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5 Most Common Mistakes Leading to Credit Card Debt

Getting into credit card debt is easy. Staying there is even easier. However, while you may feel like you are all alone under your mountain of debt, you’re not, because millions of people around the world are struggling with their credit card debt too, and fortunately we all make the same set of mistakes which lead us into debt and make it hard for us to get out again.

Fortunate because you can now identify these mistakes in your own behaviours, and stop yourself from repeating those mistakes.

1 You keep using the card

Overuse is a popular way to get yourself into credit card debt because if you do not track your credit card purchases and budget to repay your balance in full each month, the compounding interest charges make it harder by the day to repay your growing balance. Plus, even if you have budgeted for your purchases and have simply not paid your credit card before the end of the interest free period, your budget is blown because of the extra cost you now need to cover to repay interest charged.

Once you are in credit card debt and having interest charged on your balances, you need to change your behaviour right away. Continuing to use your credit card when you are in debt is a mistake because your new purchases will not enjoy any interest free days because interest free days do not apply if you have an outstanding balance. This means you are going to continue to be charged interest on your outstanding balance and immediately on your new purchases growing your debt even faster.

2 Misusing a balance transfer

Balance transfers can be a wise way to get out of credit card debt but they can just as easily lead you into even more debt if they are misused. A balance transfer is when you apply for a new credit card with a low or 0% interest rate offer, usually for a limited time, to pay out your existing high interest credit card debt. Your existing credit card balance is then repaid to zero and you make payments to your balance transfer credit card, at a much lower interest rate.

However, misusing a balance transfer turns into as big mistake when:

·You spend on your new balance transfer card. You can often be approved for a balance transfer with a limit greater than the transferred amount however, unless you have chosen a balance transfer and purchase credit card offer – where the interest rate charged on new purchases is the same as the balance transfer rate, and offered for the same period of time as the balance transfer – then you can lead yourself into more credit card debt. This is because your balance transfer card repayments will go towards repaying your transferred balance first. Therefore if you apply new purchases these will instantly be charged a higher rate of interest until you have repaid your transferred balance in full.

·You spend on your old, repaid credit card. When your existing, high interest credit card suddenly has a zero balance it can feel freeing, not to mention tempting. However, if you start using your old card again without budgeting or repaying your balance in full each month, then you will find yourself in need of another balance transfer in a few months’ time, and with one already on your credit report, you may not be as easily approved for a second.

·You don’t repay your transferred balance within the offer term. Most balance transfer offers are for a limited time, often six to 12 months. After the term of the balance transfer offer, the interest rate charged on your balance reverts to the card’s regular purchase or cash advance rate. Therefore, if you don’t budget to repay your transferred balance within the offer period, you will be stuck with just another high interest credit card balance.

3 Ignoring your debt

Ignorance of your finances is a great way to get into credit card and is a particularly good way to stay there. If you are not crystal clear about the amount you have to spend in your budget each month, then you can easily spend more on your credit card than you can afford to repay, and quickly be saddled with a growing credit card debt.

Once that credit card debt has established itself in your life, it is even easier to go on ignoring the issue because it seems so hard to handle. However, blindly making the minimum repayment on your credit card debt is a mistake many people make and a mistake which can keep you in debt for a long time.

Instead make sure you are aware of:

·Your credit card balance.

·Your minimum repayment amounts.

·The current interest rate charged.

·The fees charged on your account.

Keep all of this information in a format you can easily refer to, whether it is a spreadsheet on the computer, a notepad on your desk or a page in the back of your diary. With all the facts in front of you, you can more easily plan your attack because you can budget for the minimum repayment amounts required and then look at your budget to allocate any extra funds you have available to make more than the minimum payment.

It is also important that you check on the fees and interest charges on your credit card because neither will be static. Interest rates on credit cards can changes just as frequently as the interest on a variable home loan and credit card providers often move much higher than Reserve Bank decisions.

4 Missing payments

When you are facing mounting credit card debt it is no time to set about destroying your credit rating so don’t make the mistake of missing the monthly repayments. It is easy to think ‘well I’m already in debt this far, what difference will a missed payment make?’ but keeping on top of your repayments and budgeting to meet your credit card obligations each month can keep you on track to managing your debt – slow and steady can win the race.

At the same time don’t take it too slowly and make the mistake of thinking that just paying the minimum amount each month will clear your debt. Making just the minimum monthly payment will see you repaying your debt for many years and repaying many more hundreds of dollars in interest so budget to repay as much as you can spare.

5 Keeping quiet

It can be embarrassing to be in debt at any level and the last thing you want to do is tell your friends and family about your woeful financial situation. However, making those around you aware of your struggle can make it easier to stay on track to repaying your debt because friends will not pressure you for expensive dinners out every week and family arrangements can be made so Christmas time is less of a burden for example.

Also make sure to speak up to your credit card provider if you are looking at mounting credit card debt. You should be able to negotiate a new repayment schedule which you can meet within your budget and you may even be eligible for a lower interest rate. Talking to your provider before you default can save you money, save you face and save your credit rating.

Alban is a personal writer at Home Loan Finder, where he provides tips and advice on refinancing and Home Loan Finder

Pros and Cons of Payday Loans

What I really like about personal finance is that there are no straight forward answers. Each financial product has its pros and cons. While several people debate the usage of payday loans I think that sometimes, it could be a good *temporary* solution.

In order to have a clearer point of view on Payday Loans, I thought of reviewing their pros and cons. While you can get your money in no time, there are little bit more to know before you apply for a guaranteed payday loan:

Pros of Payday Loans:

Getting your money quickly

Obviously, the biggest advantage of applying for a payday loan is to get your money faster than your pay check. Most companies are able to give you access to your money within 24 hours. When you are in the need of money, this is quite useful.

Gives you a break to find a better financing option

As I previously mentioned, payday loans can give you a quick option to access to money. This will give you additional time to find a better financing option (maybe try a 0% apr balance transfer credit card or a consolidation loan?).

Skip late fees

If you are about to pay fees because you are late on your bills, applying for a payday loan can be a good solution. Sometimes, the late fees are higher than the payday loan fees. Therefore, you would *save* money in your transactions.

No need to supply excessive amount of documents

Payday loans companies try to keep it as simple as possible. Therefore, you don’t have to fill a ton of paperwork to access your money.

Cons of Payday Loans:

It is expensive

Interest rate and late payment fees on such loans are exorbitant. If you apply for a payday loan, you better have a plan to pay it back before you get the money. If not, you may regret your decision when you look at how much it has cost you .

Not using the money for the right purpose

Some people use this option to get money quickly but don’t think about the long term consequences. This is not free money, this is money taken from your future pay check. Therefore, if you don’t use it as a temporary financing tool, you will definitely end-up into bigger financial problems.

Loan cap

Depending on where you live and the size of your pay check, you can have a loan cap that goes from $300 to $1500. Therefore, if you need additional funding, you are better off looking at other financing options.

This post was provided by Online Cash Advance

6 Easy Steps to Make money from Cash Reward Credit Cards or Point Rewards Credit Cards Part3 – 3- Keep another credit card for emergency

Now that you have chosen the best cash reward credit card and that you use it on a daily basis (please see my guest post on The Financial Blogger for the Part2 of How to make money with cash reward credit cards), you need a plan B to finance unexpected expenses. In an ideal world, you would have about 6 months worth of salary as an emergency fund or a line of credit that can cover for such spending.

However, it is always useful to have a second credit card in your wallet as an easy plan B. The second credit card would also be very useful if your cash reward credit card is de-magnetized or frozen for fraud protection for example.

Imagine that you go in France for 2 weeks and your cash reward credit cards is being cloned at the same time. You just finish a great dinner at a fancy restaurant and you can’t pay the bill because your cash reward credit cash has been frozen or canceled to stop the fraud… This is when you pull out your second card out of your pocket and pay your bill (thinking that you won’t get your points back from this expense ;-) .

Since it is very common to have a credit card cloned (don’t worry, you won’t have to pay any fraudulent transactions), it is always a good thing to have a second credit cards to cover these situations.

For this one, you are actually looking for a cheap (no annual fees) card. As this credit card will be used for emergency only (in the case your reward credit card is not accessible), you should not look for any features requiring an additional fee on it. Try to find the best free card possible. Here’s a couple of free credit cards:

IberiaBank Visa® Classic Card

IberiaBank Visa Card

Household Bank Platinum MasterCards

Household Bank Platinum MasterCards

Discover® More Card(SM) - Wildlife Collection

Discover® More(SM) Card – Wildlife Collection (and you even get cash back rewards!!!!

TrueEarnings® Card from Costco and American Express

TrueEarnings® Card from Costco and American Express

Here is the complete 6 Easy Steps to Make Money From Cash Reward Credit Cards of Point Rewards Credit Cards (links will be updated as article goes live).

1- Select a card with cash rewards or a good point system that suits your needs

2- Use your credit card for your day-to-day spending (guest post on The Financial blogger)

3- Keep another credit card for emergency

4- Do not withdraw money from your bank account anymore

5- Pay it completely at the end of the month

6- Enjoy rewards from your credit card

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Credit Around The Blogosphere

Every Saturday, The Credit Toolbox does a review of good read around the blogosphere. Here’s what caught my attention this week:

Chief Family Officer presents Becoming debt-free: Sometimes you just need to believe it’s possible.

My Findependance Day presents Debt Repayment: Feel the rush.

Man Vs. Debt presents Declaring War: Canceling Credit Cards.

Destroy Debt presents Credit Companies are Hurting Your Credit Score.

Bible Money Matters presents Are You Emotionally Invested In Your Credit Card? presents Three Methods to Protect Your Credit Card in Online Transactions.

The Digerati Life presents Get The Best Home Loan Rates With These Tips.

American Consumer News presents Should You Purchase Credit Card Protection Insurance?

American Consumer News presents Should You Purchase Credit Card Protection Insurance?


Carnival of Personal Finance

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Consumer Credit Counseling

Consumer credit counseling has become very common these days and you don’t have to wait for your debts to pile up to get advice from a credit counselor. Even if you are apprehending that your finances may take a backseat in near future, you can take help of a credit counselor.

Credit counseling-get your finances back on tracks

In consumer credit counseling, the debt counselor evaluates your overall financial situation. You can either attend a session in person or get help over the telephone or the net. A certified credit counselor evaluates your financial situation by reviewing your income, your debts and expenses. By assessing your financial condition, the credit counselor will recommend a debt help program that will suit your current financial stature best. It may be a debt consolidation program or a debt settlement program. Credit counseling is also a part of the debt management program or DMP. The new federal bankruptcy laws had made it mandatory for an individual intending to file bankruptcy to attend a credit counseling session at least 6 months prior to filing bankruptcy.

How does it help you?

A credit counselor will help you out in the following ways-

*Provide guidance in working out a budget so that you can manage your money effectively.

*A credit counselor will negotiate with your creditors so that your late fees are eliminated; your loan tenure is increased.

*They also help you by requesting creditors to lower the rate of interest.

In addition to suggesting appropriate methods to get out of debt, a credit counselor will also help you to get back your finances on tracks. You are also taught to manage your finances and debts more effectively in future should you face financial difficulties again.

A credit counseling session may take about an hour. However, it depends on your financial situation and the time varies from person to person depending on the requirement.

When you hire the services of a credit counseling agency, make sure that you are choosing the right agency. Reports suggest that the Better Business Bureau (BBB) has received a number of complaints against 3rd party debt counselors. Since last year the complaints have increased by 20%.

Credit counselors- beware of fraudsters

The consumer credit counseling complaints lodged with BBB are of 3 types-

*Some of the consumers complained that a company offering debt elimination promised to get debtors out of debt within a very short time span. However, debtors continued receiving threatening debt collection calls and when enquired, they found that debts had piled up even more.

*When you are being offered debt settlement or debt reduction program by a credit counselor, the credit counseling agency claims that they will work on your behalf and work out a solution. Complaints registered with the BBB stated that debtors stopped dealing with creditors once they were assured that the credit counseling agency will take the onus. However, in reality the agency had actually fled with the consumer’s money.

*When a company is offering debt consolidation, the company treats all your debts as a single account. There are several companies who charge exorbitant interest rates and fees and by the time you are debt free, you will have paid more than the original debt amount.

Consumer credit counseling has a positive side too and if you hit upon a good credit counselor, your finances can be back on tracks in no time.

Author’s Bio: Anthony Marx is one of the financial writers associated with the CreditMagic Community. With his in-depth knowledge and vast experience, he has laid a profound impact through writing and advising on all credit issues and has presented useful tips on credit repair, etc.. His remarkable guidance and support has improved the community into a global hub for the credit related situations. He is highly appreciated by the forum moderators and other authors of our community.

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