Month: October 2019

Take A Bite Out Of Your Credit Card Debt

If you have found yourself with thousands or tens of thousands of dollars of credit card debt, the sudden realization can be a disheartening one. As time goes on, you begin to feel trapped like a prisoner, barely keeping your head above water from month to month. The great news for anyone battling credit card debt is that there are numerous options through which you can begin to get your finances under control. These options will not only save yourself from undue stress but will also help you save money in the long run.

Up Your Minimum Payments

This may seem like a chore, but I’ve never met one person who couldn’t cut at least a few dollars more to the credit card companies each month. By doing this, you will eat into the interest faster and pay these cards down quicker than by doing nothing different. If your monthly minimum is $50 for a credit card, upping it to $100 will save you hundreds to thousands of dollars over the course of the debt. It’s not just about paying it off faster, but about paying it off for less as well.

Shift Debts to Other Credit Cards

If you currently have debt across multiple credit cards, you should be examining which cards have lower interest rates and which ones are higher. If your lower interest cards have available credit on them, shifting your higher-interest debts to the lower-interest credit card will help you avoid unnecessary interest and pay the debts down faster. Generally, there is a one-time charge for a balance transfer (2-3% of the balance), but it is worth it when moving debt from a credit card with 19% interest to one with 12% interest.

Use Savings to Pay It Off

While this is generally not a good idea, if you are up to your eyeballs in debt and cannot function month to month, cashing out your savings accounts to pay off credit card debt may be a better (or the best) option. You no longer will have your savings to rely on but you can zero out your credit card debt and avoid unnecessary interest that would otherwise continue to hound you for months and years to come. Paying off a debt at 15% interest is the same as earning 15% in an investment as you will be saving all that money that otherwise would be going to the credit card company in the form of interest month after month.

Credit Card Companies Lowering Credit Limit Below Existing Balances

I’ve had a store credit card for a particular home improvement store for a few years. My available credit was $2,000. The card went unused for about a year. When I moved into a new home last summer, I had reason to use the card – I needed a washing machine and refrigerator. I also decided to splurge and get a portable dishwasher (since there was no way to get the less expensive, counter-installed kind). My total charges were $1,543 and some change.

Each month my credit card statement arrived in the mail, and I would send what I could – sometimes it was just the minimum payment, sometimes I paid extra – but the company always got their payment. I have not stepped foot into the store since I bought these appliances, and have not used the credit card at all since they were purchased in August of 2008.

Imagine my surprise then, when my January 2009 statement arrived with an “over-the-limit” fee of $39 on it! How could I be over the limit when I haven’t made any new purchases?

Apparently, the credit card company lowered the credit limit below the amount I had already spent. My new credit limit was $1,090 – and I still had a balance of $1,100 on the card. I didn’t even think this would be legal – after all, they gave me a credit limit of $2,000 and I didn’t spend that much. I hadn’t made any new purchases and then they “took back” their offer to spend the money basically. I could understand lowering the limit to “reduce their risk” as the credit card companies are reporting as their reason for lowering credit limits of cardholders – but to lower it below what is already spent?! It’s sort of like if you bought groceries on sale at Walmart today, and got a phone call tomorrow saying you had to come in and pay the difference between the sale prices and the current prices because the items you purchased were no longer on sale.

After contacting the credit card company, I was told the terms and service allows them to change their credit limits at any time, to any amount they want – and that just about everyone’s credit limit had been lowered because the bank had to reduce their risk. They claimed to have sent me a letter to inform me of the change – but I didn’t receive one. Just the statement that indicated I was over-the-limit. After calling customer service, I did receive a form letter a few days later that said something to the effect of:

due to items found in your credit report, we have lowered your credit limit. If you have any questions contact the credit reporting agency.

The letter didn’t match what the customer service representative told me was the reason for the credit limit decrease – but there is absolutely nothing I can do short of paying the account in full and avoiding the store and it’s credit card all together from here on out – which I fully intend to do. This is a lesson in why you can’t afford to carry a balance on a credit card (even with low or no interest offers!) until the new Credit Card rules take affect in July of 2010 – which will prohibit card companies from doing things like this.

Getting a Good Credit Card for a Bad Credit

Credit card issuers love and pamper prosperous card holders. Well-to-do people get the most enticing offers, the most favorable terms, and the most appealing bonuses. Banks would more likely make concessions when it concerns clients with good or excellent credit than when it comes to bad credit owners. People with bad credit rating face more difficulties when they try to get a credit card they need. They pay higher interest; they are restricted in the choice of card offers, and can they hardly hope for any kind of indulgence for their credit commitments. If you are going through some financial difficulties and your credit score leaves much to be desired, or in other words, you are a bad credit owner, do not give way to despair. It is not that bad. Even with a bad credit you have a number of credit card deals to choose from. Even more, sticking to some rules and common sense you can get a bad credit card that will actually help you to start over. So, this is my vision of your road to El Dorado. (By the way, I have been through bad credit problems myself, so the guide below will be a mix of experts’ advice and my own experience).

When making a decision on a bank to apply for a card at, mind that smaller ones will more willingly issue you a plastic. Their reputation is not as solid as such financial giants as Visa, Discover, Citibank, Chase Bank, and others. But your and their trustworthiness is about equal. So, think of some small companies.

Stay with your current bank, credit union, or a savings institution. If they know you as a responsible client, they might overlook your money troubles and issue you a credit card without numerous checking procedures.

Pay special attention to banks that specialize on working with bad credit owners. First PREMIER and Orchard, for instance. These banks have, probably, the widest range of credit cards for bad credit. Among Orchard credit cards, Orchard Bank Platinum MasterCard is issued to credit consumers with poor credit rating. It comes with a pretty low APR and gives you a chance to enjoy the card’s Platinum status.

In case all your attempts to get an unsecured credit card fitting your financial status quo have failed, think of applying for a secured credit card. Of course, a secured plastic does not give you so many opportunities like an unsecured does. To activate an unsecured card’s account you are to make a deposit. The amount of money deposited will determine your credit line. But the main advantage of such a card is that it is perfectly safe for your credit score. You will not be able to spend more than you have deposited.

Find a co-signer. If you talk someone with good credit into co-signing with you, you will, most probably, get approved for a credit card. But remember that you will have to share the responsibility for the account. All your financial missteps will be reflected in your co-signer’s credit report.

When you apply for a new credit card try to pay all your bills on other plastics on time.

Mind an annual fee. Why pay more? Find a no annual fee credit card. There are plenty of them for all types of credit.

And, if you did not qualify for a credit card you had applied for, claim for an explanation. A credit card issuer, legally, has to tell you the reasons for their denial.

I hope you will find these tips helpful. I did a few years ago. Now I am a lucky owner of a good credit. I wish you go the same track.