Credit Card Debt Management

Are you upside down in a loan you can’t afford? If it’s an auto, education, or mortgage loan (or even a utility bill!) you struggle to pay each month, there’s hope. Though not ideal, at least it’s good to know that options exist. ChargeSmart is the latest company to offer consumers the option to pay such bills with a credit card.

In the past, mortgage loans have been particularly difficult (impossible) to pay with credit cards, but ChargeSmart makes it possible through a third-party arrangement. The banks are not affiliated with, nor do they endorse, ChargeSmart, and it may be for good reason. The habit of putting living expenses on the credit card — even if it’s to reap credit card rewards — is a highly treacherous path.

High-balance credit cards can mean high interest rates, higher payments, higher cost of living and higher risk of default. There will inevitably be those ChargeSmart customers who are not doing this to reap rewards, but because they have to. They cannot afford to pay their electric bill, mortgage payment, car loan, etc. Where will those consumers find money to pay off their credit card bills each month? A HELOC? It gives new meaning to a revolving line of credit.

ChargeSmart is particularly dangerous because it adds fees onto each transaction, a flat rate plus a percentage of the payment processed. As MSNBC pointed out, CardIt — ChargeSmart’s like-minded predecessor discussed on this blog previously — is now out of business. We’ll see how long ChargeSmart will float. For consumers trying to stay afloat, it’s probably best not to hitch onto ChargeSmart’s raft. Pick up a second job, sell stuff, eat out less, take public transportation, rent out part of your house — do whatever you must to increase income and decrease cost of living. And that’s truly smart.

When it comes to credit cards and fine print, there is usually plenty of room for confusion. It’s been seen in the fact that few cardholders really know what their card’s interest rate is. The majority of cardholders aren’t even aware of the Universal Default Policy, and what it means to their financial health.

Well, chances are good that few cardholders really understand their highly-touted credit card rewards as well. It would take a very savvy cardholder to understand the fine print on these rewards and learn how to play the system. There are often very specific restrictions on these, like spending levels that must be reached before rewards begin to accrue at the advertised level. There might also be expiration dates on the points, or specifications on how the points can be accrued and used. There might also be annual fees, negating any rewards benefits except for really big spenders. Furthermore, rewards payouts may not be automatic, but only available upon request.

Another thing that consumers might not recognize is that rewards programs are changing, and not for the better. Companies are cutting back and becoming much less generous (not that credit card rewards were all that special to begin with), largely because of the current economic times. According to the Associated Press, CardRatings.com data shows that the best cashback rewards card are American Express Blue Cash, Chase Freedom Visa, and Discover More. The best gas cards: Cash PerfectCard MasterCard, Discover Open Road, and Shell Platinum Select MasterCard.

Ultimately, as the Associated Press reports, the final conclusion is that credit card benefits like rewards programs may not outweigh negatives like unpredictable policies that are subject to change at any time and have the power to majorly mess up your FICO score. Namely, the fact that companies fluctuate interest rates and spending limits at will. And, as aforementioned, rewards programs are becoming even less enticing now. It’s something to think about next time you get that uber-tempting credit card offer in the mail. And if you do move forward with choosing a rewards card, choose carefully and consider all the variables.

The committee of they says there’s no such thing as bad press, and they may just be right, given the fact that MasterCard was picked Thursday to join the S&P 500 and S&P 100 indexes starting July 17. The news comes on the heels of reports that MasterCard will pay a $1.8 billion settlement after American Express accused the company of engaging in unfair competitive practices. And the day that bombshell news broke in late June, MasterCard shares rose while AmEx shares dropped. Go figure.

Seemingly unstoppable, MasterCard shares are still going strong. Apparently, much stronger than General Motors Co., which MasterCard is replacing on the S&P 100 (thus far, no reason given for the GM snub). MasterCard’s sudden elevation to the Big Boys Club is hardly a surprise. It’s stock is like the Google of the financial services sector, hovering around $250-$300 over the past couple months while Visa, American Express and Discover shares stand at only $75, $50 and $14, respectively. And to think that MasterCard’s May 2006 IPO debuted just under $40, amidst widespread skepticism.

So what does all this S&P hype mean for the already-stable MasterCard stock? More than likely, it means really, really good things. According to The Economic Times:

Shares of companies joining the S&P 500 often rise because many portfolio managers try to track the index, and are required to buy shares of companies that enter it.

It also means it’s probably a really, really good time to jump on board before the MasterCard madness peaks, even if you weren’t lucky enough to get in on the ground floor.