Now compare that to other forms of loans: 3.91% for 30-year fixed rate mortgages, 3.23% for 15-year fixed mortgages and 5.27% for a 48-month car loan.

Analysts push the blame unto existing credit card laws, which prevents card companies from raising interest rates on an existing balance until the cardholder missed payments for at least 60 days. Banks then compensate for this by raising the rates on all cards – irrespective of whether the cardholder is delinquent or pays on time.

This sort of holds true, when you look at it. Banks used to charge 10.73% APR back in April of 2009. It jumped to 11.41% in April 2010 and jumped once again to 13% in January 2011. Now it’s 15.4%.

True, the CARD act of ’09 helped protect troubled borrowers from abusive lender practices; giving them a chance to avoid suffering colossal interest rates when they fail to make a single payment on time.

Now that we’re facing the full consequences of the CARD act of ’09, however, it is our turn to buckle up and see where this ride will take us in the long run.

Here are a couple of tips to help you do just that this 2012:

Pull your credit report. you are entitled to one free credit report a year, one from the three major credit reporting agencies Experian, Equifax and TransUnion. You can then use this report to know where you stand in terms of your credit and spending habits.

Get your existing credit affairs in order. You’ll be more likely to be denied a new credit card if there is inaccurate information on your credit report. You will also have a more difficult time securing a credit card if you have late payments or a high utilization ratio pulling your credit rating down.

Define what you want from your card. Credit cards have many different benefits to separate them apart from each other. Gas rewards, hotel rewards, airline rewards and cash-back rewards are some of the more common benefits you can choose.

Compare and contrast. Different cards have different pros and cons. Check the annual fees, APR interest rates, variable or fixed interest rates, penalties, reward restrictions and other features. Pick out the card that best suits your needs.

What makes Orman’s “Approved Card” different from other prepaid debit cards is the relatively low fees involved. Those that get the card will only need to pay $3 a month to make use of it, which is seriously low compared to standard credit cards, debit cards and checking accounts. Making a deposit or bank transfer of at least $20 a month will also waive the withdrawal and balance checking fees.

Most importantly, the “Approved Card” gets an initial thumbs-up from ConsumerReports.org. Maggie Shader of the site reports that “Our financial services experts reviewed the terms and conditions of the card, and found that overall, its fees are in line with the better cards in the marketplace.”

There are better options, yes, but these kinds of prepaid debit cards are sometimes the only option for those that have seriously low credit scores. Applying for credit or debit cards with such scores usually entails huge fees and penalties; making the “Approved Card” an ideal way to work with plastic minus all the fees.

Too bad that prepaid debit cards don’t have that much of an impact on our credit score. It would be an awesome way to build credit, considering the low fees involved.

Unlike most other debit cards, apparently, she has worked out a deal with Transunion that will report consumer spending information to the bureau, theoretically helping customers build credit.¹

But does the use of a debit card successfully equate with the behavior required when borrowing money?

1. Source: Consumerism Commentary

This can be good or bad depending on your situation. So let’s break it down:

The good: if you’ve been diligently paying your dues, then you have little to worry about with these more invasive forms of credit reports. You might even find a lender more willing to work with you if they can see a spotless payment history, which is the fundamental concept of the whole credit scoring system in the first place.

The bad: the system, however, is not perfect. Some people may have perfectly legitimate reasons for not paying the bills, like not paying rent because of a busted heating system or not paying the electric bills because of ongoing repairs. And then there’s the issue of privacy. Do you really want people scrounging up information on who you’ve been paying rent money to?

The ugly: in the end, it will be up to you to scrutinize these invasive credit reports and challenge any problematic issues you can find. We can petition the government to step in with more privacy laws, but these two options are the only realistic ones we have on the table right now.

Yep, subprime borrowing is back in fashion.

Subprime borrowing basically involves opening up lines of credit to people with low credit ratings. Excessive subprime mortgaging fueled the real estate bubble early in the decade and eventually caused it to pop in ’08 – taking down the entire US economy with it.

For the average consumer like us, however, this is a much-anticipated and much-welcome opportunity to rebuild your credit score. Lenders are basically willing to give another chance to individuals with low credit scores, albeit with strict caps and high interest rates on any loans when compared to pre-recession rates.

Still, these subprime loans can provide a world of opportunity to borrowers who need it the most. Those that have been hard by the recession, especially those who found themselves unemployed and/or their homes foreclosed, will be able to start building up their credit ratings thanks to subprime credit cards and loan deals.

A word of caution: be very careful in spending money if you are a subprime borrower. The interest and penalties are going to be very painful, and you may not be able to fully recover if you mess up this time around.

The Post Office Consumer Credit says that around 12 million people will use their credit cards for essential purchases this January alone. Of this 12 million, 42% will rely on credit cards for groceries while almost 10% will pay the bills with their cards.

When you look at the big picture, using credit cards to pay the bills is not always a bad thing. You could end up with quite a few useful rewards when you use the cards responsibly and pay off all your dues before the interest kicks in. Heck, you might even see your credit score go up a bit thanks to your judicious spending.

Problems will only start to crop up when you fail to make a payment with your credit cards. The interest will automatically kick in, and the credit companies will quickly notice if you have not paid off your dues on time. Excessive use of credit cards also exposes you to a greater risk of identity theft, where a “skimmer” will copy your credit card details and allow thieves to make charges under your name.

Bottom line: use credit cards for paying bills only if you know how to control your spending, repay your debt on time and avoid ID theft. Do this and you may come up with a few perks for your hard work.

This is where phone apps come in.

Companies like Credit Sesame has just announced the first-ever iPhone app that gives consumers instant and free access to their credit score and bank level analytics to make smart credit, loan and mortgage decisions.¹.

This is a pretty useful tool for those that want to show their scores on the go, like rental hunters or loan applicants. Credit monitoring on the phone can also be useful for those looking to rebuild their credit scores, as they will have a more accessible method of keeping track of the effects of their spending habits.

But not everything is all unicorns and rainbows.

One of the biggest problems with these phone apps is leaking your credit details to people who you don’t want to share them with. A carelessly misplaced phone can easily be picked up by anyone in the room; giving them access to your personal and credit-related details in the process.

And then there’s the risk of losing your phone or getting it stolen, which is dangerous for obvious reasons.

So let’s recap: phone apps are great for accessing and monitoring credit, but can pose a security risk if improperly handled. The decision will be up to you after weighing the pros and the cons, but here’s my two cents: get credit monitoring on your phone only if you absolutely need to monitor your score on the go.

If you have regular access to your home computer and know how to keep it secure, then it would be best if you leave your credit score checking for when you get home.

1. Source: PR Newswire

Confused? Think of it this way: opening new lines of credit will make lenders jittery about you as you have the potential to blow away more of their money. This is why your credit score will drop in the short-term.

On the other hand, responsibly making use of that expanded line of credit will let lenders know that you’re responsible enough to handle more money your way – ergo making you eligible for better interest rates.

There is, however, a more effective method of raising your score without having to take the short-term hit of opening new lines: improve your utilization ratio.

You can do this by having the card issuers raise your credit limit, paying down existing debt or a mix of both. This method is even safer than opening new lines of credit, especially when mixed with extra credit card charges that have been paid on time.

The first issue that pops to mind is discrimination. Banks should only have access to your financial records to determine your creditworthiness. Snooping around your Facebook profile will give them your age, gender, race and even marital status. This access to personal information could paint an unfair picture of your capacity to pay.

What’s worse is the risk of getting a hit to your credit score based on the people you’re “friends” with on Facebook.

“If you are a profitable customer for a bank, it suggests that a lot of your friends are going to be the same credit profile,” says CreditKarma.com CEO Ken Lin.

It just isn’t fair to be associated with the credit score of some random batch-mate from back in your elementary years whose posts you happen to “like” often.

This is one time where I’ll advocate rushing like mad to the federal government and getting them to put a doorstop to this exploitative use of social networks and blatant invasion of privacy.

The obvious reason is that Christmas is fast approaching us. It gives everyone a (semi) legitimate reason to cut back on the saving and just take our minds off all that budgeting for a minute or two. The generous credit card offers help lubricate our wallets as well.

The less obvious reason is that too much self-denial has a tendency to explode in a frenzy of spending.

Think about it this way: when you shake a soda bottle hard enough, even the sealed top will have to give way. This is what happens to some folks who tend to go overboard with their saving. All it takes is one solid excuse to loosen the budget strings and bam – you’ve charged a cool hundred or so out on your card.

I’m not saying budgeting is bad, but I am saying that we all need to budget right. Include luxury items in the budget, and that means allotting a set amount of money for holiday spending.

Simple, yes, but it works.