Debt Consolidation Blog

Archive for the ‘credit card debt’ Category

When facing poor or no credit, it can be difficult to obtain a credit card. Credit cards offer the consumer many conveniences and in some cases, such as reserving rental cars they may even be required. Secured cards are an attractive alternative to traditional unsecured cards and have the added benefit of building credit over time. When shopping around for a secured card, there are some basic things to know to ensure that you are making the best choice.

Secured cards function when the card holder makes an initial deposit to the credit card company. This deposit amount varies and can be anywhere from two hundred to five hundred dollars. This deposit serves as the card’s credit limit since any monies spent uses this deposit as collateral. In this way, the credit card company already has the funds should the cardholder default on payment. Finding out the amount you are required to deposit before selecting your card will help you find a deposit amount that is manageable for you.

When applying for a secured card, there are some basic things to consider beforehand such as what fees you will be charged for the card you are considering. Fees for secured cards vary and can include annual fees, application fees as well as late payment fees. Although virtually all secured cards charge an annual fee, you may be able to find a card with a minimal application fee or none at all.

In addition to finding out the fees associated with your card and the amount of the initial deposit, you should also determine whether or not the card you have chosen will help to build your credit score. A credit building secured card reports payments to all three credit reporting bureaus and will help to establish credit and improve your existing credit score as long as payments are made on time. Obtaining a secured card that works to build credit is the best way to use these cards otherwise a prepaid debit card would carry much less fees.

Another point of note when applying for a secured card is what if any interest your deposit will earn. You have the option to place your deposit into a savings account, money market account or a certificate of deposit. The interest earned will be standard for the type of account your select. After you close your account, the bank may choose to hold onto your deposit for a few billing cycles to cover any miscellaneous fees that might arise.

For many Americans, access to unsecured credit cards can seem to be virtually impossible. When there are more negative listings on a credit report than positive ones, the overall credit score can quickly plummet. This reduced score raises a red flag to prospective credit card lenders. In other situations where an individual has yet to establish a credit history, obtaining a credit card can be quite a challenge. Secured credit cards offer the best solution for consumers facing credit difficulty and wishing to establish a sound credit history for the future.

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For consumers who don’t have access to a checking account, a prepaid debit card can prove to be an excellent alternative. It may be that you have overdrawn your own checking account and are having difficulty acquiring a new account with the bank. If this is the case, prepaid debit cards offer the convenience of a check card without the danger of overdraft fees.

Prepaid debit cards offer many conveniences for those without access to a checking account. One of the main benefits is the Visa or MasterCard logo found on the card. This is very useful as there are countless instances where it will be more convenient to use a card than to carry cash or money orders. Online transactions are just one example where having a money card offers added simplicity.

In addition to its ease of use, having a prepaid cuts down on bank fees, over the limit and overdraft fees typically associated with bank debit cards. If it is difficult for you to balance your check book and you frequently experience overdraft fees, a prepaid debit card may be the best option for you. Another consideration is that once you have spent the money on the card, you will not be able to charge more than what is in the account. In this way, having a prepaid card may actually force you to be more aware of your transactions instead of simply paying the price later with over the limit fees.

Prepaid debit cards often work well for those with bad credit or those who already have an overdrawn checking account. If you have had a checking account become charged off as bad debt due to the account having a negative balance, you may be listed in the ChexSystems. The ChexSystems keep a record of overdrawn checking account holders using your social security number to track this. Having a listing here can prevent you from opening up a new account with another bank. The good news is that prepaid debit cards do not use this system when issuing new cards. This ensures that you will have access to your own money with the convenience of a personal use debit card.

There are some drawbacks to consider when deciding whether to use a pre-paid debit card. For example, if you use checks to pay your rent and other bills, you will need to purchase a money order instead.  In addition some bills that are paid over the phone charge an additional fee for using processing a debit card instead of using a routing number which is associated with a checking account. Another disadvantage to using a prepaid debit card is that there are fees associated that may exceed those of traditional debit cards. The card holder may be charged a fee for adding funds to the card, checking your account balance and even speaking with a customer service representative.

Ultimately despite any potential drawbacks, a prepaid debit card offers unmatched convenience for those burdened with bad credit. If you have just completed a debt settlement and are working to rebuild your credit score it may be difficult to gain access to a traditional bank checking account. If this is the case then a prepaid debit card may be just the thing for you.

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Many people are unaware of the option to open an additional account with the bank that has their credit card accounts. The majority of banking customers opt to open saving and checking accounts with their local banks. It is often preferable to bank with an institution that has a brick and mortar building as it is more appealing to have in person transactions whenever necessary. However opening an account with the bank that has your credit card account can often prove advantageous.

Benefits to opening second accounts

There are many benefits to opening a second account with the bank that holds your credit card account. One of the primary benefits includes the option to direct deposit funds into this account for easier payment. We all know how difficult it can be to make on time credit card payments that are above the minimum required. Having funds directly deposited into an account that is associated with your credit card can greatly assist you when your bill becomes due. It is a simple process to transfer the money towards your credit card balance and avoid late fees and charges. In addition, having the money pre allocated in this way can assist in a more efficient financial management.

In addition to having funds available to pay your credit card bill on time, opening a second account may help you to get a lower overall interest rate. Banks often look favorably on account holders who have more than one account with them. Research has proven that individuals who have more than one account with a financial institution tend to remain with that company for an extended length of time. Your credit card company may take this into consideration and seriously consider your request for a lower rate with the addition of a second account with them.

Often banks will charge fees for accounts that do not maintain a minimum balance requirement. When considering opening an account for miscellaneous expenses, the account balance may vary from month to month. It may be more ideal to have this auxiliary account with a bank that does not charge excessive fees. Since the bank’s primary source of revenue is their credit card, they are more likely to offer bank accounts with low or no fee options for those who need it.

Good option for easy banking

Opening an account with your credit card bank can prove to be a simple banking alternative. Many of these accounts offer online access as there are no physical locations. This can simplify the banking experience as all transactions will take place online. In addition, having this account can offer good budgeting options as the monies in this account can be allocated for specific purposes.

Conclusion

Banks which back credit card companies often offer other financial products that are available to consumers. To find out whether your credit card’s bank offers an account, simply call them and ask about their other financial products. You may find that having more than one account with the bank that handles your credit card may result in a decreased interest rate as well as assisting with better financial budgeting and overall monetary allocation.

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Bank overdraft fees can be very costly for consumers. Most banks charge upwards of $20 to $40 dollars for each instance of overdraft on a checking account. Avoiding these fees is the best option as they can quickly add up. Overdraft fees can even end up putting your bank account in the negative. One option for avoiding overdraft fees is to attach a credit card to your checking account for use as a protective device. This option may amount to a large savings for the consumer in the long run.

Understanding Overdraft Fees

Overdraft fees are one of the many ways in which banks earn revenue from their customers. Overdraft fees occur when a purchase made using a debit card or a check amounts to more than the balance in your checking account. When this happens, the bank or lending institution assesses fees which they may call “bounced check fees”, “over the limit fees” or “returned check fees.” These fees can quickly add up as often happens when more than one purchase goes through at the same time. In some instances, when your bank charges you the returned check fee, your account may end up with a negative balance. Any pending transactions that come through your account at this point can cause your account to become even further overdrawn. To end the brutal cycle of overdraft fees, it is necessary to set up protections for your account.

Protection Options

When taking a proactive approach to banking fees, setting up overdraft protections on your checking account can go long way towards saving you money. Some banks allow their customers to attach a savings account to their checking accounts for overdraft protection. With this option, you can place funds in the savings account that will be used in the event that the transactions made in your checking account supercede the available amount. Some banks may charge a fee to allow you to utilize this service. Another little known option for overdraft protection is to attach a line of credit to your checking account. This credit card can help protect your account and help you to avoid excessive fees.

Credit Cards as Overdraft Protection

Using a credit card as overdraft protection on your checking account is a simple endeavor. Many credit card companies will offer this service for a minimal fee. The fees associated with using a credit card are usually in the form of cash advance fees. These vary depending on the credit card company but usually average $10 dollars per transaction. In this instance, the ten dollar fee is comparatively less than the bank overdraft fees which average $30 dollars per transaction making this a very cost effective option for overdraft protection.

Conclusion

The best overdraft protection is another account offered by your bank which you can link to your checking account. Most banks allow the customer to link a savings account to their checking account for a nominal fee. In the event that this option is not available, using a credit card as an additional line of credit for overdraft protection is a valid option. Contact your credit card company to determine the fees associated with using your credit card in this way. The fees for cash advances will most likely be the ones associated with utilizing your credit card as an overdraft protection vehicle.

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Can credit card debt be inherited? The thought of paying off a relative’s debt in the event of their death can be quite an unpleasant thought. Additionally many people avoid the subject altogether and so are not educated about what debt they may be liable to pay. Although it can be an uncomfortable topic, it is important to be aware of exactly what your rights and responsibilities are in the event that a loved one dies and leaves behind considerable debt.

What debts must be repaid?

In the event that a loved one dies, any unsecured debt they leave behind such as credit card debt will be deducted from their estate. If they do not have an estate, the debt is then charged off by credit card companies or collection companies and considered a loss. However there are instances where the unsecured debt must be repaid. This happens when a relative is signed on as a cosigner on the account in question. In this situation, they are legally responsible for the debt that is left behind. This is also true if a spouse has a joint account and they reside in a community property state. Community property states include Arizona, Louisiana, Idaho, New Mexico, Texas, Washington, Wisconsin, Nevada and California. In either instance, the debt is legally collectible from the surviving family member. The credit card company also has a right to collect on the balance if the relative is listed as an authorized user on the account.

Can these debts be forgiven?

Unfortunately, debts on which the relative is listed as a cosigner or authorized user cannot be forgiven. There is however, always room for negotiation. In many instances, credit card companies will accept as little as half of the balance owed. This can be negotiated over the phone; however any final agreements should be in writing. The situation is different in the event that a student dies and leaves behind student loan debt, the debt can be forgiven. Federally subsidized loans are also forgiven in the event that the borrowing parent dies or the student becomes disabled.

What debts should be repaid?

Although there is no legal responsibility for the relative to repay a secured loan, doing so will help avoid repossession of the deceased person’s property. Secured debts such as a car or a home will be seized by the lending institution in the event that payments are not made. In this situation, it is best to continue payments until it is determined who the possessions were willed to.

In Summary

If there is any confusion over personal liability for a deceased relative’s debt it is always best to consult with an attorney. An attorney can also provide much needed assistance if collection agencies become threatening or harassing. Oftentimes a simple letter from a lawyer can stop harassing phone calls immediately. Ultimately, the only debts that a surviving relative is legally responsible for is debt that they are a cosigner for. A surviving spouse in a community property state may also be liable for the debts of their spouse. Finding out exactly what you are responsible to repay after a loved one dies and consulting with a lawyer can simplify the process immensely.

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When applying for a credit card online or in person, it is important to read the fine print to understand all the stipulations involved. Although it may seem tedious to read through, examining the fine print will ensure that there are no unfortunate surprises in the future. When examining the details of your credit card agreement there are four main areas you should have a clear understanding of. These include the interest rate, billing cycle length, repayment terms and miscellaneous fees. Understanding these main areas will ensure that you make the best decision on which credit card to apply for.

When choosing a credit card online or in person, it can be easy to become distracted by choices such as the credit card design you will receive or even more so, the amount of money that will be available to you on your card. However the details that will affect you more in the long run are in the fine print of your agreement. One of the most important details to be aware of is the interest fee that you will be charged by your credit card company. Even if you feel you will never make a late payment and therefore will not be affected by finance charges, it is important to choose a card with the lowest APR available. However be aware that many cards which offer a low interest rate offer that rate at a variable. This means your interest rate may go up at any time with no advance warning. If this is not acceptable to you, you may want to select a card with a fixed interest rate even if it is a few percentage points higher.

After you have read and understood your interest rate terms, you will then want to examine the details of you billing cycle and repayment terms. This will give you an idea of when your bill is due each month and how long you have to repay it. This section will also provide information on your grace period, if any as well as the late fees and charges incurred. Make sure to read this section completely before deciding on an offer. Your repayment terms should be practical and convenient for you. If possible, request that your due date be set to coincide with your pay period to ensure that you will have the funds for payment at the time your bill becomes due.

The last thing you will want to understand are the miscellaneous fees involved in your contract. Many credit card companies will charge an annual fee which varies by company. If you wish to avoid paying an annual fee, then simply select a card without one. On rare occasions, a credit card company may be willing to waive their annual fees for long time customers. Other fees which may be included in this section are the finance charges on cash advances as well as over the limit fees. A complete understanding of this section will guarantee that there are no surprises later on.

Every credit card company provides a complete list of their terms and conditions as required by law. Many people simply skim through this section without a complete understanding. However reading the fine print will ensure that you select the credit card which is best suited for your particular financial situation. A financial advisor can walk you through the terms if they seem confusing and difficult to understand. However make sure to work with a financial advisor who does not receive a commission by signing you up for the credit card in question. Following these guideline will ensure that you select the desired card with the most optimal terms available.

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College students and those just beginning their employment careers are often in need of establishing a solid credit history. Credit history can affect your ability to receive a car loan, rent an apartment and even receive an offer for employment. Without adequate credit history, it can very difficult to obtain any of these life necessities. Although building credit history takes time, it is a worthwhile endeavor that will grant access to many conveniences such as credit cards and personal loans.

One of the basic but little known ways for gaining credit card approval is by opening a savings account with your local bank. By making consistent, regular deposits and growing your account balance steadily, you will be building what is called a saving’s history. Your savings history can be viewed by the credit card company you apply to and may go a long way towards helping you receive approval. Credit card companies view a solid savings history as an accurate financial projector of an applicant’s responsibility and ability to pay.

Another method of building credit history is through the use of prepaid debit cards. Many of these pre-paid debit card companies offer to report your credit activity to the credit reporting bureaus. When applying for one of these cards, be aware that this feature often comes with a fee.  However despite the fee, these debit cards are a valid credit building tool.

Along with building a savings history and using pre-paid debit cards, it is also helpful to apply for a secured credit card. A secured card differs from a traditional credit card in that a deposit is required by the applicant as a condition of approval. The secured card is then issued with no risk by the credit card company as the cash deposit has already been provided. Consistent on time payments using your secured card will reflect positively on your credit report and will aid you in establishing a credit history.

Store credit cards often require very little for approval besides a regular, consistent income. These cards only allow you to make purchases at the store in which they were issued. However, each purchase you make, if repaid on time will assist you in establishing a credit history. For the best use of store cards, make sure that you are not making purchases outside of your normal spending patterns. Otherwise it can be difficult to repay and this may result in credit difficulties and mounting debt if not used appropriately.

Building credit can be a relatively straightforward process. By following these basic tips, it can be easy to establish a solid credit history and begin gaining access to larger lines of credit. The key to building credit is making consistent, on time payments on small purchases. Once you have received your first unsecured credit card, it is important to keep your spending within a pre-established budget. Maintaining a good credit history once it has been established will guarantee a positive financial state.

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Many people are familiar with the attractive offers for low 0% introductory APRs. These offers lure in consumers with the promise of low or zero finance charges for new customers. Although it may seem like a good idea to take advantage of these offers while they are available, it is better to understand the fine print before completing any applications for credit. It is best to have a complete understanding of the 0% APR offer and how to use it for optimal results.

The 0% APR offer was first introduced by monocline banks also known as limited purpose banks. The sole purpose of these banks was to process and issue credit cards transactions. There was no handling of personal loans or other traditional bank functions. These catchy offers introduced by monoline banks in the 1980’s have been adopted in today’s financial world by the major credit card companies. The truth is, these offers have been around for so long because they are extremely affective at garnering new customers. However it is important for the costumer to read the fine print and to be aware that there may be more to the offer than a low rate.

A major point of note when looking into low introductory credit card offers is to be aware of what the interest rate will revert to once the offer has expired. Many consumers applying for these offers are lured in by the low interest rate and are unaware that after the first few months are over, they may be paying upwards of 19% and more on their credit card balance.

In addition to finding out the long term interest rate on the credit card offer, the card applicant should be aware of what is covered under their agreement. In many instances, a 0% APR will only be extended towards a balance transfer. This means that unless you intend to use the card to help pay off an old balance, any new purchases you make could be subject to an interest rate that is well into the double digits. Additionally, not everyone who is approved for the credit card will receive the 0% APR. Understanding this will help to avoid any future confusion once your application has been submitted.

Another point of note when considering 0% APR offers are the terms that are involved. Many times a condition of these offers is that all the payments be made on time. If even one payment is late, it renders the introductory offer null and void and all future purchases in addition to your entire balance will then become subject to a much higher interest rate. This is a crucial point to be aware of especially if you are accustomed to missing a payment here or there. In this situation, it could become very costly.

Just as all credit cards differ, so too do introductory offers. It is important to read and understand all the stipulations involved before selecting one of these credit card offers. Having a basic understanding of how the 0% interest rate offer works can better prepare the consumer for what to expect. The best way to use these cards is to take advantage of the introductory period while it is available to significantly pay down debts. This will ensure the best use of your card for optimal financial results.

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Most people wish to avoid late payment penalties and fees at all costs. However consumers often find themselves charged with late payment fees despite their best intentions. Understanding late payment penalties and how they work can help in avoiding these fees and the added expense they bring.

When trying to avoid late payment penalties, they most important consideration is to make a concerted effort to make payments on time. Although this advice may seem straightforward, many people have difficulty doing just that. With all the day to day events of life, a credit card bill due date is most often the last thing on your mind. For this reason, it is helpful to set payment reminders either on a calendar or electronically via phone a few days before your credit card bill becomes due. Another effective option is enrolling in your credit card company’s direct debit program if one is available.

Understanding your particular credit card’s cycling schedule is another effective method of ensuring your payments are made on time. Billing cycles are typically between twenty eight and thirty days long. When your bill becomes due, there is a grace period allowed by your credit card company which allows you to make a payment after your due date and avoid incurring late payment fees. To find out the specifics of your billing cycle and grace period, read the fine print on your credit card agreement. This information should also be available on your billing statement and should be provided to you by a customer service agent. Although you won’t incur a late payment charge if you make a payment during your credit card’s grace period, be aware that they may still report your payment as late to the credit reporting bureaus. This could negatively affect your credit score in the future.

Timing your payments to arrive well before their due date is the best way to ensure a timely payment. If your payment is made too close to the due date, it may still show up on your bill as a late payment. This is because the date the payment was submitted and the date the payment actually posts may differ. For example if your payment is made on a Friday when it is due but the payment is not released by your bank until the following Monday, you may still be subject to a late payment charge unbeknownst to you. If this occurs, contact your credit card company and ask for a one time waiver. They may be surprisingly accommodating in an effort to provide you with good customer service.

Ultimately credit card companies make the majority of their revenue from late payment fees and interest. It is best to avoid these charges whenever possible as they end up costing much more in the long run. Compounding interest on late fees and large balances can quickly result in debt that is unmanageable for the consumer. Taking the time to set payment reminders, understand the terms of your billing cycle and making your payments well before the due date are all effective methods of avoiding late fees and penalties. Following these aforementioned steps will guarantee that your payments are made on time with minimal stress.

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In the effort to avoid filing for bankruptcy many people resort to making an early withdrawal from their 401K plan to help pay off debt. However this may prove to be detrimental to long term retirement savings goals. To understand whether borrowing from your 401K can be potentially beneficial it is necessary to explore all the advantages and disadvantages involved.

Most company 401K plans allow borrowers to withdraw up to 50,000 or up to 50% of the vested balance, whichever amount is less. This allows the individual quite a bit of capital to apply towards incurred consumer debt. However if you have not reached the retirement age of 59.5 years, you will be taxed heavily for this early withdrawal. When repaying the loan, you are using after tax dollars to make these payments. In addition, you will be paying taxes when taking withdrawals during retirements. This can render the tax deferred benefits inherent in a 401K, null and void.

Another disadvantage to withdrawing from a 401k plan before retirement age is that if you become unemployed or quit your job before the allotted five year repayment period, you will be required to repay the loan within two to three months. If you are unable to repay within that time period, you can face owing income taxes on the amount withdrawn as well as a 10% penalty. In addition to this, the most disadvantageous aspect to early withdrawal is the loss in retirement savings. Once the funds have been withdrawn, they are no longer earning interest and the benefit of tax deferred compounding interest is negated.

Although the disadvantages to early withdrawal may make the whole process seem like a bad idea, there are some advantages involved. One of the main benefits to using your 401K for debt management is that there is practically no qualifying process involved. In most instances a simple telephone call or short form application is all that is needed to secure the loan. This also means you won’t be denied because of a low credit score, something that prevents many people from obtaining personal loans. In addition to being easy to obtain, a 401K loan also allows the borrower to keep the interest that they are paying on the loan.  This is much more appealing than traditional loans which charge interest that goes directly to the creditor.

Depending on your financial situation the benefits of withdrawing from a 401K plan may outweigh the risks. If you are facing an extreme situation such as a bankruptcy filing, a 401K withdrawal may be a much more attractive option despite the penalties incurred. However if you are simply looking for a way to better manage your bills and eliminate some credit card debt, it may be more beneficial to explore other debt management options such as a cash out refinance or home equity line of credit. Before deciding, it is best to speak with your human resource professional to find out the specific stipulations involved in your company’s 401K plan.

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