Credit Card Debt – Time to Get Responsible

If you have a credit card and love to shop then you should be very careful not to get yourself in a credit card debt. Credit cards can simplify life for everyone but owning one comes with a huge responsibility. Do not apply for one if you think you might go out of control with spending more than what you can afford. Many people find themselves unable to pay the monthly fees for their credit card and end up in debt. Some have a serious problem and are in debt with several credit card companies. There are a few good reasons why you should be careful when using a credit card. If you are cautious your credit scores will be good, you will not be in debt, and it is handy during an emergency.

When you use your card often and are able to pay them off on time you improve your credit score. The more you use it the better your score will be as long as the payments are coming in. If your payments are late, or if you do not pay the minimum amount due, then you will begin to lose credit points. Scores of over 600 are considered high and good. If you score below that then it would be difficult for you to ask for any kind of loan in the future. Any company who offers loans will check out your credit history and when they see what your credit level is they will decline your request.

If you are a responsible card holder then having a credit card should improve your life and make things easier for you. Sometimes when you use a credit card to purchase something you get free gifts or even good discounts. This encourages people to use plastic to make all there purchases the only problem with that is addiction. Those without self control abuse it and find themselves in debt with awful credit score. Fortunately, it’s not too late for these people, there is a way out. You can correct this mistake and there are ways you can improve your credit score. This would be a very good idea especially if you plan to take a loan for a house in the future. You will never get it if you don’t improve your credit.

If you don’t have too much money to spend then your credit card should be tucked away somewhere out of your reach. Do not get yourself into the habit of using the card for purchases because it does become easy and before you know it you are in debt. Sometimes a credit card is good to have in emergency situations, when you absolutely need something and you have no cash. A good example of an emergency is your car running out of gas and you don’t have money for gas or your baby has run out of formula in the middle of the night and you haven’t received your paycheck yet.

Owing a credit card could be a blessing or it could be a curse depending on your responsibility. A responsible person will not use their credit card to buy things they can not afford. A responsible person pays their debts on time and has excellent credit scores. They become trusted by creditors and will be able to take a loan when ever they need it. So you see, it is very easy to use plastic to buy things the hard part is paying back what you owe.

Credit Cards: Pros and Cons

Sure, there are a lot of problems with credit cards, but there are a lot of good things attached to them as well. For instance, if you have a small business, fleet credit cards can keep your books in order when you issue them to drivers of company vehicles for gas and automobile repairs. On the other hand, it’s very easy to abuse department store credit cards. And it’s easy to have too many credit cards open at once.

Credit cards can be great for keeping your business in order; fleet credit cards are a tool you should use. With fleet credit cards, you can keep close watch on the expenses of your automotive fleet while building your company’s credit rating by paying off the card regularly; and because the cards are of limited use, it’s difficult for less-than-honest employees to abuse them. Company credit cards are also handy for keeping tabs on small expenditures, such as office supplies or luncheon meetings. But there’s a dark side to credit cards. When you start to slide into credit trouble, it’s often easier to get department store credit cards; and having too many department store credit cards can lead to missed payments and bad credit.

You don’t have to keep a balance on credit cards for it to count against you in your credit rating; instead, having a large amount of money available to use for credit can harm your application for large loans. And having several credit cards available to you makes it easy to either use too many credit cards for too many things, or to use the wrong, higher-interest credit card for your purchases. Either of these bad choices can cost you money and points against your credit rating.

Instead of doing this to yourself, only keep the credit cards you actually plan to use. With small businesses, issue credit cards only to trusted employees, and check the statements yourself. With wise use and proper oversight, credit cards can be a real asset in your professional and your personal life.

Which Are the Best Credit Cards?

Comparing interest rates, annual fees, introductory offers and special benefits is easy. Compare cards over the long term. A credit card that offers you 0% interest for three months but then shoots up to 30% would not be as helpful as a credit card that has a steady 9% interest rate all the time. Compare different cards and terms before committing to one company as not all offers are the same. While you may get a ton of promotional offers in the mail, it is best that you see all of your options before making a decision that is in the best interest of your financial situation.

Interest is charged as a percentage of your outstanding balance (purchases and charges reduced by payments or credits posted). Interest rates are often higher than with standard cards; annual percentage rates (APRs) on affinity cards range from 15-22 percent. Many charge annual fees, while most standard cards do not. Interestingly, but 50% of those surveyed said that they planned to give gift cards. The truth is that practical gifts have never been so popular!

Interest charged could exceed the low payments your provider suggests, and you could see the debt snowball as your credit card provider profits. Balance transfer credit cards allow you to consolidate debt that is spread across several credit cards onto one card. The best credit cards in this category feature 0% APR for an intro period from 6 to 12 months. Balance transfer with zero APR for first nine months. After that period, it can be waived with at least nine purchases in a year.

Take time and search through these credit card offers and apply for the one that best meets your needs. Student’s credit cards are aimed at those with fair, bad or no history. These cards will help students improve damaged scores or even build credit history from scratch.

Bankruptcy destroys credit ratings. This can make getting credit cards difficult. Travel credit cards or a prepaid travel credit cards are products that most credit card companies offer. The travel credit card allows you to earn points when you use your card for purchases, which makes for the best travel credit card. If you carry a balance from month-to-month, you’ll pay less on interest charges over time.

Fees, such as balance transfer fees, cash advance fees, over the limit fees, and late fees, can really put a big dent in your budget. Choosing a credit card with low fees from the get go is one of the best moves you can make.

Basically, you divide the interest rate into 72 to see how long it will take for the debt to grow. If you are being charged at 12% your debt will double every 6 years (72/12=6). Cash-back and other value additions score over insurance when it comes to valuing adds. Cash back credit cards give you money back for each transaction and are offered by some credit card companies. How much cash back you will get per transaction is determined according to your credit rating.

Debt is NOT your friend before a failed application will also have a negative impact because of it will make to obtain credit. Debt is mushrooming at a surprising velocity, and a growing portion of people found their balances growing larger and larger. You’ve exceeded credit limit as you don’t want to find yourself. You are nearing it for it is Traveling to other countries and the credit card company is regarding the limit. You’ve got your own credit card per you have any bills on you have to prove you’re and It is showing your previous records with you might be qualified for lower rates.

Add in an economic downturn and people who have traditionally been able to avoid stress in the past are suddenly bogged down by it. From depression to sleepless nights and anxiety attacks, there are plenty of stress effects that can show up in a physical form in the body.

Check the payment option and guidelines on your bill. The best method of avoiding late fees is to set up a direct debit for the minimum payment each month. Check each section carefully for any errors. Note any errors you may discover on a separate piece of paper as you read over your report.

Thank you for taking your time to read this article. Your comments on this article will be highly appreciated. Information shared here does not constitute financial, legal, or other professional advice. This article is intended to provide general information only and does not give advice which relates to your specific individual circumstances. Information in this document is subject to change without notice. Any link-listing or ad-listing on this site does not constitute any type of endorsement.

The Credit Card – A Most Valuable Tool For Building Credit

A credit card is a small plastic card issued to the consumer by a financial institution such as a bank or credit union. The card issuer creates a revolving account with a line of credit to the consumer. The cardholders can purchase goods and services or receive a cash advance, until they have reached their predetermined credit limit. The merchant who accepts credit card payments receives the money from the bank issuing the card. The cardholder eventually repays the bank through regular monthly payments. If the entire balance is not paid in full, the issuer usually charges interest on the unpaid portion.

Credit cards can be an extremely valuable tool if used correctly. However, there are also risks for those who lack self-discipline for the debt they cannot repay. Although when used responsibly and with the correct intentions, the card can provide significant benefits. Here are some of the attributes of owning a credit card:

Convenience

The credit card is a flexible payment tool accepted at over 30 million locations worldwide as it has become a good alternative for cash. On many occasions, situations arise where you need more funds than what are immediately available. Emergencies such as home or car repairs, medical expenses, travel for a family crisis, are attainable instantly with a card. Such credit spending should be done with a short-term intention with timely payments to avoid accumulating debt.

Establish and Boost Credit History

Paying your bills in full and on time indicates responsibility which helps to boost credit rating. A good credit rating also helps in many other situations, such as, obtaining a loan with a low-interest rate. More than likely, your card company will also approve a higher credit limit.

Borrowing Interest Free

Credit cards allow you to use the bank’s money interest free within a grace period. Therefore, payment for purchases on the card are due at the end of the pre-determined period. Paying your balance in full each month enables you to receive an interest-free loan month after month.

In order to entice new customers, card issuers frequently create 0% interest rate promotional offers for credit card purchases and cash advances. The only limitation is for the credit loan to be fully paid back at the end of set time period. If used wisely, one can use the credit card 0% interest loan to pay off higher interest rate debt. As long as you have the self-discipline in controlling spending, this type of financing can be a valuable tool for money management and budgeting.

Tracking Spending

As the credit card issuers provide detailed monthly statements on purchases, they allow you to keep track of your spending with ease. For business owners, the summaries are a valuable tool for tax return preparation, as they provide information for allowable tax deductions.

Rewards and Benefits Many companies offer rewards and cardholder benefits to their customers. Loyalty programs have been designed to encourage cardholders to use one specific card. As the card is used, the cardholder accumulates airline miles, hotel chain points, cash back points etc. that a cardholder can redeem for products or services. For those who use their cards frequently, the rewards can be quite substantial.

In addition to loyalty program rewards, cardholders also reap benefits that include complimentary car rental insurance, travel insurance or overseas health insurance.

Consumer Protection

For mail-order purchases that are not received, or turned out to be defective, the charge can be disputed with the credit card company. The burden of proof lies with the sender; therefore, the consumer has limited financial liability. Such consumer protection provided by the credit card company is not available with most debit cards or when paying cash.

Protection from Fraud

Carrying cash can be unsafe, as it can be stolen or lost. The lost cash is rarely replaceable. Instead, a misplaced or stolen credit card can simply be inactivated by the card issuer and a new one reissued. As for any fraudulent charges, they can be challenged. Upon investigation, the charges are usually forgiven or refunded.

Responsibilities of the Credit Card Holder

A Cardholder can maximize their benefits by,

  • Paying on Time – On time payment is the best way to avoid late fees and penalty interest, and at the same time, boost credit score. The simplest way to ensure on time payments is to set up an automatic bill pay system.
  • Paying More than the Minimum Due – If balance can not be paid in full, it is vital to pay as much as possible over the minimum.
  • Not Using Your Credit Cards’ Upper Spending Limit – Having the maximum amount charged can lead to recurring fees and interest expenses. Maxing out the credit card also leads to a The rule of thumb is to keep the card balance below 30% of the limit. By spreading purchases between several credit cards, you can manage the 30% limit with minimum difficulty.
  • Avoiding Unnecessary Fees – Many credit cards charge various fees: late payments, over-limit, cash advances, transferring balance or returning check. Read through your credit card agreement to be fully aware of all the fees. Avoid these transactions as much as possible.

Change of Terms and Conditions

Credit card companies frequently change the terms and conditions. Such changes often include fee structure, interest rates, billing, and other features. More often than not and to your detriment, these modifications benefit the card issuer. Be aware of these changes as it can help you utilize the card more efficiently. For example, a cash advance fee increase could prompt you to use a different card for cash advances.

As described, owning a credit card can be very advantageous. However, if not handled properly, it can become a liability, such as

  • For non-timely payments, a credit card loan carries a higher interest cost than other forms of credit
  • It can create poor credit scores due to late payments
  • It allows you to have a false sense of security thus accumulating more debt than manageable
  • It complicates your living with complex terms and conditions

It is critical to always use your credit responsibly. Credit problems such as extending credit limits to the maximum can result in a poor credit scores.

Credit Card Debt Negotiation Schemes: Clear Off the Debts

Not only are the Americans but people from all around the globe face up with many debt problems in the most recent cases and if you look at these problems a bit more carefully then you will find that most of these problems are arousing from credit cards.

Most of the people like to have credit cards of their own and they like to use these cards to pay for certain things and undergo a lot of shopping. However, when the time of paying the money to the bank for which the credit card is functioning, then these credit card holders find it extremely hard to pay for the debts they had undergone through the active participation of these credit cards.

Although there are several schemes to pay for the heavy debts, but still these people find it extremely difficult to pay for those ones which are calculated adding a certain interest percentage.

There is several credit card debt negotiation schemes, which can help these troubled persons to get rid of their debts and make some deal that undergo easy settling of these issues without much of a fuss. By undergoing such schemes, the payment of debts gets much faster while making it extremely affordable for these customers to pay for a short period of time while getting their debts cleared in the most legal of the ways following all the rules and regulations of the banks.

Although, credit card debt negotiation schemes are considered as a complicated solution to the problem, but it is not so. The banks are facing a lot of such cases on a daily basis and so they have their overdue amount collection agents assigned for such cases to sit with those customers who are unable to pay heavy debts and finally have stopped paying. These agents undergo a conversation session with these customers and fix up an amount that would be very much appropriate for the customers to pay for while also not making the bank face a loss. These are known as negotiation amounts, which are settled after many discussion sessions with the customers and the banking settlement agents.

However, if a customer faces too much trouble making the settlement claims with the banking agents, then he/she may seek some effective guidance of several debt relief companies present in the market. Most of these companies consist of highly professional legal personnel to provide effective guidance to sort out these cases in the best possible way

Some Credit Card Pitfalls to Avoid

What started out with good intentions for the American consumer is now turning into its worse nightmare. Having the access to credit was supposed to be a luxury and not a necessary. Now, many Americans cannot function without the access to a credit card.

How do we break this cycle of reliance on credit cards?

What is our long term benefit of even having a credit card?

We know short term, we are able to buy that high ticket item now that we cannot afford with our small bank account.

We are able to go on a vacation and live well for a week and worry about the bill later on.

Credit cards are a billion dollar industry. Banks make a staggering amount of money on the interest that they charge and the late fees that they collect. Also, there are numerous small fees and charges that we are hit with every day without our knowledge.

The interest on that credit card was 18% annually. By the time you pay off the flat screen TV fifteen years later, you would have tripled the amount that you paid in 2004.

Interest, my friend, is one of the main sources in which the banks make their money off of you when you use your card.

Your monthly payment to the card company is made up of principal and interest. The principal is the amount that you borrowed, and the interest is the cost of borrowing the money for the purchase. Interest rates on cards can vary from as low as 4.99% to as high as 30%! The interest rate is dependent on the borrowers credit score. The higher the credit score, the lower the interest rate you would be charged.

So for example, if you have a credit score of 775, a credit card company may charge you 4.99% and give you a $10,000 limit. If you have a score of 557, they may charge you an interest of 24% and give you a $3,000 limit.

The credit card companies do this because they feel the individual with the lower credit score will be a higher risk to default on the credit card account. They will, in turn, give a lower credit limit and charge a higher interest rate. If the individual shows a positive payment history, the they will increase the credit limit and may reduce the interest rate.

Plenty of times they will increase the credit limit but will keep the same interest rate.

When you make your monthly payment, most of your money goes towards the interest and a little goes towards the principal. This is because your payments are amortized.

Amortization is when a part of the payment goes toward the interest cost and the remainder of the payment goes toward the principal amount, the amount borrowed. Interest is computed on the current amount owed and then will become progressively smaller as the ending balance of the loan reduces.

Because of the way amortization is set up, you can end up paying double to triple of the value of the original amount of the principal borrowed.

Amortization is just one of the ways credit card companies keep us trapped in financial debt for all of our adult lives. There are several credit card pitfalls that you need to be aware of.

Cash Advances – Every credit card allows you the ability to draw out cash either from the ATM machine or through convenience checks. These cash advances come with a heavy price. Cash advances are charged a much higher interest rate (from 20-25%) than a regular purchase. Even if you use a convenience check to transfer a balance from one card to another, you will be charged a higher interest rate. This is like legal loan sharking.

Credit card companies will send convenience checks in the mail with your bill every month to tempt you to use them. They will make it seem that it is just as easy as making a purchase with your credit card. The fine print will say otherwise.

Avoid using cash advances as much as possible. There is no grace period with cash advances unlike regular purchases where you will have a 30 day grace period to pay back the balance before the interest kicks in. The interest with cash advances kicks in the minute you draw the money out of the ATM machine.

Late Fees & Over the Limit Charges – Besides the exorbitant interest rates that the credit card companies charge, fees are the next biggest way that they make their money. The fine print gives the credit card companies’ free reign to change interest rates at whim whenever they want. A late payment or an over the limit charge will trigger these higher interest rates.

Most companies charge a $30 late fee if you pay after the five day grace period. If you have a low interest rate, this will give the credit card company the authority to charge you a higher interest rate from that point on. You interest rate can jump from 5% to 18%.

If you go over you credit limit, most companies will charge you a $35 over the limit fee and the difference that you are over. They will also start to charge you a higher interest rate because now you are “maxed out”.

With the current credit crisis, card companies are lowering limits without proper notice causing customers to charge over their limit or maxing out their account. Once again, the customer is hit with a higher interest rate by no fault of theirs.

Annual Fees – Some credit card companies do not charge an annual fee. The ones that do will charge $150. They may charge it all at once or break the fee up into 12 even payments.

If you do not pay the fee in full, you will be paying interest on that annual fee, plus also lose the credit availability. Check your monthly statement carefully. You may have a zero balance on your account. Once the annual fee is charged, now you have a balance to pay on. If you overlook when the annual fee is charged, you may run the chance of missing a payment and getting a derogatory on your credit report.

I have seen this happen several times. Whether you have a balance or not, check your statement carefully.

Small Miscellaneous Charges – Another reason to check your monthly statement closely is because there are small automatic fees that are charged to your account monthly that we don’t even notice.

I had a Chase Visa credit card that I rarely used. I kept a low balance on the card and the monthly bill was deducted automatically out of my bank statement. One month I looked through my statement, and I noticed that $15 per month was automatically charged to my account every month for the last four months!!!.

I called customer service and found out that I was being charged for credit card insurance in case I became disabled and couldn’t pay the bill anymore. Now I know we all may need this insurance, but I never authorized the charge. $15 per month is a small fee, but it adds up to $130 per month. If the credit card company gets 100,000 unsuspecting cardholders to overlook this charge every month, they will make $13,000,000 in profits. A small charge to thousands of customers can really add up.

Now that we know that it is in the best interest of the credit card companies to keep us trapped in debt, what can we do to keep ahead of the game?

The marketing efforts of credit card companies are getting more aggressive and creative. We are bombarded with ads everywhere we look. They are even targeting kids in high school. Teenagers are approaching their adult years already caught up in debt.

Here are some tips to apply:

Keep your balances low – As I stated before in this book, the lower you keep your balances, the higher your score will be. The credit reporting agencies will rate your score higher if you maintain your balance below 25% of your credit limit. Pay down your balance if you are over 50%.

Check your monthly statement closely to make sure your credit card company has not lowered your limit without your knowledge. Many times they will lower your limit first, and send out a letter later.

Because of the recent credit crisis, credit card companies are evaluating each account that has used over 50% of their limit. If they notice a drop in credit score, or even a late payment on another credit card, they have the right to lower your credit limit without notice. This is the “universal default clause” in the fine print of your account holder’s disclosure.

Use automatic payments – This is a great method to use if you are getting paid a set salary every pay period. By using automatic payments, you will be assured that your payments will be on time every month. You will not have to worry about late fees.

Some credit card companies delay applying your payment to your account if you are close to your grace period so they can make money on the late fee. We cannot control how quick our payment can get to the credit card company by snail mail.

Make sure you budget right so that you have enough in your bank account to cover the payment. You don’t want to pay both an over draft fee to your bank and a late payment fee to your credit card company. Now that’s a double whammy!

Charge what you can, then pay back in full – I have used this method for a very long time and this has worked out perfectly for me. For example, if I needed to buy a plane ticket for a business trip, I will charge the plane ticket for $199. Since it is a business trip and I am about to make money, I will pay the $199 charge in full at the end of the month when I get the bill.

I will avoid paying interest on that charge and this will also look good to the credit card company because I am paying more than the minimum monthly bill.

When you show a long history of paying more than the minimum monthly bill, you have a great chance of the credit card company increasing your limit.

By paying back immediately what you charged, you will not accumulate a balance that you have to pay back in the long term. This will save you hundreds of dollars in not having to pay interest charges.

If you cannot afford to pay cash for the item or able to pay it off at the end of the month, don’t get it!!

Negotiate your interest rate down – Once you have established a long term history of on time payments to your credit card company, you can negotiate with them to lower your interest rate; even if you don’t have a perfect score.

The credit card company does not want to lose you as a customer. Once you have established a good relationship with that company, it is your right to ask them for a lower rate. You have nothing to lose.

If they give you a lower rate, you save yourself hundreds of dollars. If they do not give you a lower rate, you can transfer your balance to another credit card with a lower rate, close the account, or do not charge anymore items on that account.

Try to use your credit card for emergencies & business expenses – We all know by now that having access to credit cards is a way of life in our society. We need it to build our credit scores. Credit cards are convenient to use when you have to make purchases online.

We have explored the evils and temptations that come with having access to credit cards, but when is the best way to use it to our advantage?

Instead of using credit cards to buy depreciating goods, to impulse shop, or to buy big ticket items, I feel there are two good instances to use your credit cards.

1. I have heard many financial experts like Suze Orman say to take your credit card and put it in the freezer. This will stop you from impulse shopping. She is right. Use your credit card for unexpected events like:
– Making travel arrangements to see a sick relative or to attend a funeral.
-Making repairs to your car if it unexpectedly breaks down.
-Making repairs to your home if your boiler burst or your roof leaks.
-Taking care of a small medical bill or to get medicine for yourself or your family.

These are some the legitimate excuses to use your credit card in case of an emergency. Things happen beyond our control. It is good to have the piece of mind to know that you can have your credit to fall back on in your time of need.

Try to pay as much as you can when the bill comes at the end of the month. You do not want to max out your limit. You have to replenish your credit limit in case another emergency is to arrive.

2. It takes money to make more money. There will be occasions where you will need a credit card to help finance some aspects of your business. Whether you have a startup or a seasoned business, you may need access to working capital to purchase products for your business. You may need to market and promote your business as well.

Instead of using your credit card to buy a product that is making that company richer, you are investing in enriching yourself.

The Credit Card – A Most Valuable Tool For Building Credit

A credit card is a small plastic card issued to the consumer by a financial institution such as a bank or credit union. The card issuer creates a revolving account with a line of credit to the consumer. The cardholders can purchase goods and services or receive a cash advance, until they have reached their predetermined credit limit. The merchant who accepts credit card payments receives the money from the bank issuing the card. The cardholder eventually repays the bank through regular monthly payments. If the entire balance is not paid in full, the issuer usually charges interest on the unpaid portion.

Credit cards can be an extremely valuable tool if used correctly. However, there are also risks for those who lack self-discipline for the debt they cannot repay. Although when used responsibly and with the correct intentions, the card can provide significant benefits. Here are some of the attributes of owning a credit card:

Convenience

The credit card is a flexible payment tool accepted at over 30 million locations worldwide as it has become a good alternative for cash. On many occasions, situations arise where you need more funds than what are immediately available. Emergencies such as home or car repairs, medical expenses, travel for a family crisis, are attainable instantly with a card. Such credit spending should be done with a short-term intention with timely payments to avoid accumulating debt.

Establish and Boost Credit History

Paying your bills in full and on time indicates responsibility which helps to boost credit rating. A good credit rating also helps in many other situations, such as, obtaining a loan with a low-interest rate. More than likely, your card company will also approve a higher credit limit.

Borrowing Interest Free

Credit cards allow you to use the bank’s money interest free within a grace period. Therefore, payment for purchases on the card are due at the end of the pre-determined period. Paying your balance in full each month enables you to receive an interest-free loan month after month.

In order to entice new customers, card issuers frequently create 0% interest rate promotional offers for credit card purchases and cash advances. The only limitation is for the credit loan to be fully paid back at the end of set time period. If used wisely, one can use the credit card 0% interest loan to pay off higher interest rate debt. As long as you have the self-discipline in controlling spending, this type of financing can be a valuable tool for money management and budgeting.

Tracking Spending

As the credit card issuers provide detailed monthly statements on purchases, they allow you to keep track of your spending with ease. For business owners, the summaries are a valuable tool for tax return preparation, as they provide information for allowable tax deductions.

Rewards and Benefits Many companies offer rewards and cardholder benefits to their customers. Loyalty programs have been designed to encourage cardholders to use one specific card. As the card is used, the cardholder accumulates airline miles, hotel chain points, cash back points etc. that a cardholder can redeem for products or services. For those who use their cards frequently, the rewards can be quite substantial.

In addition to loyalty program rewards, cardholders also reap benefits that include complimentary car rental insurance, travel insurance or overseas health insurance.

Consumer Protection

For mail-order purchases that are not received, or turned out to be defective, the charge can be disputed with the credit card company. The burden of proof lies with the sender; therefore, the consumer has limited financial liability. Such consumer protection provided by the credit card company is not available with most debit cards or when paying cash.

Protection from Fraud

Carrying cash can be unsafe, as it can be stolen or lost. The lost cash is rarely replaceable. Instead, a misplaced or stolen credit card can simply be inactivated by the card issuer and a new one reissued. As for any fraudulent charges, they can be challenged. Upon investigation, the charges are usually forgiven or refunded.

Responsibilities of the Credit Card Holder

A Cardholder can maximize their benefits by,

  • Paying on Time – On time payment is the best way to avoid late fees and penalty interest, and at the same time, boost credit score. The simplest way to ensure on time payments is to set up an automatic bill pay system.
  • Paying More than the Minimum Due – If balance can not be paid in full, it is vital to pay as much as possible over the minimum.
  • Not Using Your Credit Cards’ Upper Spending Limit – Having the maximum amount charged can lead to recurring fees and interest expenses. Maxing out the credit card also leads to a The rule of thumb is to keep the card balance below 30% of the limit. By spreading purchases between several credit cards, you can manage the 30% limit with minimum difficulty.
  • Avoiding Unnecessary Fees – Many credit cards charge various fees: late payments, over-limit, cash advances, transferring balance or returning check. Read through your credit card agreement to be fully aware of all the fees. Avoid these transactions as much as possible.

Change of Terms and Conditions

Credit card companies frequently change the terms and conditions. Such changes often include fee structure, interest rates, billing, and other features. More often than not and to your detriment, these modifications benefit the card issuer. Be aware of these changes as it can help you utilize the card more efficiently. For example, a cash advance fee increase could prompt you to use a different card for cash advances.

As described, owning a credit card can be very advantageous. However, if not handled properly, it can become a liability, such as

  • For non-timely payments, a credit card loan carries a higher interest cost than other forms of credit
  • It can create poor credit scores due to late payments
  • It allows you to have a false sense of security thus accumulating more debt than manageable
  • It complicates your living with complex terms and conditions

It is critical to always use your credit responsibly. Credit problems such as extending credit limits to the maximum can result in a poor credit scores.

Credit Card Debt Negotiation Schemes: Clear Off the Debts

Not only are the Americans but people from all around the globe face up with many debt problems in the most recent cases and if you look at these problems a bit more carefully then you will find that most of these problems are arousing from credit cards.

Most of the people like to have credit cards of their own and they like to use these cards to pay for certain things and undergo a lot of shopping. However, when the time of paying the money to the bank for which the credit card is functioning, then these credit card holders find it extremely hard to pay for the debts they had undergone through the active participation of these credit cards.

Although there are several schemes to pay for the heavy debts, but still these people find it extremely difficult to pay for those ones which are calculated adding a certain interest percentage.

There is several credit card debt negotiation schemes, which can help these troubled persons to get rid of their debts and make some deal that undergo easy settling of these issues without much of a fuss. By undergoing such schemes, the payment of debts gets much faster while making it extremely affordable for these customers to pay for a short period of time while getting their debts cleared in the most legal of the ways following all the rules and regulations of the banks.

Although, credit card debt negotiation schemes are considered as a complicated solution to the problem, but it is not so. The banks are facing a lot of such cases on a daily basis and so they have their overdue amount collection agents assigned for such cases to sit with those customers who are unable to pay heavy debts and finally have stopped paying. These agents undergo a conversation session with these customers and fix up an amount that would be very much appropriate for the customers to pay for while also not making the bank face a loss. These are known as negotiation amounts, which are settled after many discussion sessions with the customers and the banking settlement agents.

However, if a customer faces too much trouble making the settlement claims with the banking agents, then he/she may seek some effective guidance of several debt relief companies present in the market. Most of these companies consist of highly professional legal personnel to provide effective guidance to sort out these cases in the best possible way

Some Credit Card Pitfalls to Avoid

What started out with good intentions for the American consumer is now turning into its worse nightmare. Having the access to credit was supposed to be a luxury and not a necessary. Now, many Americans cannot function without the access to a credit card.

How do we break this cycle of reliance on credit cards?

What is our long term benefit of even having a credit card?

We know short term, we are able to buy that high ticket item now that we cannot afford with our small bank account.

We are able to go on a vacation and live well for a week and worry about the bill later on.

Credit cards are a billion dollar industry. Banks make a staggering amount of money on the interest that they charge and the late fees that they collect. Also, there are numerous small fees and charges that we are hit with every day without our knowledge.

The interest on that credit card was 18% annually. By the time you pay off the flat screen TV fifteen years later, you would have tripled the amount that you paid in 2004.

Interest, my friend, is one of the main sources in which the banks make their money off of you when you use your card.

Your monthly payment to the card company is made up of principal and interest. The principal is the amount that you borrowed, and the interest is the cost of borrowing the money for the purchase. Interest rates on cards can vary from as low as 4.99% to as high as 30%! The interest rate is dependent on the borrowers credit score. The higher the credit score, the lower the interest rate you would be charged.

So for example, if you have a credit score of 775, a credit card company may charge you 4.99% and give you a $10,000 limit. If you have a score of 557, they may charge you an interest of 24% and give you a $3,000 limit.

The credit card companies do this because they feel the individual with the lower credit score will be a higher risk to default on the credit card account. They will, in turn, give a lower credit limit and charge a higher interest rate. If the individual shows a positive payment history, the they will increase the credit limit and may reduce the interest rate.

Plenty of times they will increase the credit limit but will keep the same interest rate.

When you make your monthly payment, most of your money goes towards the interest and a little goes towards the principal. This is because your payments are amortized.

Amortization is when a part of the payment goes toward the interest cost and the remainder of the payment goes toward the principal amount, the amount borrowed. Interest is computed on the current amount owed and then will become progressively smaller as the ending balance of the loan reduces.

Because of the way amortization is set up, you can end up paying double to triple of the value of the original amount of the principal borrowed.

Amortization is just one of the ways credit card companies keep us trapped in financial debt for all of our adult lives. There are several credit card pitfalls that you need to be aware of.

Cash Advances – Every credit card allows you the ability to draw out cash either from the ATM machine or through convenience checks. These cash advances come with a heavy price. Cash advances are charged a much higher interest rate (from 20-25%) than a regular purchase. Even if you use a convenience check to transfer a balance from one card to another, you will be charged a higher interest rate. This is like legal loan sharking.

Credit card companies will send convenience checks in the mail with your bill every month to tempt you to use them. They will make it seem that it is just as easy as making a purchase with your credit card. The fine print will say otherwise.

Avoid using cash advances as much as possible. There is no grace period with cash advances unlike regular purchases where you will have a 30 day grace period to pay back the balance before the interest kicks in. The interest with cash advances kicks in the minute you draw the money out of the ATM machine.

Late Fees & Over the Limit Charges – Besides the exorbitant interest rates that the credit card companies charge, fees are the next biggest way that they make their money. The fine print gives the credit card companies’ free reign to change interest rates at whim whenever they want. A late payment or an over the limit charge will trigger these higher interest rates.

Most companies charge a $30 late fee if you pay after the five day grace period. If you have a low interest rate, this will give the credit card company the authority to charge you a higher interest rate from that point on. You interest rate can jump from 5% to 18%.

If you go over you credit limit, most companies will charge you a $35 over the limit fee and the difference that you are over. They will also start to charge you a higher interest rate because now you are “maxed out”.

With the current credit crisis, card companies are lowering limits without proper notice causing customers to charge over their limit or maxing out their account. Once again, the customer is hit with a higher interest rate by no fault of theirs.

Annual Fees – Some credit card companies do not charge an annual fee. The ones that do will charge $150. They may charge it all at once or break the fee up into 12 even payments.

If you do not pay the fee in full, you will be paying interest on that annual fee, plus also lose the credit availability. Check your monthly statement carefully. You may have a zero balance on your account. Once the annual fee is charged, now you have a balance to pay on. If you overlook when the annual fee is charged, you may run the chance of missing a payment and getting a derogatory on your credit report.

I have seen this happen several times. Whether you have a balance or not, check your statement carefully.

Small Miscellaneous Charges – Another reason to check your monthly statement closely is because there are small automatic fees that are charged to your account monthly that we don’t even notice.

I had a Chase Visa credit card that I rarely used. I kept a low balance on the card and the monthly bill was deducted automatically out of my bank statement. One month I looked through my statement, and I noticed that $15 per month was automatically charged to my account every month for the last four months!!!.

I called customer service and found out that I was being charged for credit card insurance in case I became disabled and couldn’t pay the bill anymore. Now I know we all may need this insurance, but I never authorized the charge. $15 per month is a small fee, but it adds up to $130 per month. If the credit card company gets 100,000 unsuspecting cardholders to overlook this charge every month, they will make $13,000,000 in profits. A small charge to thousands of customers can really add up.

Now that we know that it is in the best interest of the credit card companies to keep us trapped in debt, what can we do to keep ahead of the game?

The marketing efforts of credit card companies are getting more aggressive and creative. We are bombarded with ads everywhere we look. They are even targeting kids in high school. Teenagers are approaching their adult years already caught up in debt.

Here are some tips to apply:

Keep your balances low – As I stated before in this book, the lower you keep your balances, the higher your score will be. The credit reporting agencies will rate your score higher if you maintain your balance below 25% of your credit limit. Pay down your balance if you are over 50%.

Check your monthly statement closely to make sure your credit card company has not lowered your limit without your knowledge. Many times they will lower your limit first, and send out a letter later.

Because of the recent credit crisis, credit card companies are evaluating each account that has used over 50% of their limit. If they notice a drop in credit score, or even a late payment on another credit card, they have the right to lower your credit limit without notice. This is the “universal default clause” in the fine print of your account holder’s disclosure.

Use automatic payments – This is a great method to use if you are getting paid a set salary every pay period. By using automatic payments, you will be assured that your payments will be on time every month. You will not have to worry about late fees.

Some credit card companies delay applying your payment to your account if you are close to your grace period so they can make money on the late fee. We cannot control how quick our payment can get to the credit card company by snail mail.

Make sure you budget right so that you have enough in your bank account to cover the payment. You don’t want to pay both an over draft fee to your bank and a late payment fee to your credit card company. Now that’s a double whammy!

Charge what you can, then pay back in full – I have used this method for a very long time and this has worked out perfectly for me. For example, if I needed to buy a plane ticket for a business trip, I will charge the plane ticket for $199. Since it is a business trip and I am about to make money, I will pay the $199 charge in full at the end of the month when I get the bill.

I will avoid paying interest on that charge and this will also look good to the credit card company because I am paying more than the minimum monthly bill.

When you show a long history of paying more than the minimum monthly bill, you have a great chance of the credit card company increasing your limit.

By paying back immediately what you charged, you will not accumulate a balance that you have to pay back in the long term. This will save you hundreds of dollars in not having to pay interest charges.

If you cannot afford to pay cash for the item or able to pay it off at the end of the month, don’t get it!!

Negotiate your interest rate down – Once you have established a long term history of on time payments to your credit card company, you can negotiate with them to lower your interest rate; even if you don’t have a perfect score.

The credit card company does not want to lose you as a customer. Once you have established a good relationship with that company, it is your right to ask them for a lower rate. You have nothing to lose.

If they give you a lower rate, you save yourself hundreds of dollars. If they do not give you a lower rate, you can transfer your balance to another credit card with a lower rate, close the account, or do not charge anymore items on that account.

Try to use your credit card for emergencies & business expenses – We all know by now that having access to credit cards is a way of life in our society. We need it to build our credit scores. Credit cards are convenient to use when you have to make purchases online.

We have explored the evils and temptations that come with having access to credit cards, but when is the best way to use it to our advantage?

Instead of using credit cards to buy depreciating goods, to impulse shop, or to buy big ticket items, I feel there are two good instances to use your credit cards.

1. I have heard many financial experts like Suze Orman say to take your credit card and put it in the freezer. This will stop you from impulse shopping. She is right. Use your credit card for unexpected events like:
– Making travel arrangements to see a sick relative or to attend a funeral.
-Making repairs to your car if it unexpectedly breaks down.
-Making repairs to your home if your boiler burst or your roof leaks.
-Taking care of a small medical bill or to get medicine for yourself or your family.

These are some the legitimate excuses to use your credit card in case of an emergency. Things happen beyond our control. It is good to have the piece of mind to know that you can have your credit to fall back on in your time of need.

Try to pay as much as you can when the bill comes at the end of the month. You do not want to max out your limit. You have to replenish your credit limit in case another emergency is to arrive.

2. It takes money to make more money. There will be occasions where you will need a credit card to help finance some aspects of your business. Whether you have a startup or a seasoned business, you may need access to working capital to purchase products for your business. You may need to market and promote your business as well.

Instead of using your credit card to buy a product that is making that company richer, you are investing in enriching yourself.