CREDIT CARD INSIGHTS

The cards we are going to discus here are the Mastercard and Visa only. Banks and Savings & Loans issue these. You can either purchase goods and services using this card or go to the institution who issued you the card and get cash advances, ie., get cash directly against the card.

To obtain these cards, one has to have very good credit or reasonably good credit.  Checking your credit can be done in different way.  One way is by writing to the Credit Bureau near them and getting your credit standing in the Bureau's Credit File.  Another way is to evaluate you by their own standards of point system (please see table at the end of this chapter).

To get a quick guide of institutions issuing credit cards, get out your yellow-pages and look under Banks and Savings & Loans.  Call them and make a list of the ones issuing these cards and then go to them and pickup their applications and keep them ready.  Then go through this book and write all the ones listed and get their applications.  Get a hold of other institutions using the yellow-pages of major cities and get their applications.  Then when you have enough applications at hand, fill them all up and mail the ones from zip codes starting 0 to 5 the first day, the ones of zips 6 to 8 the next day, and zips 9 the third day, so they all reach the institutions the very same day (for California only - other states please improvise).

If you get accepted in 10 out of 30, each with a credit limit of $1,000, you can have access to $10,000.  This is one of the quickest ways of obtaining a loan in the shortest time (and the safest).

A sure-shot way of getting credit card is the secured cards. These are credit cards issued against your depositing cash in that institution. If you have saving or other checking accounts, then you might as well have it at their institutions which give credit cards in return. The credit requirements of these mentioned ones is not very stringent. A good way to raise your credit limit on the secured credit cards is  to take cash advances and re-deposit the cash (and pay the debt) till you reach  your credit limit.

Visa and/or Mastercard

There  are  special  bankcard  agencies  that  will  issue  a  Visa and/or Mastercard to anyone that opens a $300  savings account at their bank regardless if the person has bad credit or no credit. It makes no difference if you have a bankruptcy. You're guaranteed the cards regardless hoe bad you credit might he if you open the savings account at the bank!   You would receive your card within 30 days from the time you open your savings account with them. The credit limit on the card matches dollar for dollar with the amount of money in your savings account.

A lot of people can't part with $300 for long because of bills that are  pressing  them.  There's  a  way  around  this.  Go ahead and open  the  savings account and get  the card.  Then go to a Western Union and make a  $300 cash withdrawal  on your  card  and you have your money right back plus the card.  Even though you can't charge anymore  because  you've reached your credit limit, you can still  use  the  card  for  identification or  check  writing  purposes.  Then you can pay your bill down a little at a time as opposed to putting up the entire $300 at one time and leaving it in the savings account.

Another way to get around not paying out  the entire $300 at one time  is  for you to work with a close  family member or  friend  in splitting  the  $300  cost  to get  the card.  Decide on which one  of you is going to apply for the card first. And when that person gets his  card  he's  to make  a  $300 cash withdrawal on it  so the other person  can  apply  for  his  card.  When  the   second  person gets his card he's to make a $300 cash withdrawal on it also and give his partner his  $150 investment back. This procedure will work for as many as 3 people putting up $100 each to help each other get their cards.

There's  also  a  maneuver  that  a  person can  utilize with  his secured card that will show him more credit worthy than he actually is. It will cause banks to loan him more money and quicker.  And it will make creditors want to give you things that they normally would not have.  In order to do this you have to be patient and you can't make any  charges on you card until you've gotten where you want to be.  If you can afford it secure you a Visa and Mastercard. Use one for your personal charges and use the other for the following purpose.

First of all, the bank that issued your secured card will report to  the  credit  bureau  the  transaction.  And  on  your  credit  report will be the banks name along with your credit limit and credit ratio. At first your credit limit will be only $300 if that's all you put in the savings account  that's required for the card. When you get your card make a $300 cash withdrawal on it and put it in the savings account you used to get the card with your original $300. Then you'll have $600  in the saving account- and the bank will report  this  to the credit bureau which will automatically boost your credit  limit on your card and credit report to $600.   This move will allow you to make  another $300 withdrawal on your card  because you've only made one $300 withdrawal but  you have $600 in your savings account. So go  and  make another  $300 withdrawal  on your card and deposit it into your savings account and this will automatically boost the credit  limit on your card and credit  report to $900.  Repeat this procedure  and your  limit will he $1,200.  continue until you  feel that your monthly payments have reached the limit of what you want to pay.  Some  people  have  reached a  credit  limit on their credit report of $5,000!

The object of this maneuver isn't to reach a high credit limit on your  card but rather  it's to show the highest possible credit limit on your credit report. Even though your card may have a $5,000 credit  limit  the fact  remains  that  it's all charged up.  But when creditors or banks  see a  $2,000 or $5,000 spending limit on your credit  report  they'll  think that you are a preferred customer at the bank that issued you the card. They know that banks don't give out $2,000 - $5,000 spending limits on a major credit card to anyone so therefore they'll think that you are somebody special and will be glad  to give you  the  loan or whatever you're applying for on credit  within  reason  especially  if  they can  look  back  over  time on your credit report and see that you made your payments on time every month. But what they won't know is that you were not a preferred customer  at  the bank  but  rather you  took advantage of a  special Visa  and  Mastercard  program  that  required  for  you  to  secure  the card by opening a  savings account at  the bank with a minimum of $300.  And that you legally maneuvered your way to a $2,000 - $5,000 or more spending limit that made you look like you were a preferred customer at the bank.  But as the old saying goes,  "What a person doesn't know won't hurt him."    In rebuilding credit  it takes time to walk  up the credit  ladder.  Utilizing  this maneuver  you'll  get things on credit in a few months that would have taken a few years to get if you had not done it because it made you look more credit  worthy than  you actually were according  to the  standards  of  most creditors.

The National Credit  Bureau  is the  largest bankcard agency in America that offers a secured Visa and/or Mastercard. Their telephone number is 1-800-433-2455. If you call them requesting their application package they'll send it to you for $39.95 which is a non-refundable fee that covers the expense of setting up your savings account at Transcontinental bank and issuing you the cards. After they receive your application they'll contact you  back  in 2 - 3 weeks letting you know that your account has been opened all the paper work is complete and all that is needed is your $300 deposit for your savings account. After you send in your $300 deposit you'll receive your Visa or Mastercard in 2  - 4 weeks.   And it's just that simple.

Most people charge their credit card and pay installment payments each month on a fraction of their debt. Now that is exactly what the issuing banks want you to do because you are helping them to stay in business. In fact, that is how the banks make their money. However it is your loss in the interest you pay. The new tax laws do not permit you to take any deductible on the interest payments of your revolving debt. The right way to charge is to pay the entire balance WITHOUT paying any interest. That you establish credit as well not pay any interest. Which essentially means that you borrowed the money FREE for that period of time. At the same time, the each in hand can be deposited in interest bearing deposit to EARN interest money for you. So if you do not pay in each for your purchases (assuming that you already -have the each in your hands) but charge it every time at the same time keeping the each in hand in an interesting bearing account actually makes you money; which you would have lost if you would have paid by each.

How long do you think you could charge and not pay back WITHOUT paying any interest on it ?  About one month, right ?  WRONG !! It is actually two months. Let us show you how:

Take this case:  You have a billing date of the 30^th. That means the bank bills you once a month or charges accrued during the month, & the bill comes to you dated the 30^th. This bill includes all the charges entered on your account up to the end of business on the 30^th.  You do not have to pay any of these charges for 25 days after the billing date. After 25 days, interest begins to mount up at 12 to 18 percent in most. So you start with 25 days of FREE credit.

Example:  If you make a local charge -before 3 pm on the 29^th, a Monday when Tuesday is not a holiday, and your bank is the same as your retailer's, your real Charge Date is one day later. That is the 30^th, but your billing date is the 30^th so the charge will appear on the bill of the 30^th, and you will have to pay it 25 days later.

But suppose you made the purchase after 3 pm on the 29^th. Then your real  Charge Date is now two days later, or the 31^st. That is because the charge receipts are deposited a day later by your merchant in his bank.

You will have skipped over the billing date. The charges will not appear until the next billing date...which is 30 days hence.  And you will not have to pay for another 25 days.

You get 55 days plus the two days between charge date and real Charge Date, for a total free credit of 57 days.  By simply shifting your chare form before 3 p.m. to after 3 p.m., you gain 32 additional days of free credit.

Bank         Savings Balance            Loan Amount    Payment Amount Total Interest Paid

Bank "A"   $1,000.00          $900.00             $77.49              $29.52

Bank "B"   $900.00                         $810.00                         $69.71              $29.57

Bank "C"   $810.00                         $729.00                         $62.74              $23.91

 

DON'T PANIC!

By the time you obtain your third loan, about two weeks have passed. You now have three bank loans totaling $2,439 and $729 in cash (your loan from Bank C). How will you pay these loans back? It's easy. Use enough of your $729 to make your first payment on your Bank A loan ($77.46). Do the same at Bank B and Bank C. You should now have made payments that are ahead of their due dates by about one week at Bank A, two weeks at Bank B, and three weeks at Bank C. You have used about $200 of your $729, but you have also freed up frozen funds that can be withdrawn later.

Now wait about another two weeks and repeat the loan payment process described above, making another set of payments with your remaining cash. At this point, you should be approximately one full month ahead on all three loans. With the balance left from your cash loan, make your third set of payments on the second payments' due date. By now, your $729 should be almost depleted. Approach each bank and withdraw the funds that have been unfrozen to use towards your next set of payments.

Continue this process until at least six payments have been made on each loan. You can pay off your loan in full, if you wish, after that point. Do not pay them off before six months, because this is the time frame usually considered when a payment history is calculated as a possible credit reference.

WHAT DID THIS REALLY COST?

In our example, the interest rate charged on the loans was 6%. And, your savings accounts were drawing 2% interest, making your net interest only 4% (6%-2%). We will assume the loans where for one year (12 months) and that you did not pay them off early. Bank loan A for $900 charged $29.52 interest, from which we subtracted $20.18 - the 2% interest you gained from your $1,000 savings - for an actual annual cost of $9.34. If you paid off your loan in six month, it would have cost you even less! Overall, it costs pennies to re-establish your credit using this method!

That's a very small amount to pay for three fast and easy credit references that indicate your ability to acquire bank loans in varying sizes, make you payments ahead of schedule, and pay the loans off completely before due. These activities will all look very impressive on your new credit report! And, you should still have your original $1,000.

Now is a good time to contact your local credit bureau (ask your banks which one they report to) and have this new credit information added to your profile. The bureaus will send you a credit addition form to complete and mail back. There is usually a small fee for each item to be added. They should also send you an updated copy of your new credit report.

Step Two - Secured Credit Cards

How Secured Credit Cards Work:

Now it's time to use these bank references to obtain a credit card. Select on of the banks you particularly liked doing business with and use your initial $1,000 to make a deposit there. After about one week, pick up an application form for either a Visa or MasterCard and fill it out completely at home. Be certain that the card you are applying for allows for cash advances, and include your other two bank references on the application. Then meet with a loan officer at the bank and give him/her your completed form, saying that you are willing to have your $1,000 frozen to secure a credit card with a $1,000 line of credit.

This type of secured credit plan is very common and is available to new credit builders as well as credit builders with a bad history. Similar to your bank loan, your savings is used as collateral for any debts you may accrue using the card. The card will look like any other Visa or MasterCard, so only you and the bank know it is secured by your savings.

Shopping to Build Credit

Once you have your card, use it. It is important now to again demonstrate a good payment record. A credit card that never gets used can actually reflect negatively on your profile!

Go to your local shopping mall and find a store that carries a returnable item in the $500 to $800 range (remember; your credit limit is $1,000). You can select a piece of jewelry, a television, audio or video equipment, or other merchandise within this price range. Make sure you understand the store's return policy - you will need to be able to return the item later for a credit on your charge account, not just store credit. Purchase the single item with your new Visa or MasterCard, take it home, and safeguard against damage or theft. After several days, go back to the store and return the item, requesting a credit on your card.

When you receive your first monthly statement for your card, you will notice a column marked Payments/Credits. Your credit for the returned item will show up in this column, although it looks the same as of you had paid for the item in full. Anyone examining your credit record will see that you made a sizeable purchase and a very early payment.

Obtain a Cash Advance

There is one final step to establishing your good credit record with a credit card company. Stop by a different bank than the one that issued your credit card and ask for a cash advance. Visa and MasterCard allow any lending institution that honors their cards (almost all) to make cash advances for varied amounts up to your credit limit. Some allow only a 25% cahs advance, while others will loan your entire amount. Be advised that borrowing money in this manner usually costs more in interest than your card charges for merchandise, so it is not a good way of routinely obtain loans. But it is useful for our credit-building purposes under this plan. Since you will be charged interest on your cash advance from the day you receive it, you may want to time this transaction toward the end of your billing cycle.

Let's assume that you get a 50% cash advance on your $1,000 limit, or $500. Don't spend the money. Put it away and wait for your next monthly statement. Use the money to promptly pay back your cash advance charge on your bill. Now you have used a large amount of your credit limit on two occasions, and your record indicates both were paid back in full. Your credit history is looking better and better!

Step 3 - Un-Secured Credit Cards

Low Interest Pays Off

Before taking specific steps to obtain an unsecured credit card, it really pays to shop around for a bank issuing Visa or Mastercards at the lowest possible interest rate. The national average is presently at about 19 to 20 percent. At this rate, an average balance of $650 will cost you $123.50 annually in interest charges. The same $650 balance will only cost you $78 on a 12% card - a savings of $45.50 per year.

You also want to consider any annual fee charged for use of the card, which can range from $20 to $50 for premium cards such as MasterCard Gold and Visa Gold. While Gold cards traditionally require a higher annual fee, they typically offer higher credit limits. For the purposes of this plan, we do not recomend obtaining a Gold card. Take a look also at the grace period various banks allow between the time of purchase and when interest starts to accrue. If a bank offers no grace period, you will still be charged interest on your balance in full after each billing period. Again, to find out about rates, fees, and grace periods, you can pull out the Yellow Pages and call around locally. The business sections of major newspapers also often carry ads by local banks promoting the features of their credit cards.

However, you do not need to apply for an unsecured card from a local bank. Computer networking makes it easy to quickly access any bank, and most are eager to have new credit card customers, regardless of where they live. You can find a list of U.S. banks offering low interest rates for Visa and MasterCard in the Bank-lists booklet contained in this document.

Approaching the Bank

Once again, have the new information about your secured credit card included in your credit bureau file. Now go to a bank and apply for whichever credit card (Visa or MasterCard) you do not already have, using your bank loans and current credit card as references. When the bank refers to your credit file, they will find you have an impressive payment history and another credit card with no outstanding balance. They should be more than willing to give you a regular, unsecured bank card.

Freeing up Your $1,000

At last, you need to have your $1,000 savings account unfrozen and the credit card released from it's secured status. Go back to the bank where you began this process, and inform the loan officer you now have an unsecured Visa or MasterCard. Explain that you received this card based upon your excellent payment history you established with their bank card. Ask now to have the hold placed on your savings released. If he/she is hesitant, suggest that you will leave your money in the savings account, But no longer want it frozen. If the officer still seems reluctant, you can politely say that you will then have to return the credit card and close your account with them. In most cases, the bank will not want to loose you as a customer and will honor your request.

However, if these efforts fail, then go ahead and return your card and close your account. Go to the bank that gave you your unsecured credit card. Tell them that you like their services and rates better than where you previousely banked and want to shift your Visa or MasterCard (whichever one you do not already have there) to that bank. Your second unsecured credit card should arrive in the mail soon after!

Step 4 - Department Store Credit Cards

Instant Credit

With the first three steps completed, you should feel like a credit-building pro and be proud of your new credit profile. This next step is easy. Because you already have a Visa and MasterCard, the credit world is wide open and waiting for you to sign on.

Most major department stores offer a form of instant credit - providing you with their store credit card just because you possess a major credit card, so they can collect the interest instead of Visa or MasterCard! Best of all, department store cards are issued on an unsecured, deposit-free basis!

You usually will be asked to fill out a brief application form, show your I.D., present at least one major credit card - and you are accepted! This can sometimes be done right while you are making your purchase, or at a special customer relations desk. Many stores are even offering free gifts or special discounts to customers applying fir instant credit. Be cautious, however, to apply only for cards in stores that you normally shop at. A dormant credit card does not look good on your credit report.

While many stores of all sizes now offer their own credit cards, for our credit-building exercise it is best to obtain one from a major department store chain with locations around the country.

Department Stores Offering Instant Credit

Below is a partial list of U.S. department stores offering instant credit. Many may have store locations in your area. All stores listed here report to the credit bureaus.

·                        Bacons

·                        Lazarus

·                        Neiman Marcus

·                        Broadway

·                        Lord & Taylor

·                        Nordstrom

·                        Castner Knott

·                        Macy's

·                        J.C. Penny

·                        Dillards

·                        Marshall Fields

·                        Sears

·                        Halls

·                        May Company

·                        Maas Brothers

·                        Jordan

·                        Marsh

·                        Mervyns