DID YOU KNOW?
- Trends in Business Credit Cards for 2009
- Thaw out your frozen credit
- With a credit card freeze, here's what you should do:
- With a home equity line, you need to know this:
- 8 Things NOT To Say During A Job Interview
Trends in Business Credit Cards for 2009
The year 2008 was a rotten one for the banking business. What began as a “mortgage crisis” mushroomed into a full-blown, across-the-board “credit crisis.” This has led to banks pulling back on all types of credit, but an even greater pullback on one of the riskiest types — that given to small businesses.
Looking at the 2009 landscape, there is good news and bad news. The good news is that things probably can’t get much worse. The bad news is that most of the news is still bad, and will probably remain so for at least the first half of the year.
That said, here are ten predictions / trends to be aware of in 2009.
1. You Used to be Desirable … Now, Not so Much
In 2006, an executive at a major card issuer told me that small business credit cards was a huge growth market. After all, businesses spend a lot of money, and most of that money was not going on credit cards but instead still being circulated via purchase orders and checks. Thus, there was an aggressive push by many credit card issuers to roll out new cards for business.
Well, the tide has turned. When times get rough, it seems you as a small businessperson are a little less attractive. Business credit cards will be harder to get in 2009, and the interest rates offered will be higher than those offered over the past few years.
2. Fewer Business Credit Card Offers in Your Mailbox
This may not upset you, but in keeping with the trend above, credit card companies will be sending out fewer mail solicitations.
3. Fewer Credit Card Offers Online
While online marketing of credit cards has been a huge boon for issuers in many ways (in particular the cost of acquiring a new customer is much cheaper), the disadvantage of opening your offers to all comers online is that everyone comes. This includes the people issuers don’t want, especially at times like this when every business and every person seems just a step away from being knocked out financially. Thus, issuers are being less aggressive online. In perhaps the most extreme example, Chase has (at least temporarily) pulled most of their business credit cards from online channels altogether.
4. Lower Credit Limits
This trend is especially tough for the small business owner, who is more likely to want to finance sizable purchases. New cards being issued will have lower credit limits than in the past, and you could even see your existing card company cut the credit line on which you currently rely.
5. Continued Lower Interest Rates than Consumer Cards
Despite my negativity, business credit cards will continue to offer better rates than consumer cards for those who qualify. If you have a business with a track record and/or you have a strong personal credit history, the market for business credit cards is not entirely closed. It can still make sense to apply for a card or two, especially if the alternative is using your existing, high-rate consumer card.
Also, it can make sense to apply for new cards BEFORE trouble hits, instead of when you are desperate.
6. Fewer Rewards
This is probably the last of your worries, but, in most cases, credit card companies are being stingier with rewards than in years past, whether it’s airlines miles, cash, or merchandise points.
7. More Discounts
While the straight rewards will diminish, expect credit card issuers to continue designing partnerships with relevant business vendors to give you discounts on products and services such as office supplies, overnight services, etc. They’re not freebies, but these discounts can cut your costs.
8. More Relevance
Many credit card issuers initially treated small business customers the same as consumers. The only real benefit to a business credit card seemed to be that it allowed you to separate your business and personal expenses (and you’d have a credit card embossed with your business name).
Each year, though, the industry innovates, creating offers more relevant to how business actually works. Examples abound:
- Discover offers PurchaseChecks that can be used to make purchases at vendors that wouldn’t normally accept credit cards.
- The Plum Card from American Express gives you a 2% discount for paying early or conversely allows you to pay just 10% of the outstanding debt in order to extend the payback period for two more months interest free.
- Advanta has introduced a card offering 90-days interest free on every business purchase, a significant advantage over the traditional 20-30 day “float” we’ve come to expect from credit cards.
9. More Customization
Advanta offers business credit cards targeted to specific industries or occupations, offering discounts or rewards directly related to the type of business being targeted. Other issuers have offered similarly targeted cards, such as those especially for construction contractors. Expect this trend to continue.
10. Companies Again “Playing to Win”
No business article would be complete without a sports analogy. Here’s one. Right now credit card issuers are like a football team that plays “not to lose” when up against a stronger opponent. (In this scenario, the opponent is the scary economy.)
However, issuers are not used to being in this position — they prefer playing to win (as many of us are all too well aware). They’ve called time out and are staying on the sidelines, but as soon as they see a vulnerability in their opponent (the economy starts to revive), there is absolutely no reason to believe they won’t be back in the game nearly as aggressively as before. I believe this will happen in the second half of 2009.
For now, we tighten our belts, perhaps downsize our dreams for a while. At this time last year, few of us could have imagined that things could go so bad so fast. While the recovery won’t be nearly as quick as the pain inflicted, I believe by next December we will all be feeling a whole lot better.
Thaw Out Your Frozen Credit
You may have felt a chill as banks cut back on credit, and those lower limits can hurt you in more ways than one. Here's how to recover your borrowing ability.
The artist, who lives near San Francisco, had been counting on the credit line to help pay tuition when his son starts at the University of California, Berkeley, next fall.
So the homeowner fought back. He paid $300 for a new appraisal of his home that showed its value had dropped less than 10% and that he still had plenty of equity. Washington Mutual not only restored his old credit limit but reimbursed him for the appraisal, the homeowner said.
Still, he worries.
"Once they gave me back the loan, I got paranoid that they would (cut the limit) again," the homeowner said, "so I contemplated borrowing all $160,000, just to be sure I would have access to the money."
- Video: The nation's credit freeze
Such is the uneasy state of affairs in the world of consumer credit. Many borrowers successfully fight back against home equity freezes and lowered limits on their credit cards. But some of the victories may be only temporary as the credit picture worsens.
The growth in revolving lines of credit, primarily credit cards and home equity lines of credit, exploded in recent years as lenders chased record profits. Credit card debt more than doubled between 1995 and 2005, according to Federal Reserve statistics, while home equity lending ballooned from $138 billion to nearly $500 billion in the same period.
Falling home prices and rising defaults have led to a swift about-face, however:
- Since late 2007, lenders have been freezing or closing accounts and slashing lines of credit as they try to reduce their risk.
- The cutbacks have accelerated in recent months as the economy deteriorated and investors balked at buying loans. (The furious growth rate of consumer debt depended on lenders being able to sell existing debt, bundled into securities, in order to fund more lending. Credit has grown so tight that consumer debt actually fell in November -- for the first time in U.S. history.)
- The squeeze is far from over. Home prices continue to tumble, with no clear end in sight. One prominent banking analyst estimates credit card lenders will cut $2 trillion of the $5 trillion in available credit lines over the next 18 months.
Instead of targeting delinquent consumers as they have in the past, lenders are now taking action against huge groups of borrowers -- raising rates or lowering limits on credit card customers who pay on time but carry large balances, for example, or freezing home equity lines for every homeowner in certain troubled real-estate markets.
"Banks are counting on consumers just accepting this," said credit expert Ben Woolsey, the director of marketing and consumer research for CreditCards.com. "Just like the stock market is going down and costs are going up, they're hoping consumers will just swallow this as a fact of life."
You shouldn't, of course. Lowered credit limits can really hurt your credit scores, the three-digit numbers that lenders, landlords and insurance companies use to evaluate you. The leading FICO credit scoring formula is quite sensitive to how much of your available credit you're using. When your limits are lowered or an account is closed, your existing balances loom larger and can seriously damage your scores.
The good news: You may have more leverage with your lender than you think. But how you fight a credit freeze depends on whether it's a home equity line or a credit card.
With a credit card freeze, here's what you should do:
- Know your current FICO scores. FICOs are the credit scores most lenders use, and the only place you can buy your FICOs for all three credit bureaus is at MyFico.com. One score costs about $16; all three are $48. If your scores are 700 or above, you should have some leverage with your issuer. The higher your score, generally the more they want to keep you. "Lenders want to hang on to the people with the highest credit quality," CreditCards.com's Woolsey said. "They're competing much more for those customers." (You can get a free estimate of your credit score by taking this 10-question quiz.)
- Point out your worth. If you have good credit and have been a good customer, you have options. Gather some of the credit card offers you get in the mail or take a look at the rates available in MSN Money's Credit Card Analyzer, so you know what rates and terms you'd be likely to get with a competitor. Then call your issuer and politely threaten to take your business elsewhere if it doesn't restore your old credit limit.
- Transfer your balance. As far as your credit scores are concerned, it's better to have small balances on several cards than one big balance that's pushing a card's limit. If your original credit card company won't restore your limit, transfer balances to other cards or use one or more of the competing offers. Pay close attention to all the fine print. You'll typically pay a 3% to 4% balance-transfer fee, so you want to get a low rate for as long as possible to make the transfer worthwhile.
- Don't close accounts. Closing accounts can never help your credit scores, and it may hurt them. Especially in this environment, it's important to keep accounts open and active (which also means dusting off an old card and using it once in a while, since issuers increasingly are shutting down unused accounts).
- Consider moving your debt to a fixed-rate installment loan. Credit unions and banks offer personal loans with interest rates that average around 13%. If you qualify, you can help your credit scores in two ways: by adding an installment loan to your credit mix, which is generally positive for your scores, and by reducing the balances on your credit cards.
If you don't have good credit, your options are more limited. You may not be able to get your issuer to change its mind, and it could be tough to open another account.
Your best bet is to pay down the balance as quickly as possible. If you're already having trouble paying your minimums, talk to a legitimate credit counselor -- one affiliated with the National Foundation for Credit Counseling. You can ask these credit experts a question on our Ask a Credit Counselor message board.
With a home equity line, you need to know this:
- Lenders aren't sweating the details. Many are freezing or reducing credit lines for troubled areas, regardless of how much equity their borrowers still have. If your home has held its value or hasn't dropped much since you got the home equity credit line, and you can prove it, you may be able to get a credit freeze rescinded.
- Equity is king. Add your current mortgage balance to your credit limit on your home equity line. (The limit is what's important, not the balance you owe.) Divide that total by your home's current market value (check Realtor.com, Zillow or Cyberhomes for estimates, or talk to a local real-estate agent) to get your loan-to-value ratio. Lenders want your LTV to be 80% or better.
- Lenders have different standards. Some mortgage lenders don't want your primary home loan and home equity limit to add up to more than 60% of what your home is worth, particularly in fast-declining real-estate markets. Others may be willing to lend more. Some are pulling back in certain areas while others are expanding. In other words, if you can't get your lender to rescind a freeze, shop around.
- Get the right appraisal. Don't waste $300 or $400 on an assessment that your lender won't accept. Ask it for a list of approved appraisers.
- Monitor the danger. If your account hasn't been frozen or if a freeze was rescinded, you should remain alert. If home prices fall further or the bank's policies change, you could be cut off. Ask your home equity lender what its loan-to-value limit is on new home equity loans; if your home equity credit line plus your mortgage are over that limit, you're in danger of having your line frozen. (What matters is the limit on the credit line, not what you've actually borrowed against that.)
- Use it or lose it. You shouldn't borrow money you don't need, but if you're in danger of a freeze, you might withdraw any cash you'd been planning to spend in the near future. The homeowner, for example, withdrew $30,000 of his home equity to pay next year's tuition.
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8 Things NOT To Say During A Job Interview
Interviews are nothing if not opportunities to drive yourself crazy. Just remind yourself to look good, appear confident, say all the right things and don't say any of the wrong ones. It shouldn't be so hard to follow these guidelines except you'll be on the receiving end of an endless line of questions. Factor in your nerves and you'll be lucky to remember your own name.
Don't fret.
If you walk into the interview prepared, you can make sure you know what right things to say, and you can stop yourself from saying the following wrong things.
1. "I hated my last boss."
Your last boss was a miserable person whose main concern was making your life miserable. Of course you don't have a lot of nice things to say; however, don't mistake honesty, which is admirable, for trash-talking, which is despicable.
"If you truly did hate your last boss, I would be prepared to articulate why your last organization and relationship was not right for you," says Greg Moran, director of industry sales and partnerships for Talent Technology Corp. "Then be prepared to explain what type of organization is right for you and what type of management style you best respond to."
2. "I don't know anything about the company."
Chances are the interviewer will ask what you know about the company. If you say you don't know anything about it, the interviewer will wonder why you're applying for the job and will probably conclude you're after money, not a career.
"With today's technology," Moran says, "there is no excuse for having no knowledge of a company except laziness and/or poor planning - neither of which are attributes [of potential employees] sought by many organizations."
3. "No, I don't have any questions for you."
Much like telling the interviewer that you don't know anything about the company, saying you don't have any questions to ask also signals a lack of interest. Perhaps the interviewer answered every question or concern you had about the position, but if you're interested in a future with this employer, you can probably think of a few things to ask.
"Research the company before you show up," Moran advises. "Understand the business strategy, goals and people. Having this type of knowledge will give you some questions to keep in your pocket if the conversation is not flowing naturally."
4. "I'm going to need to take these days off."
"We all have lives and commitments and any employer that you would even consider working for understands this. If you progress to an offer stage, this is the time for a discussion regarding personal obligations," Moran suggests. "Just don't bring it up prior to the salary negotiation/offer stage."
Why?
By mentioning the days you need off too early in the interview, you risk coming off presumptuous as if you know you'll get the job.
5. "How long until I get a promotion?"
While you want to show that you're goal-oriented, be certain you don't come off as entitled or ready to leave behind a job you don't even have yet.
"There are many tactful ways to ask this question that will show an employer that you are ambitious and looking at the big picture," Moran offers. "For example, asking the interviewer to explain the typical career path for the position is fine."
Another option is to ask the interviewer why the position is open, Moran adds. You might find out it's due to a promotion and can use that information to learn more about career opportunities.
6. "Are you an active member in your church?"
As you attempt to make small talk with an interviewer, don't cross the line into inappropriate chitchat. Avoid topics that are controversial or that veer too much from work.
"This sounds obvious but many times I have been interviewing candidates and been asked about my personal hobbies, family obligations, et cetera," Moran says. "Attempting to develop a rapport is essential but taking it too far can bring you into some uncomfortable territory."
7. "As Lady Macbeth so eloquently put it..."
Scripted answers, although accurate, don't impress interviewers. Not only do they make you sound rehearsed and stiff, they also prevent you from engaging in a dialogue.
"This is a conversation between a couple humans that are trying to get a good understanding of one another. Act accordingly," Moran reminds.
8. "And another thing I hate..."
Save your rants for your blog. When you're angry, you don't sway anybody's opinion about a topic, but you do make them like you less. For one thing, they might disagree with you. They also won't take kindly to your bad attitude.
"If you are bitter, keep it inside and show optimism. Start complaining and you will be rejected immediately," Moran warns. "Do you like working with a complainer? Neither will the interviewer."
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