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How To Be A High Volume Credit Card User Yet Stay Out Of Debt

Credit cards superimposed ove moneyDo you put $10,000 or more on your credit cards each month? In theory, it should be really easy to manage that debt. All you have to do is pay off your entire balances on their due dates. I mean, what else do you need to know?

Unfortunately, the answer is that there is a lot more to know. Many people are simply not able to follow this system. In fact, Americans carry an average credit card balance of about $5000. It’s just not a good idea to carry a balance like this because your interest fees can quickly escalate the amount you owe. In addition, the monthly payments you would make on past spending may inhibit your ability to pay for your current expenses and save for the future. Fortunately, many high-volume credit card users have discovered how they can charge and pay off huge sums on their credit cards and always come out ahead. Here’s what they’re doing right.

1. Use software

Savvy credit card holders use technology to see where their money goes. If you don’t know exactly where it’s going and what it takes to run your household it becomes very easy to run up debt. There are numerous apps and software available to track your cash and credit flow to make sure you never overspend. Step number one towards financial well being is to know that you can pay off your credit card debt based on your regular usage and without it affecting your checking account balance or other areas of your financial life. If you want to be a successful high-volume credit card user, go online, check out personal-finance programs and find one you think will work best for you. We like Mint.com and You Need A Budget (YNAB) but some people prefer Quicken.

2. Earn when you charge

Ultra-sophisticated credit card users make money instead of paying interest by using credit cards rewards programs. The best of these offer straight up cash back. As an example of these, Target cards offer 5% cash back on purchases and an American Express card from Fidelity has a 2% cash back rewards program. The Fidelity card could be a good choice because for every $5000 you spend, Fidelity will deposit $75 into your investment account (if you have a Fidelity account). Many cards such as the Chase Freedom Card offer choices – you can either get rewards points or cash back. This card, like many others, also offers the opportunity to earn more cash back via quarterly promotions. For example, you might be able to earn double points by using the card at restaurants during a three-month period. If you play your cards right, you could maybe spend $20,000, get as much as $1000 back and then avoid any interest charges by moving your entire debt to one of those 0% interest balance transfer cards.

If you’d like to know more about the differences between cash back, points and airlines miles, here’s a brief video that answers this question.

 3. Be prepared for the inevitable

Expensive emergencies such as a broken-down car or an aging pet that requires surgery is what trips up most cardholders. These emergencies tend to feel like surprises because they exist outside ordinary spending. If you run into one of these and don’t have the cash in hand, it will have to go on a credit card –unless you’ve taken an extra step so that you are prepared for financial emergencies. What that extra step amounts to is setting aside money to pay for those inevitable emergencies. One good way to do this is to have a separate savings account with automatic deposits from your paychecks. While many financial experts say that you should have the equivalent of six months of living expenses put aside to cover emergencies, a more affordable alternative might be three months worth.

4. Have ongoing conversations about credit

Sitting down with your spouse or partner to discuss your credit situation is certainly not much fun and can lead to arguments. But savvy credit card users communicate with their partners or spouses continually to make sure they have his or her willing cooperation and participation. Don’t wait for problems to start but make credit discussions an everyday conversation, particularly if you and your spouse or partner have conjoined accounts. If you maintain a regular dialogue, you can avoid those “oops” of credit card life. For example, suppose you need a new $500 computer. That should be a joint decision as to whether you spend the money now and incur $500 in debt or save for several months so you can pay cash. The important thing is for the two of you to be able to agree as to how you are going to handle purchases such as this.

5. Commit to zero

A survey done recently revealed that 20% of Americans feel that it’s not only inevitable to carry over credit card debt but a responsible way to manage personal finances. If this is how you feel about credit, it’s time to change your viewpoint. The high-volume credit card users say that debt is not a fact of life and that the amiunt of your income is irrelevant. Pledge to borrow only what you know you’ll be able to pay back immediately and then follow through on it, no matter how painful it might be when the time comes to write a check. It really doesn’t matter how much you put on that credit card so long as you can pay it off in full and on time. If you buy only things that you know you can pay for at the end of the month, it tends to keep spending in check. This is made easy by the credit card companies that have their high interest rates and penalties. In fact, they make it seem absolutely foolish to not pay your bill in full or, worse yet, to miss a payment.

6. Pay early and oftenCheck

The vast majority of credit cards give you about a 30-day window to send in your payment. If you pay the entire balance owed you avoid any interest charges. Your statement(s) will have a due date and you need to make sure you know what it is. Savvy credit card holders actually pay as they go instead of waiting until the date their payments are due. For example, you could pay off your credit card balance every Friday and then start the next week fresh. In many cases if you pay often and in small portions, you’ll find this is easier than having to face one huge payment. Alternately, you could pay off your balance every paycheck, which is probably twice a month.

7. Lose the plastic

Most high-volume credit card users have streamlined their accounts to just a few cards. Multiple cards can lead to confusion. The more cards you have, the more likely it is that you will get into trouble. It’s probably better to have two or three accounts with large limits than a whole bunch of cards with smaller limits.

8. Respect your limits

It’s not important that your credit card issuer will let you charge up to $20,000. And what your friends are using their credit cards for is none of your business. The important thing is for you to know how much money you have and to not worry about what other people think. The people who most often get into trouble are those who buy things they can’t afford due to peer pressure. This means the critical number is not your credit limit but the amount you can afford to repay. The best solution is to focus on your budget and live below your means. Just about anybody can alter their lifestyle to do this and there’s no reason why you shouldn’t be able to do this as well.

8 Credit Cards Things To Avoid Like Swine Flu

You probably wouldn’t want to contact swine flu. It’s a nasty disease whose symptoms include fever, cough, sore throat, body aches, headache, chills and fatigue. Credit cards are like this in that if you don’t use them responsibly, you could end up experiencing headaches, body aches and feeling fatigued. To keep this from happening, here are eight credit card things you need to avoid like, well, swine flu.

1. Don’t fall for marketing hypeman holding multiple credit cards

When choosing a credit card, don’t pick one because it has a great sign-up offer, has your favorite team’s logo or comes with rewards points or cash back. Choose one instead that has a low APR and that fits how you spend money. Would it be accepted at all your favorite restaurants and retailers? Does it have an annual fee? These are more important things to consider than rewards or great bonuses and it’s critical that you think about them.

If you’ve had credit problems in the past, you might be tempted to apply for one of those “pre-approved” credit cards. Unfortunately, these are often a marketing gimmick where you might meet some sort of criteria but pre-approval does not guarantee that you’ll actually get the card or that it would be right for you. Think carefully as to how you would use the card and research your options to get a card that would best fit your lifestyle and needs.

2. Don’t skip the fine print

While the 2009 CARD Act eliminated some specific credit card fees and requires the credit card companies to be more transparent about other fees, don’t make the mistake of thinking you’re totally protected from any and all credit card fees. These laws don’t protect you from everything. Before you sign up for any card, be sure to read its terms and conditions so you will know exactly what to expect. For example, with some cards if you miss a payment, your nice interest fee of 12.10% could automatically be jumped to a no-so-nice 19%.

3. Don’t make just the minimum payment

All credit card statements include a minimum payment or the amount you will need to pay to keep from missing a payment. You don’t want to ever make just that payment. Here’s why. Let’s suppose you have a balance of $1200 and your minimum payment is $42. You think, piece of cake. If I just pay the $42 I will still be good on my credit card. But this is not so. Your balance would still be $1200 and you would be charged an extremely high APR. For example, if your APR was 18% and you made only the minimum payment of $42 you would end up paying $$713.79 in interest payments and it would be 89 months before you were out of debt. And when you carry a balance forward on a rewards credit card you will probably be charged a higher interest rate than with a regular card that offers no rewards.

Here’s a video that uses a glass of water to demonstrate what happens if you make just the minimum payments on your credit card bill.

4. Take no cash advances

If you take a cash advance or do some other type of cash-like transaction, you will be charged interest from the minute you make the transaction. Plus, cash advances usually come with higher interest rates than when you make regular purchases. You might be tempted to use your credit card at an ATM or use one of those “convenience” checks but just tell yourself “no.” Both of these transactions will likely have high interest rates and extra fees.

5. Ignoring your statements and notices is a very bad idea

Credit card statements sometimes include what are called “gray” charges. While these charges are technically legal, you may not have authorized them. This could be membership fees from a health club you thought you had canceled or charges for downloaded ring tones that were tacked on by your cell phone company. Whenever you receive a statement be sure to review it carefully looking for those gray charges. If you find one, try to first resolve things with the retailer. If that doesn’t work, dispute the charge or charges with your credit card company. You need to carefully go over every credit card statement to make sure there are no fraudulent charges and none that you don’t recognize.

6. Never max out a card

When you use up all your available credit, this will not only cost you money but may damage your credit score. This is because 30% of your score is based on your credit utilization – or how much credit you’ve used vs. the total amount you have available. This is expressed as your debt-to-credit ratio. If you had a total of $2,000 in credit available and had used up $1,000 of it, your debt-to-credit ratio would be 50% (amount of credit used divided by total amount available), which would be too high. Most experts say that your debt-to-credit ratio should be no higher than 30% and the lower the better. When you have a debt-to-credit ratio of 40% or more it makes it look as if you were desperate and that you needede credit to just subsist. Since the credit card companies don’t like to see this, they may raise your interest rate or try to reduce the amount of credit you have available – to rein in your spending and reduce their risks. If you do have a debt-to-credit ratio of 40% or higher, try to pay down your debt as this would lower your debt-to-credit ratio and could boost your credit score.

7. Don’t miss a due date

Every credit card has a grace period or the amount of time between when your billing cycle ends and your payment is due. If you miss a due date this can lower your credit score by as many as 60 points and will probably trigger an increase in your interest rate. Your due date is really your due date. If you have a problem remembering when it is, put a reminder on your calendar to make sure you don’t miss it. We use a calendar that allows us to set a reminder on a certain date and it will then pop up on that day every month. If you use multiple credit cards, you might contact your card issuers and have your billing dates changed so they all hit on the same day. An even better idea is to set up automatic payments so you won’t be derailed by a check that got lost in the mail or because you forgot a payment. We use online banking and whenever we receive a statement from one of our credit card companies the first thing we do is go online and schedule a payment for a few days before it’s due. We do this because that eliminates the possibility of missing a payment and gives us more flexibility than if we had automated it.

8. Don’t get in the habit of chasing miles or points

If you have a card (or cards) that come with points, miles or cash back, it can be very tempting to use it to buy stuff you don’t really need. If you need a new tablet, buy it because you need it and not because you want to earn points. And if you’re trying to earn enough points to get a $300 plane ticket you will end up spending several times that amount to get the equivalent in points or miles. In fact, in many cases you would be money ahead to just buy the plane ticket. There have been studies done that showed people spent more when paying with a credit card than with cash and even more when paying with a rewards card. These cards are designed to get you to buy more and can be very enticing. But be very careful and don’t run up a lot of charges believing that getting those points or miles will make it all worthwhile.

What do those numbers on your credit card really mean?

Every credit card has a 16-digit number. Have you ever wondered if those numbers meant something and if so, what? Here’s an infographic that “cracks the code.”

Who’s Responsible For Our Huge Credit Card Debt?

Stressed, tired, overworked businessman doing paperwork, worrying about his debtsDid you know that our total credit card debt has grown to an alarming $800 x`billion? As you might guess, this is not a small problem. I saw one report recently that the average American is now carrying more than $16,000 in credit card debt. And that’s just the average! We Americans are now paying so much in interest and penalties every year that we may never be able to get out from under this debt.

Whose fault is it?

Why have we become so enmeshed in credit card debt? Some people blame the credit card industry. The credit card providers make it tempting to load up on cards. After all, if we didn’t have these cards, we wouldn’t be enticed to spend all of this money, right? Wrong.

Are we scapegoating?

Of course, the credit card companies do engage in some unethical practices. But the fact is, we’re really scapegoating the credit card providers for out terrible spending habits. Most experts say that any shady practices done by the credit card companies pale in contrast with how we use our credit cards.

How we mismanage our cards

The problem is that most of use our credit cards as a form of extra income when we want to buy something we really can’t afford. This is why an estimated 160 million people spend more than they earn.

A bad relationship

Putting aside our spending habits, it’s pretty clear that we have a poor relationship with our credit card companies. We tend to not pay off our balances each month. In fact, about 46% of Americans don’t pay their balances in full every month so end up accumulating hundreds or even thousands of dollars in interest and penalties. These penalties are for making a payment late or for going over our credit limits and are meant to encourage us to limit our spending instead of increasing it. Paying these fees is like throwing money down the drain.

How credit cards can help us

Credit cards were never meant to be an extra source of income. They were created to be a convenience and to save us money by giving us an extra 30 days of interest free money on the stuff we buy. Their interest rates were designed to penalize those who failed to pay their balances on time but, at least initially, were reasonable enough that we could use them in times of a financial emergency. If we use our credit cards that way, they can help with our financial health. In addition, many of today’s cards come with some kind of rewards. If you have one of these cards and charge up, say, $10,000 a month and get 2% cash back, that’s $200 of “free’ money a month – assuming you pay your balance in full every month.

When you use your card sensibly

If you use your credit card sensibly by paying off your balances every month, you should have a pretty darn good credit score. Since your score dictates how much interest you’ll be offered or what your credit limits will be, this can also help. For example, if you have a score of 696 and the lender’s cutoff point is 700, you would be missing out a better interest rate by just four points and basically paying additional interest for no good reason.

When credit card debt spins out of control

If you find yourself head-over-heels in credit card debt, there are options for getting it back under control. We here at National Debt Relief have helped thousands of Americans reduce their debt and become debt free in 48 months or less. Don’t let debt rule your life. Fill in the amount you owe under the “How Much Do You Owe?” section above and let us get started helping you get back onto the path of financial freedom.

“Why’s My Credit Score Just 570 And What Can I Do To Boost It?

Businesswoman reviewing paperwork at deskI saw this question asked by a young woman. She said she had a Macy’s credit card with a $100 limit that was 180 days late and had been closed by the creditor. She also had a Wells Fargo credit card with a $500 limit that she had maxed out and 36 inquiries on her credit report. She was wondering if she could increase her credit score by 50% if she were to pay off the Wells Fargo card.

No wonder

A credit card with a $100 limit that had been closed by the lender, a maxed out credit card and 36 inquiries? And she was wondering why her credit score was just 570. That aside, paying off that one credit card will not increase her credit score by 50%. It might boost it by 10 points – tops.

What’s wrong with this picture?

The thing that’s probably hurting her credit score the most is that Macy’s card that was closed by the lender as it takes about seven years to recover from this kind of charge-off. The fact that she maxed out her Wells Fargo card may have reduced her credit score by 100 points. And those 36 inquiries didn’t help.

What she could do

She should pay off that Wells Fargo card immediately and not use it for probably a year. There is nothing she can do about those inquiries as they will stay in her credit report for two years. However, only the ones that were made in the past 12 months will really hurt her score.

Why those inquiries damaged her credit score

A credit score is based on five parts. The first is Payment History or how well you’ve handled credit. The second is Amounts Owed and the third part is Length of Credit History, which is how long you’ve had credit. Part four is called New Credit and part five is Types of Credit used. However, the term New Credit is somewhat misleading because what it really means is the number of times that there have been inquiries made about your credit. This makes up 10% of your credit score and if there have been a lot of inquiries, your credit score will be reduced. The category Amounts Owed is also somewhat misleading. What this really has to do with is the ratio between the total amount of credit you have available and the amount you’ve used. In this young woman’s case, her ratio would be zero because she had used up all of the credit available to her.

What you can do to protect your credit score

If you want to get and keep a high credit score, there are several things you need to do. First, make all of your payments on time – always. Do not be late on any of your payments and do not skip any. Second, watch your debt ratio and try to keep it at 25% or below. As an example of this, if you have $1000 in in credit available, you should not have balances that add up to more than $250. Finally, keep those inquiries – or applications for credit – to the minimum. There may be times when you have to apply for credit two or three times within a single month but try to make this the exception and not the rule.

Always use credit sensibly

Always use credit sensibly. This means no splurges and no balances carried forward. Don’t charge anything unless you know you can pay for it when your statement rolls in. Use cash as much as possible as this will actually help you spend less. This is because it’s just harder to pull out a $50 bill to pay for something than to swipe a credit card. In fact, you should leave your credit cards at home as much as possible.

“I have $1,000.00 what should I do with it? Spend or save?”

happy woman with raining moneyIf you suddenly came into $1,000 what should you do with it? Should you save the money or just spend it?

Extremely low interest rates

Interest rates are very low these days. I’ve seen ads for one-year certificates of deposit with interest rates of 1% to 1.25%. Unless you could find a fairly conservative investment paying 5% or better, there may be other, better things you could do with that $1,000.
Other options

If you were willing to take more of a risk with that $1,000 you could buy gold or silver. Gold has actually gone down in price over the past six months – from a high of $1790.38 an ounce to today’s price of $1614.70 – which represents s loss of bout $176 an ounce. This means now might be a good time to buy gold as it may well go up in value over the next year. Of, course, at $1,614.79 an ounce, you couldn’t even buy an ounce with that $1,000.

Buy something that would appreciate in value

A third alternative use for that $1,000 would be to buy something you believe will appreciate in value. This could be rare stamps or coins or even baseball trading cards. However, before you invest in any of these, be sure to do your research so you can be sure they will actually grow in value . However, this will only be over the long term. I saw one baseball trading card that sold recently for more than $100,000 but was almost 100 years old.

Pay off debt

If you have high interest credit card debt (10% or higher), a better use for $1,000 might be to either pay it down or pay it off entirely – if $1,000 would be enough to pay it all off.

Comparing the two

Let’s suppose you owed $1,000 and were paying it off at the rate of $100 a month on a credit card with an interest rate of 18%. At the end of that year you will have paid $1,090.75 or about $91 in interest. As you can see, this is much more than you could expect to earn if you were to be very conservative and just buy a CD at 1.25%.

Don’t just spend it

To get back to the original question, should you save or spend that $1,000, the real answer is that there aren’t just these two alternatives. You could save the money, invest it, buy something that will appreciate in value or use it to pay down debts. However, the one thing you probably shouldn’t do is spend it. If you were to buy something for $1,000, it might feel good for a while but how will it feel a year from now? Will you still be glad you spent that $1,000 or will you have buyer’s regret and wish you had done something more worthwhile with the money?

Never Apply For More Than One Credit Card At The Same Time

Long line of credit cards (generic)What is a simple three-digit number that rules your financial life? It’s your credit score. These scores go from 300 to 850. As you might guess, the closer you are to 850, the better. Conversely, the lower your score, the harder it will be for you to borrow money, get a credit card or an auto loan, rent an apartment or buy a house. If you have a really low score, you’ll might even have to pay more for your auto insurance.

The five parts of your credit score

The whole idea of a credit score was created a company that was once known as the Fair Isaac Corporation but is now just FICO. How it computes credit scores is a very closely guarded secret. However it is known that there are five parts to a credit score. They are as follows:

Payment history: 35%
Credit utilization: 30%
Length of credit history: 15%
Types of credit used: 10%
Recent searches for credit: 10%

What this means

As you can see from these percentages, your payment history and credit utilization have the biggest impact on your credit score. Payment history is basically how well you’ve used credit – have you had any late payments or defaults – or have you always make your payments on time. The 30% for credit utilization is a bit harder to explain. It’s basically the ratio between the total amount of credit available to you and the amount you’ve utilized. A simple example of this would be if you had $10,000 of credit available but had balances totaling $2,000. In this case, you would have a credit utilization ratio of 20%, which would be considered very good.

Recent searches for credit

FICO divide searches for credit (credit applications) into two types. There are hard searches and soft searches. Hard searches are those where you actually applied for some type of credit such as a credit card. Soft searches are those that were initiated by someone seeking to give you credit. For example, when a credit card company searches your credit because it wants to offer you a “pre-approved” card, this is a soft search.

Every hard search results in a ding

Here comes the reason why you shouldn’t apply for multiple credit cards within a short amount of time. It’s because every time you apply for a new type of credit, whether it’s a credit card, a revolving line of credit or an auto loan, this reduces your credit score by three to five points. If you were to apply for four types of credit within a month, this could reduce your credit score by 20 points, which might drop you into a new, lower credit range.

Wait at least six months

If you’ve recently applied for any type of credit, you should wait at least six months before you apply for more. While it might be tempting to apply for a couple of those credit cards that come with cash back and great rewards, it’s much better for your credit score to apply for just one at a time.

Multiple types of credit

If your goal is to build a good credit score, there’s not much you can do about the length of your credit history. It is what it is. However, when you add new credit, you should apply as much as possible for different types – a credit card, an auto loan, maybe a personal line of credit. As you have seen, this represents 10% of your credit score and is an area you could actually influence.

The Best Advice For Dealing With Credit Card Debt

You may not want to hear this but the best advice for dealing with credit card debt is, of course, not to get into it. If you pay off your balance or balances at the end of each month, you’ll not only be money ahead but you will eliminate all that stress and strife that goes hand-in-hand with being seriously in debt.Man peering over stack of bills

The second best advice

If you are having a big problem with credit card debt, the best advice won’t do you much good. But here is the second best advice – do whatever possible to get out of debt. Credit card debt is expensive. In fact, if you check out the interest you’re paying on your credit card or cards, you’ll probably find that it’s in the neighborhood of 20% APR. In other words, if you have $10,000 in credit card debt and are paying $300 a month, you would pay back a total of $13144.77 or more than $3,000 just in interest charges. If you were to stretch that out to five years at $400 a month, you would pay a total of $15097.82 or nearly $5,100 just in interest.

What happens to your credit score

Having a serious amount of credit card debt can also damage your credit score. It’s said that 35% of your credit score is based on your credit usage or how well you’ve handled your credit and 30% on the ratio of your credit card debt to your total available credit or revolving credit limit. In other words, 65% of your credit score will be based on how well you’ve managed your credit cards and how much debt you’ve accumulated. If you’ve not handled your credit card sensibly or if you have used up too much of your available credit, your credit score will definitely be damaged.

What to do about that credit card debt

If you have too much credit card debt and accept the fact you need to do something about it, there are options. For example, you could use a technique called “snowballing” your debt. Here is how this works. First, make a list of all your credit cards, your balances and interest rates. The best way to do this is with a spreadsheet program as it would allow you to then check out some alternatives. For example, you could order your debts by highest balance to lowest balance, highest interest rate to lowest interest rate or conversely by lowest balance to highest balance and lowest interest rate to highest.

Make a choice

Your next step would be to decide how you want to pay all those credit card debts. The two most common ways to snowball them is to first pay off the highest balance credit card or pay off the card with the lowest balance first. If you pay off the credit card that has the highest balance first, this will free up the maximum amount of money that you could then use to next begin paying off the credit card with the next highest balance. On the other hand, if you would like to see some immediate progress you might choose to pay off the card with the lowest balance first, then move on to the one with the next lowest balance.

If your credit card debt is completely out of control

If you spreadsheet your credit card debts, total up your balances and find your debt has spun completely out of control, you might want to look into debt settlement. This could be your best option for dealing with credit card debt because only it can be used to reduce your balances, which can help you get out of debt faster than snowballing them or even borrowing money to pay them off. Check with us either by phone or by filling out the form you’ll find on this page to learn more about debt settlement whether or not it could help you.

Could A Free App Help You Get Out of Debt?

I’ve been seriously in debt so I know how it feels, which is awful. There are few things in life worse than waking up in the morning knowing that you will be receiving phone calls from irate creditors or debt collectors. The stress of being in debt can even result in physical symptoms such as an irregular heartbeat, ulcers and insomnia.Mobile Banking On Smart Phone

If this is you

If all this sounds familiar, don’t despair. There are software tools and apps available that could help you get out of debt. One of my favorites is called Debt Tracker. It’s available for the iPhone and could help you manage or pay off all your debts. It will even enable you to figure out when you would be debt-free. It’s based on the debt snowball method and is said to be very easy to use. (Note: There is also an app for Android phones named Pay Off Debt that works much like Debt Tracker.)

What one user said

Here’s an example of how useful Debt Tracker can be. One user said, “Have tried this app. It’s simple to setup and use. The calculator is really a useful tool. It also has the ability to track payments and provide reports that will put me on the right track”.

What is the debt snowball method?

As noted above, Debt Tracker is built around the debt snowball method for paying off debts. The way this works is that you order your debts by balances owed and interest rates. You then do everything possible to pay off the debt with the highest interest rate, while still making the minimum monthly payments on your other debts. Once you have paid off the debt with the highest interest rate, you will have extra money you can use to start paying off the debt with the next highest interest rate, and on and on until you have paid off all your debts, Alternately, you could choose to pay off the debt with the lowest balance first as you would see some immediate benefits that would help you stay motivated.

The downside of snowballing your debts

Debt Tracker and debt snowballing could help you become debt free but it does come with a downside, which is that it will take you a very long time to pay off those debts. You will have to be very careful to not take on any new debt during that time and you will need to be better money manager. It was probably poor money management that got you into trouble in the first place. You will have to learn to become a better personal finance manager for this to work and this might not be easy.

Other options

There are other ways to pay off debt without using the snowball technique. For example, you might be able to borrow enough money to pay off all of your debts, which would leave you with just one monthly payment. Or you could go for consumer credit counseling where you would get a debt management plan (DMP) that could help you become debt free in maybe five years. Thirdly, you could contract with us to settle your debts, which is essentially the only way to get debts reduced short of filing for bankruptcy.

How debt settlement works

The way this works is relatively simple. We contact those of your lenders where you have unsecured debts and negotiate settlements for less than you actually owe. You then pay us monthly until you complete your program, which generally takes 24 to 48 months.

It’s not for everybody

Debt settlement is not for everyone because for it to work you must have not made any payments to your creditors for at least six months. And it will effect your credit score. But if you’re seriously in debt and either can’t or don’t want to borrow more money, debt settlement could be a very good option.

“Am I Still Responsible For A Seven Year Old Debt?”

I read recently about a woman who was being dunned by a debt collection agency over a bill that was seven years old. She believed that she didn’t have a negative balance when she had stopped using the account and had not touched it in seven years. So she was wondering if this would appear on her credit report and whether or not she should pay the collection agencyWoman talking on the cell phone

Old paper

What probably happened to this woman is that the collection agency had purchased “old paper” from an agency that had purchased it from the original bank. However, most states have a statue of limitations on debts and it is likely that a seven-year-old debt would not still be valid. Moreover, if the collection agency added this debt into her credit report, she could file a rebuttal letter along with a letter from the bank showing she had no balance due.

Watch out for unscrupulous debt collection agencies

This collection agency would probably fall under the category of unscrupulous because it should have known that a seven-year-old debt was no longer valid. But if you have extensive debts, you need to be careful of other tricks that can be played by unscrupulous collectors. For example, they could file suit against you, claim they had notified you when they hadn’t and then request a default judgment. If it was able to obtain this judgment, it could then put a lien on your house or garnish your wages.

Be sure to show up

If you find yourself on the wrong end of a lawsuit over a debt, be sure to show up in court to prevent the lender or collection agency from getting a default judgment. When you get to court you could fight the suit by challenging the agency’s standing – or its right to sue in its own name. In other words, the agency would need to prove it has the right to collect on your debt as shown by a signed transfer of the credit card agreement. You could make the collection agency prove that you owe what it says you owe. You might be able to use the statue of limitations as a defense as in most states creditors have a maximum of four to six years to collect a debt.

Sue back

Finally, you may be able to sue the collection agency back. Several years ago, Congress passed the Fair Debt Collection Practices Act (FDCPA). If you can prove the agency had violated its provisions, you might be able to sue it. If you have an attorney who knows what he or she is doing, you might be able to get damages, attorney fees and costs. In fact, if you can successfully sue for violations of this act, you can get statutory damages of up to $1000, plus economic and punitive damages. In addition, the agency will have to pay your attorney’s fees and costs

Know your rights

If you’re being harassed by a collection agency – even if it hasn’t yet filed suit – it’s important to know your rights. Go online, check out the FDCPA to see what collectors are allowed to do and not do and to learn how you might be able to put a stop to those harassing phone calls.

How To Manage Credit Card Debt

man holding multiple credit cardsMost people get into serious debt because of poor spending habits. Effective management of credit card debt can help you to stabilize your finances. Most financial experts suggest that credit card debt is healthy as long you have a plan for paying it off.. Managing your credit card wisely involves not charging those items that you couldn’t pay cash for. Paying off your credit card debt on time improves your credit ratings so that it’s easy to get loans in the future. Below are tips you can use to manage your credit card debts.

Learn The True Costs

Before you make a big purchase using your credit card, contact the credit card company to learn how much interest and fees you will be charged. Calculate how much it will cost you to purchase that item using a credit card and you may be surprised to find out how much it will cost in the long run.

Make payments on time

Make sure that you pay your monthly minimum amounts on time to prevent your debt from accumulating. When you skip a payment, you will be penalized and charged a higher interest rate, which will just add to your debt. Your credit history will be negatively affected which will lower your credit score.

Pay more than the minimum amount

Try to pay more than the minimum amounts on your card if at all possible. This helps to clear your debt quicker. The longer you take to clear the debt, the more you will pay due to the interest you’re being charged.

Ask for a lower APR

Your credit card company will give you a lower APR if you have a good credit history. This is because most credit card companies don’t want to lose their customers especially those with good payment histories.

Take the long view

You’ll benefit from using a credit card in the short term but it will affect you negatively in the long run. Learn to look at your finances in the long run because once you have a large balance on your credit report, it will show for the next two to three years. If you have not yet decided to buy something, write down its costs on a piece of paper and pin it in a place where you will see it every day. You’ll find out that the thrill of purchasing the item diminishes with time.

Manage your spending

If you really want to control your debt don’t spend more than the credit card’s limit. You could find yourself in a serious debt situation. Remember that you may be charged for surpassing the limit which only adds to the debt.

Budget your money

Work out a good budget that will enable you to live comfortably while paying off your debt. Adopt the habit of sticking to your budget to avoid overspending. Review the budget to see if you can cut back on some items. You’ll have more money you could use to pay off your debt.

Consolidate your cards

You cannot keep track of how much debt you are accumulating if you have many credit cards. You could take out a loan and use the money to clear all your debts. You would then have a single payment to the consolidating company each month. This is an easier method to pay off your debts. However, it can lead to a worse situation. Many people who consolidate their debts start to use their credit cards again and accumulate new credit card debt. Since they are debt free; they forget that there is a loan that must be paid back.

Use debt settlement

If your big debt gets out of hand, you can choose debt settlement as a debt relief option. The best thing about debt settlement is that you get to pay only a small percentage of what you owe.

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