To Give Or Not To Give: Credit Cards And College Kids

When your kid is about to go to college, you need to prepare them for a lot of changes and responsibilities. They will be living on their own while getting a higher education and you need to equip them with the right knowledge and skills that will teach them how to be mature adults.

One of the hardest lessons to teach is financial management. Even parents still have a lot to learn about it. The average American household is burdened with debt and you want to make sure that the future household of your child will not be part of this statistic. But to teach them how to avoid debt, you have to dangle in front of them the temptation of debt. And what better debt temptation is there than credit cards.

These plastic cards are one of the things that you have to entrust to your child before they go away to college. They need this to help finance their daily expenses and to help them build a good credit reputation. Some parents, especially those who are struggling with credit card debt themselves may be hesitant to pass on this problem to their child. However, if you do not let your children make their own mistakes, they will never learn the lessons that will make them stronger in the future.

Credit cards are the perfect way to teach your kids about proper financial management. It’s actually all about establishing rules about credit cards.

One of the important rules include who gets to pay for the card. This has to be very clear. You can ask your child to get a part time job to pay for the credit card. Or you can tell them that the payment should come from the allowance that will be coming from you every month. Teach them how to create a budget so they can learn how to live within their means. Make sure to teach them that basics of budgeting before they move away to college.

You also have two options in issuing credit cards. One is to co-sign it with your child and the other is to let them own the card themselves. Again, whatever you decide, make sure your child understands that any purchase on those cards will be on their tab. Be firm about not bailing them out if they rack up a huge debt in their cards.

Before you issue the credit card, make sure the following points are clear:

1. Purchases made on credit card uses the money of the credit card company - not your own. They need to pay it back.

2. Credit card companies are not patient when it comes to payments. The have to pay them at least the minimum amount and pay them on time.

3. Late penalty charges and interest rates are a waste of money so try not to add this to the balance. Learn about the billing cycle and the grace period to avoid incurring both.

4. Credit scores can be greatly affected by credit card use.

Trust your children when it comes to their financial decisions so that means you have to maintain a respectable distance. Do not make the decisions for them but make sure you are still near enough to remind them of how to make the right choices.

Of course, the best teacher is one who lives by what they teach. You cannot force your child to practice wise financial management if you do not implement it in your life.

Know When Credit Cards Are Just About To Make Your Life Hell

Let us make one thing clear: credit cards are not from hell. We are pretty sure that those who created these cards meant well by providing us with the means to protect our cash. If you lose your cash, the chances of you seeing it again is next to impossible. But if you lose your card, you can simply call your credit card company and have it cut off so the person who found (or stole?) it will not get the chance to use it. There are also the reward points and its capability to increase your credit score.

These are only a few of the things that credit cards will do for you. However, we cannot erase the current statistics of it being one of the top three debts that is crippling the average American household. But you need to be clear on what caused it in the first place - which, unfortunately, puts the blame on yourself.

Our debt is a result of several wrong financial decisions. For a lot of us, we fail to recognize the signs that our credit cards are leading us to ruin. To help you avoid this, here are some of the telltale signs that your credit card is about to make your life a living hell.

First is your use of credit cards. Are you using it to purchase the most basic needs of your family? If so, then your debt is in danger of growing. Credit cards should only be used for emergencies. If you want to use it for the most basic purchase, you should have the cash in your account so you can pay off what you owe during the grace period of the billing cycle.

Another sign that indicates your card debt is about to be unmanageable is when you can barely pay the minimum on your card bill. This is an indication that your debt has grown to a sizable amount. Sticking to the minimum payment will keep you in debt for a very long time. If you are working longer hours just to have enough to pay your cards or you are considering a cash advance just to pay off the incoming bill, then you need to reassess your finances.

If you have multiple cards, you may want check all of their credit limit. If you are about to reach all of them, then you are in big trouble. You need to stop using them and concentrate on paying them off one by one. If you are purchasing more than you can pay for the minimum every month, then you are setting up your card debt to grow exponentially.

Lastly, a clear sign that your card is going to start making your life undesirable is when collectors begin calling you. That means you have been late on one or more card payment. If that is the case, you should start to think about how you will pay it off.

If you don’t have these signs yet, that does not mean you should continue using your card for unnecessary purchases. Do not create a credit card problem for yourself because it is very difficult to get out of this type of debt. The high interest rate and the penalties just keep on mounting.

Fortunately for you, there are various ways to eliminate credit card debt. Look for the right debt relief option that is perfect for your debt and your financial capabilities.

Things That Credit Card Companies Tell You That You Should Not Follow

Credit card companies are in it for the business so you need to be careful about what they say you should do with your credit card. Keep in mind that they want you to be in debt to them because that is how they will extract profit from you. There are many things that you should be cautious and vigilant about.

 

First of all, when you find yourself under a pile of credit card debt, you should not believe how your creditors want you to pay it off. We are talking of minimum payments of course. If you think that this particular method will get you by, then you are wrong. It will keep you from late payments - yes that is true. However, you will stay in debt for a really long time! And your creditors want that because the longer you stay in debt, the more interest you will end up paying for. That means more profit for them. So what you should do is to pay more than the minimum. If you cannot afford it, there are debt relief companies who can help make your payments more manageable so your limited income can accommodate all payments that has to be funded. Of course, another option apart from debt relief is to simply increase your income. That way, you have more funds for your debt payments without sacrificing your basic expenses.

 

Another popular creditor suggestion that you should ignore is getting a higher credit limit. This will put you in a deeper credit card debt pit so it is best for you to just say no. We all have the tendency to max out our cards without really thinking about how much we can really afford. If you know that you will be in danger of using your card up to its limit, then you need to make sure that the limit something that you can afford to pay off. That is your short term goal. However, your long term goal should be to remove that dependence on credit cards altogether. Develop the right habits that will help you live within your means. Paying for things in cash is not bad and when combined with budgeting habits, it will keep you from spending too much.

 

When you are convinced that you need to have at least one credit card to your name, make sure that you understand it completely. Know every fee, charge and penalty that can be imposed on you. Most importantly, you should understand the rules when it comes to your interest rates. It is confusing but you have to take time to learn it. You can call the customer support and ask them to explain it to you. Sometimes, credit card companies suddenly raise their rates and you want to make sure that you know about your rights when they do. For instance, the Credit Card Act states that creditors should send a notice before raising their rates. That way, card holders can pay off their balance before the new rate takes effect. Know these and you should be able to avoid wasting money on high interest amounts.

All in all, knowledge is your best defense when it comes to debt so read about it so you can make better judgments and decisions when it comes to getting yourself out of debt.

How To Avoid Late Payment Fees On Your Credit Card

Late payment fees contribute greatly to the fast accumulation of credit card debt. Every month that you do not meet your deadline, $30 - $35 worth of fees are added into your balance. The interest amount added to your monthly payment is computed based on the sum of the balance from last month’s bill, finance charges and the late penalty fee. If you had been late even for just a day, this will automatically be a problem for you. When it accumulates, it might be too much for you to pay off.

Some people make the mistake of focusing on the interest rate too much that they fail to recognize the dangers of late payment fees. More than the additional amount that will be put unto your current balance, any late payment will be reported to the major credit bureaus and that can lower your credit score. So just as important interest rates are important, you have to make sure you can avoid late payment fees as well. But the question is, how can you accomplish that? It is one

First of all, you need to create a budget plan so that you will keep track of where all your money should be going. In most cases, this is enough for debtors but some of them need a more specific payment plan. Feel free to create a unique plan that will help you stay on top of all your credit obligations. This will allow you to never miss your due dates.

You can also arrange for auto-debit payments from your savings account. This will also keep you from being late. However, you still have to be cautious and check the automatic payments made. Sometimes, credit card companies make mistakes in your statement. They may input purchases that  you never made.

Online payment transactions will also make payments convenient for you too. You can pay off your credit card even at night or during weekends. It sure beats having to fall in line in banks just to make sure you payments are made.

In case there is a problem with your funds and you need an extension, you can call your creditor about it. Ask for your due date to be extended or changed if need be. The date should be on a day that you will never forget. That will help you keep up with your payments.

It helps to subject yourself under a debt relief plan that will keep you from missing your payments too. Know how much you owe and find the best program that will help you get yourself out of debt.

Of course, the long term solution to this problem is to stop acquiring debts. When you do not have debt, you will never have to be in danger of late payment fees. Keep your credit card spending to a minimum or eliminate it altogether. Live within your means and start growing your savings. These are only a few of what you can do to keep yourself out of debt. Practice proper financial management and you can keep yourself from being buried in debt by late payment fees.

Best Way To Solve Those High Interest Rates On Credit Cards

Credit card debt is one of the things that are troubling the average American today. With over $849B of credit card payables, this ranks as the third highest debt in the country. The thing that makes it very difficult to get out of is the interest rate that you have to pay off on top of what you actually owe. It is one of the highest rates in the industry. And besides that, you also have to pay for finance charges and if you are late for even just one day, over $30 of late penalty fees.

The best way to solve your high interest rate on credit cards is to stop using your cards. If you got yourself in so much financial debt because of your cards, you need to stop purchasing items through them. At least until you learn how to discipline yourself about their use. That is the fastest way to not be bothered by the interest rates - stop acquiring more debt.

To make this possible, you need to start living within your means so the cash that you receive is enough for all your expenses. You can accomplish this by setting up a budget that clearly defines how much your income is every month and the various expenses that should be prioritized.

Even if you are working with the best debt relief program, if you do not stop acquiring debts, you will find it hard to reach your goal of debt freedom. Work on your budget first before you focus your eyes on the debts that you currently have.

The budget that you will create will help you identify how much you can afford to send towards your debt payments. This is very important in choosing the program that will get you out of your credit problems.

As you define all of these and you understand how your budget should be used to pay off your obligations, you can turn your eyes towards your debt payments.

One of the first things that you should do to deal with the high interest on your cards is to call your creditor. If you are finding it hard to pay it off, you should call them to ask how you can lower your interest rate. Tell them of your sincere intentions of settling what you owe but under the present circumstances, you can no longer meet the payment requirements. You may be surprised at how amicable they can be if they see your sincerity.

If that does not produce desired results, you can opt for debt consolidation loan as a way out of your credit card debt. One of the benefits of this debt solution is the reduction of your interest rate - at least if you do it correctly. If you are able to borrow a low interest loan through your good credit score or a collateral, then you can say goodbye to your interest rate problems. Just make sure you stay away from bad credit loans as these have high interest rates.

Another option is balance transfer cards. For a certain fee, you can transfer your high interest credit card debt to a new one that has a zero interest introductory promo. That will give you at least 6 months of no interest so you can make more significant payments towards your credit card balance.

These are only a few of the options that you have to help with your high interest card debt without putting too much negative effect on your credit score. Before you decide, know your options and learn from your mistakes. Start making the right choices towards your finances to keep yourself out of any kind of debt.

Techniques When You Are Dealing With Debt Collectors

Debt collectors are probably one of the most disliked people in the financial industry. It is quite sad to be in their position actually. They are only doing their job yet people seem to hate them. Although this negative reputation may not be unfounded because some of them do practice abusive behavior when collecting from consumers. But the bottom line is that they are just doing what they were hired to do. You should always remember that your debt is your responsibility. If they are collecting from you, they have every right to because you had been delinquent on your payments.

When collectors are brought into the picture, that means your original creditor had given up on your account. They have marked it as something that they will no longer profit from. It means that you had been late on your payments for a couple of months already. The chances of your credit score being in trouble is not unlikely to happen.

While the situation may seem ugly and stressful already, you need to keep your head together. There is a silver lining in this seemingly bleak scenario - as long as you know how to deal with your debt collectors.

You have to know that you have the option to stop collection agencies from communicating and harassing you for your debts. However, that usually implies that you have no plans of paying them off and they may be prompted to sue you for your debt. You don’t have to subject yourself to that risk. There are techniques to help you deal with these annoying collectors.

First of all, avoiding the calls of the collector will not do you any good. You should entertain them. You have to treat them as professionals. Be polite even when it is evident that they are being threatening. Sometimes keeping a cool head will get them to lower their tones and be more friendly. You want to show them your good side as it will help you during the negotiation process.

When you are negotiating with them, start with your payment term. As mentioned, at this point, you have been late on your payments - usually because you are in a serious financial crisis and you cannot afford your old terms. Keep in mind the amount that you know you can afford. Never agree if you know that your current finances cannot pay for it. Keep mentioning bankruptcy to get them to agree to the ideal amount that you can afford to pay.

Ask the collector about your credit score too. How will all of this be reflected on your score. Include that in the negotiation. If you can pay them a big amount, you can ask them to remove the record on your credit history. Or if they will not agree, you can ask them to mark your credit record as current or settled - whatever is applicable.

It will help your case if you read about the FDCPA or Fair Debt Collection Practices Act. This law is implemented by the FTC or Federal Trade Commission. It states the right practices of collectors so you know when they are overstepping already and abusing your rights.

Obviously, the only way to appease the collector is to give them the assurance that you want to pay them but you need to base it on the amount that you can afford. If you ever come into an agreement, make sure that it is in writing. Don’t send them any amount until you have a written agreement in your hands.

The Debt Settlement Impact On Your Credit Score

All debt relief programs can affect your credit score in one way or the other. The extent of the damage will depend on what the specific program will ask you to do in order to get yourself out of debt.

Your credit score indicates a lot of things about your financial standing. If you have a low score, that means that your are either too deep in debt, or you have a bad habit of not paying your dues. It can also mean that you have too many credit accounts open and you cannot meet all of the payment requirements diligently. These are only a few of what a low credit score will show. Bottom line is, a low score forecasts you in a very bad way financially.

Next to bankruptcy, debt settlement is the option that has the most negative effect on your credit score. When you choose to get out of debt through debt settlement, one of the first things that you will do is to default on your payments intentionally. You need to convince your creditors that you are in a financial crisis and to do that, you have to be unable to pay for your credit obligations. When you start missing your due dates, this will be marked negatively on your score. You can end up losing between 30 - 150 points on your current score.

Of course, you are not really spending that money on something else. What you should have been sending your creditors will be saved in a secure account that will eventually be used as your settlement fund. When this amount is big enough - usually in 6 months or so, you can use the accumulated funds to offer as payment for your debts. When the creditors agree to accept this amount, you can send this payment (which is lower than your current balance) and the rest of your debts is forgiven. Once the whole process is done and your debt is now equal to zero, it is still not a clean slate. Your credit report will show that you “settled” your debts instead of paying it off the traditional way. While it is not really lessen your score, this word will tell lenders that you had trouble paying off what you owe before.

Another effect that defaulting on payments will do on your score is debt accumulation - especially if most of what you owe are credit card debts. These type of credits are notorious for high interest rates and late penalty charges. Once you stop paying your dues, these can grow your debt total significantly. That can affect your credit score because one of the things that it monitors is your total debt amount.

While these can be quite discouraging, it is better to continue with debt settlement if you have analyzed your finances and have come to the conclusion that debt reduction is your best option. Your credit score may suffer but you can always rebuild it once you have settled your debts. Just make sure that you have learned the necessary lessons that will ensure you will stay out of debt for the rest of your life.

What Happens When You Stop Paying Credit Card Debts

Don’t you just wish you can drop everything and run away? When you are burdened with debt, you want to run far away from all your credit obligations and start anew. But deep inside, you know that turning your back on your debt is not the right thing to do - and that is not just for the moral implications.

Running away from any debt, especially your credit card debt is never a good idea. Apart from the fact that it is your obligation to pay back your creditors, you are also setting yourself up for some serious financial problems.

One of the obvious things that will happen when you stop paying your credit card debts is it will increase. This type of unsecured debt is notorious for the additional fees and ridiculously high interest fees. The late penalty charges alone can cripple you - which is usually $25-$35 every month. The exact amount will depend on the credit card company. When you fail to pay your bill - even for just one day, this charge will be added to your outstanding balance and the interest amount will be computed based on that combination. With the current interest rate at 15% (as of January 2013), your next monthly bill can jump into quite a big amount from the previous.

The longer you stop paying, the higher your balance will be. The higher the outstanding balance, the higher the interest will also go. So if you keep on ignoring your credit card payments, you can expect that it will become a really big amount in the next few months.

Your credit score will also suffer once you stop paying your credit cards. The creditors will inform the credit bureaus that you have become delinquent in your monthly payments. Once this is taken into account, your credit score will go lower and lower as long as you refuse to pay your debts. This is a very bad scenario for you - especially when you are planning getting a loan or asking for financial assistance for an investment.

If you do have to default on your payment, you have to make sure that you have a backup plan. Debt settlement requires you to default your bills but that is because you are saving what should have been your monthly credit card payments. You need to grow this as your settlement fund so you have something to offer the creditor once things get ugly.

If you are defaulting just for the heck of it or because you want to run away from your problems, that is probably not a good idea. It is best for you to start looking for a debt relief company that will help you get out of debt.