Are you looking for three simple ways to eliminate your credit card debt? The first one is obvious, stop using your credit cards. This may seem like a silly thing to suggest, but the best way to get a handle on your spending is to only spend the cash you have - after you've paid your bills. Second, consider consolidating your credit card debt onto one card - or moving a balance from one card, to one with a lower interest rate. Some people are in a constant cycle of moving to the next 0% interest rate card. This can be a pain, but you'll save a lot of money and buy yourself more time to pay off the debt. Third, start making double payments. If the calculated minimum payment is only on the accrued interest, then you need to make a double payment to hit the principle of the debt. By finally hitting the principle and discontinuing use of the card for purchases, you'll see that balance begin to drop.
Article found on http://www.lowermybills.com/
Thursday, September 29, 2011
Wednesday, September 28, 2011
Monday, September 26, 2011
Escape the Debt Trap
In the last 10 years credit card debt has tripled in the United States. Seventy percent of all U.S. cardholders carry a balance on their credit card averaging $3,900, and about three-fourths of them make only the minimum payment, which would be about $78 each month. At 18 percent interest, it will take them 35 years to pay their debt, and they will pay out over $10,000 in interest before they are done. (Data courtesy of Bankcard Holders of America, Salem, Virginia.)
Debt, no matter how attractively packaged, is a huge trap for many people today. It has proved to be a significant factor in the breakup of many marriages. If couples don’t use their resources wisely, overspending will eventually rob them of their money, time, health, family security, and peace of mind.
Budgeting is a plan that helps people make the best use of their income and savings. Before beginning the budgeting process, it is important to distinguish between wants and needs. Realistic, workable budgets result when couples agree to provide carefully for their needs and to exercise self-discipline and patience as they seek to provide for some of their wants. Begin budgeting by listing all expenditures from several previous months. Determine where the money went and which expenditures were unnecessary and which were necessary.
Once the stranglehold of excessive debt is loosened and eliminated, family members’ outlook on life brightens, homes become more harmonious, more children are taught by example the vital principles of provident living, and families are freed from financial bondage and thus more able to focus on truly important concerns.
Full article found on lds.org
Friday, September 23, 2011
Credit Card Debt: How to Get Out
If you find yourself deep in credit card debt, consider the following tips for getting out of debt, and staying out.
- Transfer balances to a low interest credit card. The lower your average interest rate on remaining credit card debt, the more of a dent each payment makes in that remaining balance. Consider this 18 month promotional balance transfer offer from Discover® More Card.
- Stop charging. This one seems so obvious I almost didn’t include it. Unfortunately, it is the one people usually fail to do with any conviction. The first step out of any hole is to stop digging. Debt management is no exception. Only then can you begin to devise a plan to crawl out. This step may require you chopping up your credit cards with a pair of scissors (keep one for emergencies), or at a minimum taking them out of your wallet and leaving them in a sock drawer at home. Whatever you have to do, stop making new charges.
- Pay debts off smallest to largest. Make minimum payments on all but the smallest one, and throw everything you can at the smallest one. The psychological advantage of scoring one or two quick wins bringing balances down to zero is worth the difference in interest charges. This is the snowball method of debt repayment made popular by Dave Ramsey in The Total Money Makeover, but many argue against the mathematics behind it. Like Ramsey says, “If you were good at math you wouldn’t have credit card debt!”
- Divide credit card minimum payments in half and pay that amount twice a month. Interest is calculated based on the average daily balance of your account for the entire month. By making a payment every couple weeks you are reducing that average balance and therefore reducing the finance charges assessed, as opposed to waiting until the end of the month to make a single payment. As an added benefit, splitting your payment into two separate payments helps smooth out the monthly budget as you will not have to come up with an entire payment once during the month, rather half that amount twice during the month (aim for around the time you receive your paycheck).
- Make micro payments (commonly referred to as snowflakes) any time you receive extra money. Send proceeds from eBay sales, garage sales, and any earnings from overtime or part time work directly to your credit card as soon as they are received. It may not seem like much, but it adds up. Besides, if you deposit the money in your primary checking account you are more likely to spend it than to use it later in the month towards repaying outstanding debt.
- Find part-time work. Sometimes this is the only option to generate cash flow over and above your normal monthly earnings. I offer this as a last resort, especially for families, because it often requires a parent being away from their family for long periods of time each day. Working a full-time job and then leaving for your part-time job makes for a long day. However, it also gives you more snow for that snowball, helping you become debt free even faster! Many times you can earn more than minimum wage retail jobs by doing something on your own. In the past I have mowed lawns, submitted articles to paying article directories, and volunteered for overtime to come up with extra debt snowball payments.
- Close out your newest accounts. As balances are paid off, close out all but your oldest one or two credit cards (I hung on to only my oldest card). One of the components of FICO score calculations is length of credit history, which is negatively affected each time you open a new account. By closing these newer cards you are effectively making the average age of your credit history older. If you aren’t sure about how old your accounts are, I suggest ordering a copy of your credit report at MyFICO.com). If you are not confident in your ability to manage credit cards going forward, consider cutting up all of your cards and living on a cash basis, but only after you have a fully-funded emergency fund in place of at least five or six months of expenses.
By following the above tips you should be able to make progress towards debt freedom, however there is one key ingredient missing from the list. Anger. You have to get mad about being in debt to get out of it. You have to make it a priority. You have to be willing to sacrifice all other financial goals for a period of time to put every extra penny you can scrape together towards getting out of debt.
Thursday, September 22, 2011
Credit Card Debt: 7 Step Action Plan
How to Pay Off Your Credit Card Debt: Goals
There’s only one way to get out of debt – live within your means. Of course, this is easier said than done because it’s hard to stop yourself from buying the things that you want. Credit cards make it easy to indulge yourself with luxuries but these debts can quickly snowball. If you are not able to regularly pay your credit card bills, this can spoil your credit rating. So before that happens, think about the tips and advice given in this simple plan for getting out of debt.How to Pay Off Your Credit Card Debt: 7 Step Action Plan
7. Stop buying expensive items you can’t afford.If you are now in a place where debt is a problem then cutting down on luxuries is a must. Focus on the things you really need. The extra money that you would have spent on frivolous things can be used to pay off your credit card bills.
6. Swap expensive hobbies for lower-priced ones.
Having a hobby is generally a good thing but if it costs so much that you have a hard time paying your bills, you can just swap it for a less expensive hobby. For example, do you love to do scrapbooking? You can still pursue your interests; just stop using the costliest paper and decorations for your hobby. Recycle stuff instead, it’s good for the environment and your bank account. To give another example, if you want to exercise to lose weight, don’t go for a gym membership that costs a lot of money. Take up jogging, it’s free and burns a lot of calories.
5. Get a notebook and write down all your purchases.
The little things add up. Sometimes you may not notice that you actually spend a lot of money on everyday items like soda and juice. If you keep a daily dairy you can spot many different ways to save money on small things.
4. Get a debit card.
Obviously, no one nowadays wants to carry a lot of cash around. Since you need some plastic, get a debit card so you won’t have to use your credit card when your cash on hand is not enough for whatever you need to buy. This is also a good way to keep track of your spending. If you really want to be strict about your budget you can transfer a set amount to your debit card each week. Having no extra money on hand can help you stick to your financial plan.
3. Don’t use your credit card.
This one is quite tough to do when you are struggling to pay the bills because it’s so tempting to just use your credit card and worry about the bills later. Unfortunately, it’s simply not that easy. Credit card interest rates are quite high so paying the bills with credit cards when you don’t have enough money is like putting fuel on the fire. You will just get deeper into debt. When you get your debit card, leave your credit card at home. It’s still there in case you need money for an emergency but not having it on hand makes it easier to resist using your credit card.
2. Look for cheaper services.
Bills like electricity, gas, water, phone, cable TV, internet, etc. are so hard to pay each month when you have a lot of debt to pay off. Try switching to a cheaper utilities company or service provider; there are many companies out there that may offer a better service for less money.
1. Sit down and plan your budget.
The top tip is to just sit down, find out where you are in terms of your family or personal finances and create a monthly budget. Get all of your financial records – your daily spending diary, checkbook, credit card bill, utilities bills, etc. Separate the essential expenses, like mortgage and utilities, from the inessential ones like restaurant bills and movie tickets. Total up each list separately. This will tell you how much you really need to spend and what you can cut back on.
How to Pay Off Your Credit Card Debt: Summary and Conclusion
Hopefully this 7 Step Debt Action plan has given you some good ideas. It’s not easy to cut down on daily and monthly expenses but it can be done. In the end, paying off your debts and becoming financially healthy boils down to just two simple things: keeping track of your expenses and taking control of your spending.
http://www.debtplan.org/
Wednesday, September 21, 2011
Credit Card: Fantastic Plastic?
BY ELYSSA RENEE ANDRUS
Tempted by all those credit card offers? Here’s what you need to know.
Steve was working on a term paper when a credit card company called his Brigham Young University dorm. The company was offering cards to students and wondered if he would like to apply. Happy to take a break from studying, Steve agreed to answer a few questions. He told the representative he was on scholarship and had no income. Since he planned to serve a mission at the end of the year, it would be a long time before he graduated and began a career. I’ll never get approved, Steve thought as the conversation ended. To his amazement, he received a $2,000-limit credit card a week later in the mail.
Teens and college students like Steve are an attractive market for credit card companies, according to Catherine Williams, president of a nonprofit organization that offers credit card counseling. If you are nearing your 18th birthday, you may have already received an enticing credit card offer or two in the mail. Some companies offer discount airfares, while others give away free T-shirts for filling out an application. Whatever the incentive, credit card companies aggressively seek youth because they want to establish brand loyalty early.
What is credit, anyway?
Since you have to be 18 to qualify for most credit cards, what does this have to do with you? Elder Marvin J. Ashton (1915–94) said, “Proper money management and living within one’s means are essential in today’s world if we are to live abundantly and happily” (Liahona, Apr. 2000, 44) If you have a job, you may have already been able to budget and establish wise habits like paying tithing and saving money. When you turn 18 or leave for school, owning a credit card might seem like the logical next step in your financial education. But you need to know the basics first. “Before you decide to get a credit card, you need to know the facts. You need to know what’s out there,” says David Ogden, chairman of an Internet company that offers advice to students about credit cards.
First of all, he says, it’s important to understand how credit works. Acredit card is basically a monthly loan, usually with a grace period to pay back the money borrowed. Each card has a limit, or maximum amount of money you can spend with that card. With most companies, you have until a certain date each month to repay your purchases before they start accruing interest.
Let’s say you purchase $80 worth of books one month and pay off the full balance early. You owe the credit card company nothing. Sound like a good deal? In many ways, it is.
Avoiding debt’s pitfalls
The problem with credit cards arises when you can’t pay your entire monthly bill. Credit card companies make money by allowing people to make minimum payments and charging interest on the rest. For example, instead of paying off your entire $80 bill, let’s say you make the minimum payment of $20. From the due date forward, you must pay interest on the remaining $60. This can add up quickly. Having a debt on your credit cardis like agreeing to give someone a bigger and bigger portion of your paycheck each month. The amount you owe the credit card company will increase until you pay off your full balance.
Credit card debt can get out of control, causing heartache and deep financial troubles if unchecked. President Gordon B. Hinckley has said, “Debt can be a terrible thing. It is so easy to incur and so difficult to repay. Borrowed money is had only at a price, and that price can be burdensome” (Ensign, Mar. 1990, 4). Steve learned this lesson the hard way. For the first few months he had his credit card, it stayed in his wallet. But in the last three weeks of his freshman year, Steve went on a spending spree. “After a year of living on a few hundred dollars a month, I decided to go have some fun,” says Steve.
With his credit card he paid for weekend trips and new clothes. By the time he went home, he had racked up charges nearing his credit limit. As a result, he spent the summer before his mission working frantically to pay off the debt. “It wasn’t a positive learning experience,” says Steve. “At the time, I didn’t realize that a credit card doesn’t expand your income now; it shrinks your future income because of debt.”
Wise credit card use
Owning a credit card doesn’t automatically put you in a situation like Steve’s. A credit card is just a form of payment and, if used responsibly, can be a helpful tool. Having a credit card and paying your bills on time establishes good credit, which will be handy in the future if you need a loan to purchase a car or home. Credit cards also allow you to make big purchases, like all your books for the semester, without carrying around large amounts of cash.
The trick to using a credit card is to realize it’s not free money. “A credit card is not an extension of your income,” says credit counselor Catherine Williams. She says youth with credit cards need to establish a monthly budget and decide what part of that budget can be used for credit cardpurchases. To stay out of trouble, Williams recommends starting with one low-limit credit card with no annual fees. And she says paying off the balance each month is an absolute must.
Bekah Swiss, a 19-year-old from Sandy, Utah, applied for a credit cardspecifically to build a good credit rating. To make sure she stays out of trouble, Bekah and her parents have set some guidelines. She says she will never make a credit card purchase unless she has the money in the bank to pay it off immediately. That way, she won’t pay a cent in interest. “The money some people are paying in interest could have been put in a savings account. Then it would earn them interest,” says Bekah.
Credit cards aren’t for everyone. Melinda Blunt from Tucson, Arizona, decided to leave for college without one. “I don’t feel the need for a credit card because the things that I need I can pay for up front with a debit card. That way, I don’t have to worry about debt,” she says. Melinda hasn’t ruled out getting a credit card in the future. She says she may get one to establish good credit.
Understanding credit and establishing good financial skills will set you on the right path. Becoming financially savvy means learning to live within your means and to save a little, as well. Elder James E. Faust has said, “It is important to learn to distinguish between wants and needs. It takes self-discipline to avoid the ‘buy now, pay later’ philosophy and to adopt the ‘save now and buy later’ practice” (Ensign, May 1986, 20). A credit card is a convenient way to pay for things, but it won’t bring you more money or pad your savings account. If you expect it to, you’d better wait and store those offers for cards with free T-shirts and discount airline fares in a safe place: the garbage.
Credit Card Savvy
•
With your parents, shop around for a credit card with a low interest rate and no yearly fees. Credit card companies that aggressively solicit students often have high interest rates. The bank where you have your checking account is often a good place to find a card with a lower rate.
•
You can make payments on your credit card anytime, including before you receive a bill. Paying off your credit card early helps reduce the risk of missing a payment.
• Pay the monthly balance in full, period.
• Avoid getting cash advances on your credit card. These have no grace period and have an average Annual Percentage Rate of 19.56 percent, according to a 2000 Internet survey.
• Keep all of your credit card information in a safe place. If you are moving for the summer, make sure the credit card company knows the address to which the bill should be sent.
Credit Card Safety
• Sign the back of your credit card as soon as you receive it.
• Never let anyone borrow your credit card.
• If your credit card is lost or stolen, report it immediately. You are only responsible for $50 of unauthorized purchases, and you are not responsible for any unauthorized purchases if you report the card missing before they are made.
• Go over your monthly bill carefully to make sure all the charges are correct.
• If you need to contest a billing, call the company’s customer service number.
• If you decide to discontinue using the credit card, simply cutting it up isn’t enough. You must call the company and cancel your account as well.
[illustrations] Illustrated by Scott Greer
Debt Load
by Lisa M. G. Crockett
Rationalizing their way into debt was easy. Getting out was tougher.
Melissa got her first credit card when she went away to college. Her parents, who helped her apply for the card, told her it was for emergency use only. At first, Melissa followed that advice closely, usually consulting her parents before she made any purchases on the card.
“At first, I didn’t use my card all that much,” she says. “The problem was, my parents didn’t really explain how credit worked. In fact, I saw my mom use her credit card all the time to buy things at the store. She never thought to tell me that she only bought things she knew she could pay for in full every month when the bill came.”
Married while she was still in college, Melissa and her husband soon longed for the comfortable lifestyle they had enjoyed at home with their parents.
“We felt that we deserved most of the things we purchased with our credit card. We never stopped to consider if we could afford it.”
Soon Melissa and her husband were charging necessities like groceries and gas for the car on credit cards because all their available cash was used up paying the minimum balance on several credit cards. Finally things were so bad that Melissa sought help from her parents.
“It was really embarrassing to have to go to my dad and tell him what we had done. We were really lucky that my dad was in a position to help us.”
But even with help and new knowledge about how credit works, it hasn’t been an easy road, says Melissa. In addition to having to check in with her dad for several months after he bailed them out, paying the loan back to her father has meant several years of a very restrictive budget. But Melissa says the sacrifice has been worth it.
“I felt like I was in prison before. Now, even though I don’t have as much money to spend, I feel a real sense of freedom. Getting out of debt is worth whatever it takes.”
Article found at lds.org
Tempted by all those credit card offers? Here’s what you need to know.
Steve was working on a term paper when a credit card company called his Brigham Young University dorm. The company was offering cards to students and wondered if he would like to apply. Happy to take a break from studying, Steve agreed to answer a few questions. He told the representative he was on scholarship and had no income. Since he planned to serve a mission at the end of the year, it would be a long time before he graduated and began a career. I’ll never get approved, Steve thought as the conversation ended. To his amazement, he received a $2,000-limit credit card a week later in the mail.
Teens and college students like Steve are an attractive market for credit card companies, according to Catherine Williams, president of a nonprofit organization that offers credit card counseling. If you are nearing your 18th birthday, you may have already received an enticing credit card offer or two in the mail. Some companies offer discount airfares, while others give away free T-shirts for filling out an application. Whatever the incentive, credit card companies aggressively seek youth because they want to establish brand loyalty early.
What is credit, anyway?
Since you have to be 18 to qualify for most credit cards, what does this have to do with you? Elder Marvin J. Ashton (1915–94) said, “Proper money management and living within one’s means are essential in today’s world if we are to live abundantly and happily” (Liahona, Apr. 2000, 44) If you have a job, you may have already been able to budget and establish wise habits like paying tithing and saving money. When you turn 18 or leave for school, owning a credit card might seem like the logical next step in your financial education. But you need to know the basics first. “Before you decide to get a credit card, you need to know the facts. You need to know what’s out there,” says David Ogden, chairman of an Internet company that offers advice to students about credit cards.
First of all, he says, it’s important to understand how credit works. Acredit card is basically a monthly loan, usually with a grace period to pay back the money borrowed. Each card has a limit, or maximum amount of money you can spend with that card. With most companies, you have until a certain date each month to repay your purchases before they start accruing interest.
Let’s say you purchase $80 worth of books one month and pay off the full balance early. You owe the credit card company nothing. Sound like a good deal? In many ways, it is.
Avoiding debt’s pitfalls
The problem with credit cards arises when you can’t pay your entire monthly bill. Credit card companies make money by allowing people to make minimum payments and charging interest on the rest. For example, instead of paying off your entire $80 bill, let’s say you make the minimum payment of $20. From the due date forward, you must pay interest on the remaining $60. This can add up quickly. Having a debt on your credit cardis like agreeing to give someone a bigger and bigger portion of your paycheck each month. The amount you owe the credit card company will increase until you pay off your full balance.
Credit card debt can get out of control, causing heartache and deep financial troubles if unchecked. President Gordon B. Hinckley has said, “Debt can be a terrible thing. It is so easy to incur and so difficult to repay. Borrowed money is had only at a price, and that price can be burdensome” (Ensign, Mar. 1990, 4). Steve learned this lesson the hard way. For the first few months he had his credit card, it stayed in his wallet. But in the last three weeks of his freshman year, Steve went on a spending spree. “After a year of living on a few hundred dollars a month, I decided to go have some fun,” says Steve.
With his credit card he paid for weekend trips and new clothes. By the time he went home, he had racked up charges nearing his credit limit. As a result, he spent the summer before his mission working frantically to pay off the debt. “It wasn’t a positive learning experience,” says Steve. “At the time, I didn’t realize that a credit card doesn’t expand your income now; it shrinks your future income because of debt.”
Wise credit card use
Owning a credit card doesn’t automatically put you in a situation like Steve’s. A credit card is just a form of payment and, if used responsibly, can be a helpful tool. Having a credit card and paying your bills on time establishes good credit, which will be handy in the future if you need a loan to purchase a car or home. Credit cards also allow you to make big purchases, like all your books for the semester, without carrying around large amounts of cash.
The trick to using a credit card is to realize it’s not free money. “A credit card is not an extension of your income,” says credit counselor Catherine Williams. She says youth with credit cards need to establish a monthly budget and decide what part of that budget can be used for credit cardpurchases. To stay out of trouble, Williams recommends starting with one low-limit credit card with no annual fees. And she says paying off the balance each month is an absolute must.
Bekah Swiss, a 19-year-old from Sandy, Utah, applied for a credit cardspecifically to build a good credit rating. To make sure she stays out of trouble, Bekah and her parents have set some guidelines. She says she will never make a credit card purchase unless she has the money in the bank to pay it off immediately. That way, she won’t pay a cent in interest. “The money some people are paying in interest could have been put in a savings account. Then it would earn them interest,” says Bekah.
Credit cards aren’t for everyone. Melinda Blunt from Tucson, Arizona, decided to leave for college without one. “I don’t feel the need for a credit card because the things that I need I can pay for up front with a debit card. That way, I don’t have to worry about debt,” she says. Melinda hasn’t ruled out getting a credit card in the future. She says she may get one to establish good credit.
Understanding credit and establishing good financial skills will set you on the right path. Becoming financially savvy means learning to live within your means and to save a little, as well. Elder James E. Faust has said, “It is important to learn to distinguish between wants and needs. It takes self-discipline to avoid the ‘buy now, pay later’ philosophy and to adopt the ‘save now and buy later’ practice” (Ensign, May 1986, 20). A credit card is a convenient way to pay for things, but it won’t bring you more money or pad your savings account. If you expect it to, you’d better wait and store those offers for cards with free T-shirts and discount airline fares in a safe place: the garbage.
Credit Card Savvy
•
With your parents, shop around for a credit card with a low interest rate and no yearly fees. Credit card companies that aggressively solicit students often have high interest rates. The bank where you have your checking account is often a good place to find a card with a lower rate.
•
You can make payments on your credit card anytime, including before you receive a bill. Paying off your credit card early helps reduce the risk of missing a payment.
• Pay the monthly balance in full, period.
• Avoid getting cash advances on your credit card. These have no grace period and have an average Annual Percentage Rate of 19.56 percent, according to a 2000 Internet survey.
• Keep all of your credit card information in a safe place. If you are moving for the summer, make sure the credit card company knows the address to which the bill should be sent.
Credit Card Safety
• Sign the back of your credit card as soon as you receive it.
• Never let anyone borrow your credit card.
• If your credit card is lost or stolen, report it immediately. You are only responsible for $50 of unauthorized purchases, and you are not responsible for any unauthorized purchases if you report the card missing before they are made.
• Go over your monthly bill carefully to make sure all the charges are correct.
• If you need to contest a billing, call the company’s customer service number.
• If you decide to discontinue using the credit card, simply cutting it up isn’t enough. You must call the company and cancel your account as well.
[illustrations] Illustrated by Scott Greer
Debt Load
by Lisa M. G. Crockett
Rationalizing their way into debt was easy. Getting out was tougher.
Melissa got her first credit card when she went away to college. Her parents, who helped her apply for the card, told her it was for emergency use only. At first, Melissa followed that advice closely, usually consulting her parents before she made any purchases on the card.
“At first, I didn’t use my card all that much,” she says. “The problem was, my parents didn’t really explain how credit worked. In fact, I saw my mom use her credit card all the time to buy things at the store. She never thought to tell me that she only bought things she knew she could pay for in full every month when the bill came.”
Married while she was still in college, Melissa and her husband soon longed for the comfortable lifestyle they had enjoyed at home with their parents.
“We felt that we deserved most of the things we purchased with our credit card. We never stopped to consider if we could afford it.”
Soon Melissa and her husband were charging necessities like groceries and gas for the car on credit cards because all their available cash was used up paying the minimum balance on several credit cards. Finally things were so bad that Melissa sought help from her parents.
“It was really embarrassing to have to go to my dad and tell him what we had done. We were really lucky that my dad was in a position to help us.”
But even with help and new knowledge about how credit works, it hasn’t been an easy road, says Melissa. In addition to having to check in with her dad for several months after he bailed them out, paying the loan back to her father has meant several years of a very restrictive budget. But Melissa says the sacrifice has been worth it.
“I felt like I was in prison before. Now, even though I don’t have as much money to spend, I feel a real sense of freedom. Getting out of debt is worth whatever it takes.”
Article found at lds.org
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