Most of us don’t know the true cost of credit, we simply pay attention to what we’re paying in fees and finance charges.

But the cost of goods and services increases as a result of credit card use, as merchants need to pay fees to banks, credit card issuers, and other companies for the infrastructure, equipment, and convenience.

These merchant and interchange fees vary based on the type of transaction, merchant, and card issuer involved.

Visa charges an average of about 1.80% per transaction, while American Express charges around 2.50%, though smaller retailers typically pay between 3.25% – 3.75%.

This is why you’ll often find that not all small merchants accept American Express, as they don’t want to pay the extra fees (Amex also tends to side with the consumer, another drawback for merchants).

If the merchant has a special deal in place with a card issuer, perhaps based on a volume or exclusivity agreement, they’ll be able to secure lower pricing.

Take a look at these figures below, provided by TrueCostofCredit.com to get a better understanding of what credit really costs:

But even if you elect to pay with cash, more often than not the price already reflects the option to pay with plastic, unless you work out a deal specifically with the merchant.

The use of credit is already priced in, so it’s wise to get your hands on a rewards credit card, like the American Express Blue Cash, which offers cash rebates of up to 1.25%  – 5% on all purchases.

Tip: Watch out for merchants that try to pass the “transaction fee” onto you directly.

An error on your credit report can seriously affect your finances and your ability to make purchases using credit. Errors can lower your credit rating, resulting in denials for home mortgage loans or credit card accounts. A low credit score may even affect your job prospects if a potential employer routinely runs credit checks on job candidates. If you notice an error in your credit report, it is important to dispute the mistake as soon as possible to protect your good credit rating.

If there is an error on one of your credit reports, there is a good chance that the same error is present on another report. Trans Union, Experian and Equifax are the credit bureaus in the United States and each company has their own website. Credit report errors can be disputed by completing online forms on each credit bureau website. When you submit your complaint, you will be asked to create a user name and password, which will allow you to check on the progress and eventual resolution of your complaint. Full article…

Your income may become a more important factor in determining whether you’ll be approved for a credit card, according to a post in the WSJ.

The paper said beginning in February, credit card companies will be required (Credit Card Bill of Rights) to consider an applicant’s income or assets/current debt before extending credit to ensure consumers have the ability to repay.

In preparing for the change, the credit bureaus have already gotten in on the income estimation business, with Experian reportedly nailing down income to the nearest thousand.

They came up with their estimates by matching credit reports with wages, interest, and investment income, along with total credit lines and related payments.

These income estimates will help credit card issuers approve or decline applicants, and may also be utilized to increase or decrease an existing credit line.

In the past, credit card issuers simply asked consumers to enter their gross annual income in a box on the application form, but soon you could be required to provide pay stubs, tax returns, or be asked to fill out a form 4506, which allows the IRS to release your tax filings to lenders (so no fudging the numbers).

What the changes really communicate is that credit scoring has proven to be unreliable, at least as a standalone determinant of capacity to repay debts.

Of course, the income estimates are just ballpark figures when it comes down it, which is why the credit bureaus’ contracts prohibit card issuers from turning down customers based solely on the information.

See: why credit card regulations are worthless.

I like American Express a lot, I don’t hide that fact. Their customer service is stellar, it’s easy to dispute fraudulent/bogus charges, and the rewards tend to be the best in the industry.

Their credit cards also look cool, and who doesn’t like to look cool?

At the same time, a number of American Express credit cards come with some hefty annual fees, which I’m not a fan of.

I’ve never embraced the idea of paying a fee to use a credit card, it just doesn’t sit well with me.

Fortunately, American Express has a number of credit cards with no annual fee, good ones at that.

So check out the following American Express cards with no annual fee:

Blue from American Express®

0% Intro APR for 6 Months on Purchases, “No Annual Fee,” Point-based Rewards Program, Instant Approval in Under 60 seconds

Blue Cash® from American Express (my personal favorite)

0% Intro APR for 6 Months on Purchases, “No Annual Fee,” Cash-Back Rewards Program, Instant Approval in Under 60 seconds

Up to 5% cash back at supermarkets, gas stations, and drugstores. Up to 1.25% everywher

Full article…

The problem with imposing new rules on credit card issuers is their ability to quickly circumvent them and come up with new ways to make money.

It’s quite evident if you look at what First Premier Bank, a subprime credit card issuer, has done recently to skirt the impending rule changes set to take effect on February 21, 2010 (Credit Card Bill of Rights).

The First Premier credit card typically comes with a minimum of $256 in fees during the first year for a $250 credit line, but because the new laws limit fees at 25 percent of a credit card’s total limit, it will be lowered.

Going forward, the bank will charge a $75 annual fee for a $300 credit line, but to make up for that lost profit, they’ve raised the APR from 9.9 percent to 79.9 percent.

That’s not a typo, it’s the highest APR tied to any credit card currently on the market, according to an industry analyst.

For cardholders with a $300 balance on the credit card, it equates to about $20 in monthly finance charges; assuming you pay $20 per month, you’d be looking at $315 in fees annually for a $300 credit line. Not a bad h

Full article…

Identity theft and Fair Credit Reporting Act (FCRA)
The threat of identity theft and how consumers might prevent it are two good reasons why consumers should understand their rights under consumer legislation such as the Fair Credit Reporting Act (FCRA). The 2007 Identity Fraud Survey Report released by Javelin Strategy and Research found that the number of U.S. adults who became victims of identity fraud dropped significantly from 10.1 million in 2003 and 9.3 million in 2005 to 8.4 million in 2007.

Consumers can find more information about the foregoing study and other privacy rights information at PrivacyRights.org. When consumers take charge of credit, they can protect themselves from some instances of fraud. For example, consider the consumer who monitors his bank account regularly for unauthorized debit card transactions. A concerned consumer contacts the financial institution immediately and completes the credit card dispute form to get the unauthorized charge investigated and reversed. Full article…

By now, you’ve probably heard about credit card issuers paying customers to close their accounts in the wake of one of the worst credit collapses in history.

But the latest move by card issuers is quite the opposite; some are charging customers inactivity fees for dormant credit card accounts.

That’s right, if you fail to use your credit card for a certain period of time, you may be slapped with a fee (in the ballpark of $20) to keep it open.

Of course, it hardly seems worth paying it, given the fact that most credit card issuers do not charge inactivity fees.

However, some consumers have been led to believe that closing a credit card will do serious damage to their credit score, so they may hold off.

And though your credit score could fall as a result of a closed account, it probably won’t mean a whole lot if it’s a card you seldom use.

Additionally, there’s no reason you should pay a fee to keep your credit card open, regardless of the credit scoring impact.

If you feel you must keep it open, consider using the dormant card to pay a recurring monthly bill such as your gym membership or cell phone bill to avoid the inactivity fee.

Remember, the older the card account, the more value it has in terms of credit scoring, so don’t fret about closing a newer credit card.

And if you’ve got plenty of solid credit history, the “damage” to your score will likely be minimal if at all negative (Should I close my credit card account?).

Tip: Keep an eye out for changes to your credit card terms as issuers look to charge new fees to offset the impact of the recently passed Credit Card Bills of Rights.