A new credit account could help your credit scores because it adds to your total available credit, which can lower your utilization rate. It may be easier to keep your utilization rate low if you have several credit cards and can spread out your purchases across those cards. But keep in mind that certain credit score models look at your overall credit utilization and the utilization on individual credit cards.
Be careful, though: If you tend to spend more than you earn, you could wind up with a lot of debt if you have access to several credit lines. When you apply for a new credit card , the issuer will likely do a hard pull on your credit also known as a hard inquiry. Other times, however, a hard inquiry may lower your credit scores by several points. Closing an account could lower your utilization rate, which may lower your scores. When you close an account that has at least one derogatory mark , the account will fall off your report up to seven years from the first derogatory event or up to 10 years for bankruptcies.
Once a closed account drops off your report, the average age of your accounts — another minor credit score factor — could decrease.
Generally, the higher the average age of your accounts, the better, so this may have a negative effect on your credit. You can figure out what it is by adding up your monthly spending — the balances on all your cards — and dividing that number by the sum of your limits. If the ratio is too high, getting a new card could lower it since it raises your total credit limit — as long as your spending stays the same.
Over time, closed accounts are no longer included on your credit report, which could reduce the "average age" of your account. Plus, "by closing a credit card account, the consumer is taking some of their available credit off the table," says Dornhelm.
That could have a more immediate impact on your credit score. Open yet inactive accounts, on the other hand, won't harm your score. In fact, they might help it by increasing your available credit. If two banks share ATMs, but refuse to allow a third bank, is that monopolizing or re- straint of trade?
Strange restrictions on shared ATM transactions re- sulted. Soon interchange standards began to evolve, and ATM networks became a competitive tool.
Regional and national networks started to emerge. And the lawyers struck again. If a network allows transactions in one state for a bank in another state, isn't that interstate banking, which was at the time forbidden? Should an ATM network that dominates a re- gion become a regulated monopoly? Should an ATM network that gets re- ally big be considered a public utility?
Today, the regional and national networks continue to grow and offer more services and more interconnections. All of the regulatory issues have not been resolved, and this is creating a lot of tension for eas- ing banking restrictions. Most banks long ago saw an opportunity for the ATM card to be used as a debit card, presumably to replace checks. A tremendous number of checks are used each year, and it costs banks a lot of money to process them.
Debit card transactions could cost less to process, given an ap- propriate infrastructure. Some of the costs could potentially be passed on to the merchants or the consumers, who are notoriously reluc- tant to directly pay the cost of checks.
So far there have been many trials of using ATM cards as debit cards at the point of sale, but they have, in general, met with consumer apathy.
In some areas, where banks have aggressively promoted debit, things have gone better. Still, gen- eral acceptance of debit seems a ways off.
One interesting twist to the debit card story, as mentioned earlier, is the emergence of third party debit cards. Issuers of these cards have no real account relationship with the cardholders. Instead, they ob- tain permission from the cardholders to debit their checking accounts directly through the Automated Clearing Houses ACHs , the same way checks are cleared. Think of it as direct deposit, in reverse. Oil companies first started experimenting with this a couple of years ago, and it has met with surprising success.
Banks dislike this concept, because it competes directly with their debit cards, but isn't subject to the same state and federal regulations. ACHs like this, because it bolsters their business, which otherwise stands to lose a lot by acceptance of debit cards. Merchants generally like this, especially the large retailers, because it allows them to get their payment sys- tems out from under the control of the banks. A typical machine has a microprocessor, usually along the lines of an , a communications module which may have it's own microprocessor , a security module also with a microprocessor , and special-purpose controllers for the hardware.
The user interface is typically a CRT, a telephone-style keypad, and some soft function keys. Typically there is a lot of memory, but no disk. The screens and program are usually downloaded from the host at initialization, and are stored in battery-backed RAM indefinitely. The machine typically interacts with the host for every transaction, but it can operate offline if necessary, as dictated by the downloaded program.
The downloaded program is often in an industry-standard "states and screens" format that was created by Diebold, a manufacturer of various banking equipment, including ATMs. This allows the manufacturer to make a standard machine, and plug in different communications hardware to suit the customer. The security modules do all encryption for the ATM.
They are separate devices that are physically sealed and cannot be opened or tapped with- out destroying the data within them. In a truly secure application, no sensitive data entering or leaving the security module is in cleartext. Arranging this and maintaining it is more complicated than I can go into here. Most ATMs contain two bill dispensers, a "divert" bin for bills, a "capture" bin for cards, a card reader, receipt printer, journal printer, and envelope receptacle.
Some ATMs have more than two bill dispensers, and can even dispense coins. When an ATM is dispensing money, it counts the appropriate bills out of the bill dispensers, and uses a couple of mechanical and optical checks to make sure it counted correctly. If the checks fail, it shunts the bills into the divert bin and tries again.
Typically, this is because two bills were stuck together. I've seen ATMs have sensor faults, and divert the total contents of both bill dispensers the first time a user asks for a withdrawal.
Some use tens and fives, or tens and twen- ties. Depending on the denominations of the bills, the size of the dispensers, and the policy of the bank, an ATM can hold tens of thou- sands of dollars. The journal printer keeps a running log of every use of the machine, and exactly what the machine is doing, for audit purposes. When you put an envelope into an ATM, the transaction information is usually printed directly on the envelope, so that verifying the deposit is easier.
Bank policies typically require that any deposit envelope be opened and verified by two people. In this, you're actually safer depositing cash at an ATM than giving it to a human teller. A card will be diverted to the capture bin if it is on the "hot card" list, if the user doesn't enter a correct PIN, or if the user walks away and forgets to take the card. On some machines, the divert bin, capture bin, envelope receptacle, and bill dispenser bins are all separately locked containers, so that re- stocking can be done by courier services who simply swap bins and re- turn the whole thing to a central site.
The entire ATM is typically housed in a hardened steel case with alarm circuitry built in. These suckers have been known to survive dynamite explosions. The housing typically has a combination lock on the door, and no single person knows the entire combination.
The machine can thus be opened for restocking, maintenance, or repair, only if at least two people are present. First, in the case of ATMs, the ac- cepter and acquirer are usually the same. For debit card use at the point of sale, the usual acquirer-accepter relationship holds. In gen- eral, acquirers may do front-end screening on debit cards, but all ap- provals are generated by the issuer - the floor limit is zero.
This makes it possible to eliminate a separate settlement process for debit card transactions, but places additional security and reliability con- straints on the "authorization". Often a separate settlement is done anyway.
Many merchants and cardholders would rather use sig- nature for identity verification. This is an ironic reversal of the early ATM card days, when people were trying to avoid requiring signature. Other than the PIN, the information required for a debit transaction is the same as that required for a credit transaction. One last installment on the networks that tie this all together, and the Credit Card course will be complete. There will be no final exam - you will be graded entirely on classroom participation.
Most of you are failing miserably For that reason, there are many different solu- tions, depending on the provider, the application, and geographical constraints. The simplest form of access network uses service, in one of its many forms. Terminals at merchant locations across the country dial an number that is terminated on a large hunt group of modems, con- nected directly to the acquirer's front-end processor FEP.
The FEP is typically a fault-tolerant machine, since an outage here will take out the entire service. A large acquirer will typically have two or more centers for terminating the service.
This allows better economy, due to the nature of service tariffs, and allows for di- saster recovery in case of a failure of one data center. An advantage of service is that it is quite easy to cover the entire country with it. It also provides the most effective utilization of your FEP resources. A little queuing theory will show you why.
However, service is quite expensive. It always requires 10 or 11 digits di- aled, and in areas with pulse dialing it can take almost three seconds just to dial The delay between dialing and connection is longer for calls than many other calls, because of the way the calls get routed. All of this adds to the perceived response time at the mer- chant location, even though the acquirer has no control over it.
Large acquirers prefer to offer some form of local access service. In this service, terminals at the merchants dial a local telephone number to gain access to the acquirer. Typically, the local number actually connects to a packet network, which then connects to the acquirer. If the packet network is a public network, the terminal must go through a login sequence to get connected across the packet network. Typically, local calls are much less expensive than service calls, and local calls typically connect faster than calls.
The cost of those calls are absorbed by the merchants directly. In those few remaining areas where local calls are still free from a business line, this works out well for the merchant. Otherwise, the merchant can end up spending a lot of money on phone calls. Usually, the acquirer has to offer lower prices to accepters who use local calls, to help offset this. Even so, these networks are generally much less expensive for the acquirers.
Such networks are difficult to maintain, due to the distributed nature of the access network. Since most packet networks are much more likely to experience failures than the phone network is, the merchant's POS terminal is usually programmed to dial an number for fallback if the local number doesn't work.
Also, it is generally not cost-effec- tive to cover every free calling area in the entire country with access equipment, so some service is required anyway. There is also an administrative headache associated with keeping track of the different phone numbers that each merchant across the country needs to dial.
When you have tens of thousands of terminals to support, this can be formidable. FGB access was the method of access used to get to alternative long-distance carriers before "equal access" was available.
The tariffs are still on the books, and they are favorable for this appli- cation. FGB access provides a single number, nationwide, for all mer- chants to dial in order to gain access to the acquirer. The call has simpler hence, presumably, faster routing than service, and the call is charged to the acquirer, not the accepter.
FGB access does have to terminate on equipment that is physically located in the Local Access Toll Area LATA where the call originated, so there is the problem of having distributed equipment, as above. This also implies that it is not cost-effective to deploy FGB access everywhere, as well.
There are also some technical oddities of FGB, due to its original in- tent, that have made it difficult to implement so far. The other big switched access capability that is likely to have an im- pact in the future is ISDN. So far, this has been inhibited by limited availability and lack of adequate equipment on the merchant end, but it could be very beneficial when these problems are solved. Private-line networks are pretty straightforward applications of point-to-point and multipoint private lines.
Since private lines are quite expensive, engineering of the networks is challenging. Usually, sophisticated software is used to determine the optimum placement of concentrators in order to minimize costs. Since tariffs, real estate prices, and business needs change frequently, maintaining a stable, cost-effective network is hard work.
A typical asynchronous private line network will have multiplexers at remote sites, with backbone links to companion multiplexers at a central site. Synchronous private line networks may use multiplexers, or remote controllers, or remote FEPs, depending on the application and the availability of real estate.
In many of the large interchange networks, there is a cen- tral "switch" that takes transactions from acquirers thereby acting as an issuer , and routes them to issuers thereby acting as an acquirer. Often the switch provider will actually be an acquirer or issuer as well, but this is not always the case. Usually, the provider of the switch defines standard message formats, protocols, and interchange rules.
These formats and protocols usually comply with national and international standards, but sometimes do not. Often the switch will provide translation between different message formats and protocols. The switch provider is generally very concerned that settlement com- plete successfully. Failure to settle with one or more large issuers can leave the switch provider with an overnight deficit of a couple million dollars.
Even though this is a temporary situation, it has significant financial impact. In some current networks, authorization and settlement take place on completely separate facilities, with separate hosts in some cases.
This is mainly due to the history of the industry in this country. Re- call that authorizations were originally done by voice calls, and settlement was done by moving paper around. These two processes were automated at different times, by separate means. These functions are becoming less and less separated as communication and computer facilities evolve, and will probably be completely integrated over the next five to ten years.
Interchange networks are probably the most volatile part of the ATM market right now. There is currently a shakeout going on in much of the market, with larger, more aggressive regionals buying out standalone networks and smaller regionals. This causes local banks to change local and national network affiliation from time to time. So a card may work in a given ATM one day, but fail in that machine the next, which confuses many consumers. Most large regional and national networks have operating regulations requiring labeling of ATMs and cards, so that if you see the same logo on your card and the ATM, you can be pretty sure it will work.
Some regionals are interconnected, and others are not. The two biggest nationals, Cirrus and Plus, have operating regulations that effectively prohibit a member of one network from connecting to the other. But a regional on Cirrus could be connected to a regional on Plus. In that case, whether a machine will take your ATM card depends on the routing algorithm used.
In most cases, the acquirer will have a table of issu- ers that are directly connected, and will send anything else to the re- gional switch. The regional switch will have a table of each issuer it is directly connected to, and tables of which cards are acceptable to other regionals it interchanges with.
Anything else goes to the na- tional switch. The same process happens in reverse from there. Often the order of search in the routing tables is determined by fee scales, not geography, so transactions can be routed in completely non-obvious ways. So the easiest way to tell if your card will work in a given ATM is to stick the card in and try. I don't know of any machine that will eat a card just because it can't route the transaction - it will generally give some non-specific message about being unable to complete the transaction and spit the card back out.
So, where to begin? And where to end? The short answer: you should have at least two — ideally each from a different network like Visa, Mastercard, American Express and Discover. And each should offer you different kinds of rewards cash back, miles, rewards points , etc. How many credit cards is too many? That depends on the individual — you should never have more than you can handle.
Experts say how many credit cards one should have varies according to individual and circumstance. While the number varies by generation, credit score and other factors, the average American has three credit cards and 2. To ensure a mix of credit cards and keep your credit score climbing, credit expert John Ulzheimer suggests asking yourself two questions about the cards in your wallet:. Having two or three cards sounds about right to John Corcoran, a hotel industry executive in Aspen, Colorado.
He added the second mileage card solely for the points bonus. On the other end of the spectrum is Naomi Sachs, an international business executive in San Rafael, California. Sachs is carrying around in her wallet about 10 more cards, of which she uses two or three regularly.
However, her debit card goes wholly unused. Instead, she charges strategically and checks her card balances a few times a week to stay on top of her finances. Credit expert John Ulzheimer suggests two things that can help you determine how many credit cards you should have: Always keep your overall credit card utilization low, and secure access to more than one credit card network.
While merchants in the U. And if you travel abroad , you should pack credit cards from a variety of card networks. Beyond those two key elements, Ulzheimer explains, many approaches are valid, so long as they work for you.
Want to get more specific? Start with one card, a secured card if necessary, then add a second card when you can prove to yourself that you are making your payments on time and paying your bill off in full each month, says Netiva Heard, a credit counselor in Chicago.
She recommends thinking about what rewards would benefit you the most, and whether you want to pay an annual fee to get them.
0コメント