As the recession chugs along, credit card companies have been scaling back on rewards and cash-back card offerings.  There has also been a lot of behind-the-scene movement for the credit card industry, with companies ending promotion/advertising programs on certain flagship cards and products.

I was just about to write a post titled “Death of the Cash back/Rewards Credit Card,” but along came the new Schwab 2% cash back credit card.

Despite my frequent proclaim of love for credit cards (the cash back parts of it, anyway), I’m not a credit loving fiend who opens multiple account and juggles multiple reward credit cards.  It’s simply too much hassle, and too beyond my small brain capacity to handle.

So it was with some minor reluctance that I applied for the Schwab Bank Invest First Visa Card.  Here are some features that immediately attracted me to this credit card:

• Unlimited 2% cash back on all purchases, right into Schwab One brokerage account.
• Cash back is automatically deposited into brokerage account at end of each month.
• No foreign exchange transaction fees (a rare feat indeed amongst credit cards).

The application process was straight forward enough, with usual information being requested.  If you already have a Schwab One brokerage account, things will move along slightly faster.

Although the card is branded as a Charles Schwab Bank credit card, you should be aware that the card is issued and administered by FIA Card Services (formerly MBNA, now a part of Bank of America).  Thus, any future customer service and card related issues will have to be dealt with at FIA Card Services.

After chugging through and submitting my application, I was unfortunately unable to get an instant decision on approval  (apparently being super cool isn’t good enough anymore).  An online application status check a day or two later still yielded the same result, so it looks like I’ll have to wait this out a bit.

Note: Discussion threads online mentioned that you can always call-in after applying online to get an instant decision from a representative, but you may be subjected to the act of some credit line swapping and/or closure if you have cards issued by Bank of America or MBNA/FIA.

Tidbits & Notes If You’re Also Considering This Card:

• Current BoA, MBNA, FIA cardholders won’t be able to convert an existing card to the Schwab Bank Invest First Visa Card, after all, the point is for Schwab to acquire a possible new customer.
• The Schwab One brokerage account has a $1,000 minimum balance requirement to avoid monthly fee, but this is waived when the account is linked to your Schwab Bank Invest First Visa Card.
• Although you don’t have to immediately open a Schwab One brokerage account, you will eventually have to open one if you wish to claim your accumulated cash back and withdrawal the cash back to an external, non-Schwab account.
• Opening a Schwab One brokerage account will get you another hard credit pull, as it is a separate and different financial product.
• If you qualify for a credit line of $5,000 or more (and most people should if they qualify for this card), you will receive a Visa Signature card, which means you have no preset spending limit, which means the credit limit on the new card will not be reported to the credit reporting agencies.

As you can see, there are a few quirks involved if you want to apply for this card.  But at the end, you are getting 2% cash back.  When combined with another card that gives higher cash back percentage for specific categories such as gas and grocery — you’re sure to be in cash back bliss!

Of course, all of the cash back is a moot point if you don’t pay your card in full.  I’ll update the post if my application is approved, follow by an eventual future post reviewing the card.

Update: My application was approved and I’ve received the Schwab Invest First Visa card.

A few weeks ago I requested and promptly received a $250 cash-back check from my Chase Freedom rewards card.  Being a forgetful tool bag, I quickly deposited the check in my checking account — least it slips my mind for 120 days and voids itself.

Although it was nice to receive the cash-back check in time for Christmas to buy myself a gift (being an ass, you have to resort to your mom and yourself for gifts), it was slightly bittersweet as this is most likely the last check I’ll claim from my Chase Freedom rewards credit card.

Truthfully, I hate juggling credit cards and try to limit the amount of cards I carry or accounts I open, but unfortunately the Chase Freedom card just didn’t cut it anymore.

To make a long story short, with my current spending pattern, I’ll be able to maximize cash-back better by a combination of using Blue Cash from American Express along with the new Charles Schwab 2% cash-back Visa card (more on this later).

The two versions of Chase Freedom cards I have opened have served me well, and I’ve wrote a fairly positive Chase Freedom rewards card review just a couple of months ago — but I can’t recommend the current version of the Freedom Rewards card that Chase is offering.  Chase has since stopped the 3% cash-back on top spending categories reward program, and the current version of the Freedom card doesn’t appear to have any compelling card reward program.

Hopefully Chase will continue to keep the old Chase Freedom cash-back program active for old cardholders.  Although I’ll be switching to different primary credit cards soon, I’m sure many people are still a fan of the Chase Freedom card.

In case you missed the news, federal regulators voted today to adopt sweeping new rules for the credit card companies, protecting us from some of the shadiest practices the credit card industry has conjured up through the decades.

These new rules will take effect by July 2010, and they are by far the most major smack down in terms of regulation for the industry in decades. Here are some of the new rules in our favor:

1. Double-cycle billing got axed, cajun style.
2. Payment allocation will now be to highest interest balance first or proportionately to all balances (so it won’t you longer to pay off balances).
3. Card holders will now have reasonable time to make payment (21 days).
4. Notification for change in terms has been changed from a minimum of 15 days notice to 45 days notice.

There’s a few more new rules on the table, and you can read about them via the resources below. So far, the Office of Thrift Supervision has voted on the new rules, and its expected that the Federal Reserve and National Credit Union Administration will vote on the new rules later in the day.

Although I’ve mentioned often that I love using credit cards and never really felt that card companies forced me into my prior debt, I have no illusion that many credit card companies policies and practices can make financial life of a cardholder living hell.

Hopefully these new rules will tilt the favor for future cardholders.  Despite the upcoming added protections, credit cards are still a financial tool that requires due diligence and care by consumers. You should always read all the terms and condition associated with a card carefully.

Consumer Reports took out an ad space on Monday’s USA Today, reminding us all to be a little bit wiser with our credit cards during this difficult holiday season:

From [Money & Shopping Blog] and [Adrants].

Did you came here searching for information on FICA score?  What you’re looking for is actually a FICO score, which can be found at sites such as Equifax Score Watch.

It was Friday night and I was browsing the web, reading financial tidbits and news (yeah this is how every cool 20-something rolls during the weekend) — I noticed that there was a large confusion online between the financial terms of FICO and FICA.

To make matters worse, a quick search on Google shows that many websites use the term FICA score interchangeably with the term FICO score, without clearing up the difference between these two completely unrelated financial terms.

As my weekend web trolling is already going so well, why not write a post to clear up the misconception? This will for sure make the weekend extra cool. After all, who needs to go out when there’s blogging to be done!?

What is FICA?

FICA stands for Federal Insurance Contribution Act.  Without going into too much history about Social Security and Medicare, FICA basically mandates that you and your employer contribute a percentage of your income to this tax, in order to fund the aforementioned Social Security and Medicare.

For those that may not know, Social Security provides income to retirees, people with disability, and some other select groups of people, while Medicare provides for medical insurance coverage to persons over age of 65 and again, other select groups of people.

And that’s what the 6.2% of your paycheck goes to (your employer pays the other 6.2%).  If you’re a student being employed by the educational institution you’re attending, rejoice, you’re an exception to the FICA tax!

If you happen to be self-employed, your FICA contribution will be split to 12.4% for Social Security and 2.9% for Medicare. There are of course exceptions to this rule, whether you’re self-employed or a regular wage-earner. You can read more about these exceptions in the resource of links below.

But that’s about the gist of the term “FICA” and how it matters to you.  So does FICA have anything to do with credit score or is there even such a thing as a FICA score?

Nope!

To clear the acronym confusion up, read on.

What is a FICO Score?

A FICO score is a credit score, which in short is a score providing a grade on your overall credit worthiness.  A true, legitimate FICO score can be purchased from Fair Issac Corporation at myFICO.com or with the Equifax Score Watch monthly plan.  The score ranges from 300 to 850 — the higher your score the better your overall creditworthiness and likelihood to receive favorably interest rate when applying for a loan (home, auto, etc.).

These scores are formulated with data from your credit reports. Because you have three major credit reports from three different major credit reporting agencies (TransUnion, Equifax, and Experian), you may have three slightly different FICO scores.

Factors in your FICO score:

• 35% – Payment history
• 30% – Amounts owed
• 15% – Length of credit history
• 10% – New type of credit
• 10% – Types of credit used

In short, if you have a positive payment history (never paying late), your amounts of balances on your accounts are low, and you have a long history of positive accounts — then you most likely have a super credit score.

Those are the only factors of your FICO credit score. Your sex, race, color, religion, national origin, marital status, age, salary, occupation, and residency location will NOT be factors determining your score.  If its not in your credit report, then it’s not a factor.

Importance of FICO Scores

So why are FICO scores important and why are there so many people online searching about “FICA score?”

A good FICO score increases your chances of receiving favorable interest rate.  With current interest rates, that means when you compare between an excellent FICO score of 760 and a poor FICO score of 580, there will be a difference of $780 in monthly mortgage payment for a 30 year fixed, $300,000 loan.

If that didn’t get your attention, the interest difference is a low 5.63% APR versus a high 9.451% APR. This is a significant impact as when the mortgage is paid off, the difference in total interest paid will be about $280,000!

Thus knowing and keeping your FICO score can be pretty important.  As long as you properly manage your credit usage, your FICO score should be top-notch and a non-issue.

This concludes a brief primer on FICA scores. Woops , I mean FICO scores.

top photo credit: QuitoCarela

One of the best thing about the current trend on the web is the increasing abundance of free financial web services.  You’ll find one such service provided by Quicken Loans at Quizzle.com. This is a review of Quizzle.com, where you can get free credit score, report, and home value. Super sweet!

Like many new “Web 2.0 ish” websites, Quizzle has a clear emphasis on simplicity and ease of use. Slap in your zip code, fill out the personal information, answer a few credit-related questions to verify your identity (soft credit inquiry) — and within minutes you’ll have access to the free credit score, report, and home value (or if you rent, value of home you can afford). No need to fork over any credit card, the service as promised, is free.

Upon initial login, you’ll be greeted with a Quizzle score, which is formulated base on your overall home and money performances: credit, rainy day fund, budget, mortgage, and home affordability.  If you rent like me, you may not have a mortgage factored into your Quizzle score. [Click image above for larger screenshot]

Free Credit Report and Credit Score

Quizzle’s free credit report and score offering is actually pretty decent.  The credit report, although not as in-depth as a specific report from Experian, has all the necessary information you need to have a proper understanding of your credit history.  At the summary tab, you’ll find details of your personal information along with a list of financial accounts on your credit report.

Navigating through each tab in the Credit page will reveal a list of open accounts, closed accounts, negative accounts, and whatever public records that may or may not be on your credit report.  You’ll also be able to see the recent hard inquiries on your Experian credit report (soft inquiries were not listed).

The free credit score is straightforward: Quizzle provides you with a score from the ranges of 360 to 840 while giving you a grade rating from A to F (just like back in school, yay!).  The score isn’t a FICO score, but its free and gives you a general guideline of where your creditworthiness may stand.

Estimated Home Value and Home Affordability Value

If you own a home, Quizzle will provide you with an estimated home value and an appreciation grade using the automated valuation model.  Like Zillow.com, Quizzle will provide you with data about your home, giving some brief info on living area in sq ft., bedrooms, lot area in sq ft., and the year the house was built.  You’ll also see the home purchase history, estimated available home equity, and comparable home sales in the area. Although I don’t have a screenshot of this function, you can visit Quizzle’s tour page and click on “more info about your home” to see an example.

If you don’t own a home and you rent, Quizzle will spit out a simple affordable home caulation, based on your household gross, debt, and estimated down payment.  Thanks to Quizzle, I now know home ownership in my area is never within reach! Yay. (Slightly kidding, as Quizzle didn’t factor in assets that aren’t being calculated).

Budget Calculators

The budget section at Quizzle is fairly simplistic (in a good way). Quizzle will give you a brief look at your available cash by subtracting your living expenses and debt from your household income.  This is based on your initial input, but you can further refine the income, living expenses, and debt section by heading into each of the tabs — add, edit, and remove necessary information.

For example, in the debt section, Quizzle will automatically input all the balances from your credit card accounts based on your credit report — but since the credit report may be outdated or inaccurate, you can adjust and fine tune the amounts to your actual debt responsibilities.

Mortgage, Refinance, and Home Equity Loans

The mortgage section of the site will depend again on if you already have a mortgage or you’re looking for one.  If you’re looking for a mortgage, Quizzle will calculate a few different mortgage recommendations based on numbers you input.  Utilizing offers they have from the Quicken Loan program, Quizzle will provide the usual recommendations of fixed loan, ARM, and variance of interest-only loans.

If you already have a mortgage, Quizzle will provide you with some recommendations on refinance loans and home equity loans.  They give you a general guideline if you need to take out a home equity loan to pay off other higher interest debt, but you definitely shouldn’t rely solely on Quizzle’s recommendations to acquire a mortgage, refinance, or apply for a home equity loan.

You should be aware that the mortgage section of Quizzle is where the site generates potential revenue in return for providing the free service.  Just something to be aware of if you choose to use the “contact an expert” option when you check out the mortgage recommendations. Even with refined and accurate recommendations from Quizzle, you’ll be well served if you do additional research by trying other comparison services.

Rainy Day Fund

The last section of Quizzle is the Rainy Day Fund (emergency fund).  It is calculated based on 4 months net income and Quizzle will either give you a pat on the back for already hitting the 4 months net income goal for the rainy day fund, or give you other recommendations on what you need to do to build the emergency fund.  Not a mind-blowing feature, but a nice touch and good reminder on the importance of a well funded emergency fund.

Overall Quizzle.com Impression

Try as you might, you’ll find little to complain about at Quizzle.com.  They offer exactly what they say they will: a free credit report and score, along with free estimation of your home value, and a free budget tool.  The site is easy to use and navigate, and has enough information for you to dissect your current financial situation, especially if you carefully edit and input all your financial information.

Quizzle’s free report and score can be a nice supplement to the three free annual credit report you’re already entitled to from the credit reporting bureaus. Of course, if you’re not comfortable with giving out your personal information to a third party site, you won’t be using Quizzle.com to get the free credit report and score; never mind their mortgage recommendation services.

Quizzle’s overall revenue model appears to be referring potential customer to their Quicken Loan offerings in mortgages, refinance, and home equity loans — which makes perfect sense as Quizzle should be able to acquire more targeted customers that converts better. In short, if Quizzle continues to provide valuable free analytic, tools, and estimation along with refining their loan recommendations, this should be a clear win-win situation for both the mortgage-related consumers and Quizzle.

Pros:

• Free credit report and score. No strings attached.
• Free estimated home value via AVM method.
• Decent and free budget calculators.

Cons:

• Mortgage, refinance, and home equity recommendations can be more refined.

What a bummer.

Earlier today, I was preparing to open a Discover More card as I never had a Discover card before.  I especially wanted to take advantage of the recent holiday promotion along with the occasional decent rotating 5% cash back the Discover Card offered.

Like always, I decided to check my credit report and score before opening a new account, just to make sure everything is all peachy.  Figuring I can kill two birds with one stone by taking Quizzle.com for a spin, I signed up for a Quizzle account to grab a free credit report and score.

As I was taking screenshots of the Quizzle website for the upcoming review, I noticed an unfamiliar account in my credit report:

A joint account opened just last month, with a balance of $20,000. Eh?

Digging further, I found out a family member went and opened a joint account under my name and their name, to take advantage of a 12 months 0% balance transfer offer.

Damn.

I won’t go into too much detail on who did it and how’d it happened, since a few other family members do read this blog.  But let’s just say that I’m a bit disappointed and wished they would have discussed this with me.

Although I often advise against opening joint accounts with family and friends (spouses and certain scenarios are exceptions), I would have been willing to open this joint account — as long as I was given proper notice and time to prepare and plan my credit, because I had other 0% balance transfer on other accounts.

Here are some quick tips on avoiding identity theft by a family member, especially if you live in an environment where it may be plausible:

• Place a credit freeze on your credit, this prevents access to your credit history and will require verification before any accounts are opened in your name.
• Opt-out of pre-screen offers. This can reduce the amount of offers you get in the mail and reduce the chance someone use one to open an account.
• Keep your mailing and billing address consistent.  If you use another address for residency purpose or whatever else, be mindful of the type of mailings that particular address may receive.
• Check your credit report frequently.  Remember, we get three free reports per year, so you can spread the three reports throughout the year.

So what will I do now?  Well, I think I’ll discuss the situation with the family member. I don’t think I’ll take any legal action as I’m positive they’ll pay this account off (plus I love and care about them). One silver lining in this is that the account in question is a joint account and isn’t solely in my name only (edit to add: this doesn’t mean I’m absolve of the financial responsibility for the account).

According to the FTC, 9% of identity theft cases are committed by a family member or relative. If you’re in a situation where you can’t resolve an identity theft by a family member amicably, the resources below should help you further.

Here’s a blast from the past — a post written well over two years ago on five reasons to stay away from store branded credit cards. Reposted today for your amusement.

Every time I see a person sign up for a retail store credit card at the check-out line, a little part of me dies inside. I would scream “No! Don’t do it!” silently, hoping to convey my dismay telepathically — unfortunately, it never seem to work.

There are about sixty-seven different reasons why you shouldn’t apply for a retail store credit card, but for the sake of simplicity and my sanity, let’s just go with five:

1. Shady credit lenders.
2. Interest rates are ridiculously high.
3. Tarnish your credit with unnecessary line of credit.
4. Benefits are usually nil while penalty fees are usually in abundance.
5. Some are store-only credit cards and can’t be used for purchase at other locations.

Reason #1: Shady Credit Lenders

When you apply for a store credit card, it is usually issued by a sub-prime lender in partnership with that particular store. You may enjoy shopping at that particular store, and the store may have great customer service, but be wary in associating the store’s credit card offering with the actual store.

Store cards like Gap Card, Banana Republic Card, etc. are issued by the infamous Monogram Credit Card Bank, an offspring of GE Money. They are notorious for their shady practices, such as magical late fees and magical finance charges even if you paid balance in full. If you don’t pay attention to the actual bank that issues the line of credit, you’ll be doing yourself a major disservice.

Reason #2: High Interest Rates

The interest rates are ridiculously high. Expect APR in the ranges of 20%-24%

“Sign-up for an IKEA card and get 15% off right now!”

Wow. 15% off the brand new dorm room set sounds like a smashin’ deal—but not if you carry a balance. Alright, no problem—all you have to do is pay in full and you’re set. Except when you deal with shady lenders like mentioned above.

“Woops, we accidentally charged you. We’ll fix that and credit your account right away.”

“Hmm? You still have those charges plus extra finance charges from the previous month? Well… okay, we can only remove one of them though.”

Reason #3: Potentially Hurt Your Credit

It’s one thing to build credit, it’s another thing to screw up your credit with a large amount of unnecessary accounts open. The entire ordeal can be made even more confusing by the fact that sometimes closing unused accounts may end up hurting your credit score, especially if you carry large balances.

It’s very simple. Don’t have more credit cards than you have fingers. A small discount at some retail store isn’t worth the amounts you’ll end up paying when you have trouble obtaining favorable mortgage rates in the future.

Reason #4: Low Benefits and High Fees

The benefits are usually stupid. Congratulations! You’ve spent $1,000 at Banana Republic. Here’s a $10 gift card! Oh, there’s a minimum purchase of $100.

But while the benefits are few and far in between, the penalty rates and fees are plenty.  These fees are usually higher than many regular bank issued credit card, even when compare to non-store branded sub-prime credit cards. If you stay vigilant, you may be able to avoid the fees, but using a credit card shouldn’t require mass paranoia — just a small dose of healthy suspicion.

Reason #5: Sparse Acceptance Locations

Some of these credit cards are store-only credit cards. If you don’t see a VISA, MasterCard, or a Discover logo like the Walmart card pictured above, you won’t be able to make purchases with the card at other locations. Not a big deal if you’re a frequent shopper at these specific stores, but when combined with all the other reasons above, this reduces the value and utility of the store credit card by quite a bit.  There’s little reason to make purchases with a credit card that can potentially give you so much trouble, especially when you have other options.

Alternatives to Store-Branded Cards

A lot of people seem to suggest store cards to build credit with, due to their general ‘no credit’ and ‘bad credit’ friendliness. In my opinion, they’re only to be used as a last resort in rebuilding credit.

If you have no credit because you’re a student, there are many student credit cards available from national institutions such as Citibank or Bank of America. The Citi mtvU Visa Card, despite being associated with the now-crappy music channel, is actually a pretty good pick for many college students.

If you have bad credit and want to shape up, try local credit unions or check out Patelco Credit Union’s Visa & MasterCard. It has been noted by others with bad credit that you should try applying by phone with Patelco to increase your chances of approval. You can also check with your local community bank or credit union to see if they offer secured credit cards.

If you’re simply looking for some rewards from your purchases — unless you’re a frequent shopper at the store — you’re better off with a regular cash-back card like the Discover More Cashback Card.  Cold hard cash means you’re not limited to spending your reward or cash back at one specific store.

Having said all that, the next time the cashier ask you if you would like to sign up for a store credit card, politely tell them “No thanks, I don’t think it’s a good idea to open a line of unnecessary credit without due research, especially since it may potentially jeopardize my credit.”

If you don’t, you may find yourself being stared at intently by a weirdo from the next check-out isle, with his lips slowly moving and seemingly whispering, “No… don’t do it.”