Credit card debt » Finance Charges

Credit Cards and Minimum Payments – Living in Debt

admin — Thu, 14 Oct 2010 05:48:37 +0000

Many people love their credit cards. It’s a fact of life and the figures bare this up. If you look at the rate at which UK credit card debt is rising it is quite amazing. Millions are being spent all day every day in an endless frenzy of spending. Pretty soon, three quarters of all adults in the UK will have credit cards and if you were to ask any of them to give theirs up, you can bet their answer would be no. The convenience and security of carrying a credit card is so great that once people experience it, they rarely go back.

One of the favourite features of credit cards for many people is the minimum repayment option. This is usually in the region of five pounds or two per cent. This means that even if you spend a thousand pounds on a shopping spree, your bill at the end of the month could be as low as twenty pounds if you choose to make the minimum payment. And this is what people do. It is what credit card providers want you to do, as it is how they manage to rake in billions in profits every year.

If you do have a significant outstanding balance, then making the minimum repayment is one of the most dangerous habits you can get into. Most minimum payments will barely cover the interest and finance charges that are due on the balance. This means that you are really just servicing the debt. This is what many third world countries are forced to do with their national debts and most people do not want to be the personal equivalent of sub-Saharan Africa do they? Servicing debt means you pay the interest due, but pay nothing against the principal debt. So all those monthly payments that you make are doing absolutely nothing to reduce the amount you owe.

If you continue spending on the credit card, the minimum amount, required simply to service the debt, will grow and grow each month. And all the while you are paying back nothing. If you aspire to becoming debt free, then you really have to pay a good deal more than the minimum payment level. Also, if you are serious about clearing your credit card debt, but recognise that it is going to take you more than just a couple of months, you may wish to consider consolidating the debt.

By: Joseph Kenny

Credit Card Debt Negotiation

admin — Wed, 21 Jul 2010 00:09:33 +0000

Struggling with your Credit Card Debts can leave you tired, frustrated and deeper in debt than you were to start with. If you have admitted to yourself that you are in debt then you are ready to start to move yourself into a more beneficial situation. This is where credit card debt negotiation comes into play.

The first thing you need to do is contact your credit card company, if you have been struggling with payments then they will probably be contacting you on a regular basis but do not wait for them to call you get on the phone and talk to them first. Many people are worried that when they call they will be told that there is no hope. This is not true it is within the Credit companies best interest to help you out of debt and put you in a better financial situation, that way they can try and get you to spend more on your card (Which you are not going to do once you are out of debt are you?).

When you call them tell them your situation and ask them what they can do for you, if they say nothing then you need to move onto the next stage which is to get credit counseling. A credit counselor will assist you in your credit card debt negotiation. They will help you create a budget as well as work with creditors to reduce your monthly payments, finance charges and late fees if you have accrued any.

A credit counselor will not only look at your credit card debt negotiation but also allow you to pay them one simple payment for them to distribute between your creditors. There is normally a one off fee but in many cases this is waived.

Do not continue to struggle on with your debts you will only end up deeper in than you are right now, your debts an also have an effect on your health and relationships. Credit Card Debt Negotiation is something that you need to do in order to live a more care free life.

By: Steven Turner

Consolidating Your Credit Card Debt

admin — Fri, 09 Apr 2010 00:42:07 +0000

Credit card consolidation is the process of transferring all your credit card debt to one card with a lower interest rate. This process can help save you money on interest and finance charges, and ultimately help you get out of debt sooner.

How’s it Different from a Credit Consolidation Loan?

A credit consolidation loan is a loan you get from a bank or other financial institution. You use this loan to pay off other non-secured consumer loans and credit cards.

These loans can be secured or unsecured. A secured loan will provide you with a lower interest rate because there’s collateral, like a vehicle or house, that the financial institution can take from you if payment isn’t made.

There’s some disagreement among financial advisors as to whether it’s good practice to get a secured loan to pay off credit card debt. If you have the assets to get a secure loan, then that choice is entirely up to you. Banks and financial institutions may be more comfortable giving you a lower interest credit consolidation loan if they feel that their financial behinds are covered in the event that you don’t pay.

Credit consolidation loans are not practical for everyone. They should only be used if you’re having difficulty making your credit card payments through normal budgeting. They’re a great way to reduce your debts, but in order to prevent further debt you’ll need to completely change your spending habits.

Rates for credit consolidation loans vary. They will ultimately cost you less money each month since you’ll be making one payment to one creditor instead of several to numerous creditors. Try to get a fixed interest rate so that your payments don’t change.

Some banks charge a small service fee to set up a consolidation loan. The same is true for any company specializing in such loans. Be wary of a company that makes grandiose promises about permanently reducing your debt. Also be cautious of companies that charge you a consultation fee or large commission to reduce your credit card debt.

A consolidation loan will not usually have a bad affect on your credit rating, but be sure all the loan procedures are explained to you before you get it.

Debt Reduction with Credit Card Consolidation

If you’re not interested in getting a credit consolidation loan, you can reduce your monthly credit card payments by consolidating all your balances to one low-interest card.

Credit card consolidation may also be the your only option to reduce credit card debt if you don’t have the assets to get a secured low-interest loan.

While low interest credit cards or cards with zero-interest introductory periods can help you manage overwhelming credit card debt, they will not provide a magic solution to your debt problems.

Chris Viale, general manager of Cambridge Credit Corporation, a non-profit credit counseling agency in Agawam, Massachusetts warns about the dangers of these low interest or introductory zero-interest credit cards. Viale points out that “you’re getting symptomatic relief, not a credit cure.”

According to Viale’s statistics, 70% of Americans who use credit card consolidation (as a loan or credit card balance transfer) to pay off their credit card debts end up with the same or higher debt loan within two years.

This is not to discourage you from getting a credit card with a great promotional offer. Most people find themselves back in debt because of poor financial planning and unrealistic expectations and not because of the card itself.

When you apply for any new credit card, do so with your eyes open. Companies that offer a zero-interest introductory period are only doing so to entice you to switch to their card. You will be required to pay interest on your balance sooner than you may want to.

These cards can work for you, but to make them work you need to be disciplined. You’ll need to stop charging purchases to your credit card. It’s also a good idea to make double payments to make sure that you’re paying the principle.

By: Marc Ilgen

Credit Tips – Simple Credit Card Debt Tips to Remove Your Debts Faster

admin — Mon, 05 Apr 2010 12:08:43 +0000

Credit card debt is something nobody wants to hear about, especially in this economy. Bad debt is even worse. You might consider that bankruptcy is your only option. However, that may not be the case.
Here are a few tips that will help you reduce your debts and find your way out of this vicious circle:

1. Pay more than the minimum.

The amount that you don’t pay will be added to the total for the next month creating a larger minimum pay. You must also pay on time, as the banks will add finance charges for each day overdue.

2. Negotiate a deal with your credit card company.

Some companies don’t want you to completely back down from your obligations, so they will consider lowering your interest rates or cut off your future finance charges, if you tell them you have financial difficulties. Another option would be to negotiate a deal with a different credit card company. They might pay off your debt if you switch. You can then call your old company back, present them the new offer and see if they will offer you a better deal.

3. Money management.

Set your own deadline each month for paying bills or keep track of your financial records with money managing software programs.

4. Review your spending habits.

Money is easy come easy go, there’s no doubt about it. One day you have it, the next day it’s out the window. Spend on only what you need and what is necessary. If you have vices like smoking, consider the health and financial benefits that quitting would bring you.

5. Hide your credit card.

Try paying only cash instead of using “plastic money”. The last thing you want to do is add to that debt. It’s tempting to know that with just one swipe, you can buy anything you like, but it only makes it harder for you in the long run.

Follow these tips and before you know it, you’ll have the economic freedom that you deserve.

By: Lisa Archer-Jones

Credit Cards Can Help You Get Out Of Debt

admin — Thu, 18 Feb 2010 08:33:47 +0000

Your credit rating / credit score is based upon how you have dealt with credit previously.
If you have always paid the full amount owing and never missed a payment then your credit score will be high.
If you miss payments, been late paying, not paid in full each month then your credit score will be lower.
If you’re trying to re-build your credit or if you’re young and just starting out, pay close attention the next time you receive a new card offer in the mail. When you’re trying to build a positive credit history for yourself, using the right credit card makes sense. Making small purchases and then making your payments on time each month is a simple, reliable way to build an outstanding credit report.

What to Look For On a Credit Card Application

If the credit card application you receive appears to offer a low monthly interest rate, don’t make a decision until you turn it over and closely examine the Disclosure Box. In it you’ll find a more important measure of credit terms – the Annual Percentage Rate, or APR. By federal law, the Disclosure Box will also tell you whether or not the card has what is called a grace period – a number of days, usually 25, until your purchase starts to accrue finance charges. If a card has a reasonable grace period and you pay off your balance at the end of each billing cycle, you won’t have to pay finance charges. It isn’t difficult to find credit cards that offer these grace periods, so if the Disclosure Box doesn’t declare one then throw the application in the trash and look for a better offer.

If you don’t have any credit history at all, a credit card company won’t want to give you a very high credit limit, but that’s probably best when you’re just starting out. You don’t want to be tempted to go into serious debt with your very first credit card.

Calculate Your Monthly Finance Charges

Ideally you want to pay off your balance each month to avoid paying any finance charges, but when that isn’t possible it’s important to know the actual cost of the items you purchase. The annual percentage rate, divided by 12 months, gives you the periodic rate that will be applied to your outstanding balance each month. You can estimate what your monthly finance charge will be by multiplying the periodic rate times the outstanding balance. It may sound complicated at first, but taking the time to learn this simple equation can make a big difference in how you use your credit card.

When you’re able to see how much you actually spend on an item that you don’t pay off at the end of the month, it might help you to resist the temptation to over-use your card. An item that you want to buy might be on sale at the time you purchase it, but if you don’t pay off your balance at the end of the month then those finance charges can dramatically increase the actual amount you’ll end up paying.

Use Your Credit Card as a Tool

Credit cards are only one of the tools available to help you build a positive credit history. Making on-time payments for other forms of credit, such as rent and utilities, are also important. Depending on your situation, within 1-2 years your credit rating will be improved enough that you no longer need to use your card for new purchases to maintain your good credit. Use these tools wisely, and they’ll help build your financial future!

By: Paul Forcey

Get Credit Card Debt Consolidation Help To Overcome Mounting Dues

admin — Fri, 08 Jan 2010 16:11:37 +0000

You can get credit card debt consolidation help to overcome your card bills. You might say that you are like the many others who use credit cards. So what is the big deal? You get a regular income every month; so it is easy to pay off card bills. No, at times it isn’t. A credit card is plastic cash. You might have more than one credit card. Two, three or even five! A plastic card lures you into buying expensive things ‘today’ which you might feel you would be able to pay back ‘tomorrow’, but that ‘tomorrow’ never comes. What comes is mounting card bills, harassing calls from creditors and a need to find debt consolidation help.

When you are surfing the net or asking around from friends, you might get the right debit consolidation company which may offer you free debt consolidation help. In most cases, this ‘free’ help merely means a free quote or some free first time counseling session.

However, if you are lucky to get a genuine debit consolation company that is affiliated with the government, you can avail the following debt management benefits:

The company will merge all the fees associated with your cards such annual fees, current interest rates, finance charges, cash advance fees and any other fees that is included along with the cards into one single consolidated loan. The company will take over the responsibility to pay your creditors and you will simply pay only to the consolidation company for their single consolidation loan. The company will depute a counselor to guide you through a debt control program so that you get ‘liability’ free now and forever.
Debt Consolidation Counseling Is Important

Credit card counseling is an integral part of credit card debt consolidation help. Your counselor will prepare an effective debt management program for you. Your regular meetings with your counselor will provide you with the right information and skills to manage your card dues. You will be able to identify the problem areas of your life that led you into the credit trap in the first place. Your counselor will ensure that you give up your multi credit cards and keep only one, that too if absolutely necessary. You will slowly gain confidence as your loans will be converted to a single loan at a lower interest rate and flexible repayment period.

Other Ways To Consolidate Credit Card Debt

Yes, you have choices. You can go for ’secure’ debit consolidation by putting forth your house, car or some other asset as collateral. You can also go for ‘unsecure’ debit consolidation where you don’t need to face the risk of putting up your possessions as collateral.

You can also decide to get a hang of your life and through will power and determination; you can become obligation free. How can you do this? Simple! Transfer the balance of all your previous cards to a card that has the least interest rate. You can do much to get yourself decent credit card debt consolidation help, you only have to begin by following the correct path.

By: Saurabh K Jain