Credit Card Quick

Avoiding Newlywed Nightmares

Credit Card Debt

The excitement and stress of planning a wedding often leaves very little time for anything else. However, in between wedding and honeymoon planning, it is important to arrange a meeting with your soon-to-be spouse regarding your finances – including your credit card debt.

Although finances and credit card debt are not exactly the most romantic or pleasant topic to discuss before the wedding, it is nevertheless important. If you and your fiancé don’t develop a game plan for handling finances and credit card debt then you may find yourselves in the middle of a newlywed financial nightmare.

Start your marriage out on the right foot by asking each other the following questions:

• How many credit cards do you have and what are their balances? If you both have three credit cards, then you may want to consider paring them down so that you both have one or two joint accounts.  Another issue to discuss is the balances on your credit cards. It is best to lay it all out on the table and so that you and your fiancé can move forward and develop a game plan to pay down the debt.
• Do you want to have joint credit card accounts, or would you prefer to have a separate account? Your soon-to-be-spouse may desire a joint account with you, as well as a separate account, particularly if he/she uses credit cards for business purposes.
• What do you use your credit cards for? Does your fiancé use his/her credit card for emergency purposes only, or does he/she use them on a daily basis to collect reward points? You will both need to come to an agreement regarding what is acceptable once you are married so that arguments do not erupt over credit card debt.
• Who will handle the finances, including the credit card bills? Many couples appoint one person to handle the finances as to prevent confusion and hassle. Talk frankly and openly about this issue and decide which person would be best suited to handle the position of “account manager.”

Canceling Your Credit Card – When and Why

Introduction

You have probably heard that canceling a credit card may not be a smart financial decision, as it may affect your credit score. And this is true – to some extent.

The three, national credit reporting agencies use your income-to-debt ratio when calculating your credit score, so the more available credit you have (i.e. available credit on your credit cards) the higher your credit score. Therefore, it only makes sense that canceling a credit card lowers your available credit and ultimately your debt-to-income ratio.

There are exceptions to every rule, however, and canceling a credit card has its own set of exceptions.

When to Consider Canceling a Credit Card:

• If you are in the midst of a divorce and your soon-to-be ex-husband or wife has access to the account - Remember that, as long as you are married (particularly for states with community property laws) you are responsible for half of the bills. So, unless you want your soon-to-be-ex charging up your credit card it is best to simply cancel it and avoid a potentially disastrous situation.
• If you simply can’t stop spending – If a credit card is just too much temptation and you continue to rack up credit card debt that you cannot realistically pay off, then you may want to consider canceling the credit card account. Because, after all, credit card debt that cannot be repaid will more negatively impact your credit score than a closed account.
• If the number of credit cards in your wallet is too much to manage – Consumers need only realistically to have one or two, low-interest credit cards. If you find yourself with a wad of credit cards, then you may want to consider canceling the cards that you no longer need.
• If the creditor’s terms and conditions are unsatisfactory – If your credit card company adopted a new set of terms or conditions that are unsatisfactory to you, such as interest rate hikes, then it may be best to cancel the card so that you don’t accidentally charge on it. It will also send a message to the credit card company that, because of their terms and conditions, they lost a good customer.

Borrowing from your Home’s Equity to Pay off Credit Card Debt

Credit Card Debt

Many credit card holders, particularly in this tough economy, are finding themselves in over their heads with credit card debt. Many homeowners may be tempted to use the equity in their home to pay off this debt. But is this the right choice for you?

Refinancing your Home

Many consumers choose to refinance their homes in an attempt to pay off crippling credit card debt. If you have enough equity in your home to completely pay off your credit card debt, then going this route may be an option for you. Refinancing your debt into your home loan can lessen the burden of paying several bills each month; instead, all of the debt is rolled into a single mortgage payment.

Although using the equity in your home to refinance your home and pay off your credit cards may be the sensible choice for many homeowners, it is not without its disadvantages.

First, refinancing a mortgage typically involves closing costs, which can total several thousand dollars. Although many lenders will roll closing costs back into the mortgage, you must still pay them. Another disadvantage to using your home to pay off your credit card debt is that, unlike credit card bills, you can lose your home if you default on the loan because your home serves as collateral for the mortgage.

Obtaining a Home Equity Loan or Line of Credit

Another option for paying off your credit card debt with your home’s equity is to take out a home equity loan or line of credit. Closing costs for home equity loans are generally much lower than closing costs for refinancing.  However, the interest rate for a home equity will usually be higher than a typical home loan. For many consumers, the higher interest paid on a home equity loan, however, is still lower than the interest rates on their credit cards.

It is important to understand that a home equity loan or refinance can serve as smart financial tools when you simply want to pay off your credit card debt using your home’s equity. They may also be a better financial choice, as the payment for a refinance or home equity loan will typically be much lower than credit card minimum payments because the loan is extended over 20 or 30 years.

Sure Fire Ways to Pay Down your Credit Card Debt

Credit Card Debt

You’ve made yourself promises, time and time again, that you would pay down your credit cards and be done with them, once and for all! Now, here you are again, with mountains of credit card debt and virtually no plan to get yourself out of this mess.

Perhaps, instead of simply being angry at yourself for not being able to pay down your credit card debt, you should develop a game plan and stick to it.

The following tips will lead you in the right direction so that you can, once and for all, tackle your credit card debt:

• Thoroughly examine your purchases over the last year – Ask the credit card company to send you a comprehensive list detailing your credit card purchases over the last year. Most credit card companies can easily send you this information if you ask for it. Then, pour over the list carefully and determine if there are certain patterns and trends regarding your spending. The first step to curbing your purchases is to recognize how you are racking up the credit card debt in the first place.
• Cut up the card but don’t cancel the account – If the temptation to spend is just too great, you will need to cut up the card – but don’t cancel it! Canceling a credit card can initiate an interest rate hike by your credit card company (something you certainly don’t need when you’re trying to pay down your debt) and it may also negatively impact your credit score.
• Make a new budget and stick to it – Make yourself a detailed, comprehensive budget and be honest! Do you spend $2 every morning on a cup of coffee? How many times do you go out to eat every week? Is your premium cable plan really necessary? Most people are amazed to find that their day-to-day spending habits are preventing them from paying off their credit card debt. Find extra money in your budget and put it towards your credit card balance – no exceptions.
• Consider consolidating onto one, low-interest credit card – If you have several credit cards, consider consolidating them onto one, low-interest credit card. This can often make the task of paying off credit card debt more manageable.
• Take a credit counseling course to learn new ways to manage your finances – If you are still struggling to make good financial choices, consider taking a credit counseling course through your local community college. These courses can provide you with a wealth of information so that you can make better choices regarding your finances.

Does the New Credit Card Bill Help or Hurt Young Consumers?

News

The new credit card act, which was signed into law last May, and is set to go into effect in June 2010, has placed many new restrictions on credit card companies, one of which involves limiting the availability of credit to anyone under the age of 21.

Credit Card Debt and Young Consumers

We all know the familiar sight of a busy college campus with credit card companies set up around every corner, luring young college students into applying for a credit card that they may not be able to afford.

The new law essentially states that no one under the age of 21 can obtain a credit card unless a guardian, spouse or parent co-signs for the credit card. An individual under the age of 21 may obtain a credit card if he/she is capable of providing proof of sufficient income to pay the credit card bill. In other words, if you are a college student with little to no income, don’t expect to snag a credit card under this new law.

Advantages of the Bill

The credit card bill, through this provision, is designed to protect college students who will likely become inundated with credit card debt, even before they graduate from college.

Many legislators also support this bill’s provision of a co-signer for individuals under the age of 21, as this could help young consumers learn to handle credit in a more responsible manner, as their parents will be overseeing the account.

Although this law was enacted to protect young people from racking up credit card debt that they couldn’t afford to pay back, it may also hurt their financial future.

Disadvantages of the Bill

Although the bill has many supporters, it also has its share of naysayers who complain that, without sufficient credit history, many college graduates will not be able to rent an apartment or purchase a car. In other words, if a recent graduate has no credit history, his or her options may be limited regarding independent living after graduation.

The question still remains: when is it the consumer’s job to act in a responsible fashion, and should the government stipulate who should and should not receive a credit card? There are many irresponsible young consumers that will be protected by this law; however, there are just as many responsible young consumers who may lose out on the opportunity to build their credit because of this law.

Credit Card Woes: When Making the Minimum Payment Becomes Difficult

Credit Card Debt Credit Score

It comes as no surprise that millions of credit card holders are struggling to make ends meet. From mountains of debt to increasing credit card fees and interest rates, many consumers have found themselves in the unfortunate position of not being able to pay the minimum payments on their credit cards.

You’ve always paid your bills in the past; you managed your credit card debt; and you were always able to make the minimum payments – if not more –on your credit cards. Your job hours have been cut, your variable interest rate on your mortgage just changed, and you’re struggling to pay your everyday bills, let alone your credit cards. What do you do?

First and foremost, you can not afford to avoid paying your credit card bills. Although it is important to first pay your secured credit, such as your car payments and home loans, not paying your credit card bill should be your absolute last option.

The bottom line is that your credit score, if it is strong, can continue to provide you with options, while a poor credit score can close off doors and leave you with few options regarding your ability to obtain any type of credit. It is therefore of the utmost importance to do everything in your power to continue to pay your credit card bills each and every month.

Your Options

That is not to say, however, that you don’t have options regarding your credit card’s minimum payment. Your first order of business is to contact your credit card company and explain your financial hardships to them.

Given the current state of the economy, many credit card companies are willing to negotiate lower monthly payments. If you have been a good customer with a good credit history then it is likely that your credit card company will work with you. In addition, many credit card companies have financial hardship programs for which you may be eligible.

The absolute worst thing you can do is to either not make the minimum monthly payment or not make the payment at all. You cannot afford to pay outrageous late fees and you certainly cannot afford to destroy your credit.

Finally, you may want to seek the services of an accredited consumer counseling service in your area. A reputable credit counselor may be able to help you (a) lower your monthly payments; (b) lower your interest rate; and (c) pay off your debt.

Scam Alert: Beware of Companies Promising to Reduce your Credit Card Interest Rates

Card Security

If you receive a phone call from a company promising to lower your credit card’s interest rates, beware: the promises made may simply be full of hot air.

Solicitation from companies promising to lower consumers’ credit card interest rates has been on the rise from as far back as 2007, according to the Better Business Bureau. It certainly comes as no surprise that a host of unscrupulous companies would begin to come out of the woodwork as the recession took its hold throughout the country. However, what is surprising is how many consumers have fallen victim to it.

Does it mean that there are many consumers out there looking for relief – any relief – from their credit card debt? Or does it mean that these fraudulent companies are getting better and better at doing what they do best: fooling consumers and taking advantage of them at their weakest moments?

The answer is, unfortunately, probably yes to both of these questions.

Details of the Scam

The scam usually goes something like this: a credit card holder gets a phone solicitation from a company promising to lower the interest rates on their current credit cards, thereby saving them hundreds, if not thousands, of dollars in interest rate fees every year.

The company then asks for an upfront fee to do this – usually between $1,000 and $2,000. The problem starts when the company does nothing to lower the interest rate on the credit cards. Some companies simply do nothing after charging the fee, while others simply transfer the balance on the credit cards to another credit card with an equally high interest rate.

The scam is easy to pull off because the company asks for your credit card information upfront so that they can contact your credit card company to get the fees lowered. Of course, it goes without saying that this is something any credit card holder can do themselves.

What you can do

The best defense against fraudulent companies is to stay informed, stay educated and ask questions. If the company’s claims seem too good to be true, they probably are. Aside from accredited consumer counseling services, companies in general can not make claims to fix your credit or change the terms of your credit cards.

If you suspect fraud, immediately contact the Federal Trade Commission to report the incident.

Canceling a Credit Card: What you May not Know

Credit Card Debt

You may want to close a credit card account for a variety of reasons: you simply don’t use it anymore; the interest rate is too high; you don’t need the temptation of overspending; or you are simply unhappy with the credit card’s terms and conditions.

Whatever the reasoning behind your decision it is important to understand that canceling your credit card may not be your best bet. And here’s why:

• If you cancel your credit card before the balance is paid off the credit card company may hike up the interest rate on the remaining balance. In fact, the credit card company may even hike up your interest rate if they think you may cancel. It is therefore in your best interest to stop spending on the card and pay off the balance in full before you decide to cancel it.
• If you plan to cancel your credit card in hopes of increasing your credit worthiness or bumping up your credit score, you may want to reconsider, particularly if you have plans to take out a large loan (i.e. home loan or car loan) in the near future. This is because your credit score is largely based on your available credit. In other words, canceling a credit card lowers your available credit, thereby lowering your credit score.

However, if you are dealing with credit card debt problems then it is probably a good idea to cancel the card once it’s paid off to eliminate the risk of spending. The decision is ultimately up to you and will largely depend on your current financial situation.

If you are one of the lucky few to have a zero credit card balance then it will likely not hurt your credit card score to cancel any unused or unwanted credit cards.

You may also want to keep in mind that you may be swayed by the credit card company to rethink your decision to close your account. If the credit card company representative offers you a better interest rate or special promotional rate, you may want to reconsider your decision and hang on to the card.

Credit Card Cash Advances: The Good, the Bad and the Ugly

Credit Card Debt

First, the good news: cash advances are a smart tool to have in your back pocket in an emergency situation. Now, the not-so-good news: cash advances come with upfront fees and high interest rates.

For example, you find yourself stranded out of town and in need of car repairs. Your short on cash and the repair shop doesn’t accept credit cards. What do you do?

If you are a credit card holder and you have access to an ATM, you may be able to use your credit card to get quick cash. Although the fees and the high interest rate are not in your favor, you recognize that the situation needs to be resolved.

In this instance, it is easy to see the advantages of using a credit card for a cash advance. However, many consumers have overused and abused credit card cash advances and have therefore found themselves in a mountain of unexpected credit card debt.

What you Need to Know:

• Cash advances have no grace period. In other words, you begin to accrue interest charges the moment you withdraw the money.
• The interest rate charged by credit card companies for cash advances is often much higher than the card holder’s interest rate for purchases. In fact, many credit card companies charge as much as 20 to 25 percent for a cash advance. Compare that with the typical 12 to 15 percent charged by most credit card companies for purchases and you can easily see how quickly the cost of cash advances can add up.
• Fees for cash advances can be outrageous, to say the least. Fees are generally calculated on a percentage of the cash advance taken (usually one to four percent), or are simply charged as a flat fee. Flat fees are not based on the amount of the cash advance and therefore remain consistent from one cash advance to the next.

It is also not uncommon for credit card companies to charge consumers both a flat fee, as well as a percentage of the cash advance taken. For example, the credit card company may choose to charge a flat fee of $10 for every cash advance, and then also charge a percentage of the cash advance itself.

• If you take a cash advance through an ATM, be prepared to also pay a fee charged by the financial institution that owns the ATM.

What you don’t Know Might Hurt you: Important Questions to Ask before Signing up for a Credit Card

Choosing Credit Card

A credit card offer that seems too good to be true may be just that.

If you have a good credit scores you are likely inundated with a number of credit card offers during any given month. It therefore becomes increasingly difficult to sort through these offers and decide which one is right for you.

Although the process of weeding through your credit card offers can be arduous and even overwhelming, it is important to recognize that a great credit card offer may not be all that great once you begin to peel back the layers of the credit card’s terms and conditions.

It is therefore in your best interest to ask yourself the following questions before signing up for a credit card. If you can’t find the answers to your questions or if you have trouble deciphering the often hard-to-understand legalize used in the small print, then by all means contact one of the credit card’s representatives for answers. Most importantly, never sign up for a credit card if you don’t completely understand all of the card’s terms and conditions.

Questions you Need to Ask Yourself Before Signing up for a new Credit Card:

• If there is an introductory rate, how long does it last and what will my rate be once the introductory rate has ended?
• Are there any application or processing fees associated with signing up for this card?
• Is there an annual fee for this card?
• What are the late/over-the-limit fees?
• Is there a fee for balance transfers? What is the interest rate for balance transfers?
• Is the rate on this card fixed or variable? Under what circumstances will my variable rate change?
• Do I have the option of paying my bill online? What online services/features does this card offer?
• On what date will my statement be sent out each month? How many days do I have each month to pay my bill (i.e., what is the billing cycle)?
• What are the details of the card’s reward program?