Archive for the ‘Credit Card’ Category
Tuesday, May 12th, 2009
Barbara Kiviat covers credit cards and consumer behavior today for Time Magazine. Reacting against the flurry of articles recently that focus on the lender side of the credit card problem, she summarizes nicely the challenges on the consumer end towards changing plastic-swiping behavior. One of the central points she makes is that consumers oftentimes “make decisions that are not in their economic best interest.” Some of the examples she presents include:
- the tendency for consumers to take the credit card offer that has the lowest introductory rate, resulting in higher finance charges over time
- a MIT experiment, in which the people demonstrate a willingness to pay twice as much for something with a credit card than if they were to pay with cash
- the rise of disclosure requirements over the last 20 years has not translated into better-informed financial decisions
The truth is, it’s easy to fall into a credit card swiping trap, especially given the heavy marketing used on young adults starting college, families with cyclical financial struggles, and particular consumers who fit a demographic that is used by lenders to predict uninformed decision-making — all resulting in more fees for the card issuer. Combat this problem by getting informed. The DebtGoal tool provides accurate, no-nonsense tips embedded into the debt management system. These are not only easy to use, but they help one to quickly emerge from debt in the most efficient manner possible.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: adjusting mortgages, consumer borrowing drops debt plan, consumer spending under control, credit card borrowing and debt, cutting the cable and debt, cutting the phone and cable TV bill, debt elimination, debt elimination in a marriage, Debt Management, debt management strategies for couples, debt plan, debt plan when married, debt reduction, debt reduction plan for a couple, debt reduction with new work, debt strategy, debt when married, debt with credit card overusage, digital services and debt, digital services rate reduction strategy, digital services with debt, discretionary cost strategy with debt, drop in credit card borrowing, frugality, getting back into the workforce to eliminate debt, marriage communication on debt, marriage communication with debt, marriage debt planning, marriage finances with debt, marriage spending with debt, mortgage adjustment, mortgage management, mortgage modification, mortgage reconfiguration, mortgage renegotiation, mortgage resolution, one income household and debt, saving money for debt elimination, second income family and debt, the debt guide to digital services, two income household and debt
Posted in Credit Card, Credit cards, Debt Management | View Comments
Tuesday, May 5th, 2009
Many who struggle with personal debt right now look to a light at the end of the tunnel. Those anticipating a healthy social security check throughout retirement may feel slightly more secure in spite of a tanking business, lost job, and evaporated retirement accounts. Todd Ossenfort at CreditCards.com addresses the concern of one man: can social security benefits be garnished as a result of default on credit card debt payments?
Ossenfort’s answer to that question has both an upside and a downside. The answer, it turns out, is both yes and no, or more accurately, no and yes. Social security income cannot be garnished to satisfy outstanding credit card debts. It can be garnished, however, to fulfill debts owed to the government, like unpaid income taxes, child support, or alimony obligations.
The catch to social security income is to keep it in a separate bank account – i.e., one that does not have commingled money with other income sources. If the social security check were deposited to a bank account that includes income deposits from a small business run on the side, for example, then the creditors can come reaching for those funds through the process of garnishment. In short, while creating and maintaining a separate account for social security income adds complexity to one’s financial picture, it is well worth the trouble in order to protect it from confiscation. Finally, make sure to incorporate any changes in your personal finances to your debt reduction plan, budgeting, or other system you’ve set up to manage things.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: consumer borrowing drops debt plan, consumer spending under control, credit card borrowing and debt, cutting the cable and debt, cutting the phone and cable TV bill, debt elimination, debt elimination in a marriage, Debt Management, debt management strategies for couples, debt plan, debt plan when married, debt reduction, debt reduction plan for a couple, debt reduction with new work, debt strategy, debt when married, debt with credit card overusage, digital services and debt, digital services rate reduction strategy, digital services with debt, discretionary cost strategy with debt, drop in credit card borrowing, frugality, getting back into the workforce to eliminate debt, marriage communication on debt, marriage communication with debt, marriage debt planning, marriage finances with debt, marriage spending with debt, one income household and debt, saving money for debt elimination, second income family and debt, the debt guide to digital services, two income household and debt
Posted in Credit Card, Credit cards, Lending Industy | View Comments
Friday, April 24th, 2009
A discouraging trend is the balooning credit card debt of college undergraduates. According to a Sallie Mae study, students now hold on average more than $3000 in credit card debt, and much of it is not due to late night pizza bills, beer runs to the store, or airfare to Daytona Beach – it’s for bread-and-butter costs in school – books, supplies, and tuition.
This obvious problem demonstrates the need for substantial educational planning beginning long before the decision of where to attend school is made, in part because the most financially-saavy strategy for achieving a degree if one does not have scholarships that cover the vast majority of educational expenses involves attending a public community college and transferring to a low-tuition, public institution.
But what if you’re already in school and need to make some hard decisions about money? First, live and die by a budget. Setting one up is easy. Living by it is a little harder, but absolutely doable. Second, contact your financial aid office. With their help and guidance, dedicate several days to exhausting all of the options for getting more funds toward your college years that do not involve taking on more debt. Third, cut up the credit card, yet leave the account open. Switch to cash, checks, and if really necessary, check cards with lender logos. Fourth, look into ways to trim recurring costs from your budget – items in your discretionary and non-discretionary areas that your must pay every month. Follow this advice and you’ll be leaps and bounds ahead of the “cool” kids in school with no income, 25 credit cards, the 25 correspondingly uncool credit card T-shirts, and a mountain of debt they’re unprepared to tackle upon graduation.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: consumer borrowing drops debt plan, consumer spending under control, credit card borrowing and debt, cutting the cable and debt, cutting the phone and cable TV bill, debt elimination, debt elimination in a marriage, Debt Management, debt management strategies for couples, debt plan, debt plan when married, debt reduction, debt reduction plan for a couple, debt reduction with new work, debt strategy, debt when married, debt with credit card overusage, digital services and debt, digital services rate reduction strategy, digital services with debt, discretionary cost strategy with debt, drop in credit card borrowing, frugality, getting back into the workforce to eliminate debt, marriage communication on debt, marriage communication with debt, marriage debt planning, marriage finances with debt, marriage spending with debt, one income household and debt, saving money for debt elimination, second income family and debt, the debt guide to digital services, two income household and debt
Posted in Credit Card, Credit cards, Debt Management, Saving | View Comments
Monday, April 20th, 2009
Ruth Mantell writes for The Wall Street Journal an interesting tidbit about credit cards – that by using plastic you’re providing yourself with important consumer protections that one otherwise would not enjoy. She goes on to identify five areas in which she thinks credit card spending is ok – making large purchases/buying over the Internet, buying while traveling, buying to get through an emergency situation, when budgeting, and to build up rewards points. Is this good advice?
1. Large purchases/the Internet
While it’s true that you have more leverage to return a product by using the weight of the credit card company instead of working with the merchant directly, the key question is whether or not a particular good is both expensive and does not fall under a return policy already. If it fits the criteria, it does not make financial sense to swipe the plastic for it since there is the very real temptation to not pay off the bill at the end of the billing cycle. For Internet purchases, Mantell says that credit cards help you avoid being excluded from online deals. But check cards provide similar access, and without the risk of getting deeper into debt.
2. Traveling
It is accurate to state that credit cards can be safer than carrying cash when traveling, as well as helpful when getting a hotel room or car. But minimizing their use is still possible. For example, you can reserve rooms and cars with plastic, but still opt to pay another way (such as with cash) when the bill comes. For daily purchases when traveling, be aware that credit card lenders are increasingly pricing the benefit of safety into their product – the latest notice received from my credit card lender stated that the surcharge on purchases overseas, in dollars or not, is going up to 4% of the total purchase price!
3. Buying necessities
4. Budgeting
5. Rewards points
These remaining areas discussed by Mantell all represent weak arguments for relying on credit cards. For emergency expenses, an emergency fund should be set up and used rather than reaching for the plastic. Likewise, considering something an “investment” is not sufficient to buy it on credit. Need a textbook for a class? Buy a used version of it, share a friend’s book, or use the copy sitting in the library and photocopy pages from it. In other words, think creatively about how to meet your needs because labeling non-survival items as “investments” can presage a slippery slide into more debt. As for budgeting, arguing that credit cards help with this is deceptive, and the temptation to overspend kills any of the benefits from the convenience. Instead, try and spend on a check card that allows a similar monthly view of everything bought, use a tracking tool like DebtGoal.com, and save receipts for cross-reference later on. On the final point about rewards programs, never spend on credit cards with the goal of accumulating rewards points – this is precisely what credit card lenders are hoping you do so they extract profits from your account.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: consumer borrowing drops debt plan, consumer spending under control, credit card borrowing and debt, cutting the cable and debt, cutting the phone and cable TV bill, debt elimination, debt elimination in a marriage, Debt Management, debt management strategies for couples, debt plan, debt plan when married, debt reduction, debt reduction plan for a couple, debt reduction with new work, debt strategy, debt when married, debt with credit card overusage, digital services and debt, digital services rate reduction strategy, digital services with debt, discretionary cost strategy with debt, drop in credit card borrowing, frugality, getting back into the workforce to eliminate debt, marriage communication on debt, marriage communication with debt, marriage debt planning, marriage finances with debt, marriage spending with debt, one income household and debt, saving money for debt elimination, second income family and debt, the debt guide to digital services, two income household and debt
Posted in Credit Card, Credit cards, Debt Management, Uncategorized | View Comments
Friday, April 17th, 2009
In the article entitled “Help with Credit Card Debt,” Gerri Willis, CNN’s personal finance editor, brings to our attention a new public relations move by a credit card industry trying to preempt a new regulatory system that will negatively impact their ability to make money. Quite simply, credit card companies banded together and put up a new website for consumer help. One of the goals of this site – HelpWithMyCredit.org – is to provide consumers with easier access to credit counselors. But the site doesn’t mention that using a credit counseling service from their list can drive down your credit score.
Aside from the credit counseling issue, should someone with debt take the rest of the website seriously? Probably not. For one, those building the website may offer helpful tips, but perverse incentives underlie whatever they present over the Internet: their long-term objective as a business remains to extract the maximum profits from consumers through their product – credit cards.
Take for example the page on credit card basics with the headline “Why You May Need Credit.” While some of the pointers they list are truthful, the page stills paints credit cards as a necessary part of life. But for those that struggle under the weight of revolving and overwhelming debt, many of the items in the list described as benefits are in reality not worth the cost by a long shot. They write, “Spreading out payments on high-dollar items” as one of the needs. However, if you can’t afford a high-dollar item and it is not critical to survival, then don’t spring for it.
Yet another of their “needs” is “Making urgent repairs to your car or home.” While few will argue with the need to keep a roof one’s head, perhaps the repair costs on a house that is already too expensive to maintain, with unrealistic mortgage payments and certain foreclosure is not worth adding money into. It can be the best course of action from a financial standpoint, depending on the specifics to the situation, to not repair a home and instead transitition into a rental unit. For a car, the need for reliable transportation to and from work is essential to financial security. But repairing a nonfunctional window or a scratch on the paint job are not needs; keeping the engine and tires in shape are. Even if faced with cases in which one needs to shell out for a house or car, build and rely on an emergency fund instead of the credit card.
The site goes on to identify Internet purchases as a need. The merits to buying over the Internet are numerous and include likely better price points for products because of economies of scale, the vendor’s efficient access to the target market, and the seller’s costs of doing business online. But this doesn’t mean you need a credit card to get the goods. Consider using a debit card, check card, or storing cash on a PayPal account for transfer to the seller at the point of purchase.
What accurately captures the perspective of someone thinking clearly about HelpWithMyCredit.org is one of their final bullet points – “Carry only the cards you expect to use, and keep the others in a safe place.” Why should someone not just get rid of the other cards, to say nothing of the ones you use? The truth is many people face the real temptation to go and retrieve the cards from their “safe place” – safe for reckless spending – and get into even deeper debt. Here’s a better idea for someone that is unmistakably going to fall back into the plastic routine: to maintain a credit history, keep one card open with the largest credit line, then immediately cut it up, freeze it, or toss it into a bonfire along with all of the other cards you have. Get rid of them once and for all, with one credit account left open.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: consumer borrowing drops debt plan, consumer spending under control, credit card borrowing and debt, cutting the cable and debt, cutting the phone and cable TV bill, debt elimination, debt elimination in a marriage, Debt Management, debt management strategies for couples, debt plan, debt plan when married, debt reduction, debt reduction plan for a couple, debt reduction with new work, debt strategy, debt when married, debt with credit card overusage, digital services and debt, digital services rate reduction strategy, digital services with debt, discretionary cost strategy with debt, drop in credit card borrowing, frugality, getting back into the workforce to eliminate debt, marriage communication on debt, marriage communication with debt, marriage debt planning, marriage finances with debt, marriage spending with debt, one income household and debt, saving money for debt elimination, second income family and debt, the debt guide to digital services, two income household and debt
Posted in Credit Card, Credit cards, Debt Management, Emergency Savings, Lending Industy, Saving, Spending, credit score | View Comments
