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Could You Buy A 2004 Subaru For What Your Credit Cards Are Costing You?

frustrated looking woman looking at a laptopDid you know that if you have $30,000 in credit card debt at 19% you’re paying enough in interest in just a year to buy a 2004 Subaru WRX or a 2004 Ford Focus SVT? Those two cars were recently on a list of’s best used cars for $5000. And $5000 is what you’d be paying a year if you did owe $30,000 on credit cards.

Not good long-term loans

Don’t get us wrong. Credit cards definitely have a place in your life. They can be great for buying an item when you don’t have enough cash with you to pay for it or as a short-term loan. But credit cards should never be used as a long-term loan – due to their prohibitively high interest rates — vs. a personal loan or a homeowner equity line of credit where you’d pay something like 3.99%.

If you’re working to get out of debt

If you want to get out from under that load of debt, the first thing you need to do is get a handle on your spending. The reason why you’re in debt is simple. You’re spending more each month than you have money coming in. And the only way to fix this is to determine where your money’s going. You need to then sit down and develop a budget to get your spending under control. If you find that your budget won’t handle both your living expenses and paying down your debts, you’ll have to either find ways to earn more or to cut your expenses.

Credit card transfer vs. a home equity line of credit

In the meantime there are two ways to get your interest rates reduced while you’re working to pay off your credit card debts. The first is to transfer it to several 0% interest balance transfer cards and the second – if you own your house – is to get a home equity line of credit.

So, which would make the most sense?

0% introductory rate vs. a home equity line of credit

Transferring your high interest credit card debts to new ones with 0% introductory rates or getting a home equity line of credit would both give you a lower interest rate. And either could help you pay off that debt as quickly as possible.

The fog of war

This is a phrase that is often used to describe what happens once a battle begins. It’s a shorthand way of saying that no matter how carefully a general crafts a battle plan once the fighting begins a sort of fog sets in and things don’t go according to plan. Unfortunately, the same is true about a plan for getting out of debt – things don’t always go according to plan.

A home equity loan

As an example of this, take a home equity line of credit. If you were to get one of these loans to pay off that $29,000 in credit card debt and then pay it totally off as quickly as possible, this would be a great solution. But what happens to many people is they get a line of credit with all the best intentions for paying it back. But then a bank offers them a higher limit than they need to pay off their credit card debts. They believe that’s okay and convince themselves they won’t use that extra credit.

By the way — if you’re not familiar with home equity loans here – courtesy of National Debt Relief – is a video that explains the differences between a home equity loan and a home equity line of credit.

Twice as much debt

What happens to many people is they then run into a bunch of bad luck, use up the entire line of credit and are forced to once again run up their credit card debts. And before they know it, they have twice as much debt as before they took out the loan. The same thing can happen with 0% interest balance transfer cards. People use the money to pay off their high-interest credit cards but forget to close them. They eventually find themselves short of money and begin using the old cards again and end up having both the old cards and the new ones and their balances just keep ballooning.

Have an emergency fund

If you create a budget to get your spending under control, try to make one that includes money for an emergency fund. Ideally, this fund should be the equivalent of six months of living expenses. But if that doesn’t seem doable, shoot for at least three months’ worth. Then when an emergency hits — and trust us that one eventually will — you won’t have to use a credit card to pay for it.

To escape the debt trap

If your goal is to get out of the debt trap, there are some things you should do besides creating an emergency fund.

For one thing you should close those old credit cards the minute you pay them off — whether you use new 0% interest cards or a home equity line of credit. This will cause your credit score to drop but totally eliminates the possibility that you would be tempted to use them again.

Second, if you opt for a home equity line of credit, try to get one with a limit that’s no higher than what you need to pay off your old credit cards. Some financial experts might advise you to get the highest line of credit possible, as this would help your debt-to-available-credit ratio, which could boost your credit score. But the extra points you would earn is less important than getting out of debt. The best way to improve your debt-to-available-credit ratio is to pay down your debt and not to expose yourself to taking on even more. And if you don’t get a higher line of credit than you actually need, you will never be tempted to use that extra credit.

A 0% transfer card might be best

Between the options of transferring your high-interest balances to 0% interest cards or getting a home equity line of credit, we recommend the balance transfers – but only if you’re positive you can pay off your balances before your introductory periods end. The reason for this is the transfer fees you might be charged ($300 to $500 per transfer) will be far less than the interest you would pay on a home equity line of credit over the same time period. But you need to be really careful that you do pay off the balances on those new cards before your introductory periods expire or you could end up right back where you started or in even worse financial shape.

It’s not easy but it should be worth it

Paying off a huge pile of debt like our hypothetical $29,000 is not an easy task. It takes time and self-discipline. The reason you got into trouble with debt is because you were living a lifestyle you couldn’t afford. The only way to fix this is to change your lifestyle to match your income, which will mean you will need to make some sacrifices. You might have to find a cheaper place to live, trade in your car for a used one with more miles (and not as much pizazz), quit eating out three or four times a week or stop hanging out with friends so often.

But just imagine how you will feel when you become debt free. You’ll be able to sleep better at night, which means waking up feeling refreshed and looking forward to your day. If you’ve had debt collectors hounding you unmercifully, they will go away. You won’t be paying interest on your debts so you’ll have more money to save and invest for your long-term goals such as buying a home or for your retirement. You’ll have money for an emergency so that you won’t be wiped out when you have an unexpected medical bill or car repair. You’ll be able to face the world knowing that you’re in debt to no one and that no creditor can make your life miserable.
Wouldn’t this be worth some short-term sacrifices?

Shocking News – Your Credit Card Purchases Could Be Repossessed!

grandma looking shockedYou recently purchased a washer and dryer for $1100 and now the store wants it back? It could actually happen. Many credit cards – even some of the store cards — permit the creditor to repossess items you purchased if you don’t complete your payment. This is based on an analysis done by

What it found

What this analysis revealed is that credit cards are generally called unsecured debts. This means that there is no piece of property used as collateral to secure them. The fact that credit cards are unsecured debt is often used to explain why their interest rates are more than other types of debt like auto loans and mortgages. In comparison, these are called secured debt because they are backed up by collateral such as your house or automobile.

A security interest

However, many cards including some of those medical credit cards can actually threaten to repossess your stuff. This is according to credit card agreements that have been filed with the regulators. In fact, there is in excess of 200 card agreements that give a “security interest” to the bank on items you purchase. This does not include secured cards you would use for rebuilding your credit. But store cards from Big Lots, Costco and Guitar Center that are backed by Capitol One contain this clause. So do some of the credit cards such as the high interest Wells Fargo Financial card.

Easily overlooked

These repossession rights are one of the clauses in credit card agreements that are typically overlooked. The problem is that most people who apply for credit cards do this based on their interest rates or their rewards and skip right past their other terms. When threatened with repossession people tend to say, “Wow! I had no idea I had agreed to that.” But they do agree to this whenever they sign a credit card receipt.

How this works

If you think that if you file for bankruptcy your household goods will be protected, this may not be the case. If you purchased an item with a credit card that has a purchase money security interest, this generally allows the lender to repossess the item until you’ve paid your entire balance. However, in most credit card contracts this security interest phrase is not explained. This can leave the threat of having the item repossessed very unclear. With several store cards backed by Capital One the security interest language provides the bank with a claim on even extended service contracts and insurance as well as merchandise. This term also assigns you part of the responsibility for taking purchases back. What this security clause states is that, “If we take back any good we may charge you our costs and require you to make the goods available at a convenient place of our choice as allowed by law.” For that matter, Capital One even says that the store has the right to contact you via personal visits – at home or at work.

Rarely enforced

Fortunately, threats to seize an item you purchased with a credit card are rarely followed up on. It is difficult to resell a person’s used possessions and repo men must have a court order before the sheriff can enter your house. The reality is that nobody wants used stuff back. But the possibility of having an item repossessed is treasured as a powerful collection tactic. Collectors often use this as a way to obtain a settlement check. This is because households that are debt strapped might rather pay up than risk losing their refrigerators, laptops, HDTVs or washer-dryer combinations.

What to do if threatened with repossession

How serious the threat of repossession could be will depend largely on the amount of money involved. In other words, the threat might be a lot more in the case of a $1100 washer-dryer combo vs. a $300 laptop. One bankruptcy attorney has recommended that if you are threatened with repossession you say you will pay the value of the item as used, which will be much less than the amount being demanded. And while the possibility of having that item repossessed is very low, a debt collector could threaten civil action or possibly even criminal charges.

Credit card fees raise costs

If you carry several credit cards with balances you need to be aware that there are some changes being made in fees that can increase your cards’ costs. For example, on its general-purpose card Citi did away with a deal on late fees it was giving those of its customers with low balances. Prior to this, first-time offenders had a $15 late fee if their balances were below $100. However, this now costs everybody $25 – regardless of his or her balances. In addition, there can now be fees if your credit limit is increased whether you asked for it or not. However, these fees usually are linked to subprime cards such as one from First Premier Bank with its 36% interest rate as well as a pre-account opening fee and an annual fee.

Complex fee structures

While the CARD Act has made it easier to understand credit card agreements in general, there can still be complicated fee structures that make it tough for consumers to understand what their cards are actually costing them. In many cases, people just aren’t equipped to decide what their cards are really costing them. The card agreements themselves are now a bit easier to understand. Since the year 2008, the average credit card agreement has shrunk by about 2100 words, which is 24% skinnier and readability has also improved. Despite all this, many consumers are still shocked when they get down into the fine print of a credit card agreement. The problem is that the credit card companies will always try to bury things. This definitely puts the burden on you as you must read all the fine print in a credit card agreement before you sign on the dotted line to be sure you understand what that card will really cost you.

One good exampleHand holding batch of credit cards credit card debt

One good example of why it makes sense to read the fine print is those 0% interest balance transfer cards. On the face of it they can seem like a very good option. For example, if you’re carrying $10,000 in debt on credit cards with an average interest rate of 19%, you could transfer their balances to a new one where you would pay zero interest for anywhere from 12 to 18 months. This means all of your monthly payments would go towards reducing your balance. If you were to heavy up on those payments you might even be able to become debt-free before your introductory period expired. However, if you read the fine print you’ll find that some of these cards have a balance transfer fee of $300 or even $500. Before you sign up for one of them be sure to do the math, as a transfer fee could easily reduce the amount of money you would save by making the transfer.

Just one missed payment

It’s also important to understand what happens to your credit score if you miss just one payment on a credit card. Most experts believe that this would lower your credit score by as many as 50 points. If you had a credit score of 600 this would drop you from having an “average or okay” credit score to having a “poor” score, which would make it more difficult for you to get new credit. Plus, it would likely increase your interest charges and even the cost of your auto insurance.

Credit scores rule

Whether we like it or not, our credit scores rule our financial lives. In fact, our credit scores are so important that the Discover Card has begun putting our FICO scores on its monthly statements. So if you have a Discover card, you should already know your credit score – for good or for bad. If not, you can buy it on the site for $19.95 or get it free by signing up for a free trial of its Score Watch program. Or you could go to a site such as or where you can get a version of your credit score free – though it won’t be your true FICO score.

Are You A Credit Card Revolver Hacker or Deadbeat?

Long line of credit cards (generic)Have you ever stopped to think about how you handle your credit cards? If you’re typical, you probably haven’t given much thought to this. You use your credit cards, receive statements, pay your balances (we hope) and that’s it.

But the credit card providers don’t look at things the same way. In fact, they actually divide credit card users into three distinct categories as follows.

1. The revolver

This is the person that credit companies love the most. And if this is you they want to keep you as a customer for as long as they can. Why do credit card companies love Revolvers? The reason is simple. These people are virtual money machines for the credit card companies. The name Revolver refers to people who do not pay off their balances at the end of every month, which causes revenue-generating interest to build up and increases the total amount they’ll eventually have to pay. The most diverse type of credit card users is probably the Revolvers. They make up a wide demographic that includes everything from minimum-wage workers to high-powered financiers. If you carry a balance from month to month it doesn’t matter whether you’re the type of person who buys big-ticket items on a small time budget and then makes the minimum payments on a maxed out card or not, you’re still a Revolver. However, it isn’t necessarily bad to be a Revolver. It’s just that you’ll usually end up paying more for most of the things you buy than other people do.

2. The deadbeat

When you see the term deadbeat you might immediately think it’s a person that doesn’t pay their debts. Well, you’d be wrong. A Deadbeat is really a responsible credit card user. But the credit card companies don’t make a lot of money on Deadbeats, which is why they give them such a negative name.

Deadbeats have one simple thing in common that’s undesirable to the credit card companies but desirable to almost everyone else. These are people who pay their credit card bills in full every month. Unshakable deadbeats are credit card users who never pay a single penny in interest, which keeps their credit cost as low as is financially possible. A slightly more easy-going cousin of the Deadbeat is the Transacter. This is a person that typically pays their balances in full and on time but that sometimes allows small amounts of money to ride from month-to-month.

Deadbeats are usually people who are financially responsible and don’t spend more money than they know they can afford even when faced with tantalizing bargains. If you are a Deadbeat and not admired by your friends and family members for your self-control, these people are probably just not paying a sufficient amount of attention.

3. The card hacker

No, this is not a person who is a con artist or identity thief. In this case, Hacker is the type of credit card user who opens two cards at once. One of them will have big bonuses and double rewards in key categories but a very high APR. Simultaneous to this the Hacker will also open a bare-bones reward card or one of those 0% interest balance transfer cards where there are no interest charges for the first 12 months.

Once these people have opened these two accounts they will then charge a few thousand dollars on the big rewards card. For example, they might book a vacation they had already budgeted for or purchase major appliances. They then immediately move this charge over to the card with the low rates on balance transfers. What ultimately happens is that the Hacker ends up with a big stack of earned rewards points and then a full year to pay off their balances before they have to pay any interest.

Does this sound like an exciting strategy? It might be but it does have its risks. Before you attempt credit card hacking, you need to take into account whatever balance transfer fees there might be which would negate the benefits.

Which one are you?

Judging by the statistics, the odds are that you’re a Revolver. The Financial Industry Regulatory Authority released a study in April 2012 that 55% of men and 60% of women carry a balance from month to month on their credit cards. In addition, about 40% of American adults make just their minimum payments every month, which means they’re paying more than just the retail price of their purchases.

There’s nothing wrong with being a Revolver

College student thinking while holding credit card

There is really nothing bad about being a credit card Hacker or Revolver. It’s your own business how you choose you to use your credit cards. But our advice is to not let that nasty sounding term of Deadbeat put you off. When it comes to credit cards, it’s definitely best to be a Deadbeat.

Watch out for misleading credit card offers

Whether you’re a Revolver, Hacker or Deadbeat you need to watch out for misleading credit card offers. We read of one recently where the person received a letter from Bank of America that referred to an” Annual Privacy Notice” and on the inside included several mentions of “your prepaid card.” Since the person who received this offer was not a Bank of America customer, she was immediately suspicious. If you receive envelopes like this that refer to “annual privacy notices” or to prepaid cards from banks where you don’t have accounts, be sure to read fine print. These mailing pieces often have misleading print on the outside and then turn out to be advertisements or calls for action for some product or service.

Stay safe

If you are receiving solicitations like this or any others that refer to your privacy or that include calls for action you don’t understand, be sure to get your credit reports from the three credit reporting bureaus – Experian, Equifax and TransUnion. You can get them free once a year either from the individual credit bureaus or altogether on the site You will need to carefully review these reports checking out every entry including all of your accounts, and your identification, which would include your name, address and Social Security number. Be sure to look for any inquiries or new accounts you don’t recognize. In the event you find there are accounts you don’t remember having opened or information that is incorrect, immediately contact the appropriate credit bureau and ask that it put an alert on your credit report and let you know if there are any new inquiries.

If you find mistakes

In addition to looking for accounts you don’t remember having opened, you should look for errors in your credit report. Last year the Federal Trade Commission released a study that 20% of us have errors in our credit reports and 5% of us have errors so serious they could be hurting our credit scores. You should look especially for items that have gone to collection, judgments, missed payments, late payments, bankruptcies foreclosures and tax liens. If you find any of these in your credit reports and you believe they are errors, you will need to contact the appropriate credit bureau and dispute them. This means writing a letter to the bureau along with whatever documentation you have that supports your case. You should send copies of this to the other two credit bureaus as well. When you dispute an item, the credit bureau is required by law to contact the institution that provided the information and ask that it be validated. In the event the institution cannot validate the information or fails to respond within 30 days, the item must be removed from your credit report.

Analyzing The Consumer Debt Problem Of Americans

debt split in halfIf you are having problems with debt, there is help available for you. But before you concentrate on getting yourself out of debt, you also need to consider the reasons that got you there in the first place. The consumer debt problem in the country is not decreasing. It did for a while, but now it is going up once more.

That is something that you may want to research on. Why is it that after everything that we have been through in the last recession, why are we still incurring debt? Haven’t we learned our lesson yet? Are we really driving ourselves up the wall again and setting up our future for another credit problem?

In an article published on the, it is reported that American households added $241 billion worth of debts in the last quarter of 2013. After lowering their debt levels, consumers are back to borrowing money – again. According to the title of the article, this is an “ambiguous omen” for the country.

Important statistics about the American debt scenario

The latest report from The Federal Reserve Bank of New York revealed the details of the growth in the consumer debt problem. The revealed that the change in the debt are as follows:

  • Mortgage debt is $152 billion

  • Student debt is $53 billion

  • Auto loan debt $18 billion

  • Credit card debt $11 billion

Only the HELOC declined by $6 billion. The rest went up significantly.

According to the report, this is the highest increase from one quarter to the other since Q3 of 2007. That is before the recession happened. Are we setting up ourselves for another financial meltdown? Let us hope not.

Although the debt level is rising, the delinquency is holding steady at 5%. It means consumers are trying their best to stick to their payments.

In a separate infographic from The Credit Examiner, it revealed that the average debt of consumers in 2012 are as follows:

  • $149,782 in mortgage debts

  • $34,703 in student loans

  • $15,328 in credit card debt revealed that the average consumer debt problem was $199,813 in 2012. And it is reported that the amount is higher in 2013. How can we expect to completely solve the debt problem in the country if we keep in increasing our debts?

Why is our debt continuing to grow?

That is actually a good question – why do we keep on increasing our debt level – thus increasing our consumer debt problem? In an article that we published earlier, we discussed a study that revealed how 1 out of 3 Americans still lose sleep over money problems. If debt is so bad that we lose sleep over it, why can’t we just live without it?

It is somehow connected with how we are encouraged to increase consumer spending. It reaches a point wherein we are forced to spend beyond our means already. We are given easy access to credit just to support spending that we cannot afford. That is how we are tricked into making our consumer debt problem worse.

But why is there so much concern about consumer spending anyway? We think that these three reasons are to blame.

  • Economy-driven. We are a consumerist society. In fact, it is a known fact that 70% of the US economy is driven by consumer spending. Our economy is built in such a way that it thrives in how much we spend – not how much we produce. Even if we have a high production rate, if no one buys them, that will not mean anything in our economy. Overall, the businesses thrive if we spend our money on them. So we work for these companies so we can buy the products that businesses produce. What we spend is what the business owners use to pay us our wages so we can buy some more. It is a cycle that moves because of consumer spending.

  • Measurement of an improving economy. In connection with the first reason, our consumer debt problem is made worse because we use our spending as a measurement of our economic success. According to the New York Times link that we mentioned at the beginning of this article, the willingness to borrow money to spend is an indication that households are confident about their personal economic conditions. The article quoted an expert that said “In a steady state you would expect, in nominal terms, household debt to grow.” That simply means if we want our economy to be steady, we need to expect that our debt will really grow.

  • Cultural thing. As sad as it may sound, Americans are culturally inclined to spend. If they want something, they spend on it instead of finding ways to work on it themselves. Some of us blame credit card debt on the purchasing tool itself. But if you think about it, the problem is not the card, but how we use it. An article published on revealed that other countries does not react to credit cards in the same way as we do. France, Germany and other countries in Europe do not have as much credit card debt as we have – and they have more savings than we do too. We all have access to the same purchasing tools but Americans are culturally inclined to be in debt just to get the things that we want. We do not prioritize savings as much as we should and the lack of emergency fund actually leaves us in a more vulnerable position in the future. One emergency that is beyond our budget can put us in debt.

You need to consider these factors as important influences to our current consumer debt problem. Obviously, something has to change and relying on the government to influence us to change is not possible. We need to look into our own homes and start making small changes here and there to make sure that our debt level will not reach a point that will lead into another financial crisis.

What will it take to change the debt situation of consumers

There are many ways to improve your finances but it all begins with your ability to change your mindset. It is tough to change habits that we have grown accustomed to but there is no shortcut to it. We have to work hard to make sure that our debt situation will not get any worse.

With that, here are 5 things that you can do to help make the necessary changes that will solve our consumer debt problem.

  • Ignore the calls to spend if you do not need to buy anything. Since our economy is geared towards spending, you can expect that everything around you will encourage you to buy something. These include advertisements, peers, neighbors and even your own family. Keep in mind that if you do not need it, do not spend on it.

  • Understand your current financial situation – at all times. One way to help you control your spending is when you know your financial capabilities. If you live on a budget, you can quickly decide if you can afford something or not.

  • Stop using your material possessions as a measurement of your success. At this point in time, looking into the qualities of the modest millionaire is a good idea. You need to stop using your possessions as the measurement of how financially successful you are. You do not need to show off. Just be modest and be content in knowing that you are financially secure today and in your future.

  • Educate yourself on how to properly grow your personal net worth. Not only should you know your finances, you should also understand how you can grow it. Learn about investments so you can put your money where it can grow.

  • Find out your options to get out of debt. Since we already have the consumer debt problem, we naturally have to find out how to get out of debt. Fortunately for you, there are so many options before you. You just have to find the specific debt solution that fits your needs. To help you, here is a video from National Debt Relief that will help you find trustworthy debt relief companies to aid you in getting debt freedom.

How To Ditch The Typical American Spending Habit

woman holding a credit cardIf you are American, the chances of you being guilty of overspending is quite high. Considering what we went through in the past couple of years, it is apparent that the spending habit of the average consumer has to change.

The thing about our society is that we are encouraged to spend – or more accurately, to spend excessively. In an economy that is 70% reliant on consumer spending, you will realize that everyone and everything around you will be campaigning for you to make purchases. If you think about it, our spending is probably what got us into trouble back in 2007.

Before we can really define how we can ditch the spending habit of Americans, you may want to understand how we spend in the first place.

How does the average American consumer spend?

An article published on in 2006 revealed some pre-recession statistics that showed how the American spending habit makes us the biggest spenders in the planet. Apparently, what we spend in a week is more than the annual GDP (gross domestic product) in Finland. In fact, the average spending of the American household is at $1,500 a week – and this was back in 2006! Although the majority of the spending is done food, transportation, clothing and housing, which are basic necessities, they were done in excess. We needed a home, that is true, but not two of them. We needed clothes but not those expensive designer clothes. We need to eat but we do not have to dine out all of the time.

The mentality of the excessive spending habit is deep rooted in our society that it seems quite hard to get rid of. The American spending habits can be destructive and we have already proven that when the recession triggered a lot of financial disasters in household. We can probably agree that things would not be too bad if only we didn’t have all the debt caused by our excessive spending. If we had savings instead of debt, it would have been easier to recover.

If you analyze the average consumer spending habit and compare it to different countries, you will realize just how different our priorities are. The Bureau of Labor Statistics released a comparative study that shed some light on the spending trends in 4 countries back in 2009. These countries included the United States, Japan, United Kingdom and Canada.

According to the data published on, the priority spending in these 4 nations are as follows:

United States:

  • Housing: 26.3% (does not include mortgage interest, principal payments and property taxes)

  • Transportation: 17.5% (6.3% public transportation; 34.9% automobile purchase)

  • Food: 14.6% (41.1% outside the home)

  • Health: 7.2% (more out of pocket share in expenses)

  • Clothing: 4%


  • Housing: 21.4% (does not include mortgage interest, principal payments and property taxes)

  • Transportation: 20.6%

  • Food: 15.3%

  • Clothing: 6%

  • Health: 4.2% (lower because of national health care options)

United Kingdom:

  • Housing: 24.1% (does not include mortgage interest, principal payments and property taxes)

  • Food: 19.9%

  • Transportation: 15.2%

  • Clothing: 5.5%

  • Health: 1.4% (lower because of national health care options)


  • Food: 21.8% (21.4% outside the home)

  • Housing: 21.6% (includes rent, utilities and communication)

  • Transportation: 9.8% (public transportation is preferred; 23.8% public transportation; 22% automobile purchase)

  • Health: 4.3% (lower because of national health care options)

  • Clothing: 4.2%

In ranking the basic necessity spending habit of each country, most of them spend more on housing costs. That is probably due to the fact that the average home expenses are really among the highest that people will spend on. In terms of food, it is evident that Americans spend unnecessarily on dining out. This is something that we can all cut back on. Not only that, our preference to transportation expenses may be something that we can change too. With the rising prices of gas, we should be more encouraged to seek out ways to lower  our car expenses. Biking or carpooling are only some of the ways that we can really lower our monthly expenses.

Tips to help you change the consumerist shopping habit

Changing our spending habit is something that will take more than just lowering our budget. It has to involve certain changes in our mindset and some activities too. revealed in an article last January 2014 that consumer spending rose in the fourth quarter of 2013 – by 3.2%. The household spending rose to 3.3% and it is noted to be the best since 2010. Despite that fact that the government shutdown and the debt ceiling issues were prominent in October, it did not hinder American consumers from satisfying their purchasing needs.

It seems that a looming financial problem in the nation will not deter consumers from making purchases. The strength of the spending of Americans seem to be rising once more and economists are viewing this as a good sign.

But consumers should not view it similarly. More spending would mean lesser savings. While it can help our economy, you have to make sure that your are not implementing any of the bad spending habits that got us in trouble in the past. If you find yourself leaning towards overspending, here are some things that you may want to do.

  • Put yourself on a debt diet. If you have to buy something, make sure it is not on credit. You can use your credit card if you want to maintain your credit score but make sure that you can pay for that expense in full when the billing comes in. If you cannot afford to purchase something without credit, just don’t buy it.

  • Shop with a list. This does will never get old. Making a list will help you plan and budget any shopping errand. It will lower the chances of you overspending – at least if you stick to your list.

  • Avoid catalogs. These are just temptations that will get you to spend your money. If you do not need more clothes, then just don’t buy more.

  • Exchange the old with the new. If you feel like you need to buy new clothes, look at your wardrobe and select one or two items that you can let go of. If you cannot choose, then you should keep yourself from buying new stuff. You are not only forcing yourself to make smarter spending decisions, you are also minimizing the clutter in your home.

  • Do the waiting game. If you think that you need to buy something that is not included in your plans, you may want to go on a waiting game. Do not give in to the impulse buying urge. Wait for a week before you buy it. You can make it a month or even just a day. If you really need that product, the urge to buy it will not diminish. That is when you should realize that it is not a fad.

  • Budget your online spending. Most of the time, you use your credit card to make online purchases. This is actually encouraged because of the extra layer of protection that it can provide – at least compared to debit cards. But using cards will make it more difficult to limit your spending. Make sure you budget it so you will not end up overspending.

The spending habit of the American consumer is not totally lost. We may be viewed as the biggest spenders in the world but that does not mean we cannot change that. It takes some getting used to but you have to start making smart choices about your money. That is how we can try to avoid another financial catastrophe.

In case you have put yourself in debt because of overspending, here is a video from National Debt Relief that can give you tips on how to achieve debt freedom.

10 Signs You Might Be A Credit Card Addict

Quick, how many credit cards do you have in your wallet?

You say you can’t remember exactly how many.

That’s a sure sign that you might be addicted to credit cards.

The fact is that America, as a whole has become credit card addicted. According to the most recent statistics, average credit card debt in America is $15,252 per household. Given the fact that this is an average, it’s not hard to guess that many people are carrying credit card debts of $10,000 and more. And this doesn’t count personal loans, auto loans, student loans or mortgages. In fact, when you add it all up, American consumers owe $11.52 trillion in debts.

woman holding a credit card

If you’re wondering if you might be a credit card addict, here are 10 things to look for.

1. Denial isn’t just a river in Egypt

Denial is one of the biggest signs that you are addicted to credit cards. If you have no idea as to what your outstanding balances add up to and are just sending in your minimum payments every month, the odds are that you’re in denial.

2. You can’t imagine life without that magic plastic

When you think about your credit cards being lost or stolen, do you find yourself panicking because this would mean your only real source of discretionary income is now gone?

3. You’re constantly applying for new cards

Do you fill out and mail in an application every time you see a juicy credit card offer? Maybe you just can’t resist the perks that come with that card or it’s because your finances are going down, down, down and you think that a credit card will save you.

4. You use any possible way to pay your bills

Are you taking out high-interest cash advances from a credit card in order to pay a bill? In other words, are you robbing Peter to pay Paul? If you’re using any possible method to pay your bills you definitely need help with your credit card addiction.

5. You never worry about increases in APR’s or fees

When you read that fine print about an increase in your APR or some of your fees, do you just blithely ignore it. You’re just not concerned about any of these increases even if it means that you’re paying totally exorbitant interest rates or late payment fees.

6. You keep your debt a secret

What do you do when the subject of credit cards comes up? Do you try to change the conversation? Or worse yet, maybe you’re keeping your credit card debts secret from your significant other. For example, when your credit card bills roll in do you try to hide them? And do you do the same thing with any correspondence you receive from your credit card providers? You may have read how true alcoholics hide their booze to cover their addiction. Well, if you’re hiding your credit card statements and correspondence you’re trying to hide your addiction.

7. Are you a “good deal” shopper?

If you run into a good deal do you have to buy the item even though it means putting it on that magic piece of plastic? Or worse yet, do you have a bunch of items just sitting around your house you never use but bought because they were such “good deals?”

woman looking tired and stressed

8. You have limited cash reserves

You can’t seem to save any money because you feel that saving is just something out of the past and that it’s useless. Why would you save when all you need is that little piece of plastic to cover any emergency?

9. Your credit card balances are multiplying at a rate that can only be termed astonishing

You’re in the minimum payment trap but it doesn’t matter because you are still not thinking twice before swiping a card. Plus, your balances are so high that if you thought about them you could spend your nights lying in bed thinking about nothing else.

10. You’re totally tapped out

Have you totally maxed out all of your credit cards? Unless this has been the result of some kind of emergency you definitely have a problem. This is a clear indication that your spending is out of control because it definitely exceeds your earnings.

What you need to do

If you answered, “yes” to many of these questions, you might be a credit card addict. If you don’t break the addiction you’re headed for serious financial trouble, which could end up with you having to file for bankruptcy. So, what can you do? First, toss all those credit cards. This might be the most painful thing you do this year but you need to shred all those cards. This is because there’s just no way to get out of debt while you’re still carrying those addictive pieces of plastic.

Get your debt under control

Once you’ve rid yourself of those addictive credit cards, you need to go to work to get your debt under control. To do this, you will need to sit down and develop a debt management program. If the task seems overwhelming you might go to one of those nonprofit consumer credit counseling agencies for help. These agencies have experienced counselors who will go over your spending and income and help you devise a plan for becoming debt-free. In some cases they will even work with your creditors to get your interest rates reduced so that you can become debt free somewhat faster. Do understand that if you haven’t already gotten rid of those credit cards, the consumer credit counseling agency will insist that you do so. If you follow the advice you’re given by your debt counselor you should be debt-free in about five years or less.

handwritten family budget

If you haven’t already created a household budget it’s important that you do so. There are numerous budgeting tools and apps available many of which are free. The one that we like the best is This is a free financial management tool that will track your spending to help you develop a budget and then even send you email alerts if you overspend in any of your categories. Mint is very easy to use, too. All that’s required is that you type in the numbers of your savings and checking accounts, credit card accounts, investments, auto loans and so forth. Mint will then display all of your financial information together in one easy-to-read graphic.

Create an emergency fund

Since you will no longer have that magic plastic to fall back on in the event of an emergency, you’ll need to create an emergency fund. Most financial experts say that your fund should be the equivalent of at least three months’ of living expenses but six months is better. Naturally, you won’t be able to create this fund overnight. Your goal should be to save at least 10% of your income each month. Do this and you should be able to build an emergency fund in less than nine months. If you find you have trouble saving money, open a savings account and then arrange to have money automatically taken out of your checking account and deposited into it each payday. You might also want to open a second savings account to cover a one-time expense such as that automobile maintenance bill you know is coming up in a few months. All you’ll have to do is set aside a small portion of your paycheck every month and when that expense surfaces, you will be prepared to pay for it without wrecking your budget.

7 Credit Card Traps You Should Be Careful With

credit card trapHave you ever been in credit card hell? This is a financial state when you realize that your credit cards are not really doing you any good. It is when you are put in a situation wherein you have been sucked into one of the credit card traps that is keeping you buried under loads of financial obligations.

What makes this debt easy to fall into is the fact that you can use it over and over again. It is not like the traditional loan that you apply for once and when you have used up the funds, you have to apply again to get more money. A credit card allows you to use it again and again – that makes it a dangerous habit to get used to. If you are not careful, you could end up burying yourself under a mountain of debt.

In fact, reported that the current debt of Americans have reached really high amounts already – scary high rates to be exact. That is how the article described it. They cited data from the Federal Reserve Bank of New York that the current debt is not as $11.52 trillion. It is an amount higher than it had ever been since 2011. Not only that, the article said that it is still rising quite rapidly. The debt increased by $241 billion during Q4 of 2013. That is the highest growth with 2007 – which was the start of the most recent recession.

Does that mean we have to brace ourselves for another financial crisis? That all depends on how we act now.

7 credit card qualities that double as a financial trap

One of the things that you can do is to avoid the tricky debt pitfalls that can ruin your financial situation. In particular, you may want to be a smart credit card user. That begins by learning the credit card traps that will put you in danger of too much debt. Here are the 7 qualities of a card that you need to be careful with. If you do not know enough about them, they can end up putting you in debt.

  1. Minimum payment requirement. The first is about paying only the minimum of your debts. If you compute it, you will realize that it will take you a lifetime (sometimes literally!) to finish paying off your credit card balance in full. That is because the minimum payment requirement is only around 4% of your balance. The rest are finance charges. If you want to significantly reduce your debts, you have to learn how to pay more than the minimum.

  2. Late payments. Another one of the credit card traps that you need to be cautious of are late payments. This is not just the $25 to $35 charge that you will be paying on top of your balance and finance charge. It can also include the APR (Annual Percentage Rate) penalty that you will be imposed with until after you have made 6 payments on time.

  3. Payment processing schedule. In line with number 2, you need to be aware of the specific schedule of your payment cut off. It is usually in the afternoon of your due date. If you sent in your payment even a minute late, that can trigger the late payment fee. You can call the credit card company to waive this penalty fee so that you will not be charged – at least, if you have been late for only a minute or a day. But if you know that you are going to be late, you may want to call your creditor immediately to ask for an extension.

  4. Introductory fixed interest rate. The law allows credit card companies to change your APR anytime they wish. They only have to give you advice ahead of time. Sometimes, credit card companies will offer a fixed interest rate on new accounts but do not be blinded by that. In most cases, that will change after the first year is up. Make sure you are aware of that before signing up for the card. Ask when the new rate will take effect and how high it will be.

  5. Balance transfer. Credit card traps also include the debt relief option known as balance transfers. It is true that a balance transfer can help you get debt relief but you have to understand the rules first. This is a new card that is offered with a 0% interest rate. This is only for a specific period – usually between 6 to 18 months. After that, your rate will change to the usual high interest rate of credit cards. Unless you can pay the credit card debt completely within the promo period or at least a significant part of it, this debt solution will not help you a lot.

  6. Cash advance. Be careful of cash advances in credit cards. While this can help you during emergencies, it will be imposed with very high rates. If you cannot pay it back immediately, it can accumulate quite easily. Try to search for other options to finance your need. Credit card cash advances should be one of your very last options – along the same level as payday loans.

  7. Reward programs. The last of the credit card traps that you may want to be careful with are the reward programs. If you are only getting the card because of the rewards, you need to come up with a better reason than that. Also, you may want to maximize these rewards to benefit from the card.

These credit card traps can put you in debt if you ignore them. Make sure you pay attention to them so they will not become pitfalls.

How Americans use their credit cards

Although these traps will endanger you to fall into credit card debt, the main blame will still be on your own spending habits. It is just in our culture to be spenders. In fact, the US economy relies heavily on consumer spending to thrive. That being said, you can expect that the government, businesses and everything around you will be encouraging you to keep on spending your money.

Based on an infographic from The Credit Examiner, the credit card usage statistics reveal that in 2012, Americans spent their credit cards on the following:

  • 81% on travel expenses

  • 77% on expensive purchases

  • 46% on personal items

  • 44% dining out

  • 38% on groceries

  • 37% on entertainment

  • 20% on household bills

  • 15% on small expenses


Most of the expenses here are actually unnecessary, if you think about it. In another infographic, The Credit Examiner showed some interesting statistics and facts about overspending in the country. Apparently, in 2012, the picture of consumer spending are as follows:

  • 52% of consumers are spending beyond their means.

  • 21% of them have monthly expenses that cannot be covered by their income.

  • 13.5% of consumers are forced to alter their budgets to accommodate the overspending of the previous month


According to the last infographic, some of the reasons why consumers are overspending is because they do not have monthly saving goals. Another reason is they can easily access credit and cash. It is also noted that a lot of us misuse our credit cards.

It is apparent that managing multiple credit cards without ending in debt is a huge challenge for all of us. But you do not have to get rid of these cards if you do not have to. You just have to learn how to use it wisely.

Here is a video from National Debt Relief for more tips on how to solve credit card debt problems.

A Closer Look At The Current Financial Security Index

man fanning money near his earThere are many measurements used to determine our economic conditions and one of them is the Financial Security Index. The most popular index, or probably they were the one to start measuring it, is from Bankrate.

It is a lot similar to the Consumer Confidence Index that is done by The Conference Board. Although they are opinionated, a lot of experts look at them to figure out the personal feelings that consumer have about their own financial standing. In effect, the experts can also determine their sentiments about the economy in general.

Consumers can also benefit from this knowledge because it will help them make plans to secure their own financial standing. Even if you think that your individual wealth concerns seem trivial in light of the general economic condition, it still adds up to affect everyone else. Think about it. If everyone in your neighborhood is individually confident about their own personal finances, that means the overall economic situation in your neighborhood is great. If all the neighborhood in the county feels the same way, then things are looking great for the whole county.

In 2011, conducted a survey that revealed that the top finacial concern of Americans is lack of money or low wages. According to the report, 17% of the respondents worry about the money coming in every month. Next to that is health care costs and too much debt.

Let us see if the financial security index from Bankrate this February says the same thing.

6 important components of Bankrate’s financial security survey

This particular index is done by Bankrate every month to measure the average feeling of security that Americans have towards their personal finances – at least compared to a year ago. This survey is done by Princeton Survey Research Associates International in behalf of Bankrate.

When the index is 100, it means the index is unchanged. If it is below 100 it shows a declining feeling of financial security. It is is higher than 100, it means an increase. Based on the findings from this survey, the overall financial security index is at 99.3. It is lower than December 2013 and January 2014 but is about the same level as November of last year. based the computation for this index on 6 different questions.

Which is greater: credit card debt or savings?

The first question involved the relationship between the debt and savings of the consumer – specifically credit card debt. 51% of respondents mentioned that their emergency fund is bigger than their credit card debt. 28% admitted that their debt is bigger – most of them have a full time job. 17% said they do not have both credit card debt and savings.

How is the current job security compared to a year ago?

The second question involved the job security of respondents. 61% mentioned that they feel the same a year ago – their job security neither improved nor declined. 23% felt that is was more secure while 16% said it was less. This is probably due to the fact that jobs are currently being created and unemployment is lower. The survey revealed that more men feel secure about their jobs compared to women. It is also important to note that low income earner have a higher sense of financial security.

How is the saving level compared to a year ago?

The survey also asked about the state of the consumer’s savings. 47% reported to having the same as 12 months ago. 15% are more comfortable with their savings while 36% are less comfortable. More men also admitted to feeling more confident about personal finances – at least when it comes to their savings. Those who are about to retire are noted to be more apprehensive about their savings. The same is true for low income workers.

How is the debt level compared to a year ago?

The next question focused on debt. 50% revealed that their debt is the same as before. It was also a tie between those who felt more comfortable with their debts and those who felt less comfortable. Both of them are at 24%. It was noted by the survey that the people who earned more felt a higher level of confidence about their debts.

How is the net worth compared to a year ago?

50% of the respondents revealed that their net worth is unchanged and 25% said that it is higher. 18% admitted a lower net worth compared to 12 months ago – most of which are from rural communities. The men also reported to having more net worth than before.

How is the overall financial security compared to a year ago?

Based on the survey, 51% felt the same amount of financial security as before. Those who felt less were 24% and those who felt an improvement is also 24%. It was also observed that more college graduates felt more confident about their financial situation than those who did not get a higher education. It should also be noted that retirees also felt more good about their financial standing than those who are still working.


What does this measurement of financial stability mean for consumers?

So what does all of this mean for consumers? What can be learn from the financial security index provided by Bankrate?

Well compared to the January 2014 financial security index of 102.6, the February results are declining. But does that mean consumers are making more mistakes when it comes to their finances? It is not really fair to make that assumption. If ever, what we have to note is that most of the respondents reported no change since last year. The question here is, should we be happy with a stagnant financial progress that is apparently the norm today?

Here are some of our observations and assumptions about the findings of this particular survey.

  • Consumers are wising up and prioritizing their savings instead of taking in more debt. It is also interesting to note that those who are working have more debt – that could mean that they are more confident to take on debt because they have the means to pay it back. On the other hand, retirees are reported to have more savings – naturally because they need to stretch their retirement fund to last.

  • Compared to the January results, more people feel secure about their jobs. This coincides with the higher employment rate that the country is currently enjoying. More than the added job, the stability of the economy make people more confident about their work.

  • Although the majority is saving, there is still a high percentage of people who are not comfortable with their savings. 36% is still high and that means people should put in more effort to save rather than take in more debt.

  • Those who just entered the workforce are understandably less comfortable with the credit that they owe. Retirees are also admitting to feeling more comfortable with their debt level compared to those who are working.

  • The financial improvements are concentrated on the urban and suburban areas. This is probably because the businesses and job opportunities are focused on the urban areas. That means we still need to help the rural areas find financial stability by giving them access to the same opportunities as those in the urban areas.

How to increase your confidence about your financial standing

It can be generally assumed that the financial security index does not show much improvement as the government tells us. That simply means the consumer is not feeling much of the improvements being proclaimed by our government. Does that mean the government is lying?

Maybe or maybe not. Or they could simply be exaggerating to boost the morale of the people. But truth be told, if you look at the details of this index, you will realize that the effort to improve your financial security really lies in your own actions. If you want to increase your financial security, stop looking at what you see around you and just concentrate on what you can do to help yourself. With that, here are some of our suggestions.

  • Get rid of your debts. First of all, you have to do something about your debts. This can unnecessarily eat up a part of your income so try to solve this problem as fast as you can.

  • Build up your emergency fund. If you can get out of debt while still adding to your savings, that is the best way to achieve financial security fast. Prepare for the unexpected so you don’t have to stress yourself out when an emergency strikes.

  • Save for the future. This is another way for you to secure your finances for the future. Just save for the things that you know you will need to spend on.

  • Plan for everything. Security comes from being in control of every situation. To make that happen, you should try to plan for everything. Being spontaneous is fun but not when it involves your money.

Facts About Credit Scores and Credit Cards That Might Surprise You

man holding multiple credit cardsIf you’re like us you probably take credit cards pretty much for granted. They are nice little pieces of plastic that you can whip out whenever you don’t have enough cash to pay for a purchase or when you’re running a little short and it’s not yet the end of the month. If you’re a savvy credit card user you don’t charge anything that you can’t pay off when your statement roles in so you never pay any interest charges.

The top cards

Have you been tempted to sign up for one of those cards that offer mouthwatering rewards. The top ones come with significant rewards from 2% to 5% cash back. Some even offer 0% interest for an introductory period of time. However, what these credit card offers don’t tell you is what it takes to qualify for one of them.

The credit card companies have criteria called “underwriting standards” for their cards that are closely guarded secrets. The credit card companies are much like Coca-Cola that refuses to release its recipe for Coke. The credit card providers keep secret the criteria they use to approve applicants for their most exclusive cards. However, there is information available from the site CreditKarma that provides insight into what it takes to get one of those top rewards cards. CreditKarma recently released a list of the lowest and average credit card scores of people who had been approved for some of the best and most exclusive credit card offers.

Fact #1: You could have a score in the 600s

The first surprising fact that can be gleaned from this information is that you don’t have to be a member of the “700 club.” In other words, you don’t necessarily need to have a FICO score of 700 or above to qualify for one of the top cards. While the average credit scores for people who successfully obtained the top cards did range in the low 700s, the lowest approval scores dipped well in the 600s. This is clearly because other factors are considered such as past payment history and income. This helps explain why the top credit cards from companies such as Citi, Barclaycard and Discover went to applicants with scores in the 600s.

Fact #2: 0% interest cards require a top score

A second surprising fact is that those 0% interest balance transfer cards do require a top credit score. If you’ve checked into the cards currently available, you would know that the top offer is for an 18-month introductory period. The irony is that these credit cards might be designed to help people trying to get out of credit card debt but the best ones do require a top credit score. For example, Discover and Citi are granting their 12- or 18-month cards only to people who have average scores in the low to mid-700s. If your credit score is in the mid 600s, the best you will probably be able to qualify for is one that lasts just six months.

Fact #3: Higher scores get better rewards

A third maybe not-to-surprising fact is that the higher scores get the bigger rewards. The best of these cards usually offer 2x points, cash or miles on almost every purchase. As you might expect, the average credit score required to get these cards is markedly higher than a “good” credit score. As an example of this, one version of the Barclaycard Arrival World Master Card offers 2x miles on all purchases and significant bonus miles, too. However, successful applicants for this card had average credit scores of nearly 740.

Fact #4: Students can have lower scores

Here’s one you might definitely expect, which is credit cards for students require much lower scores. In fact, the available credit score data shows that the average scores for applicants who are approved for these cards fall below 700. And the lowest scores that are approved for student cards are in the low 600s and, in some cases they even fall below 600.

Fact #5: Approval is just the start

If you are approved for one of these top credit cards this is just the start. Your credit limit and interest rate will be calculated based on your credit scores and other underwriting criteria. If you have a high score you will have higher limits and lower rates.

Something to keep in mind

If you do apply for one of the top rewards cards keep in mind that credit score information is just one factor in the card provider’s underwriting criteria. Plus, as card issuers fine-tune their underwriting standards, these criteria continually change – especially as the prime interest rate changes.

The downside of credit cardscouple worrying about finances

It doesn’t really matter much the rewards you could earn from a credit card if you’re continually racking up debt. You might think that getting 2x cash back on your Visa or MasterCard is a really good deal – but that’s only if you’re paying off your balance at the end of each month. If not, you could be racking up interest charges at the rate of 19% or even higher, which would totally wipe out those cash back rewards. The credit card companies have a grace period of anywhere from 25 to 30 days where you can pay off your balance before you begin to get hit with interest charges. If you charge a purchase the day after your card has “rolled over,” You might get nearly 2 months before that charge would come due. That’s like free money.On the other hand, if you don’t pay off your balance before or on the date it’s due, you will start piling up interest charges and could end up spiraling into a black hole of debt. Here’s an example of what we mean. If you charged $5000 on credit cards that had an average interest rate of 19% and made only the minimum monthly payment of $125, it would require roughly 273 months to pay it off (nearly 23 years) and would cost you $6,923.14 in interest charges.

If you get into credit card debt

If you’re getting to the point where you’re making late payments on your credit cards or even skipping payments, there is a good solution. It was developed by a financial expert named Dave Ramsey and is called the “snowball” method for paying off debt. The way it works is very simple. You rank your debts in order from the one with the lowest balance down to the debt that has the highest. You then concentrate on paying off that first debt being sure you continue to make the minimum payments on all your other debts. Once you have that firs card paid off, it will be easier to off the card with the next lowest balance and you will have more money available, then on to the third debt and so on.

Here’s a short video where Dave Ramsey explains more about why it’s important to get out of debt and   his snowball method.

Alternately, you could do as other financial experts counsel and arrange your debts from the one with the highest interest rate – which is costing you the most money – down to the one with the lowest. You would then focus on paying off the one with the highest interest rate then move on to the one with the next highest interest rate, etc. There are people who believe strongly in one or the other of the strategies but what it boils down to is choosing the one that makes the most sense to you.

5 Credit Card Uses That Are Actually Smart

retailer cutting a clients credit cardCredit cards have gone through a lot of bad publicity in recent years. But despite that, you should know that there are smart credit card uses that will defend their existence in the financial industry. They really have uses that are beneficial to our finances – from the convenience of a cashless transaction to the extra layer of protection for your money.

But of course, we need to learn how to use a credit card responsibly to be able to enjoy all of these benefits. If you think about it, we are to blame for our credit card problem. The card itself is not flawed. Everything boils down to how we choose to use it and how we react to the payment obligations that are expected of us after every use.

Although we are encouraged to lower our debts, statistics show that our debts are still continuing to rise. According to the latest data from the, the total debt amount by the end of 2013 is now at $3.1 trillion. Credit card debt (included in the revolving debt category) has also risen significantly in the last quarter of 2013. In quarter 1, the revolving debt is at $849 billion. In quarter 2, it grew to $851 billion and then increased to $852  billion in quarter 3. It jumped to $861 billion by the end of the the year. Most of the growth happened in December – just as expected because of the holiday spending.

These trends show us that paying off the debt completely still involves a very long journey ahead. It is advisable that you pay off any balance that you have before you decide on any more credit card transactions in the future.

5 uses for your credit card that makes sense

Despite these, did you know that there are certain credit card uses that actually make a lot of sense? If you consider it carefully, it even makes better sense than using cash – at least, if you learn how to pay the balance properly. Here are the 5 ways you can use your credit card the smartly.

Making online purchases.

Online shopping has grown to be a very convenient way to make purchases. It beats going to the store and fighting your way through the crowd just to get what you want. In some cases, the online prices are even lower than their counterpart in the store. reveals an increasing trend in online shopping. In 2010, the number of online shoppers were 172.3 million who contributed $228 billion in the overall consumer spending. In 2011, it grew to 178.3 million e-shoppers who spent $256 billion. In 2012, it grew even further with 183.8 million online shoppers who spent $289 billion throughout the year. Although the figures are not yet final, it is estimated that the 2013 online shoppers will total to 189.4 million. This growth will push eCommerce shops to improve their products and services – and that makes it an ideal place to buy things. If you want to join this trend, your credit card will help protect you and give you benefits too. Things like unauthorized charges can be reversed and thus protecting your money. You can even expect a stronger return and warranty policies – thanks to your credit card account.

Paying for big products or electronic appliances.

One of the options for credit card uses is for big and expensive purchases that takes too long to save up for. If the appliance or furniture really needs to be replaced and you cannot wait to save up for it, it is okay to use your credit card. But there are some things that you need to do. First is to check the warranty clause in your card. Most credit card companies offer extended warranties. Also, you may want to check if you can avail of a zero% installment plan to pay off that debt.

Renting a vehicle.

It will be very difficult for you to rent a car without a credit card. After all, this is the guarantee of the company that you will not run off with their car. While there are very few rental companies that will allow you to do so without a card, they will place a $500 hold on your bank account for 14 days. It will also involve a credit check. All of these will be unnecessary if you have a credit card. That convenience does not have any other alternative.

Financing your travel expenses.

Card holders can also benefit from this purchasing tool during vacations or other travelling events. In case your card gets stolen while you are away, you can simply call the creditor to ask them to freeze your account. That will keep the thief from completely stealing from you. Some cards also offer you travel insurance. In case you lose your card, there are companies who will send you cash and quickly replace your card within 24 hours. There are also certain travelling perks that you can enjoy.

Booking hotel accommodations.

Renting hotel rooms wrap up our list of great credit card uses. Just like in rental cars, booking a hotel room with cash will allow hotels to put a hold on your bank account. For some establishments, they will hold the amount that you are expected to pay for throughout your stay. That includes the room rate, phone calls, taxes and other incidental costs. It can cost up to $1,000 or more. And even if you pay it in cash at the end of your stay, the hold will not be lifted immediately. So if your expected bill is $1,000, you need more than $2,000 in your bank account.

All of these expenses are better off using a credit card but remember that you still have to practice being a smart credit card user. Make sure that you have a plan in place to pay off your card balances so it will not accumulate and become a big financial problem for you in the future.

Using your credit card for emergencies is not too smart

Some financial experts will advise you to keep your credit card for emergencies. While this may seem like a sound advice, you have to approach it with caution too. It is still important for you to save up for a cash emergency fund to be your main source of financial support.

Despite that, there are two emergency credit card uses that are acceptable.

  • When your emergency cash fund is inaccessible. There are instances wherein there is no ATM around or other sources for you to withdraw your cash fund. This is the only time for you to use your credit card. When you finally have access to money, you may want to pay off your card balance immediately.

  • When your cash emergency fund is not enough to finance what you need. Sometimes, your emergency situation demands a huge amount of money. If your cash fund runs out, your credit card can be a welcome relief. This will help ease your worries as you try to get out of your financial difficulty.

These are the only time that you should consider using your credit card for emergencies. It should not be an excuse for you to not save up for your emergency fund.

Credit card uses, regardless if it is advisable or not, should always be approached with a plan. With the exception of the emergency situation, you have to keep your card expenses in your budget. That way, you can pay it off as soon as possible to minimize, if not eliminate, the finance charges that can grow your money.

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