• Lower your monthly payments
  • Reduce stress and live your life
  • Avoid personal bankruptcy court

Pay Off Your Credit Cards with 3 Simple Steps

Paying off any amount of credit card debt can often seem like a daunting and intimidating process. However, with just a bit of time, attention to detail and patience, paying off your credit cards in 3 simple steps is entirely possible. To start, follow these three simple guidelines to help you to save money and ensure a favorable credit score:

  1. Identify cards with the highest rate
  2. Focus on cards with the lowest balance
  3. Pay off  cards as quickly as possible

It is important to point out that paying off credit card debt is going to be different for every individual. Especially if you have a limited amount of financial capital, paying off debt is not always as “simple” as you would like it to be. Because the process of paying off debt might differ based on how much debt you have and how much debt you can realistically pay off, below are three tips to help make the process as pain-free as possible.

Pay Off Your Credit Cards

Identify Cards with the Highest Rate

Every credit card comes with an interest rate and the interest you pay varies based on the financial institution issuing you a line of credit. An interest rate is the percentage a financial institution charges you on the amount of money they loan you. You can usually find your interest rate on your monthly credit card statement. The interest rate will typically be labeled as an APR, or annual percentage rate.

The higher the APR, the more money you get charged in the long run. For example, if you take a year to pay off a $1,000 purchase on a credit card with a 25% interest rate, you can end up paying over a $100 in interest (depending on how much you pay for your monthly payments). With the help of an APR calculator, you can easily determine how much you should pay per month in order to pay the least amount of interest.

If you wish to pay off your credit cards with the highest rates, it is always a good idea to pay more than the monthly minimum. Oftentimes, the monthly minimum will only cover accrued interest, meaning you are only paying off interest rather than your debt. Paying more than the monthly minimum means you can pay off your credit cards by lowering your credit owed.

Focus on Cards with the Lowest Balance

Regardless of how much debt you owe, it is always ideal to first pay off credit cards that have the smallest amount of accrued debt. You will want to focus on cards with the lowest balance for two reasons:

  • Paying off lower balances is easier than paying off higher balances. Instead of keeping up with payments over 4-5 years, you might be able to pay off your credit cards in 1-2 years. Having a lot of credit cards open with small debt might reflect poorly on your credit report.
  • Paying off lower balances is more efficient than paying off higher balances. Since you will pay off your credit cards in a shorter amount of time, you will be less likely to continue adding credit debt. Studies show that completely paying off debt helps boost your financial confidence. By eradicating certain elements of debt, you are more likely to continue paying off other types of debt.

When you focus on cards with the lowest balance, you’re not ignoring cards with higher balances. Basically, your primary intent is paying off more money to cards with smaller balances and less money to cards with higher balances. For cards with higher balances, you might only be paying the monthly minimum, which is okay. Once you’ve completely paid off cards with smaller balances, you can continue to pay off your credit cards with higher balances.

Pay off Cards as Quickly as Possible 

Sometimes it is completely or nearly impossible to focus on paying off cards with smaller balances with higher rates. For some people, it might seem more effective to pay off all cards at the same pace. Though it really depends on your personal financial situation, regardless of what method you use to pay off your credit cards, the best method is to pay off your credit cards as quickly as possible.

The easiest way to find out which method of paying off debt is best for you is by making a spreadsheet. In your spreadsheet, include the total balance, interest rate, and monthly minimum payment, and monthly payment due date.

Credit Card Total Balance Interest Rate Payment Minimum Payment Due Date
Credit Card Name $XXXX.XX XX.XX% $XX.XX MM/DD

Figure 1: Credit Card Spreadsheet

Organizing your debt in a manner like the spreadsheet shown above can help you identify which credit card needs to be completely paid off in the shortest amount of time, and which cards should be paid off to avoid future debt problems.

Cashing In On Your Credit Cards

Credit cards have given new life to finances and the ability to spend money. Nowadays, purchasing merchandise and paying for services do not require cash or check writing transactions. All you need is a credit card with a sufficient balance on it to cover your expenses, and you are able to buy whatever it is that you need to purchase. However, with the increasingly rising use of credit cards, few consumers are aware that even with swiping the credit card, the purchase is only made temporarily because eventually, you have to make payments on the card to cover the amounts already taken off of the card. Not only that, you have additional processing and interest fees that must be paid as well. Because of that, consumers are constantly battling with credit card debt, either getting out of it or trying not to get into it.


Credit Card Spending Trends

In a study conducted in 2013 by the Federal Reserve, payment trends including long-term and short-term that took place during the years 2000 up until 2010 were examined.  It was concluded that there were various transactions that involved card not present transactions on general purpose credit cards. This type of transaction means that the consumer was not able to present an actual credit card. These types of transactions typically take place over the internet or the telephone. The information taken from the study also showed that these types of transactions are becoming increasingly popular as the sale of merchandise online constantly increases. In fact, the trend increases at a rate of 25% or more each year, and currently almost $1 trillion is made in online spending.

Credit card companies are very mindful of this increasing trend. In fact, more credit card companies are shifting their standards in an effort to get more individuals interested in using their credit card. This puts consumers at risk for racking up further debt. In America, the average credit cards debt is approximately $8,000 per credit card user, and the APR averages at almost 13%.

Exchange Traded Funds (ETFs)

Because of the above study conducted in May of 2014, investors who have their funds invested into the world of retail have strengthened their investments by turning to exchange traded funds, or ETFs. Exchange traded funds gives a solution for retail investors who are looking for more exposure to more industries, commodities, and investment opportunities. However, exchange traded funds are not available to help those investors gain access to the credit cards industry. Any investor who wants to purchase stock in a credit card company is recommended to focus on the publicly traded credit card companies. Those companies are:

  • Visa with a market cap of $163 billion.
  • American Express with a market cap of $94 billion.
  • MasterCard with a market cap of $89 billion.
  • Discover with a market cap of $29 billion.

Credit Card Growth and Predictions

When it all boils down, consumer credit depends primarily on the state of the economy as a whole. When the economy is good enough for consumers to benefit financially, they are more able to make more purchasing leading to the retail industry increasing in profits and the economy improving all together. However, when the economy is decreasing, consumers become overwhelmed with making enough money to cover the expenses that are on their credit cards. This causes a decline in customer spending and an incline in consumer debt. This also results in the limited use of credit cards in general. Overall, the negative impacts that credit cards have on the economy of the country and the overall debt of consumers have made possible investors turn a blind eye to the credit card industry.

Out of all of the popular credit card companies, Visa seems to be the strongest competitor among MasterCard, Discover, and American Express. Each trade on the market as resulted in a strong up-trend. If any investor were to pinpoint an ideal credit card company to invest in, Visa would be a good start, especially with its reported market cap being approximately $163 billion. Discover card, being the least used credit card company is slowly but surely making its way into consumers’ purses and wallets. Although its market cap is barely at $30 billion, it has improved on its quality as a credit card company, which is another company investors could be more interested in. its increasing quality has outdone its competitors in performance.

The rise of using credit cards as an alternative to using cash or writing checks have become a popular trend for Americans. Although credit cards are a convenient way to make purchases, it is also responsible for placing a huge debt on consumers and the country as a whole. So where does that leave investors interested in cashing in on credit cards? It is difficult to tell, but it is apparent that credit card companies are aiming at increasing their business to encourage more investors to hop on board.

The Way to Find a Credit Counselor

If you’re in as dire straits as many Americans are, your way of living paycheck to paycheck might have you on the brink of a very serious financial disaster. After paying your mortgage or rent, utilities and other bills each month, you probably find yourself feeling defeated and lousy. If you’ve racked up a few different debts over the years and you’re looking for a way out of the chaos, it might be about time for you to find a credit counselor that can work with you to make your life a bit easier.


So, if and when you find a credit counselor, you might be wondering how it is that they can make your financial aches and pains less of a problem. Credit counselors work for you in the sense that they reach out to individual lenders to lower your interest rates by as much as half with thorough negotiations. A very skilled credit counselor might also be able to help you create a customized budget, design a debt management plan, eliminate late payments and other fees, and administer payments to your lenders. If you’re trying to get a grip on your finances once and for all, these things could certainly help guide you down the right path. Keep reading for more information on what to look for when you’re trying to find a credit counselor.

Seek Them Out, Don’t Wait Around

You probably shouldn’t spring from the credit counselor that you found in a flashy advertisement or a late-night television commercial. The most reputable credit counselors depend on their past clients for references and they won’t be seeking you out via telemarketing or seedy emails for that very reason. What you want is a credit counselor that has proper certification who isn’t paid on commission: you’re not looking for someone who will rush through your case just so they can be paid as quickly as possible.

Go to a few different agencies and weigh your options before you commit. Starting with an internet search to find a credit counselor in your area is a great place to start.

Are The Associated Costs Worth It?

Of course there are costs associated with taking on the help of a credit counselor. No two financial situations are exactly the same, so you should be sure that the credit counselor you plan to deal with is willing to go that extra mile to devise a plan of attack that will best suit your needs. Make sure you’re made aware of the costs associated with hiring a credit counselor upfront. You might find that paying that credit counselor is just another expense that you can’t afford in your already-cluttered financial state.

You shouldn’t be spending more than $100 in setup fees and the monthly charge shouldn’t exceed more than $50. Monthly fees vary from state to state.

Designing a Debt Management Plan

Once you find a credit counselor you’re comfortable working with, you’ll have to provide detailed financial information from you income to the debts that you owe. It’s your counselor’s job to review your information and make recommendations about the best way to move forward. Your counselor should begin creating a debt management plan for you that allows you to repay your debts at reduced interest rates while also getting some late fees and other penalties erased if you’re lucky. It then becomes your responsibility to make payments to your credit counseling each month instead of paying off your various creditors with several different payments.

Things to Keep in Mind

  • When you find a credit counselor that you feel is right for you, they won’t pressure you into working with them right away. They’ll allow you all the time you need to evaluate each of your offers before choosing one. Although it’s important to get a hold of your debts as soon as possible, you don’t have to feel pressured to make a hasty decision.
  • Debt management plans only cover certain types of debts which don’t include mortgages or car loans. Find out which debts are included and excluded from your debt management plan.
  • A successful debt management plan normally takes between 30 and 60 months to be completed. Most times, you can’t apply for any new credit or incur any additional debt while you’re currently in the process of a repayment plan.
  • If you’re more interested in renegotiating the entire amount of your debt, you should be looking into debt settlement instead.

No one should have to live in fear of their mailbox forever. If you’re outstanding debts have gotten the better of you for far too long, you can make a change once you find a credit counselor. Get those debts in control and get on the right track to financial responsibility and freedom as soon as possible!

Five Prepaid Debit Card Pitfalls to Avoid

If a debit card is prepaid, it is often pitched as a cheaper substitute to checking accounts. With a prepaid card, you should expect normal fees as well as some pitfalls. Be sure to have a read of the prepaid debit card pitfalls below and do your level best to avoid these.

Lack of FDIC Coverage

Robust consumer protections such as insurance coverage and fraud protection come with conventional checking accounts. However, holders of the prepaid debit cards do not get these protections. They do not need to provide FDIC insurance, which is why only some prepaid debit cards have deposit insurance, whereas others do not. This is not such a big worry, until the time you run into financial trouble. Funds that are loaded on the prepaid debit card could be put in jeopardy, which is one of the prepaid debit card pitfalls.

prepaid debit card pitfalls

Card Loss or Theft

The funds of holders of the prepaid debit card are more prone to being lost or stolen. This is another one of the prepaid debit card pitfalls, which is why you must ensure your debit card is registered and attached to your date of birth, social security card, or name. The registration process is very straightforward and helps to prove you are actually you. You should register the card as soon as you purchase it. The registration can be carried out online or you can get in touch with the provider via phone. If you currently own an unregistered card, make sure you avoid this one of the prepaid debit card pitfalls by registering and requesting a replacement card as soon as possible.

Inactivity Fees and Deactivation

With a prepaid debit card, it is important that you use this. Providers of the prepaid card make money via the swipe of fees the dealer pays the bank to process the debit transaction. The company will not be making any money until you do not swipe. This explains why a survey found 29 percent of prepaid cards with some kind of inactivity fee. The fee gradually slows down the balance of the cardholder after some time.

If you are intending to use the card as a replacement for a checking account, then this is not such a big deal for you. However, if you will be using it occasionally, then the fees can add up quickly and are another one of the prepaid debit card pitfalls that you should avoid. If you will be using the card a lot, then it is important you select it in a way that it does not turn out to be a punishment.

Credit Score Atrophy

The main reason to why the demand for prepaid credit cards has exploded is that there is no need to undergo a credit check in order to get one. Regardless of what you do with the prepaid debit card, there is less chance that it will negatively affect your score. Regardless of your credit history, you will always get a prepaid card. This is because with these, you do not have to go through credit writing and neither need do you need to report to credit agencies.

No matter how good this may sound, it may also turn out to be one of the prepaid debit card pitfalls, as it can also work the other way. A credit score measures how well a person uses credit. If you are looking for ways to improve your credit score, you may find it time-consuming to achieve your goal, as the progress with one of these cards can be slow. If you are after a method to help you boost your credit, then you are better of using a credit card that is secured.

Fees for Overdraft Protection

If you are considering a prepaid debit card thinking you can easily get past overdraft fees, then it is time you think again. Overdraft protection may be offered with some prepaid debit cards, which can lead to Deja vu for a user who escaped straight checking accounts over flowing overdraft fees.

The scheme behind using the prepaid cards is that the user puts their money in first, and then spends what they have. The primary concern that consumers have is making very small overdrafts and experiencing a major amount of fees. When the providers of the debt card add on the overdraft, the value is very undermined by the user, which is another one of the prepaid debit card pitfalls.

If you wish to avoid coming face to face with overdraft fees, it is important you run through the terms and conditions of the prepaid debit card and ensure it does not allow overdrafts. If you find that it does, then it is best that you save yourself from all the prepaid debit card pitfalls and move on.

Need To Know Information About Your First Credit Card

You’re new to credit cards – you know that some people use them, but you’ve never even applied for one and you don’t have a clue as to how you can land good deals on rates.  Well, let’s give you a helping hand, and let’s start with the basics: why get one, and where can you get your first credit card?

Why a Credit Card Is a Good Move

First of all, it’s convenient – really convenient. A sliver or plastic is easier to carry around than a wad of cash – especially if you need to make a larger purchase, whether it’s buying a plane ticket or applying for a home. In this day and age making sure that you have good credit is important: few people can just pay in cash, and for those who can’t, good credit scores can help in life!

  • You can get lower rates of interest when applying for loans, be it for a home or a car!
  •  Employers might check your history before taking you on.
  • Certain utilities might do the same before letting you get a contract established.
  • If you ever want to buy something that isn’t local, a credit card is almost the only way – if you’re getting a car imported or ordering something online, you’ll need a credit card.

It’s important to make sure you have a good credit score as early as your first credit card, so it’s important to have a credit card: but where can you get one?

 First Credit Card

Getting Your First Credit Card

So where can you start off? The first place to check might be your bank – they know you, and if you have been a solid customer so far and can prove your income, they’ll be more than happy to give you a credit account. Credit unions or smaller banks might be a little bit more comfortable in offering a card to customers without credit so far – but either way, you’ll want to dig around! Take close looks at the deals available to you: stop in bank branches, check online, or make some phone calls.

Sometimes card companies will come straight to you. Are you already receiving offers in your mail box from week to week? You can use these to compare the deals you’re getting – the hook is easy. Rewards, a low introductory rate and other things to entice you – but it’s on the back that you’ll find important details like fees, finance charges or interest rates.

Otherwise, look online! Comparing credit cards is easy if you look around, and you can get all of the little details which are important – that you might not know when you’re getting your first credit card. This is all new to you: you need a helping hand.

Comparing Offers

After you have a few offers on the table, it’s time to study them. Do they come with annual fees? What’s the yearly percentage rate? How long do introductory rates last, and what happens if you make a late payment?

Some companies give you a bit of leeway on late payments – and others will slam you with a penalty as quickly as they can. Read the fine print! It’s all there, and it’s all incredibly important for your first credit card – you don’t want to pick something that’s going to work out poorly for you.

Some credit cards will boost your interest rate if you miss even one payment; others will wait until you pay ate on two payments before slamming a penalty interest rate into effect. It’s all in the fine print of the card offer. So get out that magnifying glass and take a look. Once you’ve looked over the offers, pick a favorite and apply.

Be Good, Prompt and Loyal

So you’ve gotten your first credit card – what’s the etiquette like? Make sure to pay on time every time that you possibly can to get your credit history set up right, and make sure to stick to a single card at first. You really don’t need more than one when you first start off.

If your credit card happens to come with a nasty annual fee, start shopping around again. A year of payments done on time will get you better deals, so look around, and once you find one, tell your old credit card company – unless they ditch that annual fee, you’re canceling the account. Be loyal as long as the company is loyal to you.

Alternative Options: Sharing an Account

Is this a good idea? It was in the past, but now things have changed – making it even more important for you to pick up your first credit card. Before 2007 you could get a shared account, but after that, the Fair Isaac Corporation decided that – in their credit rating formula – they would no longer let linked accounts contribute to the dependent’s score. That’s right; if you want to start up a solid credit history and a good credit score, you need to get your first credit card in your own name.

Why Does Your Credit Score Matter

Chances are you have a good idea of exactly what where your credit score lies.  It’s just that little number, following you around everywhere with its big, sad eyes, and it might be 600, it might be 700, or it might be even higher – but does it actually matter?  And do you actually know what it is and why it matters?

How credit scores are calculated

The simplest explanation: your score is just your credit report’s numerical representation, based on mathematical formula developed by the Fair Isaac Corporation (now simply FICO).  Three credit report bureaus exist – TransUnition, Equifax, and Experian.  All of them select credit scores based on information from your score (compiled by FICO), but they each use a different proprietary formula.  It’s possible to have three separate credit scores, but as you can probably guess, a higher score comes with a better report.

Why your credit score matters

The first look a prospective lender will take before approving a credit application is right at your credit score.  The range can go down as low as 300 and up as high as 850 – and a score higher than 800 means you are clear when it comes to lending.  On the other side of the spectrum, if your score is lower than 500, you might have problems getting credit.  Lenders will see you as someone at risk not to pay them back, and the credit they do give you will be at a high interest rate.

Reasons for bad credit scores

You might lack any sort of credit history, you may have defaulted on personal loans, dealt with the pains of a foreclosed home, filed bankrupt, or been late making payments on existing debts.  These are all the types of things that contribute to a low score.

What you can do about your bad credit

The first thing you need to do is learn your credit score.  Check out www.myfico.com – if you sign up for a trial, only two-weeks long, of the FICO Score Watch, you can get your score for free.  If not, it’s only twenty dollars.

If you find out that you do, in fact, have a poor credit score, there are ways to improve that.  There are things called ‘secured credit card’ – you deposit cash to the company issuing the card, and the card is then charged until reaching a zero balance.  A large number of these cards are available, but be sure to check out fees before signing up for one, as some of them can soar fairly high.

Think about credit in a different way

Although it might sometimes feel like free money, you have to remember: it’s the exact opposite.  You don’t want to use credit for emergencies, unless there are absolutely no other alternatives open to you.  In an ideal world, you would never put anything on credit unless you could immediately pay it in the same month to avoid keeping any kind of balance in the future, but in the real world, there are problems, some self-inflicted and others brought upon us by powers beyond our control.  But one thing you can do is avoid shopping splurges.  This isn’t just when you go on a wild shopping trip.  It applies to smaller things – buying a round for your friends, eating out big one night, or purchasing tools to keep yourself entertained.  No matter how it happens, not being careful about splurging can rack up some serious credit debt.

Debt consolidation can be your rescue

At times it might feel like you don’t have a way out.  Your poor credit score comes from your debts, and you have trouble paying your debts – it can be a painful cycle, but we can show you the way out.  Our debt relief professionals offer you a simple way, 100% satisfaction guaranteed.

If ever, you grow dissatisfied or jaded with the debt relief programs we recommend, canceling out is free – you’ll see neither fees nor penalties come your way.  We are confident in the help we can provide to make you debt free in reasonable time, and in the process, we’ll save you thousands.  Fill out the forum on this page or dial our toll-free phone number, and we’ll give you even more information.  It might just be the smartest decision you make this year.

A Guide on Credit Card Debt Management

So many Americans find themselves in the same situation regarding their debt. They have too much debt and no idea how to eliminate it. Credit card debt makes up the largest portion of debt in most homes. A credit card debt management plan can help you to eliminate some of your debt.

When people find themselves in debt, they tend to be unsure of how to eliminate their debt without getting further behind. It can be very important to some to not influence their credit score any more than it already has.

A Guide on Credit Card Debt Management

The Basics

Follow your payment schedule on time. In order to help your credit score or eliminate your debt make your monthly required payment on time. Late fees will only increase the amount that you owe. Making sure that your account never goes into default is very important.

Communicate with creditors. Whenever you are on a credit card debt management plan it is important to keep your creditors informed. Many times, you find that they have options to help you when you are in need. Ignoring creditors can only make your situation worst.

Pay off credit cards not just pay them down. It is important to a credit card debt management plan to pay off the debt. Eliminating the credit card debt should be the first goal of any good debt management program.

Committing to a plan is the next part of being successful in eliminating your debt. No matter the choice that you make in reducing your debt, be sure to commit everything you have to it. The only way that true success is achieved is through making payments on time and working with your creditors.

Refinance your credit card debt. It can be beneficial to discuss with your creditors the ability to modify your terms to have a fixed payment. This can help when budgeting and trying to determine what you have in extra monies.

Tactics Too Know

I can be important to know some optional tactics to helping you when creating a credit card debt management plan. These tactics might help you to reduce your debt faster or improve your credit score. Each of these tactics requires you to create a budget. Determine where you can cut expenses allowing you to have extra money every month above what your normal basic monthly bills are.

Consolidation Loans

If you still have decent credit you may be able to gain a low interest loan. With a loan, you are able to pay off all the littler debts and then only have one fixed payment. This method can reduce your debt the fastest, because you will be able to negotiate with your creditors to reduce the balance due for lump sum payments.

Debt Snowball

This tactic is one that is designed to keep you motivate by showing the quickest results. This is done by adding any extra money from your budget on top of your minimum payment. However, the trick is to pay off your smallest balance first. When you do this, you will see the results, by losing one card quickly. Then you are able to add that monthly payment into the budget and start over with the next card. This is not always the best option for some, because you are not looking at the interest rates.

Debt Avalanche

This credit card debt consolidation tactic requires a budget as well, however the cards are going to be listed based on their interest rates not the balance owed. Any extra that you have in your budget is going to be applied, above your minimum payment, to the creditor with the highest interest rate. By reducing the highest interest rates first, you are adding more money back into your budget when the debt is paid off. This can sky rocket the ability to become debt free faster. You can lose motivation with this plan, because you do not see fast results.

The Debt Hybrid

This plan relies on your ability to visualize. Take your debt and reduce it to manageable amounts. This might mean that the balance of one card is divided into three amounts. Pay each part off separately. This will allow you to feel accomplished because of your small goals, however it does not actually finish paying of the card until the third goal is complete. This is beneficial because with smaller goals you can pay off your highest interest rates first. You will still feel accomplished because you are meeting those smaller goals. This may not be the program for you if you are unable to able to “pretend” while making imaginary goals.

Having a credit card debt management plan is the most important step to your success. Without a plan, you will not be able to eradicate your credit through the most advantageous plan for your needs.

Managing Credit Card Debt

managing credit card debt

Managing credit card debt can become very difficult if you allow the balances on a number of credit cards to approach their credit limits, start missing payments, or find yourself needing to get cash advances on one card in order to make the minimum payment on another. Sometimes problems managing credit card debt occur solely as the result of one or more unplanned events such as loss of a job, the uninsured loss of a major asset such as an automobile, or a natural disaster such as flood. In most cases however, credit card debt has risen slowly over months or years until the cardholder suddenly notices that their credit card balances have begun to spiral sharply upward as late penalty charges are added to already high balances, and making even minimum payments on all cards sometimes requires taking on extra debt extra debt through “payday loans” or other high interest sources.

What to Do When You Become Aware You Have a Growing Credit Card Debt Problem

Unfortunately, the first reaction of many individuals when they realize that they are beginning to have serious problems managing credit card debt is a combination of guilt, fear, and simply not knowing what to do. That combination often makes them unable to take any immediate actions to resolve the problem. Delays in taking action always makes the job of bringing credit card debt under control more difficult and time-consuming. The first step on the road to financial security is to shine a bright light on the problem. Here how to get started:

  • Clear a table, and make a stack of all of your credit card statements, student loans, home mortgage, and other installment loan contracts such as auto loans.
  • Copy the outstanding balances, interest rates, minimum payments, and other pertinent information for each debt onto a single sheet of paper.
  • On a separate sheet of paper, put your monthly income at the top of the page. Below that, put three list of expenses.
  • In the first list, include expenses that are always the same every month such as your cable or internet service, rent, club memberships, etc.
  • In the second list put estimates of monthly expenses that vary from month to month such as groceries, public utilities, clothing, transportation to and from work, and discretionary spending for entertainment, etc.
  • In the third list put expenses that are not paid monthly, but which occur on a regular basis year after year. This list should include costs such as tuition payments, taxes, insurance policies, costs related to vacations or attending family reunions, etc.
  • As a final step, order a free copy of your credit report from one of the three national credit reporting agencies.

Working With a Qualified Debt Counselor

Getting all that down on paper may not make you happy, but it will make it easier to take the next step toward managing credit card debt, finding an experienced and qualified debt counselor. Here are some suggestions:

  • Call one or two of your credit card issuers and ask them for lists of nonprofit organizations providing debt counseling services in your area. Federal law requires credit card issuers maintain such lists for every community they serve.
  • Improve your chances of getting a well-qualified counselor by focusing on organizations that have been in business for at least five years in the same location. Before visiting any of the organizations meeting that criteria, run their names past your community’s Better Business Bureau or your state’s Office of Consumer Affairs.
  • Walk into at least two of the organizations Okayed by the Better Business Bureau or state Office of Consumer Affairs to pick up a brochure and to get a feel for each place. The brochure should include a clear list of services provided and fees. It also should provide a list of the organization’s national accreditations, and the training and accreditation requirements for debt counselors.

Working Out the Recovery Options

When you have selected an organization to work with, set up your first appointment. Bring your credit report and the two sheets of paper containing your debts, expenses, and monthly income to that first session. Much of the first one or two sessions will involve analysis of those documents and working out a livable household budget that includes savings for non-monthly payments, savings for unexpected emergencies, and an allocation for debt repayment. Based on the availability of funds for debt repayment, the debt counselor will present recovery options that make sense for your financial circumstances. Some of those options might include:

  • Providing guidance on how to approach your creditors to request lower interest rates or other modifications to existing credit terms;
  • Helping you to prioritize the debts you should focus available resources on first;
  • Offering you support in the form of money management training courses or literature;
  • Suggesting that you explore the possibility of a debt consolidation loan, and providing guidance as to the terms you should be able to get, and the banks or specialized lending organizations you should consider applying to;
  • If your income, debt level, or credit score make a consolidation loan inappropriate for your circumstances, the debt counselor may suggest enrollment in a formal Debt Management Program. In typical Debt Management Programs you make a single monthly payment to the plan provider, which in turn negotiates with your creditors to obtain lower interest rates, extended payment terms, and possibly forgiveness of accrued penalty charges or a portion of the outstanding balance. In exchange for those concessions your creditors are guaranteed a portion of the monthly payment the company receives from you. Your credit counselor will explain the impacts participation in such a program will have on your credit score.
  • If you’re only practical option for managing credit card debt is to file a petition in Federal Bankruptcy Court, the debt counselor will explain which Chapter of the Federal Bankruptcy Code you should file under, the costs involved, and the impact filing will have on your credit score.

The Rewards And Dangers Of Today’s New Credit Card Policies

Stack of credit cardsDo you carry one or more credit cards? There was an article recently on the website of WPRI.com that reminded me that they these new policies represent both dangers and rewards.

The rewards

Many of the credit card companies will reward you if you pay your statements when due or pay more than the requisite monthly payment. These rewards can be interest rate rebates or even cash back. Their purpose is to give you an good reason to pay off your credit card debt.

Be careful with rewards cards

With a rewards card if you carry forward a balance just two or three times a year, you will be charged higher interest. In fact, it will generally exceed whatever you’re accumulating in rewards.

Dangerous habits

Some credit card companies’ policies can actually make it too easy for you to lapse into unsafe habits. For example, if you have a problem paying your bill, you might be spared penalties and late fees. You would think this was a good thing but it may not be. The problem is that when you make a late payment, it will go into your credit reports. And this will probably lower your credit score.

How to make the most out of your credit card

There are some things that you can do to get the most out of your credit cards. First, before you sign up for a card evaluate its incentives. Second, if your card came with an interest-free introductory period, pay off your balance before that period expires. Third, make sure you pay your balance in full each month. As noted above, some credit card companies will reward you for good behavior. On the other hand, others may charge you a late fee if you do not pay your bill within 60 days. Even worse, if you exceed that 60 days, your APR might take a bad hit.

If you’re having a problem with credit card debt

Even if you’ve amassed a huge amount credit card debt, you do have options. For example, you could transfer your high interest credit card balances to one with a lower interest rate. If you’re carrying balances on more than one credit card, you need to add up the interest rates you’re paying and then divide this by how many credit cards you have. This will give you an average interest rate. If you find you have an average of 18% or higher, you might be able to transfer all those balances to a new card with an interest rate of 12%.

A 0% interest credit card

If you could qualify for one of the new 0% interest balance transfer cards, this would be an even better option. This is where you transfer all your balances to a new card and pay no interest for an introductory period of six, 12 or even 18 months – depending on the card you choose. All the money you pay each month would then go against reducing your balance. If you were able to heavy up on your payments, you might be able to become totally debt free before your introductory period expires.

Choose debt settlement

If you’re having a really, and I mean really, big problem with credit card debts, you might choose debt settlement. This is also often called debt negotiation because what it requires is for you to contact your creditors and negotiate settlements for less than what you owe. If you’re at least six months in arrears on your payments, you might find the credit card companies would be willing to settle with you. You would have to be a good negotiator to pull this off and you would need to have the cash available to pay for any settlements you were able to negotiate. This would leave a black mark in your credit reports but not as severe a one as if you were to declare bankruptcy.

Click here to read the complete WPRI.com article.

You Might Need A Credit Counselor If …

Payment overdueI read an article the other day that I thought would be helpful to people being pummeled by debt. The article appeared on Bankrate.com. One of the points it made was that if you haven’t had much success coping with debt on your own, you shouldn’t necessarily feel bad about it. Some people are able to shed weight on their own through dieting or by working out regularly but others need the help of a health club or a fitness trainer. So, how can you know whether or not you need the help of a credit counselor? Here are some questions that could help you figure this out.

If your credit card balances are going up while your income is going down

This can be a sure sign that you need some credit counseling help. It’s tough enough to get out of debt if you can keep both it and your income stable. But if you have the two going in opposite directions, you may have a very hard time dealing with that debt on your own.

If you’re paying only your required monthly minimums

Credit card companies just love it when you pay only the required minimum monthly payments on your accounts. The reason for this is because it can keep you in debt practically forever. I saw one example recently of where it would take 28 years to pay off a $10,000 credit card debt if the cardholder made only the minimum monthly payments.

If you’re juggling bills

An example of juggling bills is if you were to get a new credit card and then take a cash advance against it to pay off an existing card. This can start a vicious cycle where your debt ultimately spins completely out of control. The only exception to this is that if you were to do a balance transfer. Transferring the balances on credit cards that have high interest rates to one with a lower rate can make sense – assuming you don’t immediately take a cash advance on the new card.

You’re close to the limit on all your cards

This is not only financially dangerous but can have a nasty effect on your credit score. This is because 30% of your score is based on “credit utilization.” In turn, this is based on the ratio of your debt to the total amount of credit you have available. Supposing that you had $15,000 in credit card debt and a total of $20,000 in available credit (the total of your credit limits). In this case your debt to credit ratio would be 75%, which is way too high and would have a very negative impact on your credit score.

If you’re working overtime to keep up with your payments

The fact that you’ve taken on extra shifts at your work or a second job speaks well of how seriously you take your financial responsibilities. However, this can lead to a lot of physical and emotional stress and can even have a bad impact on your family.

If you don’t know how much you really owe

Sticking your head in the sand and refusing to figure out how much you really owe will only get you deeper and deeper in trouble. You might want to ignore those debts but your lenders won’t. If you ignore them long enough, you could be sued and have liens put on your property.

Do you see a pattern?

It’s not critical if you saw yourself in several of these instances. What would be critical is if you could see a trend. As an example of this, making the minimum payments on your credit cards occasionally might not be a cause for concern. But if you’re making only the minimum payments and are close to the spending limits on your credit cards, you might be a candidate for credit counseling. This would be especially true if you also don’t know how much you really owe.

For more information on this subject, you can read the entire article on Bankrate.com by clicking here.