Card Offers
Be cautious about sharing personal information and consider opting out of unsolicited card offers to reduce exposure to potential fraud.
Does anyone have a 900 credit score? ›
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
How rare is an 830 credit score? ›
Your score falls in the range of scores, from 800 to 850, that is considered Exceptional. Your FICO® Score and is well above the average credit score. Consumers with scores in this range may expect easy approvals when applying for new credit. 21% of all consumers have FICO® Scores in the Exceptional range.
How rare is an 850 credit score? ›
How many Americans have an 850 credit score? Only 1.31% of Americans with a FICO® Score have a perfect 850 credit score. While a score this high is rare among any demographic, older generations are more likely to have perfect credit. Baby boomers make up a whopping 59.4% of the people with an 850 credit score.
Is it better to close a credit card or leave it open with a zero balance? ›
If you pay off all your credit card accounts (not just the one you're canceling) to $0 before canceling your card, you can avoid a decrease in your credit score. Typically, leaving your credit card accounts open is the best option, even if you're not using them.
Key takeaways: Closing a credit card can hurt your scores because it lowers your available credit and can lead to a higher credit utilization, meaning the gap between your spending and the amount of credit you can borrow narrows. Canceling a card can also decrease the average age of your accounts.
Is it bad to have too many credit cards with zero balance? ›
However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.
What is the 5 24 rule? ›
What is the 5/24 rule? Many card issuers have criteria for who can qualify for new accounts, but Chase is perhaps the most strict. Chase's 5/24 rule means that you can't be approved for most Chase cards if you've opened five or more personal credit cards (from any card issuer) within the past 24 months.
What is a bad number of credit cards to have? ›
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
Is 12 credit cards too many? ›
So, while there is no absolute number that is considered too many, it's best to only apply for and carry the cards that you need and can justify using based on your credit score, ability to pay balances, and rewards aspirations.
Why are so many companies offering credit cards? ›
Credit can be profitable to the store, offering an additional percentage on purchases when the consumer spreads the payments out over several months. Why should an outside party get 2.6% or more, when the store can grab those profits instead? Businesses can also offer bonuses and set up loyalty programs through a card.
Why am I getting credit card offers for someone else at my address? ›
Be assured you are not the only one that has received these types of mailings. Prequalified credit card offers are a common tool that banks use to get new business. Chances are the "fake name" you refer to is on some mailing list that was bought by the companies who send out these types of mailings.
Is it bad to decline a credit card offer? ›
However, it is important to carefully consider the consequences of declining a credit card as it may affect your credit score and future credit applications.
Do I have to shred credit card offers? ›
Junk mail comes in every day. Unfortunately, with so many data sources available to companies, your personal data may be included in those garbage mailers and credit card offers. Don't toss the junk mail in the trash bin; shred it.
