Credit Cards » Credit Card News » Three Ways To Win Against Credit Card Debt
Date May 11, 2009

Three Ways To Win Against Credit Card Debt

Credit card debt is a fact of life. That needs to change as soon as possible, especially if you want to survive the economic crisis. To do just that, read on.

Three Ways To Win Against Credit Card DebtDon’t Spend What You Don’t Have

Credit cards are very convenient, no argument. With credit cards, you don’t have to carry a wad of cash every time you go out, you only use a small, thin card to pay for your purchases and you get to shop even if you don’t actually have the money to pay for it. That last one is the problem.

Credit cards make it easy for you to buy something on the assumption that you can pay for it someday. Most people rationalize that they can easily pay off their credit card purchase by paying a fraction of the item’s price every month. Unfortunately, that is not always the case which is, of course why many people are finding themselves in credit card debt nowadays.

If you really want the convenience of a credit card, use a debit card. With a debit card, you are buying with your own money. Thus, you can be sure that when you buy, it is paid for then and there. You won’t have monthly payments or interest rates. It’s a win-win, unless you want to buy something which you don’t have the money for. If, you really need to spend what you don’t have, read the next one.

Pay Your Debts Right

If you read your monthly credit card bill, you’ll see some figures their labeled as “minimum amount due”. Avoid paying that as much as you can.

If you only pay the minimum amount  on your bill, you’re not actually paying to lessen your debt balance. You need to remember that the longer your balance stays on your bill, the higher the interest you are getting. So what you really want to do is ignore that deceiving “minimum amount due”, calculate the highest amount you can pay towards your actual debt balance and pay that amount. That way, you avoid the high interest rates and get to congratulate yourself on playing smart.

However, if you’re in over your head already, the last one is for you.

Move To A Cheaper Card

Credit companies love to sell you credit cards. It can be annoying but it can give you a break with your credit card debt problem. If your credit card is an old one, the interest rate on that card is probably higher than that of a new card.

What you should do is to get a new card with a low or even zero interest rate and move your card balance to that. Just be aware that the low or zero interest rate is usually offered for a limited time, usually a few months. Make sure you maximize your payments during that period to get the best out of the deal.

Date May 9, 2009

Consumer Borrowing Falls, Smart Spending is the Order of the Day

Consumer Borrowing Falls, Smart Spending is the Order of the DayThe economic recession, the rise of unemployment, and the fall of the property markets have hit the country quite hard. For the average American, the reality has been rising loan rates, the risk of losing homes, and the threat of unemployment. As a result, every American has had to rethink the way they spend their earnings.

Today, Americans around the country are moving away from their old, consumer-driven spending habits. The order of the day for most Americans is now spending smart. It seems that frivolous spending, a common practice just a few years ago, is now on the way out.

Paco Underhill, an expert in consumer psychology, has stated that the consumer mindset is undergoing a major change due to the recession. He was recently quoted saying, “Our retail culture is in a major transition. Conspicuous consumption is now bad manners. Too many of us have spread ourselves far beyond our means. We can’t do this anymore.”

“Our closets are full, our houses are too big, we have too many cars. It’s time to make some very wrenching changes,” he further elaborated.

It seems that American spenders are doing just that. A report released by the Federal Reserve last Thursday shows that consumer borrowing dropped to $11.1 billion this March. Reuters had earlier polled industry analysts who had expected consumer borrowing to drop to $3.5 billion for March. The annual rate of consumer credit fell to 5.2% this March. This totals $2.55 trillion. Not since December 1990 has consumer credit percentage dropped so low.

The drop in non-revolving credit was to the tune of $5.7 billion, which is equivalent to a 4.2% rate, to $1.6 trillion. Non-revolving credit encompasses closed-end loans, such as those taken out for holidays, cars, boats, and college educations. On the other hand, the drop in revolving credit in March was at $5.4 billion, which is at a rate of 6.8%, to $946 billion. Revolving credit is composed of borrowings from credit cards and charge cards.

The sales figures of major retailers for April are also quite telling. Discount stores and supermarkets are winning out against their more high-end competitors. From food to clothing purchases, most Americans are moving towards where the best value is. Consumers are beginning to recognize the importance of holding on to their dollars and are being very careful in their spending. As a result, previously scoffed at buying practices such as buying pre-owned items and “private label” store products are becoming more and more the norm.

The appeal of high priced, luxury branded goods is also beginning to wane.
The changes in buying behavior have its positive and negative effects. Some retailers, for example, are being hit by the change in consumer practices. Clearly, they will have to adapt to this new consumer behavior trend or risk losing everything.

Date April 16, 2009

Capital One Survey Shows Consumers Are Changing Their Spending Habits

The United States recognizes April as National Financial Literacy Month. This is in an effort to highlight the importance of financial literacy and educate consumers on the importance of developing healthy financial habits.

Capital One, in recognition of Financial Literacy Month surveyed over 1000 American consumers to learn more about their spending and saving habits. The results indicate consumers are definitely making efforts to better manage their finances and save more money. The following results from the survey give an overview of the changing spending habits of American consumers.

  • Fifty percent of those surveyed have been clipping coupons to save money.
  • Fifty percent of consumers are canceling or postponing their vacation.
  • Sixty-two percent are cutting entertainment expenses.
  • Sixty-eight percent are not dining out as often.

This news is encouraging and indicates that American consumers may finally “get it” when it comes to the excessive consumerism that has taken over our society in the past few years. Unfortunately not all survey results are as positive. While most Americans are making temporary adjustments to their spending habits to survive the current financial crisis, other results indicate consumers are not really making the long term lifestyle changes required for financial security. 

  • Forty-seven percent of respondents are putting less money in their savings account.
  • Forty-one percent have reviewed their credit report, even though most of the respondents are aware they have access to a free annual credit report.
  • Twenty percent have never reviewed their credit report.

These results indicate that there is indeed a need to focus on financial literacy in this country as consumers continue to struggle with increasing the amount of money in their savings accounts. In addition to not increasing their savings, it would seem consumers are not taking advantage of reviewing their credit report. Your credit score is important in so many areas and the information on your credit report can affect your score. By not viewing your credit report you are unable to notice and correct erroneous reports or view activity that may indicate identity theft.

Americans must not only focus on the short term benefits of altering their spending habits but also recognize how the positive changes they implement now will have long term benefits financially. To properly manage your personal finances you need to not only spend your money wisely but also save and invest in your future.