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June 12, 2009

Who Is Really In Charge Of Your Credit?

Credit card companies, it seems, go out of their way to make their practices as obfuscated as possible. For instance, have you every run across these credit cards that offer 0% interest rates?

Who Is Really In Charge Of Your Credit? At first glance, the offer seems awesome. That is actually what the credit card companies are banking on, that you, as a consumer, will buy into their product based mainly on your “first glance” judgment. Of course, if you were really to take a step back and think about it more, you’d realize that a 0% interest rate is just too good to be true. And, once you ask about the terms of the card, you find out that it is. Once you miss a single monthly bill, your 0% interest rate zooms right to 10% or even more.

There is also this kind of “condescending” practice of credit card companies where they give you customer service assistance as if you don’t really deserve the help you are getting. Ask them for help and they put you on hold. They love to put you on hold, don’t they? Have you ever tried negotiating with a customer service person for, say foregoing your automatic interest rate increase because you missed your due date by one day? Basically, you have to hold something over their head in order for them to do anything. You could threaten to cancel your line (won’t work if you have a bad record with them) or you could appeal to their sense of business courtesy. You can remind them how loyal a customer you’ve been and how you are the best credit customer in the world that you deserve an award for it (again, won’t work if you have a bad record).

Obviously, credit card companies (and maybe cardholders as well) have forgotten who really is in charge in the game of credit issuing and paying. Credit is, basically a convenience. It is not a necessity as many credit industry supporters would say. Consumers, by and large can do without credit. Albeit they will have to make drastic changes with their lives (which has been heavily affected by credit card spending habits), it is very doable.

The credit card bill, when it finally becomes active, will level the field somewhat. The legislations in the bill will force a more moderate kind of credit practice. However, in the end it is the cardholders themselves who can force a change in the way credit card companies. All they have to do is to start being in charge of their credit.

June 10, 2009

Professional Debt Management Options For Debt Laden Consumers

In these days of financial insecurity, American consumers are doing their best to balance out their finances. They are trying to make sure that they have enough savings or credit to their name in case a serious emergency should come up. Unfortunately, with the economic crisis hardly slowing pace, massive layoffs, rising unemployment and debt interest rates soaring to record levels, that is proving to be very difficult. What makes it even more difficult is that many of these American consumers are also carrying heavy debts.

Professional Debt Management Options For Debt Laden Consumers Getting rid of debt is, without a doubt the first step for anyone who wants to balance out their finances. The monthly interest and penalty fees by themselves can already ruin a budget. There are many ways to get out of debt. Consumers usually go with the “do-it-yourself” or DIY approach. However, there are many things to be said about seeking the help of professionals. While a DIY approach can work, a professional often has more experience and access to information and resources that a normal consumer does not have.

Here are three professional options that debt laden consumers can access to get a handle on their debts.

Credit Counseling

Credit counseling is where consumers should first seek out help for debt problems. When consumers go for credit counseling, the counselor takes a look not only at their debts but on their whole financial picture. Spending habits, payment habits, monthly expenses, monthly income and many other details are taken into consideration when a credit counselor creates a financial picture of a consumer. By doing this, the counselor can then help the consumer formulate a workable setup for debt payments. Counselors can also negotiate with lenders for consumers to give them better debt payment arrangements.

Debt Consolidation

For consumers who have multiple debts, debt consolidation may be the best solution for them. In debt consolidation, consumers take out a large loan which can cover all their other debts. The end result is that the consumers reduce their multiple debts into one debt. Debt consolidation can also mean better interest rates and lower monthly payments for consumers, provided they shop around for options and choose wisely.

Debt Settlement

Debt settlement is a type of debt management service wherein the debt settlement negotiates for a better monthly payment setup for their consumers. According to debt settlement advocates, the service can settle debts much faster than other debt management services. They even claim that debt settlement companies can arrange for the consumer’s debt to be lowered by an appreciable percentage.

Debt settlement is a hot topic in the financial world nowadays. There has been some controversy over shady debt settlement offers that ended up costing the consumer more. However, this does not mean that all debt settlement companies are questionable. Consumers looking for reliable debt settlement companies are advised to make sure that the debt settlement company that they choose is affiliated with the proper authorities.

May 21, 2009

5 Simple Credit Tips Before Availing a Loan

Your chances of securing a loan relies heavily on the kind of credit score you have. The better the score, the higher your chances of getting that loan will be. A good credit score can also get you a relatively painless set of terms for your loan. So when you plan on getting a loan, make sure your credit score looks good first.

credit card tips Here are a few tips to get your credit score up to muster.

1. Credit Score Review. To determine how things stand with your credit score, make a review of it. See where your problem areas are and correct them. Also, make sure of the accuracy of the report. If there are any errors, inform the appropriate people immediately.

2. Pay On Time. How soon you pay your bills weighs greatly on your credit score. It actually accounts for 35% of your credit score. You should do as much as you can to avoid paying late. Make automatic reminders for you to pay your bills. You can also use the services of automatic payment systems to make the payments for you. Of course, make sure you have the balance to cover it.

3. Keep Balances Low. 30% of your credit score depends on the ratio of the amount that you owe and the available credit that you have. This means the larger your credit balance is, the lower the ratio that you will get. Thus, if you keep your balance as low as you can every month, you can be assured of a high credit score.

4. Keep Up Card Activity. Aside from keeping your balances low, you can also get a lower ratio between your credit balance and your available credit by getting multiple lines of credit. With multiple credit lines, you have a higher credit amount available, which will actually give you some leeway with your credit balance. Don’t get tempted, however.

Of course, to continue enjoying your higher credit amount, you must keep your multiple cards active. To do this without bloating your balance, use your cards for small purchases every once in a while.

5. Avoid New Cards. While having a number of credit cards can help your credit score, getting too many can actually hurt it. Avoid opening too many cards, as they will hurt your credit score in the short term. The burden of juggling bills and purchases over many lines of credit might make it difficult for you to keep up. Also, opening multiple lines of credit in a short time can ring warning bells amongst most creditors.

May 19, 2009

Credit Card Debt: Where the Problem Lies

Credit Card Debt: Where the Problem Lies The credit bill is going to get passed soon enough, but is it really enough to get Americans off debt in the long term? Some say that legislation will take care of that by limiting and reigning in the credit card industry, which seems to have been running wild the last few years. Others argue that the problem is actually the American people themselves, specifically their spending habits.

So, where does the problem lie? If you really take the time to look at it, you’ll see that the problem is shared all around and every part of the problem, from the creditors to the credit cardholders, holds the solution to the entire problem.

Judging by the recent public outcry over the unfair and downright deceitful practices of credit card companies, it definitely seems that credit card issuers are the root cause of the problem. Their sudden rate hikes and imposition of high transaction fees to their customers without any prior notice and without even taking into account their customer’s credit history is certainly right there with outright highway robbery.

Other questionable practices perpetrated by the credit industry include allowing overdraws so that they can make money off the interest or the overdraw fees, extending credit to people who are not in a stable enough financial situation to pay off their credits and, perhaps the sneakiest of all, increasing interest rates if the customer pays late to an unrelated credit card company or even a utility company.

The credit card bill, which will soon come out of congress, should stop these practices and some others. However, there is some degree of truth over justifications of credit industry insiders who say that the credit card industry never forced their customers to sign up to their programs or to charge excessively on their credit cards.

It is very true, cardholders were never forced to charge expensive dinners, luxury gadgets, and unnecessary expenses without considering if they could pay for it or not. The mantra for the spending habits of America seems to have been “spend, spend, and spend” for the past few years. It also didn’t help that the credit card industry encouraged this habit by lowering their credit card application requirements, offering deceptive packages and generally giving consumers enough leeway to bury themselves in debt for the next ten years or more.

Although the credit card industry has a lot to answer for, clearly the spending habits of the American consumer need to change as well. Fortunately, the economic crisis, the employment slump and the oppressive actions of the credit industry have put such a strain on every American consumer’s finances that they are doing just that.

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.

Don’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.

May 10, 2009

Credit Card Companies Going for Premium Customers to Survive

Credit Card Companies Going for Premium Customers to Survive With the state the economy is in now, it is of no surprise that credit cardholders are changing their spending habits, avoiding unplanned buying, and generally preferring to use cash instead of their credit cards whenever they have to buy. Credit card companies are getting hit hard by this complete reversal of American buyers’ consumer habits, which used to follow the mantra “buy, buy, buy”.

With the decrease of credit card use among credit cardholders, credit card companies are losing one of their biggest earners. In general, credit card companies usually get most of their earning through three pathways. These are through customer transactions, revolving credit, and through premium credit card accounts. Since consumer buying has dropped recently and most of them prefer to use cash rather than their credit cards to make purchases, credit card companies are losing credit card transaction earnings. The consumer smart spending trend, partially spurred by the increase in interest rates that credit card companies have implemented, has also meant that revolving credit is no longer a big earner for credit card companies. As a result, credit card companies nowadays are eyeing the premium credit cardholders as their way out.

In a recent summit held in India, it was suggested by Mastercard Worldwide that one way to boost activity for the credit card market may be to charge annual fees. Mastercard Worldwide has been having difficulties continuing its growth with the recent state of the economy. However, Mastercard acknowledged that the only viable market for credit cards with annual fees would be the high end cardholders.

Mastercard may actually be coming late in the game. Competitors Citibank, Standard Chartered, Deutsche Bank, and ICICI bank have already beat them to it. Citibank is known for their Platinum Select Card; Standard Chartered and Deutsche Bank have a partnership going with Emirates Airline, and ICICI Bank is currently partnered with Singapore Airlines.

More and more banks are beginning to see that continued profitability lie in the direction of premium cardholders. Banking insiders recognize that the premium credit card market is better prepared to keep up with their credit card payments and understand much better the need for annual fees.

It seems that, for the moment, banks and credit institutions are going to be marketing aggressively towards the premium cardholders’ market. Most of them are now seeing this market as the best way to continue their growth in the current economic climate. However, bank and credit institutions are acknowledging that the selection process for premium cards is much stricter compared to regular credit card lines. Banks take into consideration several factors before considering an applicant such as educational level, employment industry, annual salary, and their credit history.

May 9, 2009

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

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

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.

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