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How To Pay Down Those Holiday Debts

Woman depressed over billsIf you’re like us you probably over did it a bit – or even more than a bit – on your holiday gift giving. We try to budget carefully but always forget that tip we need to give to our newspaper delivery guy, that cousin in Toledo that deserves a present or the cost of that holiday dinner at our favorite upscale restaurant we always treat ourselves to. Plus, we always manage to spend more on some of our family members than we had anticipated.

If you did something like this and those (ouch!) credit card bills have you worried, what could you do to pay off those holiday debts quickly? Here are some suggestions you might find helpful.

Write out a list

Sit down and make a list of all those holiday-related expenditures you paid for with a credit card. If you see you won’t be able to pay them all off at once, divide the list by credit cards and then prioritize them by their interest rates. If you pay off the cards with the highest interest rates first, you will save money on interest charges over the next few months. And you should find it easier to create a realistic pay-off plan when you know your total holiday debt load.

Use your annual or holiday bonus

If you received a nice check as an annual or holiday bonus, you might want to use it for a luxurious vacation or some other fancy purchase but resist the temptation. Put the money instead towards paying off your holiday debts – to improve your financial situation. Trust us. You’ll feel much better when you’ve paid off those credit card debts than if you’d spent a week at the beach – where the memories you made soon fade.

Stop using your credit cards

Stop using your credit cards while you’re tying to pay down your holiday debts. Take a break from using them until you get your finances under control even if those cards have points or great cash back rewards. The best way to stop using credit cards is to leave them at home when you go shopping – so you won’t be tempted to use them. If you have a problem doing this, you might give them to a friend or relative for safekeeping.

Sell unwanted items or gifts

Did you find yourself opening gifts from cousin Hank or great aunt Babs and thinking, “Wow! What am I ever going to do with this?” If you got gifts you don’t want make a list of them along with any items you have lying around the house you don’t need or use. Put the items on eBay or Craigslist and sell them. Be sure to do some research before listing them to make sure you price them fairly and realistically. Take some good quality photos and write strong, attention-getting headlines so you can sell those items as fast as possible. Heck, you might raise enough money in just a few days to pay off all your holiday debts.


man holding multiple credit cards

Sell gift cards you can’t use

There are online marketplaces such as Alula and Cardcash.com where you can sell unwanted gift cards. Alula has kiosks where you could turn in those cards and immediately get a voucher you could redeem right in that store. Plastic Jungle used to buy gift cards but now offers three non-cash options. You could use it to turn your gift cards into Best Buy rewards points, exchange them for a CVS gift card or swap them for United Airlines miles. If you choose to sell your gift cards, be sure to read the fine print so you will understand how much money you will actually get back after any transaction and selling fees. How much can you expect to make selling a gift card? You’ll probably get anywhere from 65% to 85% of the card’s value.

Transfer your balances

Could you qualify for one of those 0% interest balance transfer cards? If so, you might transfer all your credit card balances to it and enjoy from six to 18 months’ interest free. This means all your payments would go towards reducing your balance instead of being gobbled up by interest charges. If you heavy up on your payments during that interest-free period, you could have your entire balance paid off before it expires. Be aware that some cards charge a balance transfer fee. Check this out before you sign up for that new card to avoid an unpleasant surprise.

Make your payments weekly

Don’t wait until you get your monthly credit card statement and then make just the minimum payment. Make your payoff plan a top priority by doing weekly payments. This will both reduce your interest expenses and help you get back onto a solid financial footing, as it should strengthen your commitment to become debt free. However, don’t start doing this until you’ve contacted the credit card company (companies) to make sure it will accept weekly payments.

Adjust your spending habits for three or more months

You will probably need to make some changes in your budget and scale back your spending for a few months so you’ll have more cash available to pay off those holiday debts. For example, you might cancel your health club membership or some other subscriptions you no longer need. You could tighten up on your grocery budget by using coupons or by buying items in bulk. You might be able to cut your cable bill by downgrading the number of channels you receive or maybe you could drop cable and stream your entertainment from Hulu, Netflix or some similar source. Whatever you decide to do be sure to keep track of how much money you’re saving. Add up that amount at the end of the month and then calculate how much it reduced your debt load as this can help keep you staying with your plan.

Use these tips to help pay off even more holiday debtSmiling woman hugging sack of groceries

If you’re really interested in paying off those holiday debts, here are some suggestions you might find helpful.

  • Focus on buying items at the grocery store that are on sale or are generic brands. These usually have the same quality as brand name items but can cost 40% to 50% less.
  • Buy and sell clothes at a consignment store. You will not only make money this way, you can often find very high quality clothing for pennies on the dollar.
  • Skip soft drinks when you’re eating out and stick with water. Also, skip dessert. Getting coffee, soft drinks or a dessert will increase the cost of that meal by 20% to 30%.
  • Trade services with friends. For example, you might be able to trade out handyman services for haircutting, photography for babysitting or pet sitting for housekeeping.
  • Give baked goods, service IOUs or other homemade gifts in place of expensive presents.
  • Boxed cereals can be very expensive. Switch to eggs, oatmeal or fruit for a better and more nutritional bang.
  • Call your utility companies and switch to a budget plan so that your expenses will be more consistent and predictable each month.
  • Don’t host or attend any in-home parties where you would be pressured to purchase things.
  • Brew your coffee at home instead of buying it at one of those drive-through stores or at work.
  • When you cook dinner, make extra servings on purpose so that you will have leftovers for lunch or for dinner the next day.
  • Pack your lunch. You don’t have to do this several times a week but if you do it regularly, it will definitely save you money.
  • Check out books and videos from your local library. You may not find the most recent movies but you should be able to find classic movies including those wonderful children’s’ films.

Do You Need To Kick The Credit Habit?

woman thinkingAre you a credit junkie? Millions of Americans are. As an example of this in 2011 the average American household had credit card debt of $15,279. The median household secured debt was $91,000 and US families had an average mortgage debt of $149,456. Plus, in March 2012 the percent of households that had credit card balances was 39%. This means that nearly 40% of credit card holders were unable to pay their balances when due. Even more alarming there were 1.18 million non-business bankruptcies just in the year 2012.

You maybe a credit junkie if …

Do you have more than two or three credit cards and can pay only the minimum or less on them? Then you might be a credit junkie. You might also be a credit junkie if you have to juggle other bills in order to pay the minimums on your credit cards or if you charge items that you used to pay cash for such as food, gas, lunches, etc. You might be a credit junkie if you constantly incur late or over-the-limit fees on your credit cards and if you take out cash advances to pay other expenses or bills. Have you taken out one or more debt consolidation loans to pay off your credit card balances but then began charging on the credit cards again? Or have you used your bank’s overdraft protection when you’ve written checks that you can’t cover? Then you might definitely be a credit junkie.

Do you also make these mistakes?

If you’re a credit card junkie you might be compounding the problem by making these common mistakes.

First, do you not read your credit cards’ terms and conditions? In one recent survey 40% of the respondents said that they did not understand the terms, conditions and rewards programs of their credit cards. If you fail to understand your cards’ terms and conditions you’re bound to run into trouble – if not now then very soon.

Second, do you clearly understand your finance charges? In one survey JD Power found that a full 73% of those who responded did not comprehend the interest rates they were being charged. At the minimum you must at least know the rate you’re paying and the penalty rate if you don’t pay. Failing to understand this is a sure path to creating more debt.

Third, is misunderstanding the terms of an introductory offer. While it might be a good idea to shift your high-interest credit card balances to a 0% interest balance transfer card, it’s a mistake to not read the fine print. You will be charged interest once your introductory period expires and it could be as high as 18% or even 20%.

Fourth, do you get credit cards for the wrong reasons? Are you tempted to get a card because of its rewards program instead of choosing one that has a low interest rate? It’s important to understand that the credit card companies are not your best friends. Their objective is to extract as much money from you as possible. This puts the burden on you to not let that happen. And the best way to do this is by comparison shopping for your cards to make sure you will be getting the best interest rates.

How much debt is too much debt?hands chained while holding coins

Do you honestly know if you’re carrying too much debt? There is an easy way to find out. First add up all of your fixed monthly debts including all those credit card payments. Next, add up all of your monthly income. If you get money as gifts or receive bonuses or commissions, total them up, divide by 12 and add that number to your normal monthly income. Finally, divide your monthly income into your monthly debts. This is your debt-to-earnings ratio. For example, let’s suppose that your total monthly income is $5000 and your total monthly debts are $2500. You would have a debt-to-earnings ratio of 50%, which would be much too high. Most experts say your ratio should be no more than 30% and, of course, the lower the better.

How to break the credit habit

If you have now learned that you’re a credit junkie, you need to get to work and break that habit. First and foremost you need to stop using credit cards and begin paying cash for everything. One easy way to stop using your credit cards is to shred all of them but one and then lock it away or give it to a relative to hold. Or you could do as one woman did and freeze it in a container of water. Do this and you would have it available in the event of an emergency but it would not be so easy to access that you would be tempted to use it for some impulse purchase.

Another trick for breaking the credit card habit is to reward yourself for not using them. You could build a new habit via positive reinforcement. Every week that you don’t use a credit card you might reward yourself with some small indulgence like a latte at your favorite coffee shop or a visit to your neighborhood ice cream store. Just make sure you keep those indulgences cheap.

How about using old-fashioned self-control? You should be able to apply the same self-control you use to get to work on time every day to stop using credit cards.

Finally, you might try a little shock therapy by figuring out how much interest you’re paying a year. As an example of this, if you have a balance of $1000 on a credit card at 14%, it would take you 4 ½ years to pay it off, assuming your payments were $25 a month. At the end of those 4 ½ years you’ll have paid $347.55 in interest. Just ask yourself if there aren’t better ways you could use that $347.

Review your credit reportsCredit Report

If you truly want to kick the credit habit you need to get and review all of your credit reports to see exactly where you stand. You can get them free once a year either from the three credit reporting bureaus – Experian, Equifax and TransUnion – or on the site www.annualcreditreport.com. Once you get your reports you need to review them carefully to make sure they don’t contain any errors that could be damaging your credit. This can also help you understand why you’re having a problem with debt.

Don’t try to borrow your way out of debt

You can get your debts under control and ultimately paid off. The trick is to not borrow any more money because as the old proverb goes, you can’t borrow your way out of debt.

While you could be tempted to take out a debt consolidation loan and get all of those other creditors out of your life, it’s not a real solution. All you’re really doing is stretching out that debt over a longer period of time. For example, if you were to get a secured loan such as a homeowner equity line of credit or home equity loan, you’d probably be paying on it for anywhere from 10 to 30 years. You might be able to pay off an unsecured loan quicker than this but you’d likely end up with a higher monthly payment than the sum of the payments you’re currently making.

Another not so good option for getting your credit card debts under control would be to transfer all your credit card balances to a 0% interest balance transfer card. This could work but only if you are able to pay off your balance before the end of the introductory period. If not, you would still be in debt and probably at a very high interest rate.

Two healthier options

Two other ways to get debt under control are debt settlement and to snowball your debts. Both of these represent better options because neither requires you to borrow more money.

If you’re not familiar with debt settlement this is where you hire a company such as National Debt Relief to settle your debts for you and for much less than you actually owe. When you owe less you should be able to get out of debt much quicker and with a lower monthly payment. Snowballing your debts means ordering them from the one with the lowest balance down to the one with the highest. You focus all of your energy on paying off the debt with the lowest balance while continuing to make the minimum payments on your other debts. Once you get that first debt paid off you would have more money available to pay off the one with the second lowest balance and should be able to do it fairly quickly. You would then go to work on the debt with the third lowest balance and so on until you became debt-free.

If you’d like more information on using the debt snowball to pay off debt, watch this video.

How Three Federal Acts Help Protect You Finically

Federal EagleDid you know that banks, credit card companies and debt collectors have something in common? It’s that they are all regulated by the federal government. Some of these regulations have to do with your rights as a consumer. You need to understand these rights so that you can avoid being scammed or become the victim of greedy credit card companies.

It’s in the CARD(s)

The first federal law you should know about is the CARD (Credit Card Accountability, Responsibility, and Disclosure) Act that was signed into law in May of 2009. The reason it was passed is because many credit card companies were engaged in activities that weren’t illegal but were definitely on the shady side. In fact, it was quite common for credit card issuers to raise their customers’ interest rates on their existing balances and often with little or no advance notice. You could have a credit card with a perfectly reasonable interest rate of 10% only to open your statement one month and find it had been hiked to 19%. If you were carrying a balance of, say, $10,000 that increase would cost you $156 more to pay of your debt in 12 months and $516 more to pay it off in 24 months.

High late fees

Another way the credit card companies were abusing cardholders was with very high fees for late payments and what are called “overlimit” fees or fees charged if you exceeded your credit card’s limit. For example, if you had a card with a $3000 limit and your balance grew to $3300, you could be slapped with a very high fee.

Confusing information

Prior to the CARD Act, some credit card companies had TOCs (terms and conditions) that were written in such a way that some consumers either could not understand them or actually misunderstood them. As a result many people signed up for credit cards and were then shocked when their statements began arriving complete with fees, charges and interest rates they hadn’t expected.

What CARD did

The CARD act was responsible for four important changes that helped consumers considerably.

First, it dramatically reduced the practice of increasing the interest rates of existing cardholders. Second, it substantially reduced the size of late fees being charged them. And, third, CARD forced the credit card issuers to rewrite their TOCs so their costs would be easier to understand – though some confusion still remains in this area.

Provisions about interest rates

The CARD Act also contains two provisions designed to reduce credit card interest rates. They are:

1. Credit card companies are generally barred from increasing the interest rate on existing balances unless and until you’ve missed two consecutive payments.

2. They are generally permitted to increase your interest rate on new purchases but must give you an advance notice of 45 days during which time you are allowed to cancel your account with no penalty.

What’s happened with late fees?

The CARD Act also protects you from unfair or excessive late charges. It does this two ways. First, your credit card bill must be due the same day each month and if your payment is received by 5:00 PM that day, it must be treated as timely. In other words, you are to be given at least 21 days to pay your bill before you can be charged a late fee. Second, any late fee you’re charged must be “reasonable,” which is usually defined as $25 the first time you’re late and $35 the second time you’re late within the following six months.

Its effect on overlimit fees

The CARD Act has also had a dramatic effect on overlimit fees as they have all but disappeared. This is because the credit card companies can no longer charge an overlimit fee unless you expressly opt in and permit the card issuer to process overlimit transactions. Plus, the credit card companies cannot charge more than one overlimit fee on any one billing statement. To put this another way, if you were to go overlimit three times in one billing period, you could be charged only for the first one.

The Fair Debt Collection Practices Actcollector holding a past due document

The second act you should be familiar with is the FDCPA or Fair Debt Collection Practices Act that was passed by Congress in 2011. This is a particularly important act if you’re being harassed by a debt collection agency as it spells out what debt collectors can and cannot do and how you can stop any harassment.

For example, the FDCPA bans collectors from:

  • Contacting you before 8:00AM and after 9:00PM local time
  • Contacting you at your place of employment after the collector has been told that this is prohibited or unacceptable
  • Threatening arrest or some legal action that is either not permitted or not actually contemplated
  • Causing your phone to ring or engaging you in telephone conversation repeatedly or continuously with the intent to abuse you
  • Communicating with third parties to reveal or discuss your debts – other than your spouse or attorney
  • Failing to cease communicating with you after you had requested this
  • Misrepresenting your debt or using deceit to collect the debt such as the debt collector representing himself as an attorney or law enforcement officer
  • Publishing your name on a “bad debt list”
  • Seeking an unjustified amount of money, which would include demanding any amount of money not permitted under the applicable contract or as under applicable law
  • Reporting false information to the credit reporting bureaus or threatening to do this
  • Contact by media that would embarrass you such as mailing you a postcard or using an envelope that includes the debt collection agency’s name.

What else you should know about the FDCPA

There are other things that debt collectors cannot do. If you’re having a problem with one, you should go to the Wikipedia page on the FDCPA to learn all of your rights.

Stopping harassment

As you can see, debt collectors are prohibited from harassing you. Unfortunately, there are those who will hassle and threaten you regardless of the FDCPA. In this case, there are other things you can do. You could send a “cease and desist” letter to the debt collection agency notifying it to stop contacting you. If you go to this site, you will find a sample cease and desist letter you could send the collection agency. Most experts say that you should send it registered and return receipt requested so that you can prove you sent it and that the collection agency received it.

Once the collection agency receives your cease and desist letter it is allowed to contact you only once more – to either tell you that it won’t contact you again or to advise you as to what step it will take next such as filing suit.

If this doesn’t work

There are definitely some really bad apples in the debt collection business and no cease and desist letter will stop them from continuing to harass you. But there are things you can do beyond just sending a letter. For example, you could report the collection agency to your state’s attorney general’s office. You could also hire an attorney and file suit against the agency. If you are successful, you could collect up to $1000 in statutory damages, plus your attorneys’ fees and reimbursement for any other expenses you incurred as a result of the collection agency’s behavior. If you would like more information about suing a debt collection agency, go to this website.

The Fair Credit Reporting Act

The third of the three federal acts you should be familiar with is the Fair Credit Reporting Act
(FCRA). Among other things, it regulates how your credit information can be treated and requires the three credit bureaus to provide you with free copy of your report once a year. The FCRA also regulates how long negative information can stay in your credit report – typically seven years from the date of your delinquency with the exception of a bankruptcy that will stay in your reports for 10 years and tax liens that will remain there for seven years from the time you paid them.

Finally, and perhaps most importantly the FCRA provides a means for you to get erroneous information deleted from your credit reports. The short version of how this works is that if you find an item on one of your credit reports that you believe is an error, you can write the appropriate credit reporting bureau and dispute it. When you do this, the credit bureau must have the institution that provided the information verify it or it must remove the item from your report.

An Action Plan For Getting Out Of Debt

woman drowning in debtBeing in debt can feel a whole lot like being in jail as it can have an effect on almost every aspect of your life. You could wake up dreading every day or wishing that you had not committed the crime of creating so much debt. This can be bad if you’re single and even worse if you have a growing family. So what can you do to dig yourself out of that pit of debt? Here is an action plan that could help.

Shred those credit cards

If you’re over your head in debt, the first thing that you need to do is stop using those credit cards. In fact, you should shred all of them but one and you might freeze it in a tub of ice. It would then be available to cover a financial emergency but not so easy to access that you would be tempted to use it for some impulse purchase.

Do a personal financial inventory

If you can learn why it is that you got into debt, this can help you find the right ways to get out. Sit down and determine what you owe and how much you’re spending. This should help you determine where you could trim your spending in some areas to get the money that you need to repay your debts.

Talk with a financial counselor

If you meet with a financial counselor, he or she will assess your situation and give you advice that would help you get out of debt. He or she would even help you develop a budget if necessary so that you would have extra money to pay down your debts.

Call your creditors

If you believe you will have to skip some payments, call your creditors. Ask for more time. If you make that call before missing any payments, your lenders are likely to be willing to work with you.

Pay off the high interest debt first

If you have multiple credit cards, you need to work on paying off the one that has the highest interest rate first. Make a goal to pay a specific amount towards that credit card debt each month, while still making the minimum payments on your other cards or loans. When you get that high-interest debt paid off, you will then have extra money you can apply to the debt with the next highest interest rate. In time, you should be able to pay off all your debts and save a lot of money in interest charges.

Send in your payments early

Make sure you pay your credit card statements a few days before their due dates. In fact if possible, mail your payment at least a week before your bill is due. This is very important. Credit card companies generally post payments to your accounts by a certain time of day or on your due date. If your payment is not posted by then, they will charge a late fee. This means it’s important that you mail your credit card payments early so they will be posted on time. If you make a payment over the Internet or by phone, be sure to ask when it will be posted to your account. Late payments will not only cost you money, they will hurt your credit score. In fact, some experts believe that a late payment will lower your credit score by as many as 60 points.

Go to a consumer credit counseling agencycouple talking to a counselor

There is probably one of these agencies near where you live. If not, it’s easy to find one on the Internet. Just make sure that it’s a legitimate non-profit and that its fees are reasonable. When you go to one of these agencies or companies you will be assigned a counselor who will help you develop a budget and, if appropriate, a debt management plan. He or she will also work with your lenders to get any fees waived and your interest rates reduced. In most cases if you stick to your debt management plan, you should be debt-free in four or five years. Many credit unions, colleges and universities also offer these services so be sure to check this out.

How can you choose a good credit counseling service. This video offers a 7-step program that could help.

Avoid credit repair scams

It is just not possible to get out of debt quickly or repair a bad credit report. Be sure to avoid any debt settlement companies that require upfront fees or “voluntary contributions.” Be especially wary about any of those companies that say they can make your debts go away. Also make sure to stay away from any company that tells you to stop communicating with your creditors or that requires credit card information or other personal information before sending you information.

Think about bankruptcy only as a last resort

There are people who believe that when their debts become too difficult to manage that bankruptcy is their only option. However, there are actually several others. If you are considering filing for bankruptcy, talk with a financial counselor or explore other options such as a debt consolidation loan or debt settlement. Bankruptcy should be absolutely your last resort as it will have long-term consequences and may not even provide you with 100% debt relief. For example, a chapter 7 bankruptcy won’t get rid of child support, alimony, student loan debts or debts obtained through fraud. It can also not do anything about secured debts – or debts where you were required to provide collateral – including mortgages and auto loans.

College Finances: Where To Get Money When You Need It

frustrated womanThere are a couple of debt problems that you will face in college but that does not mean you should let yourself be a part of the statistics. Students usually end up with two type of debts: student loans and credit cards. The first is used mostly for school related expenses while the other is for the daily expenses that the student will encounter. The former is necessary but the latter is usually curbed by students to keep debt levels low.

But no matter how much you plan or prepare for it, you will always find something that will deviate from your budget. These unexpected expenses are usually the reason why some students are forced to use their credit cards. The “emergency” expenses can sometimes pile up to become a significant debt that can spiral out of control. Students must take extra care when it comes to their college finances because it will set the pace for their financial life in the coming years.

Smart ways to earn money in college

Since the unexpected expenses cannot be avoided, you need to be prepared for it. While calling mom or dad will get you out of a tight spot, the fact that they are far away will mean you will not be able to get help immediately. Most will quickly resort to credit cards to pay for purchases.

However, if you want to keep your credit spending low, there are smart ways for you to boost your college finances so you can save the cash for these emergency needs. When it comes to earning more, we obviously mean getting a job.

There are various benefits to earn while in college and you will not only get more money to spend, you will also learn various habits that will prove to be useful when you  graduate. The job experience will be noticed by your future employers and carrying that responsibility will bring you bigger opportunities. College students and even new graduates can look for jobs through websites like CollegeRecruiter.com or CoolWorks.com. Try to browse for job openings that are not particular about work history and can partial to your flexible work schedule.

Here are other suggestions that will help you earn more for your college finances.

  • Join behavioral study projects and similar surveys/experiments. There are professors and students on campus who are probably looking for groups that they can study and you can volunteer if you qualify. This usually varies between schools and projects but you can earn a decent amount for these one time projects. Look at the community boards in your campus for these opportunities.

  • Focus groups. Corporations and even local businesses sometimes need the opinion of focus groups and you can see if you can join these. All you have to do is to get in touch with companies and register to be a part of their focus group. You get to try their new products or provide your honest opinion about certain campaigns that they want to release.

  • Use your skills. If you have a particular skill like playing a musical instrument or being academically advanced, you can use this to tutor others.

  • Sell your possessions. Even someone as young as students sometimes accumulate a lot of junk. If you have things that you are not using, sell them off. Or you can trade. That will lower the need for you  to spend.

These are only some of the things that you can do to help raise the funds for your emergency stash of cash.

Sources of money that you should never rely on while in school

While there are options that we highly recommend, there are also those that we strongly advise against. If you need fast cash, never opt for any of these options because you will only make things worse.

  • Payday loans. If you are using payday loans to just get by, then you are putting yourself through a debt cycle that you will find difficult to get out of. The high interest rates of these short term loans will never bring you any good. It will only bury you in debt and the high interest will be robbing a huge amount of money from your college finances.

  • Cash advance. Getting a cash advance on your credit card is also a bad idea because of the high interest rate that you will have to pay off. If regular purchases have a high rate, credit card cash advances will have higher rates than that.

  • Get rich quick programs. There are so many of this online and you have to be very careful about it when you come across these. If they are too good to be true, then they probably are. Be cautious of these and do not, under any circumstances, give out vital information about yourself. If you really want to get rich, you have to work hard for it.

  • Gambling. Surprisingly, some students resort to this when they are in need of big money. This is never a good idea and you will just lose the little amount of cash that you have. You may win a couple of times but it is usually not worth what you will end up losing in the long run.

You have to realize that the quick cash are usually the ones that are most destructive. You do not want to make your college finances rely on these unreliable sources of income.

What Is The Issue With Medical Credit Cards?

medical professional with cash in the backgroundWhen you are sick, you want the peace of mind that comes with knowing that you can afford your payments. This is not the time to be worrying about your finances because you need to concentrate on getting better. Sometimes, the stress is what aggravates the whole situation. So you want to make sure that this is a problem that you will not worry about when you get sick.

This is probably why people opt to get medical credit cards. This is a limited-purpose credit card that you can use on health related costs. Usually, people use this for expenses that are beyond the Medicaid/Medicare coverage – or other private health insurances.

The problem with health care credit cards

While the main intention is a good one, this type of credit card poses a lot of issues. We came across an article from Kiplinger.com and they mentioned a couple of problems with medical credit cards. They said that using these will not really help you with your health – it could even make it worse. Here are the important facts that are mentioned about these credit cards.

  • It is the health care providers who offer the option to patients. They give the option of paying for the treatment with medical credit cards. Although they do the talking, these cards are owned by financial institutions like Wells Fargo, Citigroup, etc.

  • The cards are usually for expenses that are not covered by government or private health care insurances like dental, audiology, vision and other similar treatments. It can also cover vet-related expenses.

  • The medical credit cards are offered with deferred interest – this means the consumers will not pay interest as long as the full amount is paid back in 6 months. Depending on the card, this can reach up to 2 years.

These facts shows a lot of issues that we should have with these medical credit cards.

  • Since cards are offered through the health care provider’s office, the consumers availing it are not scrutinized for their ability to pay.

  • Since the interest is deferred consumers are more tempted to use it more without considering how much they will end up paying on the service.

  • There is a possibility that consumers will skip negotiating with health care providers.

  • Offering the card to patients is a tricky way to encourage credit card use. Since they are vulnerable, they will be more inclined to accept the card without really thinking about the repercussions of using it.

  • It is a financial trap that will only benefit the health care providers because they will be paid by the credit card company immediately. It will not help consumes but instead, it will endanger them by putting them through so much debt.

  • It shields the rising cost of health care services and the interest rate from the cards will heighten that further.

  • Although the interest rate on the charges will only take effect after a certain period, it will be imposed on the original amount – and not the current balance. So let us assume that the patient has a $1,000 bill and they have been paying without interest for the last 6 months. When the interest rate kicks in, they will still be charged on the original amount owed – $1,000.

  • Those offering the credit cards do not explain all of these and they are not held accountable if the patients misunderstand the details of the card. This is not yet covered by any law that protects medical credit card users.

What is sad for this scenario is the fact that those who are using it are usually the elderly or low income families who have no cash or health insurance to help with medical expenses. This is definitely an issue that the government has to address to head off any lasting problem in the future.

Is it wise to rely on cards for medical expenses?

In the end, we are confronted with the question about using credit cards for emergency situations. What are the emergency fund best practices that you should follow? Does it include the use of medical credit cards?

In all honestly, it is unlikely that this will be one of the practices that you should follow. Using credit cards for emergency situations means you are more likely to make the wrong financial decisions. You will be in a vulnerable state and that makes you in an irrational state of mind.

The best option for you is to build up your cash emergency fund. That way, when you need the money for your medical expenses, you don’t have to worry about it. When you pay with credit cards, you still have to think about where you will get the money to pay for that. After all, you paid with the creditor’s money – not your own.

If you build up your cash reserves and you get in an emergency, you can pay with cash. We all know that it is more psychologically restricting to pay in cash and that makes us more hesitant to spend. It will encourage us to negotiate with health care providers for a lower rate on the services they will give us.

If you like the additional security, that is when you should use medical credit cards. But you should never use it as your primary source of funds.

In case you have acquired so many debts already, here is a video that will tell you where to find credit card debt help.

Credit Card Strategies For The Holidays

woman with a laptop and holding a credit cardThe holidays will soon be upon us and with the holidays comes holiday spending or in some cases overspending. We all like to give gifts and sometimes we get carried away. It just feels so good to see all those big smiles as people open our gifts. But then comes January and those credit card bills. Those statements can really be a pain. But there are some strategies you could use with your credit cards during this upcoming holiday season and here are four of them.

#1: Pay all  statement balances each month

You’re always better off if you can constrain your holiday spending to whatever amount you can pay off in full each month and on time. This generates several benefits. First, you would not have to worry about high interest rates because you’re not accruing any interest at all. Second, you would enjoy an interest-free grace period on all your charges that would be 20 to 50 days depending on when you charged the item in your statement cycle. If you play your cards right, this could give you nearly two months of credit at zero interest cost.

#2: Don’t get new credit cards

If you find that you must carry a balance, make sure you continue to use your normal credit cards so that you would be incurring interest charges at the usual rate. Applying for new credit cards will not only harm your credit score but can come with very high interest rates. For that matter, if your credit score decreases, your interest rates will increase. Carrying a balance forward may be acceptable so long as you can pay it off within the next several months. But whatever you do don’t miss a payment. Missing just one payment on one of your credit cards could lower your credit score by as many as 60 points. And this could drop you from having “good” credit to “poor” or even “bad” credit.

#3: Look for a 0% interest balance transfer card early next year

If you find you’re over your head in credit card debt, apply for a 0% interest balance transfer card early next year. If you can qualify for one of these cards, you won’t have to pay any interest for anywhere from 6 to 18 months – depending on the card. This would give you a sort of timeout period where all of your payments would be used to reduce your balance, which could help you get caught up on that Christmas spending. However, make sure you understand that new credit card’s terms and conditions. Some of these cards charge a 3% fee on the amount of debt you transfer. If you were to transfer, say, $5000 to a 0% balance transfer card, this could cost you $150. This is something to just be aware of.

Get that promotional credit card offer before the holidays.

If you feel you will be creating debt over the holidays, you could apply for one of those 0% credit cards that have interest-free financing on new purchases for some period amount of time. Just make sure there is no balance transfer fee. That way you could carry a balance, while avoiding both balance transfer fees and interest charges. Because these offers can last as long as 18 months, you could potentially finance your purchases for this holiday season and the next one as well.

Which of these makes the most sense?

As any expert will tell you, the best way to use a credit card is the pay off your balance in full every month. If you do this you’re using your credit card as a helpful method of payment and not as a way of finance or to create debt. Beyond this, the 0% interest balance transfer cards can make sense if you can pay off a portion of your debt each month before your promotional period expires.

Keeping that holiday spending under control

It’s also important that you try to keep your holiday spending under control. There are several strategies for doing this as well.

First, you should set a limit on your total holiday spending. Determine what it is that you can afford to spend, combining both the cash you have in hand and what you can afford to put on your credit cards. Then stick to that limit.

Give less expensive giftsSmiling woman hugging sack of groceries

Second, create a budget based on your own finances and not what it is you would like to do. The people on your list will probably appreciate the less expensive presents you buy them as much as more expensive stuff. It’s definitely true that it’s the thought that counts.

Make your gifts

There’s just nothing that beats a homemade Christmas gift where you’ve not only put thought into it but your time and efforts as well. Anyone can buy a Christmas gift. But it takes a special person to make them. It’s also great to give personalized gifts. Instead of shopping at those expensive, trendy shops, take a moment to think what the people on your list could really use. As an example of this, suppose you have a friend who loves to bake but can’t seem to ever do homemade piecrusts right. You might buy her an inexpensive pastry-making tool for less than $10 and then wrap it up with a copy of some foolproof recipe. You can just imagine how much she would love the gift and yet you’ve spent next to nothing.

Collect coupons and coupon codes

You may be able to find some very good sales before the holiday season, especially those legendary Black Friday sales. But there are other ways to save money on your gifts. For example when you’re shopping online, first do a quick web search for coupon codes that you could use on your favorite online stores. Also, comb through the coupons you receive in your mailbox before hitting the mall. Don’t forget to comparison shop. It’s possible save anywhere from $10 to $100 on an item just by watching out for deals. Speaking of which, here’s a video loaded with good tips for shopping online.

On Managing Multiple Credit Cards Without Ending In Debt

man holding multiple credit cardsA lot of people have learned their lesson when it comes to debt. They want to keep themselves from this dreadful credit problem because it is very easy to fall into it and tough to get out of. The high interest rate and the finance charges are enough to grow your debts into an amount that is difficult to recover from.

Sometimes, consumers choose to avoid credit card debt by eliminating these plastic cards from their lives entirely. There is some logic to this because if you remove the temptation to spend, you will not land in debt. But then again, that is not how you solve the problem. The real culprit here is your inability to control yourself. Instead of disciplining yourself, you will sacrifice your credit score by cutting off your multiple credit cards. Closing an account decreases your credit rating and that can prove to be damaging for any financial opportunity that you may have in the horizon.

While financial experts advise that you should only own one or two accounts, what can you do if you already have multiple credit cards? Well you have the option to keep them.

Tips to retain several credit cards and still be debt free

Keeping several credit card accounts can be a risky move but only if you do not know how to manage them properly. There are techniques to make sure that these multiple accounts will not land you in debt.

  • Define the purpose of each card. It is important to categorize where you will use your card. Make sure you use it where it is most able to get rewards. There are credit cards that are great for travelling and there are also cards that will give you great discounts in groceries or restaurants. Know your multiple credit cards so you can maximize the benefits that you can get out of them.

  • Budget the use of your cards. Now that you know the purpose of your cards, you should make sure that it is plotted in your budget plan. For instance, the credit card for clothes must have a specific budget every month. The same is true for your food and groceries. If you use your credit card for these, you have to allocate a budget for each and put it aside. Do not spend that cash for something else.

  • Pay your balance in full every month. The reason for the previous tip is to enable you to pay for your balance every month. This is how you stay away from finance charges and the effects of high interest rates. This is how you stay out of debt.

  • Do not be late with payments. Another factor that can increase the amount that you have to pay for is when you do not meet the deadline of your credit card payments. Since you have multiple credit cards, it may be beneficial for you to have the dues dates fall at the same time and right after a paycheck is released. This will keep you from forgetting to pay them.

  • Track your expenses carefully. It is also very important for you to track your expenses. Do not wait for the billing statement to arrive before you take note of what you are spending. If you are scared that it can be tedious, you can check out ComputerWorld.com. They have a list of smartphone applications that can help you track the expenses that you make every month – both for cash and credit transactions.

  • Get rid of credit cards that charge annual fees. If you own cards that charge annual fees, have them waived. If not, downgrade them to an account that does not have this fee.

It is possible to own multiple credit cards as long as you can stay organized. If you can control where you use your credit card and you are never reckless, then the chances of you landing in debt will not happen.

Reasons why you still have a lot of cards

Point in fact is, credit cards can help you enjoy a better future. It does have benefits and it goes beyond the cashless transaction. There are many reason why you would want to keep your multiple credit cards and here are some of them.

  • You can’t afford to lower your credit score at the moment. As mentioned, closing your credit cards will affect your credit score. So if you are gearing up to make a huge loan for a home or a business, you might want to refrain from closing your cards. This will lower your score.

  • You want to categorize your credit spending. One card to pay for all your expenses might be a bit more difficult when you want your spending categorized. Having one card for certain expenses will help make category spending easier to track.

  • Your lifestyle is able to benefit from reward points. If you are the type who is able to maximize the rewards for various credit cards, then feel free to keep all your credit accounts. These rewards can save you a lot in the long run – as long as you pay the full balance of your debts on time. That way, you only pay for the value of what you purchased.

  • You don’t have a problem with credit card temptations. Lastly and probably the most important reason is you have no problems curbing the temptation of spending on your credit card. People who cannot control their spending and does not have the discipline to track their expenses will not benefit from having a lot of cards.

As you can see, changing your habits will allow you to enjoy the perks and benefits of using multiple credit cards. You don’t have to eliminate it totally from your financial life.

6 Tips For Managing Multiple Credit Cards

man holding out credit cardsIf you’re a really good money manager, you probably have just one credit card, which you use only in case of an emergency. On the other hand, you may not be quite so sensible and have managed to accumulate multiple credit cards because of all those different cards available what with their rewards points, free travel and cash back.

Managing multiple cards

The task of managing multiple credit cards is certainly not as simple as managing just one. However, there are strategies you could use that would make this simpler. So if you do have a billfold full of credit cards, here are eight tips for handling them.

Don’t carry a balance

The first, important thing you should do is not carry a balance on any of those credit cards. As a general rule, those rewards cards have higher interest rates. So if you carry a balance, the interest you pay may offset or even negate the value of the rewards you earn by using them.

Pay on time

In addition to paying off your balances every month, make sure that you’re making your monthly payments before your due dates. The easiest way to do this is with automatic, online bill paying. If you miss a payment due date, this could drop your credit score by as many as 60 points. If you do miss one, immediately contact the credit card provider and ask that it waive the normal fee. In most cases, you’ll find that the credit card company is happy to do this.

Don’t sign up for any cards that have an annual cost

You shouldn’t have any credit cards that have an annual fee. This, too, could just about negate any rewards you would earn from having used them. If you do find that you have one with an annual fee, put a sticker on the front of it with the amount of the fee and the date it will be charged. This will then be a reminder to call the card issuer about a month before the fee is due and ask to have it waived. In the event the company declines, you might want to downgrade the card to one that didn’t have a fee.

The right card for the right purchase

The toughest part of managing multiple credit cards is in maximizing your rewards points. There are mobile apps such as the Glyph, Wallaby and Reward Summit that can help you do this by keeping track of the cards that offer the best rewards for each of your purchases. You should also pay attention to the features of each card, which could include things like extended warranties, fraud protection or travel insurance. These can come in very handy when you’re making a major purchase.

Keep track of your purchases

It’s difficult to pay off your balance each month if you don’t know where you’re spending your money. If you stop paying attention to this, things can quickly get out of control. You should carefully review each credit card’s paper statement or use a program such as Quicken to monitor how you use your cards. Many of these cards have purchase requirements. So you need to track things carefully to make sure you have the right number of transactions or spent the right amount of money to gain the maximum in bonuses.

Watch out for the impact on your credit score

Be sure to understand the effect that having multiple credit cards will have on your credit score. For example, 15% of your score is based on your length of credit history or how long you’ve had credit. If you find you’re not using a card and close the account, this will drop your credit score. Every time you apply for a new credit card, this also nicks your credit score so be careful and not apply for a lot of credit cards.

Resisting temptation

If you can manage those multiple credit cards sensibly this can be a great way to get rewards points and earn cash back, free travel and other perks. However, this is not a good idea for everyone. The biggest problem is one of temptation. You might get all those cards with the best of intentions but if you let your spending get out of control, then bad things happen. And bad things means excessive spending and missed payments, which can lead to fees and high interest you didn’t expect to pay. The net/net of this is that trying to juggle multiple credit cards is not for someone who is disorganized or easily convinced that they need that shiny new something.

If you’re spending gets out of controlwoman making financial decisions

In the event your spending gets out of control and you find that you have high balances on all of those cards, there is a way to pay them off called “snowballing” those debts. The way this works is that you create a spreadsheet with all of your credit cards, their balances, interest rates and due dates. Then sort them from the one with the highest balance down to the one with the lowest. Next, do everything you can to pay off that card that has the highest interest rate while making the minimum payments on the other cards. When you’ve paid off that first card, you will have the maximum amount of money available to begin paying off the card with the second highest interest rate. Keep doing this and you should be debt-free in just two to three years even if you owe as much as $50,000. Here’s a video that explains more about snowballing credit card debt and how to do this successfully.

How To Increase Your Credit Card Payments

hand holding credit cardsSometimes, people who are buried in debt only have to manage credit card debt to keep it from totally ruining their personal wealth. Why the special treatment on credit cards?

Well first, it is the easiest debt to get into. The allure of being able to buy things that you cannot afford at the moment is just too hard to pass up on. Secondly, the high interest rate on the credit card can quickly grow your debt into unmanageable proportions. Third, it is does not have much restriction on your credit as long as you have not reached the credit limit. And when you have reached the limit, you can expect that things will be very tough to get over.

The problem for some people is they remain oblivious to the amount of debt that they incurred. The convenience that it brings can be a double edged sword. If you can relate to this, you have to act fast to keep credit cards from ruining your life. Of course, that means you have to do something about your credit card payments.

How to boost the monthly payments on your credit card

It is not enough that you stick to the minimum requirement for your monthly credit card payments. This is a trap that will keep you in debt for a very long time. If you really want to solve your credit problems, you must implement certain financial habits that will help you boost the monthly contributions on your credit card balance.

Here are some tips that we suggest you look into.

  • Know your options. First and foremost, you have to know the different ways you can get out of your credit card troubles. All debt relief programs are applicable to credit card debt and you cannot say that you do not know what to do. Just like it is your responsibility to pay off your debts, it is also your responsibility to know your options in case your finances can no longer afford your payments.

  • Create a budget plan. If you really want to maximize your payments, you must look into your finances and see how you can squeeze more out of your income. A budget plan will help you determine the maximum amount that you can allot for your credit card payments without compromising the other expenses that you need to spend for.

  • Track where your money is being spent on. Take a month or two to list where your money goes to. If you have to carry a small notebook – then do it. Or simply utilize your mobile phone to help you jot down every expense that you make. This will help you filter out any expense that should not have been made or habits that you need to correct. Do this for both cash and credit card purchases.

  • Maintain your card payments. Make sure that you can sustain the payments that you are making on your credit card so you can track it accurately. Create a payment plan that will help you monitor it. Find ways to keep yourself motivated – it even helps to watch your balance go down.

  • Try not to use your credit card for new transactions. If you really want to pay down your credit card debt, you must keep yourself from incurring more debt. Otherwise, you will never be out of credit obligations.

3 tips to pay off credit card debt

There are many methods that you can use to make sure that you can make better progress at paying your credit card debt. You may want to follow any of these methods to help you achieve debt freedom without compromising your credit score.

  • Rank your debts according to the highest interest rate. The first strategy is to rank your debts with the high interest debt on top. What you will do is to distribute your credit card payments one all of these – starting with the minimum requirement only. Anything that is left will be placed on the topmost debt on your list – which is the one with the highest interest rate. The idea it to concentrate on this debt so you can get out of it faster – while making sure that you do not default on the others. When you have finished paying this off, you can get the payments from the first debt and transfer everything to the second debt priority – which will grow your monthly payments exponentially. You rollover the payments to the next debt when it is finished. You continue with this until you have paid off all your dues. The goal of this is to start with the high interest so you can limit the money you will waste on them.

  • Rank your debts according to the lowest balance. This is very similar to the first in terms of the process but instead of prioritizing the high interest, you will be focusing on the debts with the lowest balance. The reason for this is to give the consumer an early success to they get the motivation to continue paying the rest of their credit card accounts. Sometimes, this is more effective than the first in giving consumers debt freedom. However, it does result in increasing the interest amount that you will end up paying for in the long run.

  • Set up automatic payments. Lastly, you may want to set up automatic payments that will keep you from forgetting your payments. You can choose the date that you want to send the payment and the amount that you will pay. If anything, this will help you implement your payment plan flawlessly and avoid late penalty charges.

You may find all of the payments quite confusing but there are credit card payment calculators that you can use online. Sites like Bankrate.com offer various credit card calculators like their credit card payoff calculator that will help you determine when you can completely pay a credit account. Another tool that you may find useful is the credit card minimum payment calculator. This will tell you how long it takes to finish paying a debt via minimum payments as opposed to paying more than the minimum requirement.