Credit Card Quick

Is it Ever Okay to Carry a Credit Card Balance?

Credit Card Debt

We hear of the evils of credit cards all the time. Pay it off every month! Never carry a balance! Beware of rising interest rates and fees! While it is true that the best rule of thumb is to pay off your credit card balance each month, there may be times when carrying a balance isn’t such a bad idea.

So, the question is: Should you always feel guilty when you carry a balance? Perhaps not.

Here are a few examples of times when it may make sense to carry a balance on your credit card:

1. When your credit card has a low, fixed rate – If you have a credit card with a low, fixed rate, or if your credit card offers convenience checks with a low, promotional rate, you may want to make a large purchase or two and take a few months to pay it off. This may make sense if your other loan or credit options feature higher interest rates. If you know you want to take a few months to pay off your credit card balance, just be sure to formulate a game plan for paying it off in a preferred time frame.
2. When you transfer balances with a low, promotional rate – If you have a number of credit cards or loans with high interest rates, you may find that transferring these loans to a credit card with a low, fixed interest rate is your best bet. Pay close attention to the balance transfer’s promotional period and formulate a game plan for paying off your balance during that time, as the card’s default percentage rate will likely kick in and you’ll find yourself with quickly mounting finance charges once again.
3. When you encounter unexpected expenses or a financial emergency – Credit cards serve many practical purposes, yet are also crucial if you find yourself in a financial emergency. From an inoperable vehicle to a broken furnace, emergency expenses catch us off guard; luckily, a credit card is the ideal financial tool to save us when we don’t have access to quick cash. It is quite reasonable to take a few months to pay off an emergency purchase because the card served a very useful purpose helping you out in a financial pinch.

Using your Home’s Equity to Pay off Credit Card Debt: Is it a Good Idea?

Credit Card Debt

If you feel inundated with credit card bills each month, or if your credit card balances are getting the best of you, you may consider consolidating your credit card debt using your home’s equity.

In particular, if you have equity in your home, you may choose to use that money to pay off higher interest rate credit cards using a home equity loan or a home equity line of credit.  In addition to probably paying a lower interest rate, a home equity loan is spread out over many years, thereby dramatically lowering your monthly payment obligations. Because of the lower payments each month, many homeowners choose a home equity loan to pay off their credit card debt.

But is this always a good idea?

We like home equity loans and home equity lines of credit because they allow homeowners to take advantage of the equity in their homes to pay down their debt and lower their monthly payments. In fact, a home equity loan or line of credit may allow you to get your debt under control and get better control of your finances.

On the flip side, it is important to understand that, unlike a credit card, a home equity loan or line of credit is a secured loan, meaning that the bank can take your home if you fail to pay on the loan. A credit card is an unsecured loan, meaning that a bank can’t take your assets if you fail to pay your credit cards. Because of this, many banks warn homeowners to consider their options when using their home’s equity to pay off unsecured loans.

A home equity loan or line of credit, although it affords a homeowner a lower, monthly payment, is not a free deal, as the homeowner will need to pay on the loan for a longer time than he or she would a credit card.

Final Thoughts

Whether you use a home equity loan or line of credit to pay off your credit card debts will depend on your personal, financial situation, but you should consider whether a home equity loan or line of credit is a solution to your credit card problems and not simply a short-term band aid. In other words, if you have trouble controlling your spending or maintaining a budget, a home equity loan or line of credit may not be the best solution for you.

What Lengths can Credit Card Companies go to Recover Debt?

Credit Card Debt

Because credit cards are considered unsecured debt, meaning they are not attached to any assets, many people believe there are no real consequences from failing to pay their credit card debt.

In fact, credit card companies have suffered greatly over the past, few years because credit cards are often the first bills people skip paying if times are tight. Although credit card companies cannot take your home, car or other assets if you fail to pay your credit card bills, they can take a number of actions against you, including:

• They can put pressure on you – The most common form of communication employed by creditors when seeking their payment is the phone. If you fail to pay your credit card payment, you can expect phone calls at your home. In fact, you can expect numerous phone calls throughout the day and into the evening if they can’t get a hold of you. It doesn’t stop there, either, as creditors will likely call all phone numbers they have on file for you, including your cell phone and your work number. Receiving a phone call at work from a creditor can be incredibly embarrassing, and receiving numerous phone calls throughout the day may prove to be quite stressful. Expect to receive phone calls until your payment obligations have been met.
• They can hand your debt over to a collections agency – Once your account has been handed over to a collections agency, expect phone calls and pressure to increase. Debt collection agencies get paid when they collect money, so they have plenty of incentives to get their money.
• They can place a lien on your home – Although a credit card company cannot take your home away from you, they may be able to get a judgment against you and ultimately put a lien on your home. In other words, you won’t be able to sell your home until you have paid off the debt.
• They can garnish your wages – In extreme cases, credit card companies may be able to garnish your wages. If the creditor obtains a judgment against you, they may be able, through the judgment, to garnish your wages until the debt is paid.

If you are experiencing difficulties paying your credit card bills, it is best to contact the credit card company to set up more realistic payment plans or contact a reputable consumer credit counseling agency to help you manage your credit card debt and develop a game plan for paying off the debt.

How to Save yourself From Financial Disaster

Credit Card Debt

There are certain things you can do to ensure your financial future will be bleak. Risky, irresponsible financial decisions can quickly get you in trouble, so it’s important to realize bad decisions before you make them.

If you are concerned that your current actions will have a negative effect on your financial future, then you owe it to yourself to understand the many decisions that can wreak havoc on you and your credit report:

• Using balance transfers without concentrating on paying off the debt – If you are a serial balance transfer individual who doesn’t have any kind of game plan for paying off your debt, you could be heading into murky financial waters. Instead of transferring your balances only to transfer them again once the promotional period has ended, take the time to set up a realistic repayment plan so you can say goodbye to feeling like a hamster running on a wheel, going nowhere.
• Failing to pay attention to your credit report – What you don’t know can hurt you, and this is particularly true when it comes to your credit report. Mistakes, errors and inaccuracies can cost you in the form of higher interest rates or even credit rejection, which would have a serious impact on your finances.
• Spending freely on retail credit cards – There have been many studies conducted that show consumers are more likely to overspend in a store if they have a retail credit card in their wallet. Because of this, many people charge up retail credit cards and get themselves in over their heads, thanks to the high interest rates and fees that come along with many of these types of cards.
• Failing to make a budget – A household budget is essential if you are to maintain your financial health. In other words, you can’t begin to make good financial decisions if you are unaware of where your paycheck is going each month.
• Making just the minimum payment – You can assured of going nowhere fast if you pay just the minimum payment each month. Often times the minimum payment barely covers the finance charges, thereby sticking you with a balance that goes nowhere but up.

The 3 Life Lessons I’ve Learned about Money

Credit Card Debt

There are a few truths in life, especially when it comes to money. We all want to enjoy a comfortable life, and we all want the finer things in life. Yet not all of us can realistically afford to do this.

What most people find surprising is that what sets those individuals who enjoy a comfortable financial life apart from those who don’t isn’t money; it’s a smart financial attitude. I know a few people who can’t seem to make ends meet on six figures a year; yet there are other families I know who live quite comfortably (and happily, I might add) on half that much.

In order to get to a good place in your life regarding finances, there are a few life lessons to live by:

1. Don’t spend more than you make – Seems quite simple, doesn’t it? Why is it, then, that so many Americans are incapable of doing this? The truth of the matter is that we live in an instant gratification society, and we are bombarded with people and retailers telling us we can have it now and we don’t have to wait! Unfortunately, the flat-panel LCD television you simply had to have will haunt you for months – maybe even years – in the form of a credit card bill and quickly mounting finance charges. The best way to approach the “don’t spend more than you make” attitude is to take the “wants” vs. “needs” approach and instead of buying everything you want, save your money and purchase your “wants” only when you’ve saved the money to do so.
2. Living simply is better than living in over your head – You may feel out of the social loop because you don’t have the latest computer or cell phone, but are people who have the latest and greatest really happier, or are they simply burdened with more debt that keeps them awake at night?
3. View credit as a privilege, not a right – Credit is a good thing; it affords us the opportunity to make large purchases like a home or a car. But it is a privilege, and should be viewed as such. Reserve credit for major life purchases; otherwise, let cash be the main form of currency in your household.

The Facts about Prepaid Debit Cards and how to Protect yourself

ATM Credit Card Debt

You may be tempted to purchase a prepaid debt card as a credit card replacement, as a gift, or as a spending tool for your teenager. It may seem quite advantageous to use a prepaid debit card and, in some cases, it is; however, in order to make the best decision whether to use a prepaid debit card, you must know all the facts:

• Prepaid debit cards are not free to use. In particular, pay close attention to the small fees charged by the prepaid debit card company, as they can quickly eat away at your balance. Some of the fees charged by prepaid debt card issuers include: ATM cash withdrawal charges, PIN purchase charges, balance inquiry charges, and activation fees.
• Chargebacks are possible with prepaid debit cards. Some retailers do not accept prepaid debit cards for purchases (iTunes is one of them); although most retailers will simply decline the purchase, there have been cases where the purchase went through, but the customer found a chargeback that they were responsible for covering.
• If you lose your prepaid debit card, there are very little protections in place for you. In other words, prepaid debit cards are essentially viewed as cash by prepaid debit card issuers, so you have no protection if your prepaid debit card is lost or stolen.
• Because you won’t receive a monthly statement from the prepaid debit card issuer, it is very hard to track your spending. This makes it particularly hard for individuals who need to keep their spending to a minimum. Some prepaid debit cards provide features that allow individuals to view their activity online, but the prepaid debit card issuers usually always charge a fee to do this.
• You must keep track of your spending using a prepaid debit card; otherwise you may be quite embarrassed when a purchase is declined. Because retailers are not able to determine the balance on the card, you must be aware of what you have on the card so you can alert the retailer to only charge a certain amount to the card if your purchase exceeds the card’s balance. Then, you will need to cover the remaining retail purchase balance using another form of payment.

Is it Ever a Good Idea to Share your Good Credit?

Credit Card Debt

Congratulations! You have made a commitment to being a responsible borrower and spender and, as a result, you enjoy a strong credit score and easy access to credit. You may, however, have someone in your life that isn’t in your position regarding credit and finances.

You may have wondered (or may have been asked) if it is a good idea to help your loved one improve his or her credit by offering your good credit and name to a loan or line of credit. But is this a good idea?

Here are a few factors to consider that will help you determine if it is a good idea to share your good credit:

• If your loved one’s credit was damaged due to an ex-spouse – Often times, a divorce can take a tool on an individual’s credit, leaving them financially vulnerable. If you have a loved one who is trying to rebuild his or her credit after a messy divorce, you may want to aid him or her by co-signing for an apartment, car loan or credit card. If the credit problems started before the marriage began dissolving, however, you may want to rethink this decision, as your loved one may very well be a credit risk.
• If your loved one lost his or her job – There have been countless casualties as a result of the economy, and the number of lost jobs has been too numerous to calculate. As a result, millions of Americans have fallen behind on their mortgages, car loans, credit cards and rent payments. If you have a loved one who lost his or her job and lost his or her good credit because of it, you may want to help him or her rebuild his or her life; and this could mean cosigning for a car loan, lease or a credit card. If your loved one is now working, but having a difficult time because of past credit problems, it may be a good idea to help out.
• If your loved one continues to make the same credit mistakes – Although you can provide support and guidance for a loved one who has made (and continues to make) poor credit decisions, it simply isn’t worth destroying the credit you have worked so hard to build only to have it destroyed by another’s poor decisions.

Is a Debt Consolidation Loan Right for your Credit Card Maladies?

Credit Card Debt

With unemployment still hovering around the 10 percent mark, the demand for debt consolidation services continues to rise. Many individuals across the country are turning to debt consolidation services as a way to better manage their finances and deal with unmanageable payments while they are unemployed.

Debt consolidation companies offer consumers the chance to take control of their finances and control their debt, but not many individuals understand exactly how the process works.

What is a debt consolidation company?

A debt consolidation company works to negotiate unsecured debt with creditors. A debt consolidation company is designed to work on the consumer’s behalf to negotiate better rates, terms and conditions with their current creditors, including personal loans, credit cards and car notes, just to name a few. The debt consolidation company negotiates lower rates with their client’s creditors, and rolls all debt into one, manageable loan. The debt consolidation company offers the loan. In other words, the client will pay their monthly payment to the debt consolidation company, who will then pay the creditors.

What are the advantages of a debt consolidation company?

The upside to using a debt consolidation company is that you no longer have to worry about paying multiple bills to multiple creditors each month. Instead, you can pay one bill to the debt consolidation company instead of dealing with different companies. In addition, the debt consolidation company should be able to negotiate better terms with your creditors, thereby providing you with a more manageable payment each month.

What are the disadvantages of a debt consolidation company?

Using the services of a debt consolidation company will likely hurt your credit score. However, many of the individuals who seek debt consolidation are already in a financial bind and have likely already taken a hit on their credit score. Also, a debt consolidation loan may come with a fairly high interest rate to account for their services. In some cases, the high interest paid on a debt consolidation loan will end up costing you more than if you simply paid off your bills on your own.  These disadvantages, however, are often welcomed by consumers who are anxious to put an end to their debt problems.

The Top Five Reasons why you Should Pay off your Credit Card Debt this Year

Credit Card Debt

If you want to make a fresh financial start in 2011, perhaps the best place to start is with your credit card debt. Simply put, there is no good reason to carry around mounds of credit card debt. We have all found ourselves, at one time or another, in a situation where we’ve spent more than we had anticipated; however, it is important to look ahead and not worry about bad spending habits of the past.

There are a number of great reasons why you shouldn’t be paying on credit card debt every month. Here is our list of the top five reasons why you should make 2011 the year you say good-bye to credit card debt:

1. You have better things to do with your money every month – Writing a check, each and every month, to your credit card company is not an enjoyable task. This is because there are probably countless other things you could spend that money on each month. From setting aside grocery money to handling your ever-increasing monthly gas bill, there are much better ways to allocate your monthly income.
2. You can start getting serious about saving for retirement – If you’re like many Americans, you want to save more for retirement, but you can’t seem to find the money in your budget. Now, imagine how satisfied you would feel if you were able to take the money you spend on credit card debt every month and sock it away into your 401K or IRA. Sounds exciting, doesn’t it?
3. You can concentrate on paying off other debt – From student loans to medical bills and car notes, Americans often have other installment-type debt that must be paid on a monthly basis. If you didn’t have to pay on credit card debt every month, you could instead focus on paying off your other debts so you can really lead a debt-free lifestyle.
4. You can (finally) beef up your savings – Instead of writing a check to the credit card company, write a check to yourself, and watch your personal savings grow.
5. Because paying finance charges is like throwing away your hard-earned money – You work too hard for your money, so don’t throw it away by paying unnecessary finance charges to your credit card company each month.

Drowning in Debt? Why it’s Vital to Act Now

Credit Card Debt

If you are having more and more difficulty paying your bills each month, it is time to act. In other words, don’t wait until the month comes when you can’t pay your bills, as you are simply delaying the inevitable. In other words, if things don’t change, you can’t expect to miraculously start covering your bills. Thus, if you act sooner than later, you will likely be able to save your credit score and get your debts under control.

Here’s what you need to do now to begin digging yourself out from underneath your debt:

• Strategize and develop a plan – Without a plan you can’t expect to begin undoing the damage. In short, you must sit down with your partner and make a budget. If you can recognize where your money is going each month, then you can begin making changes now. Your first order of business should be to collect at least three months of bills, credit card statements and bank statements. Then, take the time to review this paperwork so you can examine spending trends.
• Start cutting back – It may seem quite obvious, but now is the time to see if your bills are bigger than your income. If this is the case, you will need to determine which of these bills are essential and non-essential, and begin eliminating the non-essential bills. If your income still covers your bills, but you are still finding it difficult to pay bills each month, then your spending is the problem. In this instance, you will want to begin keeping a detailed journal of your spending so you can find ways to cut back on your monthly expenses.
• Find the money and put it to good use – Once you have a good idea of your monthly income versus your monthly bills and spending, you will be able to either recognize areas in which you can cut back to better begin paying down your debt. A few extra dollars may not seem like a big deal but, in the long run, it can make a serious dent in your debt. Take all extra money each month and put it towards your highest interest rate debt and work your way down.