Thoughts on Debt

Ban raising rates on existing balances unless you’re at least 30 days late paying the minimum due

“They’re not gonna raise the interest rate if you’ve been less than 30 days late. In the past, if you were three days late (for instance), they would hit you. That’s not gonna happen anymore. So that’s a really, really good thing.” Payments won’t show up on credit reports as late anymore until the 30-day mark is hit.

Eliminate the “universal default policy”
“They’re not gonna increase interest rates if your payment is missed on another card. … If you miss on your phone bill or something like that, the credit card companies see it and raise all your interest rates to across the board. That’s what’s called the ‘universal default clause.’ That one’s gonna be gone, too.”
End “double-cycle billing”
“No (more) retroactive interest. This is what’s called ‘double-cycle billing.’ You’ve paid your bill for the last month, but you’re still paying interest, even though you’ve paid it off in the past. It’s outrageous. So, they’re gonna stop double-cycle billing. That’s a really very, very good thing.”
If you pay more than the minimum due, prohibit banks from applying the extra only to the parts of your balance carrying the lowest interest rate

Improve the readability of monthly statements

“Those things have got all sorts of legalese and (are) very difficult (to read). (Banks are) supposedly gonna make it much easier to read, so you understand the interest rates, you understand the late fees and all that, so that, hopefully, should make things a little bit better.”
There will be more bold-face print, and still be a bunch of legalese, but more plain language. Companies will have to be more forthcoming on their policies.

Most experts feel, although these changes will begin moving the credit card companies in the right direction, that they will still find legal ways to get us to pay more like increasing membership fees and so forth.  For now keep an eye on the changes and on your statements, because you don’t know for sure when the changes will begin or how other areas of your billing may be affected.

These days I think that everyone is becoming more conscious about how they are spending their money.  The companies who have the necessity items and have them for less are about the only one’s that are profiting, as a matter of fact, it seems that overall most companies are really hurting and reports show that we are not buying anything extra these days.  This includes items like clothing, jewelry, electronics and so forth.  We are instead, looking for new and better ways to hang on to our money, and miscellaneous spending is becoming a thing of the past.  There are some very simple ways to go about saving some money, and so here are just a few of the ways that cutting back a little can save you a lot in the long run:

1. Make coffee at home rather than buy it every day. You’ll save about $2 a day or $40 a month. This is $480 a year, and that can be money in the bank.  Depending on where you go, it could be a lot more. 

2. Bring in lunch from home instead of buying it. You’ll end up with at least $5 - $7 dollars a day in your pocket.  That is a $25 per week savings at least, and a savings of $1300 per year.  Now that would make a nice vacation don’t you think?

3. Stop getting delivery of magazines and newspapers at home. Most of the content is available online and you can read it everyday—for free!

4. Shop around for credit card interest rates and consolidate credit cards, if you keep a balance.

5. Use cash or debit cards instead of credit cards and incurring interest charges.  Not only will this save you more money on the interest charges, but you will also be more aware of what you are spending your money on, and how fast it goes.

6. Save your stamps and pay bills online, usually for free.  Most companies will allow you to make payments right on their web site, either using a check or debit card, and most banks offer online bill pay services for nothing as well.  This is a very convenient way to pay your bills, and you can also put them on automatic payment, which is great because this way your bills will get paid on time, without missing payments and accruing late charges.

These days every little bit of savings helps.  It is nice to see the gas prices come down, but who knows when they will go back up again and grocery prices are still high.  So be sure to keep a good handle on your spending the rough economic times are not gone yet.

Okay, so we realize that the banks in this country are going under, but how will that effect the average consumer.  Well, it will mean that the whole credit system will need to be revamped and this may or may not be a good thing depending on who you are.  The credit card and loan companies don’t have any more money left to lend and are in the process of actually recalling the credit that they have overextended to everyone.  If you don’t have all your credit used, the bank may close down the credit lines that you have available to you right now.  For some people, this is devastating, while others are taking clear advantage of the system and maxing out all their credit turning it to cash for use later.  Only one problem, you are putting that money where? Of course in the bank, so what you are really doing is giving them the money back anyway.  Now that is not a problem until everyone doesn’t pay back their debts.  Then the banks will be left without money and whose money do you think they are going to use? Of course, your money (which essentially is really their money).

The problem is now, people are realizing that unless they have exemplary credit and no outstanding balances, they won’t be getting any new lines of credit.  This means that they won’t pay back what they have outstanding now because the banks really have no recourse, and there is no more money coming.  Debt collectors are getting desperate, since they really can’t collect on outstanding balances owed and they are going to have to cut enormous deals to get people to pay.  After all, most people are thinking the country just fronted them huge amounts of money, why should we pay them again? The only problem with this, is that our country will never have any type of credit card or loan system again, because if this one can’t be saved and things only get worse, people will only be able to buy what they can afford, and at the wages we are making people it ain’t much.  I personally think that is the way it should have been all along, but the banks and credit card companies decided to get greedy, leaving just about everyone in a hole that they can’t get out of.

Everyone thinks that using a debit card instead of a credit card, is the wiser, less expensive way to go.  Well, let me state it very frankly for you, this is only true if you are using your debit card wisely.  Let’s say that you have a credit card and you make 10 charges on that card then you will have to pay off the balance in about a month and the interest won’t accrue very much at all.  But let’s say that you have made those same 10 charges on your debit card and you haven’t correctly balanced your account and then you receive return check fees on those 10 items in the amount of $35 per item, then that would be $350.00 for charging those 10 items, so quite frankly it can cost more using your debit card if you are not careful with your money.

This quite frankly goes back to the old philosophy that the rich get richer and the poor get poorer.  Honestly, have you noticed that when you don’t have money, they charge you more money.  If you don’t pay your bills on time, they make them bigger by adding late charges and/or interest.  If you don’t have money in your account and a check comes in they charge you a fee.  Sometimes the fee is actually bigger than the item.  So the fact is, if you want to hang on to your money, then don’t buy what you can’t afford.  This can be difficult in trying economic times or when things come up, but quite honestly, this is the only way to get more money.

If you see yourself in this situation, work hard to rectify it.  Keep good records of what you have spent and what is in your account, and keep at least an extra hundred dollars in your checking account just in case you forget about something that you paid or have an automatic withdrawal that you forgot about.  These can be deadly if you don’t keep up with what dates certain things get withdrawn.  In any case make a plan and stick with it.  Good record keeping is the key, so stay on top of it and don’t be caught short, it will cost you big time.

Many people remain uninformed about credit card debt and about credit cards in general. When asked about their debt, 35% of American’s said they carry balances on credit cards, and about 5% said they didn’t know. (How do you not know?) Maybe it is just that they don’t want to admit it. Studies by the Federal Reserve and data release by credit card companies indicate that the percentage of households with credit card balances in this country is at least in the mid 40’s. It could be even higher with the economy on the down swing.

In a separate study, nearly 2/3 of more than 1,000 people said they carry a revolving balance on one or more of their credit cards. Another 8% said they didn’t know whether or not they did. And 15% of people with credit cards say that they have experienced at least some amount of difficulty in paying their minimum balances. They continue to do studies about consumer debt which still show that most consumers don’t really understand the whole thing. They have a limited understanding of reading their credit report, understanding their credit scores and in spite of this they say that consumer knowledge about credit is improving. For example, less than a third of Americans understand that a credit score is a number that estimates your likelihood of paying back a debt. A credit score is based on but is separate from your credit reports. The three major credit reporting agencies are Equifax, Experian and TransUnion and the best known credit score is the FICO . The best way to improve your credit score is to pay all your bills on time. The range is about 300-850 and the higher your score the better the credit you can get and the lower the interest rate available to you.

More than a third of American’s were unaware that insurance companies use credit scores to approve your coverage and to set your rate. Less than 3/5 knew that regularly maxing out a credit card, even if paying your bills on time will lower your credit score. In addition, 79% of American’s thought they could get their credit score free once a year, however that is your credit report, not your credit score. You generally have to pay about $15 for your credit score number.

Most people don’t realize that they need to be checking their reports for accuracy every year, and they should check their credit score every few years and before they apply for a mortgage or other large line of credit. Washington Mutual estimates consumers can reduce finance charges by $105 a year on average by raising their scores 30 points.

Knowledge is power and knowing more about credit, how it works, and how we can make it work for us, is an important part of the system. Getting information now about credit, debt, credit score and other credit information, can help us improve our credit score and keep it in good standing. This can open up some major opportunities for you. Just remember it is never too late to start improving your credit rating.

Most American’s are carrying a lot more debt than they can afford.  Credit card debt in the US has reached a record high - Nearly $1 trillion, according to the latest figures from the Federal Reserve Board.  The average American household’s debt from credit cards has risen from $2966 in 1990 to $9840 in 2007.

As getting loans becomes more difficult and the cost of groceries and medical bills is on the rise, more and more people are turning toward plastic instead of cash to meet many of their basic needs.  For many of us easy credit has lead to spending well beyond our means.

The debt crisis in this country however, is created less by our spending and more as a result of an industry devoid of regulations and checks and balances.  For too many years, the credit card industry has been allowed to run rampant with charges and additional fees well beyond what is reasonable.

Consumer complaints and pleas for help may be having an effect.  Both the Federal Reserve and Congress have proposed new rules that have broad support.  Unfortunately, action has not yet been taken, but it is on the horizon.

The real problem is that the credit card companies make the most money on those of us who can’t afford what we spend.  This is why if you pay your bill in full every month, the credit card companies have a term for you and surprisingly they think of you as a “deadbeat”.  They deliberately target those who can not afford to pay their bills.  As a matter of fact, if you are having trouble paying your credit card bills, then you will more than likely receive some extra credit card offers in the mail.  They all want you to borrow from them.

We can hope that the legislation will soon be coming down the pike to give these big companies what they truly deserve and perhaps bring some relief to us all.

We are all feeling very helpless against the powers that be that are pulling our purse strings these days.  There are things that we need to do to take back some of the power from these piggies.  I am not saying that there has not been a cost increase in the production and delivery of the foods we love.  I am however saying that the price of gas has been backing off a little, but a block of cheese, 16oz of mozzerella cheese has risen about $3.00 a block, this is double its price only 3 months ago.  I can assure you that the cost to produce this block of cheese has not gone up $3.00 and therefore we need to be careful not to let these companies take advantage of us.  We need to take some proactive steps to stand up for ourselves here.  After all, you better believe that the price of cheese will come down after pound after pound goes bad on the store shelf.  Yes, it will mean compromising a little, but it is worth it to take a stand.  We can do something about it, we still have the power of the dollar and if we start exercising that power, we can make a difference.

It is time to move from debt to debt free and the best way to do this is to live like it was the 1900’s all over again.  Grow your own food, cook it, can it, freeze it.  That is right, we can bake bread, we can go to bed when the sun goes down and we can live without a credit card.  You may not eat what you want, watch what you want or go where you want, but you can actually live much, much more frugally than you have been.  I know this sounds like the extreme, but the truth is just like any other lifestyle change there is a period of adaptation, and it will feel a little odd for a while, but we can make the changes necessary for survival and we must or we won’t make it.

Credit seems to be one of those things damned if you do, damned if you don’t. What are the right choices? Is it a good idea to have a credit card? Do I need one?

Credit unfortunately is a necessary demon. You must obtain credit and use it wisely. If you purchase something on your credit card it is a good idea to spread out the payment of that item over the next 3 months and then pay it off. Then do the same thing a few months later. If you can’t afford something than don’t buy it. This is the rule. In other words, credit cards are not something that you should use to pay for something that you really can’t afford. If you do this, you will either wind up paying so much in interest that the item will cost 3x what it actually did, or you may fall into a trap of not being able to pay your bills on time, which could put a serious dent in your credit. Credit cards unfortunately are necessary, as getting them will afford you the opportunity to build your credit score and establish good credit for a car loan or mortgage in the future. One of the biggest ways to have wealth and good financial standing is to have an excellent credit rating and to own homes and land. These are how anyone who is anybody has obtained their wealth and if you don’t believe me than find someone that you know who is financially over the top, and they will tell you credit and real estate are their 2 most important and valuable assets.

Go ahead and apply for a few different cards. Try getting one gas card, one store card, one American Express card, and a Master Card or a Visa. If you can do this without racking up debt and get the items paid off in about 2 or 3 months than you are set. With the exception of Amex the other cards won’t really improve your credit rating if you pay the balance in full every month, that is why we suggest American Express as one of your primary cards. It is a big name card, but needs to be paid monthly, so you can’t get too far in over your head. Use your credit wisely and it will serve you well, don’t and you will be forever sorry.

Although it is easy to hear all the things that you should do to improve your personal financial situation. Some things are easier said then done. Unfortunately, many of us who find ourselves in debt do so because we were unequipped with the resources necessary to make good sound financial choices, and now there is so much water in our boat that we are sinking quickly without help in sight. Well you will be happy to know that there are steps that you can take now to improve your financial future and insure the fact that you don’t wind up in this same boat again.

There are many resources available online, not only in the form of debt consolidation, but also in the areas of financial counseling and management. There are companies available to help you improve your credit score, manage your money, manage your debt, and help you budget correctly. These resources in addition to the oodles of materials available in your local library can very easily help you get the information you need to make sound financial choices for your future. There are also many shows on TV that can help you better understand money management and how to spend more wisely. Using these resources will help you to better understand the mistakes that you have made and are making and will give you the education in finance that you lacked the first time around.

One simple thing that you can do to help improve your financial situation is to improve your credit score. In order to do this you first need to get copies of your credit report from the 3 big reporting companies. These 3 companies are Equifax, Experian and TransUnion. Although these reports may be similar in nature, sometimes for some reason they contain some different items as well, which is why you really need to take a look at all 3.

According to a Federal Law passed in 2004 you are entitled to one free credit report per year from each of these three credit reporting agencies. You must request these three reports through one agency called annualcreditreport and this can be done through their website online. Once you have those credit reports in front of you, you can see what companies see when they look you up. You can see your credit score, which is the number that has been assigned to your credit worthiness. The scale runs from 300 to 850. The vast majority of people will have scores between 600 and 800. A score of 720 or higher will get you the most favorable interest rates on a mortgage. If your score is on the low end, then you need to work to improve it. One way to improve your credit score is to contact every company to verify the debts that are on your credit report. If you don’t get a response in 30 days, then they must remove these items from your credit report. It can eliminate some of your bad credit by the company just not responding and this is a pretty simple thing to do. Another thing that you can do to improve your credit score is start paying all your bills on time. Make deals with creditors that you still owe money to that if you pay half the balance they will change the negative mark on your credit. Negotiate, they want their money, and may be more than willing to change your credit rating in exchange for payment. Another thing that can improve your credit is to open a new credit card and keep a good payment record on it. If you can no longer get a card because of bad credit, you always have the option of getting a secured card, which in the future will become unsecured as you make payments. This can be a little expensive, but if use properly can be to a means to an end to restoring your credit.

The best way to stay one step ahead of the rising cost of everything is to budget. This has been something that I have always struggled with, so I went online to find some tips on how to create a budget, and came up with a realistic way to do this.

You must first take a look at what you are spending so that you can adapt it accordingly. Unfortunately this is not always easy. We can all account for how much we spend on utilities every month, but figuring out the smaller more trivial amounts that we spend each month can account for a lot of our missing money, and we don’t even account for it. In order to take a good hard honest look at your budget, you must first account for every dime you spend in a month. Now, I have found that tracking your spending from one end of the month to the other is easiest if you do it all out of one account, on your debit card or credit card. Otherwise you must save every receipt in order for your assessment to be accurate, let’s face it for most of us keeping track of each receipt can be tiresome. Some people say that you can just keep track of your spending for a week and then figure out a monthly budget, but I prefer doing it for the month. Sometimes there are expenses that occur at different times of the month and so I have found that looking at my monthly expenses gives me a little better overview.

Now, once you have tracked your spending for an entire month, put it down on paper into categories. Monthly bills on one side, these are the expenses that you may be able to cut back on a little, but they are necessities like house payment, electric, fuel oil, water, basically all the things that must be. On the other side make categories such as entertainment, dining, cigarettes and/or alcohol, clothing, and any other category that applies to your life. Lastly, make sure that you include your monthly grocery bill and auto gasoline bill on the other side, as these are necessities that can be reduced, but more than likely can not be eliminated.

Now, on the top of your page write down your take home income, how much you cleared after taxes. In an ideal situation you will be able to save 25% of your salary. If the amount that you have spent is more than 75% of your take home, then it is time to start cutting back.

The more you can save, the more you can spend. Now is the time to really tighten the belt and cut out all but the necessities and if you can use coupons, shop sales, and shop around for the services that you need such as car insurance and phone services, do it. The more money that you can keep in your pocket the better.