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The 8 Very Worst Mistakes You Can Make With Credit Cards

Video thumbnail for youtube video 6 Tips For Simplifying Your Financial LifeYou could love or hate your credit cards but, of course, they’re just little pieces of plastic with your name and a number on the front and a magnetic strip on the back. Whether you love or hate your credit cards you know it really isn’t the cards. It’s you and how you use them. Credit cards can be real friends when you use them correctly. For example, they offer instant gratification – for better or for worse. There you are browsing through one of your favorite stores and you spot a smart TV for just $499. Unfortunately there’s only $30 in your wallet. But, hey, you don’t have to save money for three months to buy that TV. Just whip out that little piece of plastic and you’ll walk out of the store with it under your arm.

Convenience and security

Credit cards also offer both convenience and security. It’s just much more convenient to carry one or two credit cards than a big wad of cash. If your card is stolen or if you suffer identity theft most credit card issuers limit your liability to just $50 and many cases will even waive that. And of course there are those juicy rewards programs offered by many credit cards. Depending on the card you could earn cash back, points redeemable for travel and other goods and services every time you buy something. If you use your cards regularly and pay your balances in full every month, you can actually come out ahead. Use those cards correctly and you could be flying home free for a weekend with friends.

 On the downside

Unfortunately, those little pieces of plastic can turn into little devils if not used correctly. There are some very bad mistakes that can be made with credit cards and here are eight of the worst.

1. Having too many credit cards

There is a simple equation at work here. The more credit cards you have the more likely you are to use them, which means the more likely it is that you will get into debt. In addition, when you have many credit cards this can negatively impact your credit score, which will reduce your ability to borrow money. Ideally, you should probably have only one credit card because this makes it easier to track your spending and to make your payments on time. There is a case to be made that having three to five credit cards won’t be a problem but if you find your balances are increasing, it’s a danger sign and you need to definitely not get another card

2. Misunderstanding the introductory rate

One smart thing to do if you have high interest credit cards is to transfer their balances to one of the 0% interest balance transfer cards. But when you do this don’t mistake the introductory interest rate for the permanent rate. Those cards make a big thing about the number of months where you won’t be required to pay any interest at all but they tend to put their permanent interest rates in very small type. If you don’t pay off your balance before your introductory period expires you could end up paying 19% to 20% on it.

 3. Failing to read the fine print

If you do make a balance transfer it’s important to read the fine print. It could include two-tier balance transfer fees as well as some limitations. In most cases, your introductory rate will apply only to balance transfer amounts or to purchases for a certain period of time. There could even be a security interest clause that would allow the card issuer to repossess items you bought with its credit card if you fall behind on your payments.

 4. Not shopping for the best interest rate

One of the biggest mistakes people make is to not do what’s called rate shopping. Before you sign up for a new card look for the best possible APR or interest rate. When you get unsolicited credit card offers make sure you note the rate. This is because if you’re having financial problems you probably won’t get the best rates or terms. Always comparison shop for a credit card

 5. Making only the minimum payments

If you make only the minimum payments on a credit card where you have a high balance, you could be repaying the money over several lifetimes. Here’s an example of what this can mean. Let’s suppose you owe $5,000 at 15% and make just the minimum payment of $100. In this case it would take you 79 months to pay off the debt or about 6 1/2 years. Just imagine how long it would take to pay off $10,000 or more.

6. Paying no attention to your monthly statement

When you pay attention to your monthly statements you will know your due dates. This will also allow you to make sure that all of the charges are legitimate. You’ve probably heard of the big data breaches that have occurred recently. These are bound to turn into identity theft and you could be a victim. If you ignore your monthly statements there is no way for you to know that your identity has been stolen. In addition, one of the worst things you can do is be late in making a payment as this can have a very bad effect on your credit score. If you won’t be able to make a payment on time, call the credit card issuer explain what happened and ask it to waive the late fee. Most credit card issuers will be happy to work with you if you just ask for help.

 7. Exceeding the credit limit

When you review your credit card statements every month you’ll also keep from exceeding your credit limit. While the CARD Act stopped the policy of automatically enrolling customers in over-limit programs with high fees, it can still be very embarrassing to stand at checkout and find that your card has been rejected. If you review a statement and find that you’re getting close to your credit limit try hard to pay down your balance before using the card again. And when you go over the limit, you will be charged an over-the-limit fee.

8. Using credit cards to buy things you don’t needwoman looking at a lot of bills

Probably the worst mistake you can make with credit cards is using them to buy things you don’t need. One good exercise is to sit down at the end of the month, go over your credit card statements and look for things you purchased that you don’t really need. There’s a simple fact that we all spend more using credit cards than cash. When you review your statements you might be really surprised at the number of items you bought you could have done without. We all fall victim to making purchases that at the time we think are needs but are just really impulse buys. If you are about to make a really significant purchase like a smart TV or a new refrigerator, wait 48 hours. If you still think you want the item wait another 48 hours. If after that you still believe you need the item then go buy it.

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8 Tips To Help You Become Smarter About Personal Finance

woman putting a coin in a piggy bankThe US economic recovery continues as witnessed by recent job growth. In fact, according to the Brookings Institute employment increased in January by 267,000 jobs. In addition, private companies have now increased their payrolls for 59 consecutive months, which boosted their total employment by 11.8 million people.

However, the past few years have been difficult ones for most people and this may include you. If you’re typical, your number one priority has probably been financial security. Now that things have loosened up might be a good time to start revisiting personal finance and here are eight tips that could help you become smarter about it.

#1. If you don’t already have the budgeting habit you need to get started. The easiest way to do this is to log your expenses every day. Use a spreadsheet and group your expenses by categories. This needs to include everything from your once-every-four-week haircut to that sweater you bought on impulse last week. You should find it much easier to keep track of your expenses if you do it every day.

If you’re not quite sure how to make a budget, here’s what one woman calls the simplest budgeting technique ever.

#2. Be smarter about how you feel about saving money. Don’t think of it as denying yourself or renouncing something. Instead, imagine what you will do with the money you save. For example, if you usually buy a $3 latte on the way to work every day think of the $60 you would save by forgoing it and how you might use the money for something important such as saving for a vacation or a weekend getaway.

#3. Spend some time thinking about the biases and assumptions that could be holding you back. As an example of this you might have been a student a few years back and had little or no money. Today, you might be thinking about money the same way you did back then even though you’re now earning a lot more. You could be having a problem handling money because you’ve just become used to having more and spending more and don’t feel that you’re actually making any headway. If you find you have more money in the bank than in those previous years, there’s the temptation to spend it. That $10,000 you have in the bank should stay there as an emergency fund and not be used as a deposit on a new car you don’t really need.

#4. Be smart about your spending. Before you make any purchase consider whether it’s a need or a want. You might want a new car but do you really need one? You need food, gasoline, shelter, some clothes and you might need a cartridge for your inkjet printer. On the other hand, you could want that expensive piece of jewelry, a new computer or a saber saw. You can save a lot of money if you look at purchases this way with the goal of spending money only on those things you need and not the things you want. The money you save by buying only the things you need will eventually add up to the point where you will be able to easily afford one of those things you want without busting your budget.

#5. Be smart by always looking for ways to earn more money. There are a myriad of ways to earn more money besides asking your manager for a raise. We recently sold enough items on Craigslist and eBay to buy a new computer and without taking a cent out of our budget. Spend a few minutes thinking about what you could do that saves other people time and money and start a side business. One way to determine what a good part-time business would be is to think in terms of three things and where they meet – what you’re very good at, what you could do for other people and what they would be willing to pay you for.

#6. Never stop learning. There are numerous places where you can get information free on personal finance. The websites Yahoo Finance, CNN Money, Microsoft Money and Mint.com all have good articles daily on various aspects of personal finance. Our government has a very good website dedicated to personal finance with information on everything from money management to credit and debit and from home ownership to how to get your credit reports free. And if you haven’t done this already you should invest in at least a couple of books on personal finance. Two of the most popular of these are Rich Dad, Poor Dad and Dave Ramsey’s Total Money Makeover.

Two smiling girls have coffee time#7. Schedule a weekly “money date.” We understand that sitting down and going over your finances is not the most exciting thing you will do this week. But it’s an important part of being smart about your money. If you set a day and time to pay your bills, review and update your budget and take care of any other financial concerns and call it your “money date” this could bring some fun and exciting elements into your personal finances and help you stay committed. There’s a strategy that could help where you couple the tasks you really don’t like with rewards. This can really work for tasks that take a lot of time but don’t require a lot of concentration like updating your budget for the month or working through the backlog in your email inbox. You could do this on your laptop at your favorite restaurant or coffee shop or while watching TV at home. Some people have found it’s much easier to get through these kind of mindless tasks by doing them with a friend that needs to do the same sort of thing. These are generally called concurrent rewards because they are things you do to reward yourself concurrent with doing tasks you really don’t enjoy.

#8. Look for smarter places to put your money. If you’re keeping your money in a bank savings account, the interest your earning is probably best termed abysmal. We’ve seen ads bragging about interest rates of less than 1%. on savings, These rates are costing you money because they’re lower than the current rate of inflation. If you have money in a bank savings account get it out and put it at least in a money market account. These accounts offer better interest rates and usually include free check writing privileges. There are also online banks where you could put your money. Most of these have the same FDIC insurance as a brick-and-mortar bank. Also, have you looked at the interest rate on your credit cards recently? If you’re paying 17% or more, you need to do a balance transfer to a card with a lower interest rate. Or better yet transfer those balances to a 0% interest balance transfer card where you would have anywhere from 12 to 18 months interest free. If you shop around you should be able to not only find one of these cards but one that offers good rewards, which could save you even more money. For example, as of this writing the Chase Freedom Card was not only offering 15 months’ interest-free on purchases and balance transfers but also a $100 bonus just for signing up.

What To Do If You’re Wrongly Targeted By A Debt Collector

Young man trying to learn about debt reductionThere is an animal called the Cookiecutter Shark that attaches itself to other fish and then neatly takes out a chunk of flesh using its band saw-like set of lower teeth. You could also describe a debt collector much like this. They have about the same sort of tenacity and their one and only goal in life is to excise a chunk of money out of you.

Unfortunately, in this era of identity theft and data breaches it’s more than possible that these Cookiecutter shark-like debt collectors could get your name by mistake. Your home mailing address and your phone number could get attached to debt collection notices, court records and other documents that were actually intended for some debtor who had a similar name as yours. As a result, you could be getting countless phone calls from collection agencies at all hours of the day. You may be mailed legal looking documents requiring your appearance in court. In a worst-case scenario you could even have a County Sheriff at your doorstep waiting for you to arrive home so he could serve you with papers over some alleged past-due alimony payments.

If this happens to you

If you’re being harassed in error by a debt collector the first thing you need to do is call the agency, explain the error and ask that your contact information be deleted from its file. The problem is that this may not be your last conversation with a bill collector. In fact, the US Consumer Financial Protection Bureau released a report last year about complaints against debt collectors. It turned out that the top source of complaints was about them trying to collect from the wrong people. In fact, about 25% of the complaints received by the CFPB involved mistaken identities that were followed by harassing phone calls.

Don’t ignore it

If you do or have received a phone call from a collection agency where you’ve been targeted in error, the worst thing you can do is ignore it. You need to follow up immediately with the collector. The important thing is to not tell that person you want to dispute the account but that this is clearly a complaint about mistaken identity. If your phone call with the collector seems unsatisfactory, then ask to speak to that person’s supervisor. Always take note of any conversation and get all names and direct phone numbers. Be sure to keep any paperwork you receive. Having a paper trail will be essential if you continue to have a problem.

Be civil

You’ve undoubtedly heard the old adage about honey attracting more flies than vinegar. This definitely holds true when talking to a debt collector or his supervisor. Be calm and civil during your phone conversation. Losing your temper does no more good than trying to attract flies with vinegar. Also, keep in mind that debt collection can be a very tough business and honest mistakes can be made.

File a complaint

State and federal laws regulate collection agencies. You can always file a complaint with the federal Consumer Protection Bureau. While this may not help in the short term it will at least put that collection agency on notice. And if it gets enough of these complaints it might change its ways.

If it turns out the debt is really yours

Were human, too, and we make mistakes. If it turns out that the debt is really yours it’s important for you to know what the debt collector can and cannot do. For example, it’s not allowed to call you early in the morning or late at night. It’s also barred from contacting your employer without your permission. He or she also cannot falsely claim to be an attorney or law enforcement official, talk to anyone but you or your attorney about your debt or threaten to sue you unless the collection agency really intends to take legal action against you.

man shouting at phoneHow to stop the harassment

If you are receiving repeated phone calls from a debt collector or if he or she is calling you at work, there is a way to stop this. You will need to send the agency what’s called a cease and desist letter. You can find an example of this letter by clicking on this link. This link will take you to a webpage where you will not only find a sample letter but also a short video explaining the letter and why you should use the template. If you choose to send the collection agency one of these letters it’s important to mail it registered and return receipt requested so that if necessary you can prove you sent the letter.

What happens next?

Once a debt collection agency receives your cease and desist letter it is allowed by law to contact you just once more. This is to either tell you that it will no longer be contacting you or that it intends to take some legal action against you. Of course, a debt collection agency can continue to contact you even after you send a cease and desist letter and many of the worst ones will. If this happens, your best recourse may be to sue the agency. The law allows what are called statuary damages at $1000 per case (not per violation) and you might also be able to get actual damages. And as noted above, you can also file a complaint against the agency with the Consumer Financial Protection Bureau.

Get your credit reports

The best way to protect yourself against identity theft and being erroneously targeted by debt collection agencies is to get and review your credit reports on a regular basis. The law requires the three credit bureaus (Experian, Equifax and TransUnion) to provide you with your credit reports free once a year. There is also the website www.annualcreditreport.com where you could get all three of your credit reports simultaneously – but again just once a year. Most experts say the best way to get credit reports is one at a time at a four-month interval. If you do this you will be able to monitor your credit year-round at no cost.

If you find errors

When you review your credit reports you need to look carefully for errors. This could be charges you don’t remember making or the names of companies with whom you don’t remember ever doing business. If you find one of these errors on a credit report you must dispute it with the credit bureau. All three have forms on their websites specifically for this purpose. However, most experts say it’s better to do the dispute in writing via a letter. When the credit bureau receives your letter it’s required by law to contact the company or institution that provided the information and ask that it be verified. If it can’t be verified or if the institution or company fails to respond within 30 days the credit bureau is required to remove the item from your file. And it’s a good idea to do a follow-up after a month or two to make sure that the item was actually deleted.

Can’t Make Your Mortgage Payments? Our Government Wants Help

man balancing a checkbookhouse is more than just wood, nails, shingles and siding. It’s your home. You’ve spent years furnishing and decorating it. It might be where your children live or where they grew up. It’s the place you come back to after a hard day’s work. It’s your refuge from the world. But you’ve been unable to make your mortgage payments for many months. Your mortgage company has been calling you weekly – to the point where you’re at your wit’s end. This might be because you lost your job or had some other financial disaster. But that doesn’t matter. The point is you’re about to lose your home.

Take heart

You may be able to avoid this because our government wants to help people like you that are in danger of losing their homes. The program is called Making Homeownership Affordable. All it takes to get started is to call 888-995-HOPE (4673). Do this and you’ll be connected with a housing specialist from a HUD-approved housing counseling agency that will talk with you about your specific situation. He or she will be able to offer you a variety of services such as identifying those mortgage assistance programs that might be suitable given your situation. Your counselor will also explain the documents you’ll need and in certain circumstances may even submit those documents to your mortgage holder for you. You will be given help in creating a budget that would allow you to cover your mortgage payments and other expenses. And you will be provided with information regarding local resources that could be of help.

The documentation you will need

If you want to get help through the Making Homeownership Affordable program, you’ll need to have the following documents available:

• Your monthly mortgage statement
• The last two years of your tax returns
• If applicable, information about a second mortgage or any other encumbrances on your home
• If you are self employed your most recent quarterly or year-to-date P& L statement
• The two most recent pay stubs for all members of your household that contribute toward your mortgage payment
• Documentation of any income that you receive from other sources such as Social Security, child support, alimony, etc.
• Your two most recent bank statements
• A utility bill showing your name and property address
• An unemployment insurance letter (if applicable)
• The minimum monthly payments and account balances for all of your credit cards
• Information regarding any other assets and your savings
• A letter describing what happened that caused your income to be reduced or that you lost your job or that your expenses were increased due to illness, divorce etc. (optional)

What you’re housing expert will do

If you choose to work with a HUD-approved housing counselor you can expect that person to work as your advocate and advisor. He or she will need as much information about your situation as possible to help decide which MHA option would be best for you. When working as your advocate your counselor will need the documentation described above to champion your cause. This will not only be documented information about your current mortgage loan but also your overall financial situation and your prospective income in the future. The more of this documentation you can provide, the easier it will be for your counselor to find the best solution given your situation.

Programs that could help you reduce your monthly payments

There are a number of government-sponsored programs available to help people like you. Some of these are designed to help you reduce your monthly payments. This includes HAMP (Home Affordable Modification Program) and the Principle Reduction Alternative (PRA). HAMP could be helpful if you’re not unemployed but are struggling to meet your mortgage payments. If you’re underwater, that is your home is currently worth a lot less than what you owe on it, you could be eligible for PRA. There is also the Second Lien Modification Program This is designed to help people whose first mortgage had been permanently modified under HAMP but have a second mortgage on the same property. If your mortgage loan is insured or guaranteed by the Federal Housing Administration, it’s possible you could be eligible for the FHA Home Affordable Modification program (FHA-HAMP).

Programs designed to reduce your interest rate

Many people have a problem making their monthly payments because they’re trapped into a mortgage with a very high interest rate. If you fall into this category, there are two programs that could lower that interest rate. The first of these is the Home Affordable Refinance Program (HARP), which is designed for people who are not behind on their mortgage payments but have been unable to refinance their mortgages through traditional means. The second is the FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance). It is for those who are not behind on their mortgage payments but are underwater and their mortgage loans are not guaranteed or insured by the FHA.

If you’re unemployed

If you’ve been unable to make your mortgage payments because you’re unemployed there is the Home Affordable Unemployment Program (UP). This would depend on your situation but it’s possible that your mortgage payments could be reduced to 31% of your income or even suspended altogether for a year or more.

Finally, there is the Hardest Hit Fund (HHF) that has more than $7.6 billion to help borrowers in states that were hardest hit by the recent economic crisis.

It will take time and effort

If you believe that Making Homeownership Affordable could help you, do understand the program will take some time and effort. The more prepared you are, the more positive an outcome you can expect. A good start is to spend some time on the MakingHomeAffordable.gov website to learn about your options, your eligibility and what you’ll need to do to apply for assistance. Review the various programs available and the features they offer so that you can choose the one you think will best fit your situation.

Your mortgage company wants you to stay in your house

Believe it or not, your mortgage loan servicer wants to keep you in your house. One of the efforts you will need to make is showing it that you are committed to helping with your modification. Of course, if your loan servicer agrees to modify your loan, it will get lower returns on its investment but this will be far less than what a foreclosure would cost. This means your mortgage company’s biggest concern is whether or not you would be able to comfortably make the payments under your new modified terms. You will need to submit an Initial Package of documents and the more information you can offer assuring your loan servicer that you will be able to make the new, modified payments the easier it will be for it evaluate your modification application.

House with cash on the roofYou could save your home

As you have read, our government does want to help you stay in your home and it is possible – regardless of how severe your situation might be. The important thing is to get started. Make that phone call to 888-995-HOPE (4673) today and talk with an HUD-approved housing counselor.

Reasons Why Credit Unions May Be Better When Borrowing Money

financial establishmentA lot of people are borrowing money left and right for a number of reasons. With a lot of options on where to  take out a loan, this cycle seems never ending. According to Statisticbrain.com, about 25% of American consumers do not have a savings account and these are probably where most of the borrowers are coming from.

The less income you have coming in and with all the expenses in life, there is a big chance that you would have to keep on borrowing from lenders just to make ends meet. There are also people who do not earn a lot due to underemployment but still face steep payments that includes living expenses to loans and other consumer debts.

Debt freedom seems to be a far away place for people who are in the red because they have to keep borrowing money to meet their expenses. It is a debt cycle that is truly difficult to get out of – unless they take drastic measures. Apart from people who do not have any savings and are earning less than what they need, there are also people trying to front a lifestyle they cannot afford. Some people want to project an affluent life for all the world to see but in truth, it is something that they obviously do not have the financial capabilities to support. Relying on debt to support this expensive lifestyle is recipe for financial disaster because the amount due just keeps getting bigger together with all the interest and fees added on to the loan.

The truth is, debt becomes a terrible financial choice once consumers abuse it. There are debts that can become a means to promote financial stability – if you know how to handle it properly. This seems to run contrary to what most financial experts would advise but it is possible that a loan can help further your finances. If you are looking to start a business, a loan is a great tool to get started with it. Or you can use it to invest in your knowledge and skills by getting a student loan to help you be qualified for a higher job compensation.

Why you are better off taking credit from credit unions

Whas11.com shares that the student loan debt is already at $1.3 trillion and chances are it will get bigger. Some people borrow money to pay for school but the interest rate and the repayment terms are quite challenging. There are some who just needs the money to meet a high monthly payment for a bill. While some needs to make a big purchase for a given  month. Whatever the reason may be, there is another option to get the funds that you need to improve your financial situation. It is a legal option that is not as common as getting from private bank.

We are talking about a credit union.

Investopedia.com explains that credit unions are owned by the people that pooled in the money for the union. This is usually formed by big companies for their own employees. Here are a few reasons why borrowing money from a credit union is sometimes better that other large financial institutions as a lender.

  • Loan interest rate. When you are looking to take out a loan, one deal breaker would be the interest rate. The higher the rate, the more you will have to pay out over the course of the loan. There is a big chance that you will understand what debt hell means especially when you miss payments. But credit unions offer some of the lowest interest rates in the market. NCUA.gov shows that credit union rates are sometimes half of what private lender offers.
  • Motive behind the union. The big banks and other similar financial institutions are created to turn a hefty profit for the shareholders. The credit union on the other hand also aims to make money but their priority are the members. It helps that credit unions adhere to a cooperative structure, the members comes first before the need to rake in profits at the end of the year.
  • Quality customer service. You cannot deny that when borrowing money, one of the things you will look for is the post-loan relationship with the lender. You can never predict the future so in case anything happens, you can quickly reach out at any given time and contact your lender. Credit unions may not rival the 24/7 customer service models of big banks but they are able to deliver quality service with the representative being able to call you by your first name.
  • Credit unions are fee-friendly. This means that they do not impose a lot of fees related to your financial transactions. One example is that most of the credit unions do not put fees in case you do not have money in your account. If that was the case in a regular bank, you would already be seeing fees being assessed on your account.
  • You get money. Yes you read that right, credit unions will give you money in the form of dividends. Borrowing money is one thing but getting some without asking for it is another. Of course, the amount may not measure up with what you need but free money is still great.

Here is a great video that differentiates credit unions from banks:

Important reminders before you borrow money

Taking out a loan or borrowing money from lenders is not as easy as it sounds because this is a great financial responsibility. It’s not like asking your parents money when you were still small and you did not have to worry much about repayment. When you are looking to borrow money for a business or for higher education, there are a couple of things you need to take note of.

  • Borrow only what you can afford to pay off. It is quite tempting to borrow more than what you need only because the opportunity presents itself to have quick money. But you need to remember that you are taking money that you will be paying interest on.  Try to keep the loan to the minimum to make sure that your repayment amount is manageable.
  • Use the loan for what it was intended for. Borrowing money should not be just a random thing you want to experience. You need to have a purpose for the loan because this will define how you use the money. If you are trying to pay for medical debt, then use the loan only for that and not buying a new car or a new piece of jewelry.
  • Know your payment plan before borrowing money. Even before diving head first and taking out a loan from either a credit union or a lender, you need to have a payment plan. You must revisit your budget and see where the payments will be coming from. It is a little easier if you have a big wiggle room in your budget but if you are running a tight ship, knowing how you will make the payments is very important.

Borrowing money is something that most of us will encounter in our life. It is important that you know your options so you can figure out which source of financial aid you will benefit from the most. Whether it is through a traditional bank or a credit union, you have to ensure that you can commit to the loan that you are making. Otherwise, you will be digging a debt pit so deep that it will be very hard for you to get out of.

 

Why Repairing Your Credit Could Be Easier Than You Think

You’ve trashed your credit. Maybe it wasn’t even your fault. You could have had a medical emergency that cost you thousands of dollars. Maybe you were in an automobile accident and your car was totaled. Or it could be that you lost your job and didn’t have enough money to both pay your bills and keep a roof over your head. Of course, it could have been your fault. Did you charge wildly on a two-week dream vacation without considering how you’d repay the credit card company? Did you quit making payments on your cards because you just didn’t have enough money to make even the minimum payments?

The embarrassment of being declined

You know for certain you’re in trouble with your credit cards when you’re trying to checkout at your favorite store and your credit card is declined. That can be a horrible feeling. Fortunately, there are things you can do to repair your credit, which is not as difficult as you might think.

First, if you find that you’re in trouble with debt don’t apply for any more credit. Maybe that’s a sort of well duh, but if your credit is already poor the last thing you need to worry about is more credit. It’s likely that the application system will auto decline your application anyway. However, the more times you try to get new credit the more this will damage your credit report. This can bring down your score even further (more on this later).

Review your credit reports.

You have three reports because there is three credit reporting bureaus. They are Experian, Equifax and TransUnion and they are obligated by law to give you your credit report free once a year. You can also get your credit reports individually or simultaneously on the website www.annualcreditreport.com. But whichever you choose it’s important to get your reports and read them carefully to see what the lenders are seeing that’s damaging your credit. This could at least help you do better in the future.

If you would like information on how to read your credit reports watch this short video courtesy of National Debt Relief.

Pay down your accounts

A third way to help resuscitate your credit is to pay down your accounts. One of the biggest factors in your credit score is your debt to credit ratio. In fact, it accounts for 30% of your score. If you have a high debt to credit ratio it’s because you’ve used up a large percentage of the credit available to you. When you pay down one or more of your accounts this will improve your ratio, which ultimately will help your credit score

Dispute errors on your credit reports

Another reason to review your credit reports regularly is that one or more of them could contain errors. Your credit card company or a business could have reported something to the credit bureaus by mistake. If you do find an error it’s important that you dispute it. You could do this online but it’s much better to write the credit bureau a letter disputing the item you think is an error. Once the bureau receives your letter it will contact the company that provided the information and ask for it to verify it. If it is unable to do so or if it fails to respond within 30 days the credit bureau is supposed to remove the item from your credit report, which might be able to improve your credit score.

Open an account at a credit union

If you have a good job and need to prove yourself in terms of your credit you might want to join a local credit union. This is because credit unions tend to be a bit more liberal with credit. Or it might offer a secured credit card that would help you get started. If you use that secured card wisely, you might be able to eventually convert it into a normal credit card.

Did you know that it’s important to have different kinds of credit? Having a credit card or credit cards is only half the battle. If you have an installment loan, a line of credit, a mortgage, an installment loan or some other form of credit this can help your credit score considerably. This shows potential lenders that you are responsible with multiple kinds of credit. Of course, being responsible with all those different kinds of credit means making all of your payments on time every month going forward.

Get a secured card

As mentioned above, if you’re trying to rebuild your credit a good way to start is with a secured card. This is where you deposit some amount of and then use the card to charge against that balance. Once your balance reaches zero, you could deposit more money and continue to use the card. You need to be careful which type of secured card you choose, as there are two types. One is a prepaid debit card, the other a secured card. In both cases, you deposit money and then charge against the balance you’ve created. If you were to choose a prepaid debit card, you would load it with money just as with a prepaid cell phone.

However, with a secured card you deposit the money with the card issuer and then draw against it just as if it were a checking account. Of course, you can’t overdraw the account, as you could with a checking account because when your balance reaches zero the card can no longer be used. Prepaid cards are called cash centered transactions because you’re not using the bank’s money. In comparison, with a secured card you’ve actually deposited money with the card issuer (a bank) and are drawing against it.

What this means is that the biggest difference between these cards is that how your use a secured card will be reported to the credit bureaus but not how you use a prepaid card. This means if you’re trying to rebuild your credit it’s important to get a secured card. Naturally, you will want to use it sensibly which means adding money before your balance reaches zero and not trying to use the card when there is no money left in your account.

Understanding your credit score

If you are serious about repairing your credit it’s important to understand how your credit score is computed. As mentioned earlier in this article 30% of your credit score is based on your debt to credit ratio. Your credit usage or how you’ve used credit in the past accounts for 35% of your score. If you have misused your credit there’s nothing you can do about it because, well, history is history. Another important factor is length of credit history as it accounts for 15% of your score. This is basically how long you’ve had credit. The different types of credit you’ve had accounts for 10% of your score as we covered in the section about signing up with a credit union. The final 10% of your score is based on what are called hard credit inquiries or how many times you applied for credit. Your score is actually dinged two points every time you apply for credit. These stay in your credit report for two years though their significance diminishes at six months and then at one year.

2 Types Of Reserve Funds That You Should Save For

two piggy banksThere are several types of  financial instruments that can help you guard against unexpected problems. Having reserve funds is just part of that equation. These funds are meant to help you get over a financial crisis that would usually impact your main source of income. It can also help you guard your household budget against sudden unscheduled expense.

There are basically two types of this saving fund, an emergency fund and a rainy day fund. There are a lot of consumers who are confused between the two and usually mix up one with the other. For some, they believe they are actually one and the same.

But as important as reserve funds are, not all people are saving for the unexpected. As Statisticbrain.com shares, there are only about 38% of American consumers with an emergency fund tucked away for the future. Some may have rainy day funds but with the confusion, they either refer to their emergency fund as their rainy day fund or think that their savings will work the same way as a rainy day money.

Apart from being responsible in using emergency fund, people need to know how to differentiate it from a rainy day fund. Both of these are necessary if you want to keep your financial life secure and protected against the unforeseen expenses. It is hard to control all aspects of your financial plans because there will always be external forces that can have a big effect on your planning efforts. What you can do is to just be prepared for whatever can happen.

Differentiating the two saving funds

An emergency fund and a rainy day fund are two types of reserve funds that you need to understand to prevent overlap of use.  Here are the main differentiators between the two.

  • Emergency fund. This is the more popular between the two types of saving funds. This is because a lot of financial experts have advised time and again that consumers need to have this to secure their budget and deal with financial emergency. Any unforeseen and unprepared financial crisis can topple down your budget in an instant and having an emergency fund is what keeps your finances from crumbling down. This is usually meant for big emergencies such as losing a job or an illness that sometimes entail a medical operation. As such, an emergency fund is measured by how much you spend in a given month. There are a lot of people suggesting that this should be about six months worth of expenses because this is the average amount of time people spend looking for a new job.
  • Rainy day fund. Apart from big emergencies, there are are small ones that can happen in between and using your emergency fund seems counter-productive. This is where the second type of reserve funds come in to the picture. It is supposed to tackle small financial emergencies to separate it and keep your emergency fund intact. This can be anywhere from a broken home equipment, minor home repairs and sometimes even a plane ticket to see a sick relative. With the nature of what it covers, a rainy day fund is usually smaller compared to an emergency fund. It usually anywhere from $1000 to a few week’s worth of expenses.

Why you want to have an emergency fund in your budget

Here is a short video on how to get started with an emergency fund.

Some people would be quick to point out that earning a lot is enough to offset any unexpected financial needs and they question the need to have reserve funds. Having a nice big income will surely help but the work does not end there. If you do have a big income but use them at your heart’s content, chances are you will be in debt after just a small crisis. Here are a few things to remember to convince you about the importance of this funds.

  • Preserves your money. USNews.com shared that the average savings of a household is at $12,000 – at least for those headed by a 55-64 year old. The scary part is that if they do not have any type of reserve funds to speak of, their savings and probably even their retirement money would go down the drain just to cover an important expense. Having an emergency fund and a rainy day fund helps you keep your finances intact and prevents you from falling into debt.
  • Secures your emergency fund for real emergencies. This has to do with having both an emergency fund and rainy day fund. If you only have an emergency fund and you encounter small emergencies often, chances are your emergency fund will be depleted real easily. And as people have come to realize that emergencies come when you least expect them to, getting caught in a financial emergency with your fund depleted can be really challenging. Having a separate fund to address the smaller needs keeps your emergency fund in tact to address the bigger emergencies.
  • Helps you categorize the unexpected expenses. If you can’t stay on budget because you keep on mixing up the funds and what they need to be for, having two reserve funds will help. It can help you separate the money for trivial home repairs or even a blown out transmission from the more important ones like losing a job. It puts more structure with the way you lay out your monthly household budget.

Ways you can keep yourself from spending your savings unnecessarily

Having a fund for emergency situations is not the end of it but is actually just the beginning of maintaining your finances and keeping them in order. You need to make sure that they are used for their intended purpose. Here are two tips to help you with the proper way to use reserve funds.

  • Set clear restrictions and definitions to what an emergency is. An emergency can be encompassing as it can cover anywhere from a busted light bulb to getting laid off. One way to make sure that use the funds accordingly is to set clear parameters on your definition of an emergency. Understand what incidents would compel you to use your emergency fund and what would be categorized under your rainy day fund.
  • Make it harder to access your emergency fund. This is quite tricky because your reserve funds needs to be accessible and within arm’s reach in case emergency strikes. But it does not mean that you keep them in an envelope with rubber bands with one under your bed and the other under the couch. You can look at putting them in a  checking account or a savings account. This way, your reserve funds can earn a little interest while being accessible at a distance. This can help you think twice before you use the money in frivolous expenses. You can also invest them but make sure it is an investment that can be easily liquidated and will not take weeks to access.
  • Keep communication lines open. This applies specifically for couples who are sharing the same budget under one roof. This is another layer of security that can help consumers think twice before spending the reserve funds. They need to talk to their partner and it has to be a mutual decision when using either the emergency fund or the rainy day fund to address any financial need. This way, two sets of eyes are looking at details that lessens the margin of error and increases the chances of looking for alternatives before dipping into the reserve fund.

Reserve funds are great financial support to help you keep your budget in tact. You just need to understand the different types and how to use them accordingly.

Credit Cards’ Nine Biggest Problems And What To Do About Them

woman holding a credit cardWhy are credit cards like automobiles? It’s because they can both be very helpful if used sensibly. An automobile can get you from one place to another quickly and effortlessly so long as you drive prudently. If you don’t you could end up in a serious accident or even in jail. Credit cards are also very convenient but they do come with potential problems just as do automobiles. The old adage forewarned is forearmed is definitely true of credit cards. So here are the nine biggest problems you could have with your credit card and how to handle them.

#1. Your card has a high interest rate

Just do the math and you will see why it’s a problem if your credit card has a high interest rate. The simple fact is that this card will cost you more than one with a lower interest rate. There’s just no reason to have a card with a high interest rate if you have a really good credit score. This is especially true if you’re getting offers from other credit card issuers. If you have good credit and your interest rate is 19% or higher call your credit card company and ask it to lower your interest rate. If it refuses think seriously about transferring the balance on that card to one with a lower interest rate or even a 0% interest balance transfer card.

#2: You find an error or unauthorized charge on your billing statement

It’s practically impossible to turn on the TV these days without hearing about another data breach. The most recent big breach was Anthem Blue Cross/Blue Shield, which was hacked putting its millions of members at risk. You need to carefully review your billing statement every month. While you are not responsible for paying one of these charges or billing errors you need to dispute the problem in writing within 60 days of when the statement was mailed to you. It’s really important to report any errors quickly. You can resolve many problems just by calling the credit card issuer but when you write a letter, it ensures your rights will be protected.

#3: A merchant declined your credit card

It can be embarrassing when a merchant declines your credit card. There can be several reasons for this. You could be over your credit limit or your card has expired. Or maybe it’s been canceled. The important thing is to always carry a backup funding source so you can pay for your transaction in the event your credit card is declined. If this happens, there is a phone number on the back of your credit card that you should call to learn why your card was declined. It might be something that could be cleared up very quickly.

woman looking tired and stressed#4: You forgot to make a payment

One of the biggest problems with credit cards is that it’s easy to forget to make a payment. This can be especially true if you’re going through a major change in life. Your credit won’t be damaged severely if you realize that you did miss that payment before your next due date. It’s possible you could even get your credit card company to waive that late fee – if you haven’t been habitually late. Also, you can prevent any damage to your credit score by making up that payment before it gets 30 days past due. If you have a calendar on your computer or smart phone you should put your due date on it as a recurring event – to help make sure you don’t miss any payments in the future.

#5. The due date on your card doesn’t align with your payday

When your credit card due date doesn’t align with your payday you can find yourself constantly juggling bills to make your payment on time. If this is your problem call your credit card issuer and ask it to change your due date. Keep in mind that your due dates will fall on the same day every month.

#6. You let a relative or friend use your card and he or she isn’t paying

It’s never a good idea to let someone else use your credit card but if you did and that someone isn’t paying, you’re still responsible for the charges – assuming you gave that friend or relative permission to use your card. If a person used that card without your permission you’d have to sue him or her to eliminate your liability and clear your name. You could take that person to small claims court to get back what you are required to pay on his or her behalf. If you don’t want to do this for some reason, you’ll have learned the hard way not to trust someone else with your credit card.

#7. Your credit card will no longer swipe

If you accidentally leave your credit card around some kind of a magnet for a long period of time, it can become de-magnetized. This means the information is erased from that magnetic strip on the back of your credit card and card readers can no longer process your transaction. Some cashiers will process the transaction manually. But ultimately you’ll have to call the credit card company and ask to have a new card sent to you.

#8. You can no longer afford your payments

If you charge up too much on a credit card and discover that you can no longer make the payments the worst thing you can do is to stop making them. If you do this, your account could be sent to a collection agency. What’s better is to first try to trim down your expenses so that you’ll have more room to make your credit card payments. This could mean sacrificing some luxuries for a few months until you get your balance reduced. You could also contact the credit card company and ask it to lower your interest rate or minimum payment. If none of this works you may want to get help from a credit- counseling agency. When you do this, you’ll be assigned a debt counselor who will review your debts and your earnings and help you create a budget that could make it possible for you to make those payments.

#9. The credit card company has made an error on your credit report

Credit card companies can make mistakes just like everyone. If you find inaccurate information on a credit report you can dispute it. All three of the credit bureaus have forms on their websites specifically for this purpose. However, most experts say it’s better to dispute the item in writing. When you do this, the credit bureau will contact the credit card issuer that provided the information you’re disputing and ask that it be verified. If it can’t verify the information or fails to respond within 30 days, the credit bureau is supposed to remove the item from your credit report. If this doesn’t work, you can dispute the item directly with your credit card company. If all this fails, you could complain to the Consumer Financial Protection Bureau. If you can prove that the information on your credit report is inaccurate and the credit bureau contains to report it you could sue the credit bureau.

4 Financial Tips Before Quitting Your Job

lose jobFinancial tips abound for almost every aspect of your life. From how to make do with a low income budget to valuable tips when you suddenly get your hands on windfall money. Just like when your account suddenly gets credited with a tax refund. That is an unexpected amount and you suddenly  find yourself with a happy problem.

But those financial tips are easy to read through when you are trying to figure out how to use money that you have. But what if you are looking at a major financial decision that has the tendency to lower down your income? If you are trying to look at quitting your job, the financial ramifications will be severe in case you cannot replace that income in your budget.

Statisticbrain.com shares that in 2014, unemployment rate was at 6.1% leaving about 18 million Americans jobless. And if you are quitting your job, you then become part of the statistic of people trying to make do with little to no income. There are about 10 million consumers collecting unemployment benefits and you do not want to be one of them .

Of course, if you are quitting your job, it sounds like it was a personal decision. No one wants to be jobless in this consumer driven economy – unless you have something lined up like another job waiting for you. It can also be because you are looking to start up your own business and need to put in all your effort in realizing your entrepreneurial venture.

It is definitely a different ballgame when you are looking for ways to make ends meet. When you are having to live by a shoestring budget, everything becomes a lot harder. And quitting your job which is the main source of income can leave you in financial distraught.

Tips in handling your finances

When you quit your job it is a major financial decision that you need to plan for. The income that sustains your whole budget will now be almost non-existent. Here are some things you can consider when preparing your finances when in light of quitting your job.

  • Consider talking to a financial advisor. Investopedia.com defines a financial advisor as a qualified person who can dispense financial pieces of advice or guidance. This is the holy grail of financial tips for almost all aspects of your financial need. When you want to quit your job, you are putting in danger your household budget. But a financial advisor might be able to point out other areas of your financial life that will be affected your decision to quit your job. They can also give you more tips on how to prepare your finances before letting go of  your job.
  • Strengthen your emergency fund. Your emergency fund is meant to be your safety net when you encounter financial challenges in life. On top of the list is usually losing your job and quitting one definitely fits the bill. Your reserve fund should be able to cover your expenses for as low as six months to a year. There are several rules about how much of an emergency fund you need to have. The bottom line is that your emergency fund can be as big as you want it to be. In truth, the bigger, the better. When you are quitting your job, you need to have a plan on what you want to do next. This timeline should be your target in building up your emergency fund.
  • Do not forget your 401(k). When you are in a hurry, you tend to forget a few things just like when you are rushed in packing so you can catch a flight. You later realize that you forgot to pack shirts in your bag because you were pressed for time. The same can happen when you are quick to decide in quitting your job but you might lose more than just a shirt. Think of your 401(k) that you have been contributing in your past job. But before you decide to just take out your 401(k) to pay for debt, you need to know that you can rollover your contributions to benefit your retirement. You can choose to do two things with our 401(k) – you can either put it in an Individual Retirement Account (IRA) or you can even put it in your new employer’s 401(k) if you have another job waiting.
  • Settle bills with advance payments. This is one of those financial tips that can benefit your cash flow greatly in case you plans to say goodbye to your job.  If you already know ahead of time that you are resigning from your post, try to make payments on your bills in advance before the date of your resignation. With all the chaos and confusion that can happen on the month that you leave work, you might overlook some of your payments which can hurt your budget even more not to mention your credit score.

Handling your finances after you quit your job

Your financial planning will be different when you are just about to quit your job and when you have actually taken the plunge and left the company. You can look into all the financial tips that you can find prior to leaving your job but all those planning can go down the drain if you blow your after-resignation finances.  Here are some tips to consider when managing an income-less budget.

  • Take a frugal lifestyle. Living below your means  can do wonders for your budget. And it does not even mean dumpster diving or living off noodles for months on end. There are actually fun ways to a frugal lifestyle that you can consider even if you already have kids of your own. It actually becomes more important to consider a frugal lifestyle when you are managing a budget for a big family. The more you can save, the more it can benefit your budget in the long run.
  • Do not blow your emergency fund. You might have been able to build up a solid amount for your emergency fund in preparation for leaving your job but you need to make sure that you use it for its intended purpose. Define the instances wherein you can dip your finger in your reserve fund. Is it only for expenses that spell the difference between life and death? That sale in the mall does not constitute as an emergency and must not be satisfied  by pinching on your fund.
  • Monitor your household budget. This is actually something that you need to do, regardless of your financial situation. It is not a sexy chore but you need to monitor your budget more than ever when you quit your job.  You need to make sure that all the expenses are on track and you are not overspending at a time when your income is essentially non-existent.
  • Look for an alternative source of income. If you know that it will take you a while to regain a steady source of income, one great financial tip you can use is to look for alternative sources of income while you do not have a job. One idea is to use your hobby and transform it into a money making venture. If you love baking, you can take orders and deliveries starting with friends and relatives. If you have a talent in taking pictures, you can look market yourself as a photographer and book events.

There are a lot of financial tips that you will come across when you are planning to quit your job. You just have to remember that whatever you set your sights on financially, you keep at it and continue to learn and evolve.

13 Grocery Shopping Tips That Can Save You Money And Time

woman carrying groceriesDon’t you just love to grocery shop? “What,” you say, “love grocery shopping?” The truth is that very few people love to grocery shop. It’s just another chore that needs to be faced once a week – if you’re well organized – or several times a week if you’re not. Of course, the big problem is really not grocery shopping. It’s making a grocery list, which means meal planning and scanning your pantry or closet to see which items you’re short on. Then maybe there’s lunch for the kids or even for you to take to work. Yuck.

While there’s no way to make grocery shopping a breeze, there are things you can do to make it easier and here are 13 of them.

1. Buy in bulk

When you buy in bulk you not only save money it can help cut down on your grocery shopping. Of course, to do it right you have to do some thinking. For example when something goes on sale you know you should buy as much of it as you can and then store it. But you need to think what would make sense to store. When frozen vegetables are 10 for $10 it would make sense to buy 20 or 30 but do you have room to store that many? The same is true of frozen chickens. When they’re on sale for 99 cents a pound you might want to buy a lot but do you have enough room to store even three?

2. Talk among yourselves

Do you remember this line from Saturday Night Live? Well, even if you don’t it makes sense to keep it in mind. It can be very annoying when you do a week’s worth of grocery shopping only to see your spouse come home the next day with a gallon of milk that you don’t need. That’s just a waste of money. It’s important to communicate with each other about your groceries and your meal planning as this can prevent wasteful spending.

3. Label stuff

When you buy ingredients for meals you plan on fixing later in the week it’s a good idea to label them. That way you won’t reach into your pantry for those cans of tomato soup you need only to find one of them has already been consumed.

4. Play favorites

Do you shop at the same supermarket every week? When you do this you get to know the store’s layout as well as the prices of the things you buy most often. Then when the store offers something “on sale” you’ll know whether it’s a really good bargain.

5. Put your grocery list online or on your smart phone

You could make your best grocery list ever but it won’t do you much good if you forget to take it with you. It’s just very hard to remember 30 or more items. But if you put your list online or on your smart phone it will always be there. We have a shopping list app right on our phone, which makes this very simple. If you don’t have such an app you could put the list on Google Drive and then access it from anywhere.

6. Look for discounted items

When products, especially bakery items, are about to expire your grocery store will discount them. The same can be true of canned food and meat. Look for these items in your store because the discounts you’ll find are usually substantial and the food is still okay to eat. Don’t forget generic brands, as they will always be cheaper than brand name items. We probably buy one third of our grocery items as generic and have never had a problem with their taste or freshness.

7. Use your smart phone for something besides phone calls

There are apps available like Fresh 20 and Emeals that will provide recipes, a weekly menu list and even a grocery shopping list. In fact, if you follow the suggestions you’ll find on these apps you may never have to worry about dinner again. There is also Plan to Eat and Ziplist, which will organize your recipes for you and then convert your favorite meals into shopping lists and meal schedules. In short, these apps will do almost all the thinking for you – at least when it comes to grocery shopping.

8. Make sure you store food correctly

It can be very depressing to buy a whole week of food and then end up tossing away half of it because it went bad. A good investment is to spend a few minutes learning how to keep your food fresh for longer. As an example of this, you could stand fresh herbs in water. This will be pretty and is also practical.

9. Make a week’s worth of meals

Do you have friends that set aside one day a week such as Sunday and then make a week’s worth of meals and freeze them? You could do it yourself at home or go to services such as Dream Dinners or Wildtree. Check out your Yellow Pages and you’ll probably find other stores near you that offer the ingredients and workspace you would need to do this.

family, family discussion, family meeting10. Let the family help

You really don’t have to do all the meal planning yourself. Ask your kids what they would like for dinner. Or give them a couple of cookbooks and let them look for stuff they would like. Be sure to tell them that desserts are not entrées or you could end up with suggestions of cupcakes for dinner.11. Create themesConsider having themed meals. For example, Tuesday could be taco night. Thursday could be spaghetti night. Wednesday could be what we call upside down dinner, which is basically having breakfast for dinner. These will be meals that everybody loves and when you do them weekly, it will take a lot of the stress out of menu planning

11. Create theme nights

Consider having themed meals. For example, Tuesday could be taco night. Thursday could be spaghetti night. Wednesday could be what we call upside down dinner, which is basically having breakfast for dinner. These will be meals that everybody loves and when you do them weekly, it will take a lot of the stress out of menu planning.

12. Become a coupon Queen or King

These days there are coupons available that will save you money on almost everything you buy. Your favorite supermarket may even be sending you coupons personalized to your buying habits as ours does. Plus, there are sites like Thecrazycouponlady and CouponChef where you’ll find thousands of coupons that will save you money and help with your menu planning. For example, if you were to find a coupon that would save you $2 on a pound of steak why not plan a meal around it instead of the fish dish you had been planning?

13. Go really big

We realize this doesn’t work for everyone. In fact, it may work only for a select few. But if you plan your meals for an entire year, it will be over and done with for 365 days. Then when Saturday rolls around instead of having to sit down and think about what meals you’re going to fix that week all you’ll have to do is make a grocery list.

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