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 May 7, 2009

Keeping Finances Afloat: Avoiding Bank Fees

Today’s economy being what it is, the ability to keep one’s finances float can spell the difference between surviving the economic downturn and going bankrupt. People in the United States have had to quickly adapt their financial habits to fit the requirements of the current state of the economy. While keeping an eye on savings and foregoing the luxury buys are one of the most obvious ways to avoid going bankrupt, some people might be overlooking keeping their eye on their credit card and banking fees.

1176251_27831922One of the industries most affected by the financial crisis is the banking industry. As more and more credit holders delay payment on their monthly bills, banks are coping with the rising rate of credits being defaulted. As a result, banks are beginning to see bank fees as one of the ways to recover. Case in point, a recent study from bankrate.com has shown that the average ATM fee is now at $1.97. Compared to figures from last year, this represents an 11 percent increase.

Bank fees are one of the most overlooked financial leaks that banking customers miss. These small fees may seem inconsequential at first but, as they begin to add up, they often translate to a considerable amount of lost cash every month. Aside from the aforementioned ATM fees, another fee that banking customers need to be aware of are overdraft fees. Overdraft fees are standard fees that have to be paid when the cost of the transaction is higher than the money available in the account. Overdraft fees can be quite high and estimates from Consumer Reports place the interest as high as 1000%.

Most banks have some form of membership fee for their customers. However, what most customers do not know is that they may be able to negotiate for a lower membership fee with their bank. This, however, depends on the bank. There are also some banks that have a monthly maintenance charge for their clients. As much as possible, these banks should be avoided. Some banks will only demand payment if the account falls below a certain amount, the maintaining balance. So, it is best to know what the minimum balance in the account is and to take care that the amount in the account never falls below it.

Another bank fee vacuum according to bankrate,com are ATM surcharges that are charged when customers use their card on another bank’s ATM. According to the study of bankrate.com, 99.2% of ATMS have these surcharges. It is therefore best to avoid using ATMs, if at all possible. A good strategy is to use a debit card for purchases.

The economic turmoil has placed a lot of pressure on the average American to keep their finances firmly in check. It looks like everyone is going to have to be careful of even the little things when it comes to fighting off the economic turndown.

Date April 17, 2009

Can We Live in a World Without Credit Cards?

About 25% of Americans living a cash-only lifestyle prove that it is in fact possible to live a life without credit cards. For the rest of us relying on the convenience of credit cards and the access to money when we may not have the cash flow available – we wonder how it’s possible to sustain a life in these modern times without using plastic.

The creators of the FICO credit score, Fair Isaac Corporation, claims approximately 20 to 25 million people in the US do not have credit, with another 35 million living in the US with a very limited credit history. These numbers boil down to some surprising statistics: one in every five Americans do not have access to credit.

cut-up-cardsOf course, there are two groups of people in the category of non-credit card users: people who don’t have credit cards because they don’t want them; and those who just can’t get credit cards because they have bad credit, or due to their immigration status, or other reasons.

The Federal Reserve Board Survey of Consumer Finances of 2004 showed that 58% of households having credit cards had balances on their cards. With the current state of the economy, studies have been showing that the use of credit cards is declining (whether that is due to inability to get new credit or a desire to avoid getting into (more) debt is unknown).

“In college, I got my first… and second… and third credit card. Every where I turned their were people set up on campus giving away free stuff if we applied for their credit card. I mainly used my credit cards to fill in where student loans left off and my own income wasn’t quite enough when it came to paying for college tuition and required textbooks – but after four years of relying on the credit cards to fill in those gaps, I graduated with about $6,000 in credit card debt,” says Stacy Jamezegour. “The credit card debt was on top of the $45,000 in federal and private student loan debt!”

Jamezegour goes on to explain that some of the credit card debt also came from repairing the vehicle she used to get to and from work and college – since all of her full-time income was paying for college and living expenses she was unable to establish an emergency fund. She believes that she would not have been able to finish college had she not had credit cards available to “fill in” the gap of what she needed to pay and what she had available through student loans and her income.

Others who have used credit cards and then paid them off later vow never to go into credit card debt again. They are able to live a credit-free lifestyle, and once adjusted, say there is really no need to carry a credit card in your wallet. “I used a home equity loan with a low interest rate to pay off my high interest credit card debt,” Jason Michaels explains, “instead of making multiple payments to several credit card bills each month, I just make one, lower payment. I will never use credit cards again.”

Like many people who have sworn of credit cards after bad experiences or have decided never to use them in the first place, Michaels uses a debit card with a MasterCard logo connected to his checking account to handle any purchase that would traditionally be done on a credit card – like reserving a hotel, or to pay for items online or by phone. This counters the argument of credit card users that you really need them for certain expenses or reservations.

Credit card companies have made billions upon billions of dollars off consumers using credit cards incorrectly. As people began relying on credit cards as “additional income”, forgetting that it would have to be paid back, or otherwise allowing the debt to become too much to handle – interest payments and over-the-limit fees and other finance charges we a welcomed result by the industry. As consumers become more knowledgeable and take better control over their financial situation – consumers and credit card companies alike may discover that it is in fact, possible to live in a world without credit cards.