Don't cancel that credit card!

When you consider the interest rates you're paying on your credit card debt, it's natural to think that the best financial decision you could make would be to simply cancel it (or them, if you've got several).

Don't be too hasty though!

Here's the thing: credit card debt is expensive, for sure, and paying off your balance is a good thing. In fact, it's better to pay off credit card debt than it is to save. But once you stop carrying a balance, there are some very good reasons to hold on to your card. For example, it shows commitment to banks and credit bureaus while keeping your debt to credit ratio low, both of which will improve your credit score.

That's not to say that owning 20 credit cards is a good thing: anything over 7 will probably start to hurt your score.

The Motley Fool have a great article about this subject that you really should read: http://www.fool.com/personal-finance/credit/dont-cancel-that-credit-card.aspx

How to Make Balance Transfers Work for You

If you've got a lot of credit card debt, and the high interest rates have you locked in a never-ending battle to clear your balance, perhaps a 0% APR balance transfer is the best reward you could ask for.

Be warned: shopaholics need not apply. If you're going to switch to a zero interest card, make sure you're serious about using this break (usually 6-12 months) to get your debt under control.

Watch out for the small print too. Some 'free' rates still apply a transfer fee, and there could be other charges that reduce your benefits significantly (annual fees, zero rate on transfers but not new purchases, introduction rate void on any late payment, and so on).

As ever, look beyond the initial offer, and make sure that the long term conditions offered by any credit card are good enough. For a great article on how to make the most of the balance transfers game, check out Motley Fool's tips:

http://www.fool.com/personal-finance/credit/how-to-win-the-balance-transfer-game.aspx

Can't understand your Credit Card agreement? Join the club...

It's shocking to think that credit card agreements are written at a level beyond what 4 out of 5 Americans can understand. Why? To protect the credit card providers against lawsuits. But there are some good starting points included in this video from CreditCards.com that will help you to level the playing field:

It's vital that you understand your credit card agreement. Usually, there are enough consumer laws out there to protect you from the excesses that have plagued the industry in the past. Even still, it's worth asking your provider to explain areas you have difficulty with. If nothing else, their willingness to cut through the legal and technical jargon should give you confidence that you're dealing with an open and trustworthy company.

A lovely, humane look at budgeting for generosity!

Most financial advice is introspective: making YOUR dollar go further, paying YOUR bills. Yet, whenever we help someone else out, we do feel good about it, don't we?

Now, this article isn't for everyone. If you're struggling to make your own budget cover your outgoings, it's going to be difficult to help anyone else out. But if you have a little spare change, what could be better than giving someone else a helping hand?

A controversial idea, perhaps, but certainly food for thought. Check out the article in full at: http://christianpf.com/how-to-build-generosity-into-your-budget/

Image Credit: http://www.sxc.hu/photo/1105757

How does cancelling your credit card affect your credit score?

Found this nice article today about the effects of cancelling your credit card on your credit score. As we've discussed previously on http://creditcards-withrewards.com, cancelling a credit card (for example, when your transferring to another card with a 0% APR intro rate) can actually damage your credit score, because your credit utilization ratio is changed, an important part of your overall credit score.

Think of it like this: you have $2,000 balance on a $4,000 limit card, and then you transfer the balance to a new card with the same limit. At that point, between the two cards, you are using $2,000 out of a total available credit of $8,000, so your credit utilization ratio is 25%. When you cancel the first card, you're now using $2,000 out of a possible $4,000, which means your credit utilization score has shot up to 50%. This doesn't look so good to the credit bureaus.

Jeremy Simon goes into more detail in this excellent, and very readable article at: http://www.creditcards.com/credit-card-news/faq-jeremy-simon-cancel-close-credit-card-score-fico-1508.php