If you are finding it increasingly difficult to pay your debts, it's time to think about credit card debt negotation.
Upon finding yourself in a financially tight situation, your best course of action is to act quickly. Let's get real here. Short of coming into an inheritance or winning the lottery, your situation is not likely to suddenly improve. It will, in all likelihood, get worse.
You may think that missing the occasional credit card payment will go unnoticed by your creditors, but that is not the case. Nowadays, credit card companies, banks and other financial institutions use special computer programs to alert them once a payment falls overdue. Just because they don't contact you immediately does not mean they are in the dark about you not having paid. If the debt goes unpaid you will hear from them, no doubt about it!
Given that this is the case, it's far better that you initiate contact with them and explain that you are having difficulty making the required payments. This will let them know you are not about to skip out on your debt and you will be more likely to receive a sympathetic response to your plight. That is not to say they will release you from making further payments, but they will definitely be more open and flexible towards hearing you out and negotiating a new monthly repayment plan if you approach them early in the piece rather than wait for them to approach you.
Before phoning the credit card company, write down all of your debts and work out which you can afford to pay in full and which you can only afford to pay in part. If you cannot afford to pay any due to a temporary circumstance such as being laid off from work and you have since found a job, ask about a credit card payment break. Your request will usually be met favorably, but only if your situation truly is temporary. In other words, don't tell the credit card company you have found employment if you haven't. If you then fail to find work this will only serve to work against you when you are unable to meet your payment again the following month.
When you phone, ask to speak with someone who is in a position to discuss and approve your proposal. This will save time and allow you to talk with someone you can work with to come up with a new repayment plan. While they may not agree to everything you propose, most creditors will be open to negotiation. They want to be paid, and they would prefer not to have to resort to putting the case in the hands of a debt collection agency or taking you to court. Both of these options will cost them money, so are something they would like to avoid.
When you settle on a new payment plan that is acceptable to both you and the credit card company, ask for a copy in writing. This way both party's will know where they stand. Don't agree to a repayment plan you will not be able to meet. Your account will more than likely be monitored closely for some time, so it's important that you make your payments on time.
If you can't bring yourself to talking to the financial institution yourself, a debt counselor can speak on your behalf. Something to keep in mind though is that the lending institution will usually prefer to deal directly with the person concerned (in this case you) rather than a third person. So phone yourself if you can. The problem won't go away on its own, so it's far better to confront it head on. The sooner you do, the sooner you will be able to work out a new payment plan and ease the financial stress in your life.
Saturday, June 16, 2012
Friday, June 15, 2012
How to Eliminate Credit Card Debt
Credit cards are a great convenience for those who use them wisely and can pay off in full the balance due each month. Unfortunately, this is not always possible for those who regularly make large, or multiple smaller purchases. These people can soon find themselves struggling with credit card debt.
Credit card interest rates vary from between approximately 10 to 30%, this being payable on the balance owing that is not paid off in the allocated interest free period. The higher the interest rate and the more often the card is used, the easier it is to fall deeply into debt. This is especially the case for people who only service the minimum payment on their credit card bill each month. The interest charge can then be far higher than the cost of the items purchased and we find ourselves still paying for them months or even years down the track.
Paying off credit card debt may not be easy, but by keeping a tight rein on further spending it can be done no matter how unlikely that may currently seem. The sooner you take control of your spending, the faster you will be debt free. Follow these basic steps and you will not only be able to sleep easier at night knowing you no longer owe money, you will have less interest to pay overall and you will improve your credit rating.
Action Plan
The first thing to do is either grab a pen and paper or open notepad on your computer and list all of your credit cards. Put the ones with the highest interest rate first, continuing on down to those with the lowest interest rates. Note the amount owing, interest rates payable and the minimum repayment required. All of this information can be found on your last credit card statement.
Add up and make a note off the total minimum monthly repayment. This is the least amount payable, but paying only the minimum will mean it will take a very long time to pay off your credit card debt and to do so you may have to totally stop making further charges on it. Charging more items will mean you are forever playing catch up.
Once you know what your minium repayments are, work out how much more you can pay per month. The more you pay off the faster you will reduce and eventually eliminate your credit card debt, but every little bit helps. You may find you can only pay an extra $20 or $30 off the minimum repayment each month, and while that may not sound like a lot it will soon add up and start to reduce the balance owing.
Each month when a new payment is due, put the extra money you have allocated to pay the card at the top of the list and pay the minimum amount due on the other cards. Paying the extra money on the card with the highest interest charges will mean reducing faster the one that is costing you the most. The sooner you can pay this card off, the better off you will be financially. Once you have paid off the credit card at the top of your list, work your way down and pay extra on the second, then subsequent cards on your list.
Why it Works
The minimum credit card payment that falls due each month is calculated as a percentage of the total balance owed. As this balance decreases, so does the minimum required payment. For this reason, it can take a long time to pay off a seemingly small amount of money. By paying extra each month rather than the required minimum due, your repayments are staying constant and the extra money is going towards paying off the principal as well as the interest. By working on clearing the balance of the card with the highest interest rate first you will lower the total amount of interest you have to pay.
Additional Tips
While following the above method will help you reduce your credit card debt faster, there are some other things you can do that will also help.
Sometimes your credit card company will lower your interest rates, but this is not something they will customarily offer to do. You will have to phone and ask them. If you are considered to be a good customer who has always paid on time and has a decent credit card score, your chance of the credit card company granting you a discounted rate will be higher.
A balance transfer is also something you may wish to investigate. The savings on this can be considerable. Keeping in mind that a transfer fee will be payable, not all of the deals on offer will be worth it, but a saving of even 5 or 6% will make a difference over time. Ideally, pay the money you are saving off the balance owing on your cards.
Look for 0% interest deals. While some can still be found they are not always readily available, and sometimes the hidden fees involved outweigh the potential benefits so be sure to do your homework before signing up for a balance transfer.
Paying off credit card debt can be a long process. By curtailing unnecessary spending and paying any extra money you can on your cards you will be able to clear your credit card balance and be debt free faster.
Credit card interest rates vary from between approximately 10 to 30%, this being payable on the balance owing that is not paid off in the allocated interest free period. The higher the interest rate and the more often the card is used, the easier it is to fall deeply into debt. This is especially the case for people who only service the minimum payment on their credit card bill each month. The interest charge can then be far higher than the cost of the items purchased and we find ourselves still paying for them months or even years down the track.
Paying off credit card debt may not be easy, but by keeping a tight rein on further spending it can be done no matter how unlikely that may currently seem. The sooner you take control of your spending, the faster you will be debt free. Follow these basic steps and you will not only be able to sleep easier at night knowing you no longer owe money, you will have less interest to pay overall and you will improve your credit rating.
Action Plan
The first thing to do is either grab a pen and paper or open notepad on your computer and list all of your credit cards. Put the ones with the highest interest rate first, continuing on down to those with the lowest interest rates. Note the amount owing, interest rates payable and the minimum repayment required. All of this information can be found on your last credit card statement.
Add up and make a note off the total minimum monthly repayment. This is the least amount payable, but paying only the minimum will mean it will take a very long time to pay off your credit card debt and to do so you may have to totally stop making further charges on it. Charging more items will mean you are forever playing catch up.
Once you know what your minium repayments are, work out how much more you can pay per month. The more you pay off the faster you will reduce and eventually eliminate your credit card debt, but every little bit helps. You may find you can only pay an extra $20 or $30 off the minimum repayment each month, and while that may not sound like a lot it will soon add up and start to reduce the balance owing.
Each month when a new payment is due, put the extra money you have allocated to pay the card at the top of the list and pay the minimum amount due on the other cards. Paying the extra money on the card with the highest interest charges will mean reducing faster the one that is costing you the most. The sooner you can pay this card off, the better off you will be financially. Once you have paid off the credit card at the top of your list, work your way down and pay extra on the second, then subsequent cards on your list.
Why it Works
The minimum credit card payment that falls due each month is calculated as a percentage of the total balance owed. As this balance decreases, so does the minimum required payment. For this reason, it can take a long time to pay off a seemingly small amount of money. By paying extra each month rather than the required minimum due, your repayments are staying constant and the extra money is going towards paying off the principal as well as the interest. By working on clearing the balance of the card with the highest interest rate first you will lower the total amount of interest you have to pay.
Additional Tips
While following the above method will help you reduce your credit card debt faster, there are some other things you can do that will also help.
Sometimes your credit card company will lower your interest rates, but this is not something they will customarily offer to do. You will have to phone and ask them. If you are considered to be a good customer who has always paid on time and has a decent credit card score, your chance of the credit card company granting you a discounted rate will be higher.
A balance transfer is also something you may wish to investigate. The savings on this can be considerable. Keeping in mind that a transfer fee will be payable, not all of the deals on offer will be worth it, but a saving of even 5 or 6% will make a difference over time. Ideally, pay the money you are saving off the balance owing on your cards.
Look for 0% interest deals. While some can still be found they are not always readily available, and sometimes the hidden fees involved outweigh the potential benefits so be sure to do your homework before signing up for a balance transfer.
Paying off credit card debt can be a long process. By curtailing unnecessary spending and paying any extra money you can on your cards you will be able to clear your credit card balance and be debt free faster.
Thursday, June 14, 2012
Credit Card Debt Settlement
Credit card debt settlement, also known as discounted debt settlement, is sometimes on option offered to people with overdue debt who are unable to meet their repayments.
How Does Discounted Debt Settlement Work?
The way discounted debt settlement works is that upon noting that no payments have been made for some time, the finance company you owe may offer to reduce your bill by around 50% or so. If you accept, their requirement is generally that you finalize your debt in one lump sum, though if the amount owing is large they may agree to being paid in two or three instalments.
The reason a finance company may present you with this alternative payment option is quite simple. Generally speaking, they would rather accept less money and write off the balance, than take you to court. Court proceedings would cost them money and there would be no guarantee they would receive the money owed as you could declare yourself bankrupt.
Should You Agree to Credit Card Debt Settlement?
Whether or not you agree to discounted debt settlement will depend upon a number of factors.
While accepting the finance company's offer may be tempting on a monetary level, something to keep in mind is that in doing so your credit card score will be impacted negatively. For this reason, if there is a way for you to pay in full, you should do so. Assuming your reasons for not being able to pay are genuine and your financial situation is not likely to take a turn for the better, agreeing to a discounted debt settlement would be preferable to being taken to court.
If you want to take up the offer of credit card debt settlement, the first thing you should do is work out how you will pay. Will paying mean you will have to let other expenses slide? If so, what will the consequences be? If, for example, you were to use money to pay off your debt that is normally set aside for food, what would your kids eat? And if you use your rent money to pay your debt, you may find yourself living on the street!
If you are not quite able to meet their offer, it's worth calling the credit card company to see if you can negotiate a lower percentage repayment. They may be quite willing to settle on 40% of the money due or whatever it is you can afford, so don't hesitate to ask.
Should you decide to pursue this avenue, be sure to make a note of the name of the person you speak with. If they agree to a lower credit card debt settlement, ask for a letter outlining the new terms. When the letter arrives, send your check along with a letter stating that your payment is to fully settle your debt. Include a request that they verify by return mail that your debt has been cleared and no further claims will be made upon it.
Something to be aware of when considering whether or not to accept their offer is that not going ahead with it could mean you eventually find yourself being taken to court. If that were to happen the judge could rule in favor of the credit card company, meaning you would have to pay the full amount owing, PLUS any associated court costs.
Once your repayment plan has been finalized, it's a good idea to check your credit card record. If anything has been incorrectly listed, request it be corrected without delay. Having a written record of everything that has transpired regarding your debt and settlement will facilitate this.
How Does Discounted Debt Settlement Work?
The way discounted debt settlement works is that upon noting that no payments have been made for some time, the finance company you owe may offer to reduce your bill by around 50% or so. If you accept, their requirement is generally that you finalize your debt in one lump sum, though if the amount owing is large they may agree to being paid in two or three instalments.
The reason a finance company may present you with this alternative payment option is quite simple. Generally speaking, they would rather accept less money and write off the balance, than take you to court. Court proceedings would cost them money and there would be no guarantee they would receive the money owed as you could declare yourself bankrupt.
Should You Agree to Credit Card Debt Settlement?
Whether or not you agree to discounted debt settlement will depend upon a number of factors.
While accepting the finance company's offer may be tempting on a monetary level, something to keep in mind is that in doing so your credit card score will be impacted negatively. For this reason, if there is a way for you to pay in full, you should do so. Assuming your reasons for not being able to pay are genuine and your financial situation is not likely to take a turn for the better, agreeing to a discounted debt settlement would be preferable to being taken to court.
If you want to take up the offer of credit card debt settlement, the first thing you should do is work out how you will pay. Will paying mean you will have to let other expenses slide? If so, what will the consequences be? If, for example, you were to use money to pay off your debt that is normally set aside for food, what would your kids eat? And if you use your rent money to pay your debt, you may find yourself living on the street!
If you are not quite able to meet their offer, it's worth calling the credit card company to see if you can negotiate a lower percentage repayment. They may be quite willing to settle on 40% of the money due or whatever it is you can afford, so don't hesitate to ask.
Should you decide to pursue this avenue, be sure to make a note of the name of the person you speak with. If they agree to a lower credit card debt settlement, ask for a letter outlining the new terms. When the letter arrives, send your check along with a letter stating that your payment is to fully settle your debt. Include a request that they verify by return mail that your debt has been cleared and no further claims will be made upon it.
Something to be aware of when considering whether or not to accept their offer is that not going ahead with it could mean you eventually find yourself being taken to court. If that were to happen the judge could rule in favor of the credit card company, meaning you would have to pay the full amount owing, PLUS any associated court costs.
Once your repayment plan has been finalized, it's a good idea to check your credit card record. If anything has been incorrectly listed, request it be corrected without delay. Having a written record of everything that has transpired regarding your debt and settlement will facilitate this.
Paying off Credit Card Debt
Is your credit card debt out of control? As much as I'd love to tell you otherwise, there is no overnight solution to this. There are, however, some reliable methods that will work to lower your debt, IF, you commit to sticking with a plan. The plan you choose is up to you. All will work so look over the suggestions (below), choose the one you feel will be easiest for you to adhere to, and make a promise to yourself to follow it to the letter. If you can do that you will reduce and ultimately pay off your credit card debt.
1) The Snowball Method
The "debt snowball" method can work well for anyone, and it works particularly well for those who have difficulty controlling impulse buying so need extra motivation to curb their spending. The way it works is you pay off your smallest debt first, then the second smallest, then the third, etc. Do this regardless of the interest rate you are paying, and keep at it until you are debt free. (The only time it's imperative to pay off a larger debt prior to a smaller debt is if you owe the IRS or are facing foreclosure.)
The reasoning behind this method is that to clear a small debt will take less time than to clear a large debt. Paying a debt in full can provide the motivation to pay off a second debt, then subsequent debts, and encourage you to keep going until all of your debts have been cleared. The downside of this method is that your smallest debt may not necessarily be the one that incurs the lowest interest rate charges. If this is the case you will be paying more than you would be if you paid off your credit card with the highest interest rate charges first.
2) Pay off Your Credit Card With the Highest Interest Rate First
Some people, including those who have been using a credit card with a high interest rate and who have used over 30% of their credit line, can do better paying off their largest debt first. Paying off your credit card debt this way will result in a more favorable credit score as the amount you owe compared to the amount of available credit will be lower. Many people also find it rewarding, both on a monetary and psychological level, to pay off the credit card which incurs the highest interest rate charges first. This is the card that's eating the biggest hole in your pocket, so getting it out of the way can be a relief.
The downside of this method is that if will take longer to clear the debt from your card with the highest interest rate if the balance owing is high. This method may also not be the best choice for people who feel they need the extra motivation provided from totally clearing the debt from at least one card to be able to stick with a budget and pay off additional credit card debt.
3) Balance Transfer Credit Card
A balance transfer involves transferring your debt to another credit card with a lower interest rate which can be as low as 0% interest for a set period of time. While this may sound great in theory, and it definitely can be, before signing on the dotted line take the time to work out how much the transfer fee will cost you. If it is high there may be little to no point in going ahead.
Another thing to be aware of is that following the transfer you will have in your possession a credit card with zero balance. For some the temptation can prove to be too much and they will find themselves using the card. Remember, the idea is to lower your debt, not increase it. Your debt still exists and still needs to be paid off. If you are fail to do this your situation will not improve, and will in fact worsen more and more as time passes.
A further negative to this method is that opening a new account can have an adverse effect on your credit score, albeit a temporary one.
4) Leave Your Debt in Place
Don't confuse moving your credit card debt to another card as paying it off. While you may feel relief, the reality is you still have a debt that has to be dealt with. Shifting that debt to another card will at best be a bandaid solution if you keep spending and racking up more debt.
Another thing to be aware of is that if you are thinking of applying for a loan anytime soon, acquiring a new line of credit will, at least for the short term, negatively impact upon your credit card score.
5) Save for a Rainy Day
It's estimated that up to one third of Americans have no savings other than the money in their retirement fund. If an unexpected emergency expense crops up the only alternative for these people is to cut back in other areas, which may not be possible, or to seek a loan from family members or friends.
For those people who have some savings put aside, using them is not ideal as it can make for a precarious situation, especially in the current economic situation when more and more people are being stood down from their jobs. Always try to have at least one month's worth of expense money put aside for use should the need arise, and do not touch that money unless there is a genuine and pressing need.
6) Utilize Your Savings
If your debt is very large and you have some savings available, using some to decrease your debt can be a good idea, but using all of your savings is not.
Emergencies have a tendancy to occur when we are least prepared, so it's important to have some money put aside for them. Having to borrow more money on top of what you owe will put you into deeper debt, so it's wise to have at least $1,000 put aside at all times. Once all your debt has been cleared, try to add to what you have put aside until you have enough in savings to fund 3 to 6 months worth of living expenses should the need ever arise.
1) The Snowball Method
The "debt snowball" method can work well for anyone, and it works particularly well for those who have difficulty controlling impulse buying so need extra motivation to curb their spending. The way it works is you pay off your smallest debt first, then the second smallest, then the third, etc. Do this regardless of the interest rate you are paying, and keep at it until you are debt free. (The only time it's imperative to pay off a larger debt prior to a smaller debt is if you owe the IRS or are facing foreclosure.)
The reasoning behind this method is that to clear a small debt will take less time than to clear a large debt. Paying a debt in full can provide the motivation to pay off a second debt, then subsequent debts, and encourage you to keep going until all of your debts have been cleared. The downside of this method is that your smallest debt may not necessarily be the one that incurs the lowest interest rate charges. If this is the case you will be paying more than you would be if you paid off your credit card with the highest interest rate charges first.
2) Pay off Your Credit Card With the Highest Interest Rate First
Some people, including those who have been using a credit card with a high interest rate and who have used over 30% of their credit line, can do better paying off their largest debt first. Paying off your credit card debt this way will result in a more favorable credit score as the amount you owe compared to the amount of available credit will be lower. Many people also find it rewarding, both on a monetary and psychological level, to pay off the credit card which incurs the highest interest rate charges first. This is the card that's eating the biggest hole in your pocket, so getting it out of the way can be a relief.
The downside of this method is that if will take longer to clear the debt from your card with the highest interest rate if the balance owing is high. This method may also not be the best choice for people who feel they need the extra motivation provided from totally clearing the debt from at least one card to be able to stick with a budget and pay off additional credit card debt.
3) Balance Transfer Credit Card
A balance transfer involves transferring your debt to another credit card with a lower interest rate which can be as low as 0% interest for a set period of time. While this may sound great in theory, and it definitely can be, before signing on the dotted line take the time to work out how much the transfer fee will cost you. If it is high there may be little to no point in going ahead.
Another thing to be aware of is that following the transfer you will have in your possession a credit card with zero balance. For some the temptation can prove to be too much and they will find themselves using the card. Remember, the idea is to lower your debt, not increase it. Your debt still exists and still needs to be paid off. If you are fail to do this your situation will not improve, and will in fact worsen more and more as time passes.
A further negative to this method is that opening a new account can have an adverse effect on your credit score, albeit a temporary one.
4) Leave Your Debt in Place
Don't confuse moving your credit card debt to another card as paying it off. While you may feel relief, the reality is you still have a debt that has to be dealt with. Shifting that debt to another card will at best be a bandaid solution if you keep spending and racking up more debt.
Another thing to be aware of is that if you are thinking of applying for a loan anytime soon, acquiring a new line of credit will, at least for the short term, negatively impact upon your credit card score.
5) Save for a Rainy Day
It's estimated that up to one third of Americans have no savings other than the money in their retirement fund. If an unexpected emergency expense crops up the only alternative for these people is to cut back in other areas, which may not be possible, or to seek a loan from family members or friends.
For those people who have some savings put aside, using them is not ideal as it can make for a precarious situation, especially in the current economic situation when more and more people are being stood down from their jobs. Always try to have at least one month's worth of expense money put aside for use should the need arise, and do not touch that money unless there is a genuine and pressing need.
6) Utilize Your Savings
If your debt is very large and you have some savings available, using some to decrease your debt can be a good idea, but using all of your savings is not.
Emergencies have a tendancy to occur when we are least prepared, so it's important to have some money put aside for them. Having to borrow more money on top of what you owe will put you into deeper debt, so it's wise to have at least $1,000 put aside at all times. Once all your debt has been cleared, try to add to what you have put aside until you have enough in savings to fund 3 to 6 months worth of living expenses should the need ever arise.
Monday, June 11, 2012
Budgeting to Reduce Credit Card Debt
It goes without saying that the less you spend the more you will be able to save, and therefore the more you will be able to pay off your credit card debt. If you are in the habit of spending every dollar you earn you need to find ways to cut your outlay or bring in more money, preferably both.
Budgeting isn't everyone's idea of fun. It's certainly not mine, but there are times when it is necessary. If you can bring in extra money regularly, you will have a little more flexibility. The most obvious way of doing this is to work a second job, part time. Renting out your spare room is another option if you are open to sharing your home.
When formulating a budget, write down everything you spend for a month. More than likely you will be shocked by how much you fritter away. If you eat out often, buy your lunch for work and regularly get takeout coffee, cutting out these unnecessary purchases will save you at least $200 to $400 a month. Even cutting back on these things will make a difference. For example, eating out once a week instead of twice, taking your lunch to work three days a week and halving your takeout coffee consumption. This method of budgeting works well for those whose credit card debt is not out of control. The idea is to strike a balance, as if you cut out every little thing you enjoy you may feel deprived and fall off the wagon big time. If your credit card debt is out of control though, you will need to totally eliminate all unnecessary expenditure, at least until you reduce the balance owing to a comfortable level.
Here are some more tips on budgeting to reduce credit card debt:
Take control of discretionary spending on clothing, cosmetics and grooming products. Work out a realistic buget for these items and stick to it. Buy in sales and from online discount stores or eBay, and avoid impulse purchases. A good tip is to keep a list of the things you truly need, not want, and if you do occasionally give in to the urge to spend, chose something from your list.
If you have a mortgage, check that it is the best available. A 1/2% to 1% lower rate might not sound like much but it can translate into a couple of hundred dollars a month or more, depending upon how big your mortgage is. If you find a financial institution offering a lower rate change to them, but not without first checking with your current lender that in doing so you won't be liable for an early exit fee. If there will be a fee, before swapping to another lender work out if it will be worth it.
When it comes to food shopping, buying specials in bulk, using generic brands and planning your menus ahead of time so as to avoid wastage can equate to considerable savings. Shopping online at discount food stores is another good option..
Maintaining a car and paying for gas is not cheap, so if possible couples should avoid owning a second car. Car pooling or car-sharing schemes are cost effective alternatives. If you find you only need a second car on rare occasions, renting a budget friendly car for these times will work out cheaper.
If you have a choice of utlities providers, check to see that the company you are with offers the best deal. If they don't, change providers. You may have to pay a fee for breaking your contract, but if so it will usually be fairly small. Do the math and work out if changing will save you money over time.
We all want fast internet access, pay TV and the latest cell phones and electronic gadgets. These all cost money that could be put towards reducing credit card debt. Decide upon what you really need, put the others on hold, and look for the best deal rather than just going with the first one you find.
Finally, assuming you have money in the bank, make sure you are getting the best interest rate going. If you aren't, swap banks.
I hope you found these ideas on budgeting to reduce credit card debt useful and that they inspire you to come up with some money saving ideas of your own.
.
Budgeting isn't everyone's idea of fun. It's certainly not mine, but there are times when it is necessary. If you can bring in extra money regularly, you will have a little more flexibility. The most obvious way of doing this is to work a second job, part time. Renting out your spare room is another option if you are open to sharing your home.
When formulating a budget, write down everything you spend for a month. More than likely you will be shocked by how much you fritter away. If you eat out often, buy your lunch for work and regularly get takeout coffee, cutting out these unnecessary purchases will save you at least $200 to $400 a month. Even cutting back on these things will make a difference. For example, eating out once a week instead of twice, taking your lunch to work three days a week and halving your takeout coffee consumption. This method of budgeting works well for those whose credit card debt is not out of control. The idea is to strike a balance, as if you cut out every little thing you enjoy you may feel deprived and fall off the wagon big time. If your credit card debt is out of control though, you will need to totally eliminate all unnecessary expenditure, at least until you reduce the balance owing to a comfortable level.
Here are some more tips on budgeting to reduce credit card debt:
Take control of discretionary spending on clothing, cosmetics and grooming products. Work out a realistic buget for these items and stick to it. Buy in sales and from online discount stores or eBay, and avoid impulse purchases. A good tip is to keep a list of the things you truly need, not want, and if you do occasionally give in to the urge to spend, chose something from your list.
If you have a mortgage, check that it is the best available. A 1/2% to 1% lower rate might not sound like much but it can translate into a couple of hundred dollars a month or more, depending upon how big your mortgage is. If you find a financial institution offering a lower rate change to them, but not without first checking with your current lender that in doing so you won't be liable for an early exit fee. If there will be a fee, before swapping to another lender work out if it will be worth it.
When it comes to food shopping, buying specials in bulk, using generic brands and planning your menus ahead of time so as to avoid wastage can equate to considerable savings. Shopping online at discount food stores is another good option..
Maintaining a car and paying for gas is not cheap, so if possible couples should avoid owning a second car. Car pooling or car-sharing schemes are cost effective alternatives. If you find you only need a second car on rare occasions, renting a budget friendly car for these times will work out cheaper.
If you have a choice of utlities providers, check to see that the company you are with offers the best deal. If they don't, change providers. You may have to pay a fee for breaking your contract, but if so it will usually be fairly small. Do the math and work out if changing will save you money over time.
We all want fast internet access, pay TV and the latest cell phones and electronic gadgets. These all cost money that could be put towards reducing credit card debt. Decide upon what you really need, put the others on hold, and look for the best deal rather than just going with the first one you find.
Finally, assuming you have money in the bank, make sure you are getting the best interest rate going. If you aren't, swap banks.
I hope you found these ideas on budgeting to reduce credit card debt useful and that they inspire you to come up with some money saving ideas of your own.
.
Wednesday, June 6, 2012
Credit Card Debt Do's and Dont's
Anyone who has experienced credit card debt will know just how easy it can be to rack up a large debt in a short period of time, and how long it can take and how difficult it can be to clear that debt. Following are some do's and dont's to keep in mind when using your credit card. The info may come a little late if you already have a large debt, but implementing these tips along with those on my other posts will result in your credit car debt being eliminated faster.
Credit Card Debt Do's
You may want those new shoes or golf clubs, but do you really need them - - - even if they are on sale? When we really want something we can convince ourselves we “need” it. While credit cards are great when used wisely, they also mean we can make impulse purchases we later regret. Ask yourself if you really need the item you have in mind, or just want it. Allow yourself a 24 or 48 hours “cooling off” period to think this through. The item will more than likely still be there if you really do need it. If it isn't, you've managed just fine without it until now and will continue to do so.
Keep spending within 30% of your credit card's limit. Maintaining a lower balance will mean your credit score will be in good standing and your debt will be easier to manage.
If you know you won't be able to meet your payment, phone your creditor and explain the situation. You may be able to have any late fees waived or even negotiate a new payment plan that will be easier for you to meet.
Credit Card Debt Dont's
Don't put everything you buy on credit. Pay cash or use a debit card for everyday items such as food, gas and clothing. Viewing your credit card as a cash substitute will see you in deep debt faster than just about anything else. Five dollars here and twenty dollars there may not seem like a lot, but it will quickly add up.
If your best friend asks you to go shopping to help her buy a new outfit and you know you'll be tempted to buy something yourself by all means go, but don't take your credit card with you. Leaving your credit card at home out of harm's way will mean you can still enjoy your friend's company and shopping vicariously. While this may not seem as fun as the real thing at the time, when your credit card bill arrives you'll be glad you behaved responsibly.
Don't use your credit card to buy items you can't afford. There are times you may need to put an expensive item on your credit card, say when your refrigerator packs it in. But do you really need the model that comes with a built in computer screen? Look for a basic model and buy it on an interest free repayment plan. Better still, ask family or friends if they have a fridge they don't use or try a second hand store or eBay. There may be time for that top of the line model later, when you can afford it.
Don't close out a credit card before finding out the effect doing so will have on your credit score. Sometimes closing a card can impact credit score negatively, particularly if the card is one that makes up a large part of your credit history.
Credit Card Debt Do's
You may want those new shoes or golf clubs, but do you really need them - - - even if they are on sale? When we really want something we can convince ourselves we “need” it. While credit cards are great when used wisely, they also mean we can make impulse purchases we later regret. Ask yourself if you really need the item you have in mind, or just want it. Allow yourself a 24 or 48 hours “cooling off” period to think this through. The item will more than likely still be there if you really do need it. If it isn't, you've managed just fine without it until now and will continue to do so.
Keep spending within 30% of your credit card's limit. Maintaining a lower balance will mean your credit score will be in good standing and your debt will be easier to manage.
If you know you won't be able to meet your payment, phone your creditor and explain the situation. You may be able to have any late fees waived or even negotiate a new payment plan that will be easier for you to meet.
Credit Card Debt Dont's
Don't put everything you buy on credit. Pay cash or use a debit card for everyday items such as food, gas and clothing. Viewing your credit card as a cash substitute will see you in deep debt faster than just about anything else. Five dollars here and twenty dollars there may not seem like a lot, but it will quickly add up.
If your best friend asks you to go shopping to help her buy a new outfit and you know you'll be tempted to buy something yourself by all means go, but don't take your credit card with you. Leaving your credit card at home out of harm's way will mean you can still enjoy your friend's company and shopping vicariously. While this may not seem as fun as the real thing at the time, when your credit card bill arrives you'll be glad you behaved responsibly.
Don't use your credit card to buy items you can't afford. There are times you may need to put an expensive item on your credit card, say when your refrigerator packs it in. But do you really need the model that comes with a built in computer screen? Look for a basic model and buy it on an interest free repayment plan. Better still, ask family or friends if they have a fridge they don't use or try a second hand store or eBay. There may be time for that top of the line model later, when you can afford it.
Don't close out a credit card before finding out the effect doing so will have on your credit score. Sometimes closing a card can impact credit score negatively, particularly if the card is one that makes up a large part of your credit history.
Tuesday, May 15, 2012
Credit Card Debt - The Facts
The majority of adults in America, and indeed many other countries for that matter, are in possession of at least one credit card, with the average number people hold being estimated at 3.5. The benefits of having a credit card cannot be denied. They allow us to easily shop online and to shop in person without having to carry cash which could be lost or stolen. They can be utilized in an emergency or to purchase neccessities or high priced items when we don't have the cash at hand. When used this way, and if purchases charged to the credit card are repaid before any interest charges are incurred, the convenience of credit cards is obvious. A problem arises, however, when we use our credit cards excessively and indiscriminately then find ourselves unable to repay our debt.
Credit card debt is on the increase overall, and though the average amount owed has declined slightly over the past couple of years, the average US family today owes approximately $14,750 to credit card companies. Students make up another large sector of people living on borrowed money. Getting a college education is expensive, so it's not uncommon for students to have multiple credit cards, Recent estimates put the debt of new graduates at $4,100, with 20% of those owing to the tune of over $7,000. Not the ideal way to start working life, but it's a harsh reality and this money will need to be paid back to the lender or lenders. While these statistics are alarming, even more alarming is the fact that about 5 billion credit card solicitations are issued annually, and penalty fees for credit cards tops 20.5 billion per year.
Refer to my other blog posts for advice on credit card debt settlement, credit card debt negotiation and tips on how to eliminate credit card debt.
Credit card debt is on the increase overall, and though the average amount owed has declined slightly over the past couple of years, the average US family today owes approximately $14,750 to credit card companies. Students make up another large sector of people living on borrowed money. Getting a college education is expensive, so it's not uncommon for students to have multiple credit cards, Recent estimates put the debt of new graduates at $4,100, with 20% of those owing to the tune of over $7,000. Not the ideal way to start working life, but it's a harsh reality and this money will need to be paid back to the lender or lenders. While these statistics are alarming, even more alarming is the fact that about 5 billion credit card solicitations are issued annually, and penalty fees for credit cards tops 20.5 billion per year.
Refer to my other blog posts for advice on credit card debt settlement, credit card debt negotiation and tips on how to eliminate credit card debt.
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