Credit Doesn’t Mean Debt When Using Fleet Cards
With only a couple of weeks until Christmas, many of us have taken advantage of the Black Friday sales and Cyber Monday deals. That might mean we are closer to completing our holiday shopping, but along with the online checkout, it can also mean mounting credit card debt. Between gifts, parties, and winter weather emergencies, many Americans have added an average of $986 to their existing credit debt this season. We turn to our credit cards, our fleet cards, and our fuel cards more during the holiday season than any other time of year, but for the trucking industry, credit card use does not have the negative impact that it will have for hundreds of thousands of consumers across the country come January when the bills start to arrive and even in the months to follow.
For several reasons, you should not use your personal credit cards for purchases on the job even if you are guaranteed a quick reimbursement. While company purchases might be covered, your personal credit can be impacted. The trucking industry has addressed the issue through the implementation of fleet cards, and other industries would do well to follow suit. The consequences of credit card use during the holiday season can be costly.
The Cost of Consumer Credit
1. Put It on Plastic and It Could Cost Double
Interest rates on credit cards are high. And interest rates on store cards are even higher. According to the Federal Reserve, the average credit card interest rate is 13.93%. If you spend $1,000 this holiday season and make only the minimum payment due on a credit card with a 13.93% interest rate, you will end up paying more than $350 of interest. And if you use a store credit card with an interest rate of 24.5%, you could end up paying more than $1,000 of interest.
2. Max Out Your Credit Cards and Your Auto Insurance Premiums Could Increase
If you max out your credit cards this holiday season, you should expect to see your credit score drop. Thirty percent of your FICO score is based on how much debt you have. In particular, the score looks at how much credit card debt you have, and how much of your available credit limit you are using, which is called utilization. FICO makes a judgment about good debt and bad debt. In general, you can still have an excellent credit score even if you have a large mortgage or a lot of student loan debt, so long as you are paying that debt on time. However, credit card and store card debt is treated differently. If you max out your credit cards, you should not be surprised to see a reduction in your credit score.
Increasingly, your credit score is also being used by auto insurance companies to determine your premium. Using credit scores for auto insurance pricing is not legal in all states but where it is legal, a study has showed that a bad credit score can have a bigger impact on your auto insurance premium than a bad driving record.
3. Max Out Your Credit Cards and All Forms of Credit Can Become More Expensive
If you want to buy a car or refinance your mortgage next year, your credit score will be critical. And by maxing out your cards this holiday season, you could make those future borrowing decisions even more costly. Not only does your credit score determine whether you will be accepted for a loan, but also in most cases, it determines how much you will be charged. The worse your score, the higher the interest rate you will pay.
Fortunately for the trucking industry, companies like EFS offer a variety of fleet card options that can manage expenses in ways that sustain or even improve credit scores and availability. Flexible fleet cards and fuel card solutions can provide fleet managers with the transparency and control they need to manage overall fleet finances, while fleet and fuel cards give drivers confidence knowing they will have the resources they need to make a purchase, so they don’t have to worry about building debt on their own personal credit cards. While EFS delivers more than one fleet card solution, the one that responds best to multiple purchase needs is the EFS Mastercard® Fleet Card. The EFS Mastercard® Fleet Card is the single card, dual network solution that leverages superior controls for fuel purchasing, combined with Mastercard’s wide acceptance network for non-fuel purchases such as T&E expenses, emergency repairs, and more.
The Mastercard Fleet Card advantage:
1. Accepted wherever Mastercard is accepted for purchasing and/or T&E expenses such as fuel, additives, repair, cash services
2. Cash price for fuel in the EFS truck stop merchant network
3. Superior purchasing controls
4. MCC/TCC categories/velocity limits in Mastercard network
5. Level III+ data
So during the season when credit cards reign, look to tools like the EFS Mastercard Fleet Card to help manage costs while providing the critical resources where and when they are needed. Fleet managers can breathe a sigh of relief knowing that costs have been controlled, while drivers can take solace in knowing, come January, the bills will be paid.