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Credit Cards

Q&A: How to improve credit card security

January 2, 2023 By Liz Weston

Dear Liz: Can you please explain why a personal identification number is not required when one uses a credit card? I know people who’ve had their card stolen and used quickly and for large amounts. That would immediately protect the credit card company from paying millions to cover losses.

Answer: “Chip and PIN” cards — which combine a microchip with a personal identification number — are the norm in most of the rest of the world. In the U.S., however, credit card issuers are reluctant to require their customers to use PINs.

The issuers are worried people would find the PINs to be a hassle and would opt to use a competitor’s card that didn’t require remembering and entering a number. The massive amount of fraud that results is considered a cost of doing business.

Consumers aren’t on the hook to pay for these bogus transactions as long as the fraud is reported within 60 days of the charges appearing on a statement. But compromised cards are still a hassle.

One of the best ways to protect your credit cards from fraud is to use mobile payment systems such as Apple Pay or Google Pay. These systems don’t expose your credit card number to the merchants and allow you to pay for purchases quickly and securely.

Filed Under: Credit Cards, Q&A

Q&A: Credit use and your scores

January 2, 2023 By Liz Weston

Dear Liz: When my credit utilization decreased to 24%, my credit score rose from 675 to 690. My utilization has since decreased to 17% but my score remains 690. Approximately what does my credit utilization have to be to see a credit score over 700?

Answer: Keep in mind that you have many credit scores, not just one, and the formulas used to create these scores can vary considerably. But in general, the less you use your available credit, the better. People with the highest credit scores tend to use less than 10% of their credit limits.

Filed Under: Credit Cards, Credit Scoring, Q&A

Q&A: Authorized credit card users

December 19, 2022 By Liz Weston

Dear Liz: Following your advice on building credit, we recently added our son as an authorized user on one of my credit cards. My question is, what happens when I pass away? Does the card remain with him as the only user? Do I need to address this in my will?

Answer: Your executor, the person you named in your will to handle your estate, will be responsible for closing the account when you die. If there are any balances owing, the debt will be paid from your estate. There’s no need to make special provisions for the account in your will. By that time, your son, one would hope, would have cards of his own, so the closure shouldn’t affect his credit scores much if at all.

Filed Under: Credit Cards, Q&A

Q&A: Multiple payments may help credit scores

November 28, 2022 By Liz Weston

Dear Liz: You recently wrote that using more than a small percentage of your credit cards’ available limit can hurt your credit scores, even if you pay your balances in full. I pay my credit cards in full each month and I also make several payments (via my bank’s online payment service) during the month. Do these multiple payments hurt or help my credit score?

Answer: They probably help. The balance that matters for credit scoring purposes is the balance that’s reported to the credit bureaus, and that’s typically what you owe on your statement closing date. Making multiple payments before the statement closing date should lower that balance. Just remember to make a payment between the statement closing date and before the due date to avoid late fees.

Filed Under: Credit Cards, Q&A

Q&A: Mom has dementia and credit cards. How does her family cancel the accounts?

November 7, 2022 By Liz Weston

Dear Liz: My mother has two credit cards that have had no activity for a year and a half due to being in an assisted living facility. She is living with dementia and no longer able to make any decisions (personal or financial) on her own. Should I or am I even able to cancel these cards or do I have to wait until she passes and send in a death certificate to the bank?

Answer: Theoretically you could close the accounts for her if you have a legal document known as a financial power of attorney. These documents are designed to help you take over the finances of someone who is incapacitated. Unfortunately, banks and credit card issuers sometimes refuse to honor powers of attorney despite legal requirements that they do so. You might need to hire an attorney to force them to accept your authority. You can get referrals to experienced attorneys from the National Academy of Elder Law Attorneys and the American Bar Assn.

If you don’t have this document and your mother is no longer of sound mind, you probably would have to go to court to become her conservator to make financial decisions for her. That can be an expensive process.

But there might be a simple solution. Some credit cards have an “off” switch that prevents anyone from making charges on the account. If the card has this feature and you can access the account online, you may be able to effectively disable the account even if you can’t formally close it.

Filed Under: Credit Cards, Q&A

Q&A: Got an old credit card that you no longer use? What to do instead of canceling it

October 31, 2022 By Liz Weston

Dear Liz: I have been keeping a credit card that I no longer use because I’m afraid that canceling it may reduce my credit score. I have had the card since 1983, and it shows on my credit report as my longest credit relationship. I have other credit cards that I use regularly. I no longer have a mortgage. Should I keep the unused card?

Answer: Closing the card certainly won’t help your scores, but it’s impossible to know in advance how much they might be hurt. That doesn’t mean you should never close a card, but you may want to consider alternatives, particularly because this is your oldest card.

Does the issuer offer another type of card with cash back or other rewards you could use? If so, consider asking for a “product change” to the new card. That should preserve your long history with the account while supplying you with a credit card that better suits your needs.

Filed Under: Credit Cards, Credit Scoring, Q&A

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