Why Most Americans Need Credit

                                                         

     

You need a credit card or loan to generate a credit report and credit score. No credit no credit score, it’s just that simple. If you live a cash only lifestyle and don’t feel you will ever need to apply for a credit card or loan then you don’t have to worry about a credit score. However, most Americans at some point in their lifetime will need to apply for a credit card or loan at least one time.

If you have no credit it can be almost as difficult to get approved for credit as someone who has bad credit, however they are not the same. If you have no credit or bad credit try opening a department store credit card. Once approved and you have at least 6 months of good payment history you can apply for a bank credit card.

If you need to apply for a credit card, student loan, mortgage loan, personal loan, home equity loan or line or credit, car loan, business funding, refinance, consolidate loans, need any type of insurance, need a utility account, cable or internet service you will need a credit score of at least 650 to get approved or to get service from a service provider.

As credit card companies became more competitive they started to target consumers who were the most lucrative to them – essentially consumers who always carried a balance from month to month. Companies then began offering teaser interest rates, cash back, and other perks to retain consumers and attract new consumers.

Some credit card companies offer perks such as frequent flyer programs, discounts on products, rebates, cash back rewards, points and other perks. Credit card interest rates can range from 1% to 29%. Grace periods vary by company. Credit cards also come with lots of fees such as annual fees, late fees, over-the-limit fees, balance transfer fees, and more. Read the terms and conditions of the credit card including the dispute policy and fees charged. Don’t get tricked by the 10% off discount to open a credit card. Compare at least 4 different credit cards to see which has the best feature for you using sites like www.bankrate.com or www.creditcards.com. Pay the balance in full every month.

You are not a good candidate for a credit card if:

• You constantly pay late fees
• You are a procrastinator
• You are struggling to pay your current bills or living paycheck to paycheck
• You are unemployed, underemployed or a college student
• You don’t keep track of your spending or don’t have a budget
• You are an impulse or emotional shopper or have a shopping addiction
• You aren’t good with paying bills
• You are already owe a lot of debt
• You defaulted on your student loans or already have bad credit

Take advantage of credit card perks such as:

• Return protection - if you are able to return a purchase your credit card may cover the cost of the item
• Purchase protection - if your purchase is stolen or damaged you could be reimbursed for the cost of the item
• Warranty extension - your warranty can be extended for up to a year
• Rentals - covers damage or loss when you rent a car which is cheaper than the insurance coverage offered by rental car companies and can be used in addition to your car insurance coverage 
• Shopping portals – most credit cards offer an online shopping portal which offer deals that earn higher amounts of rewards points or cash back
• Traveling protection - some credit cards offer trip cancellation and trip interruption policies, lost or damaged luggage insurance, travel assistance hotlines, coordinate roadside automobile repairs or discounts on entertainment
• Identity Theft - offer more protection that debit cards if your card is stolen or comprised. Visa and MasterCard have a zero liability policy that protects consumers and any credit card with the Visa logo but not all credit cards offer this protection.
• Laws – consumers are protected under the Fair Credit Reporting Act, Fair Credit Billing Act and Fair Debt Collection Practices Act. 
• Fees - some credit cards offer no annual fee or low fees.
• Programs - rewards cards only work to your advantage if you pay the balance off in full each month.

However, I encourage you to reduce your dependence on credit cards as you pay off all of your debt and as your financial situation improves. Credit should be a secondary form of payment not a primary form of payment.

Be Your Own Santa Claus

                                                              

Santa Claus or St. Nicolaus is known as a legendary saint and is the symbol of generosity. He gives to the less fortunate, goes all over the world, carries a naughty or nice list, loves children and inspires imagination. Santa answers and fulfills the hopes, wishes, thoughts, and prayers of children all over the world.  Santa symbolizes a belief in something.  The mere belief in his existence shows faith, innocence and a strong belief system. Santa Claus is always happy and full of joy.  Santa is young at heart and has an open heart showing love for all mankind.  Santa provides gifts to children and has a vast knowledge and memory of what each child deserves as a gift for Christmas.

Giving unites people of all races, cultures and backgrounds.  Giving eliminates fear and helps to relieve your burdens.  Giving to others helps you discover who you truly are.  The best way to give to others is to give to yourself first. Start by being the best person you can be. 

Make a commitment to learn something new every day.  Make another commitment to manage your finances on a regular basis.  Many hopes, wishes, thoughts and prayers are not fulfilled due to lack of money or not properly managing your money.  Money will not solve all of your problems but effectively managing your money with help you develop good habits that will transcend into other areas of your life such as patience, discipline, accountability, and time management.  Here are 19 ways to be your own Santa Claus.

1. Change Your Mindset.  Change the way you think about money. If you believe you will always be in debt or always be broke you will.   
2. Develop a Financial Plan. Write a list of your entire total monthly expenses including debt and write down your total monthly income after taxes.  If you do not have any money left over (at least 10% of your monthly income) look at the areas where you can reduce spending.
3. Pay down debt. Pay ½ the balance with the 1^st paycheck then pay the remaining balance with the 2^nd paycheck or pay the minimum monthly payment when you get the bill, then each week pay as much as you can toward the balance.
4. Become debt free. Pay more than the minimum monthly payment which helps pay your balance down faster so you can get out of debt. Keep debt balances at than 10% of your monthly income.
5. Keep money in your pocket. Do an annual check on your heating system or insulate your attic. Automate thermostat settings and use the lowest setting. Seal drafts and cover floors to retain heat. Open blinds during the day to let heat in. Find other ways to save money.
6. Plan for the unexpected. Create an emergency savings account to cover all of your monthly bills and expenses for 9-12 months. Create a backup plan if some financial crisis occurs and you need extra money. Have a plan A, B, C and D.
7. Go green. Help save the environment by filing your taxes electronically and get your refund in 2 weeks from the date of filing. Use tax preparation software like Turbo Tax or Tax Cut to help with the tax filing process. Purchase energy efficient appliances.
8. Shop like the rich. Set a budget and find bargains online, use coupons or shop at holiday sales. Mix and match basic pieces with fashionable accessories such as belts, earrings, bracelets, shoes and purses. Buy knockoff pieces for extra style. Shop at discount stores and outlets.
9. Cut back. See what areas you can reduce spending in your budget. A balance budget recommends 35% should go towards housing, 15% towards debt, 25% towards transportation, 10% towards savings, and 15% towards other expenses.  Reduce spending by 30-50% each month.
10. Save. Do at least one thing a week to save money, i.e. bring your lunch to work or bring coffee from home one day a week.  
11. Limit Credit Card Usage. Use your credit card for emergencies only.  Keep credit card balances at 20% or less of the credit limit. Pay balances off at the end of each month.
12. Plan for the future. Open a retirement account and save at least 10% towards your retirement each month. You will need 70-80% of your pre-retirement salary for a minimum of 20 years to have enough money during retirement or at least $1,000,000. 
13. Don’t be a question mark.  Know your net worth (assets - liabilities). Verify your net worth annually. Know how much you earn, how much you owe and how many assets you have. Use the figure as a baseline to increase your net worth on a yearly basis. 
14. Get Your Financial House in Order.  Organize financial papers and store in a centralized secure location. Backup financial documents and records saved on your personal computer.  Make copies of all personal documents and store in a waterproof fire proof safe.  Develop a will and update beneficiaries for life insurance policies.
15. Get insured. Make sure you have adequate health, auto, life, disability and long-term care insurance.
16. Don't stop at retirement. Don't just plan for your retirement, plan for your children's retirement. If you plan for your children's retirement or your grandchildren's college education this will ensure you have more than enough money to retire and enjoy your golden years.
17. Do better than your parents.  If you parents retired at 65 or had to work until they were 70 and had nothing to show for it, do better than your parents. If you retire at 55 be sure you have at least enough money to live on for 20 years.
18. Further Your Education.  Take training classes or get a college degree to increase your skills set and salary. Plan to take at least one training course every year during your career to stay current with industry standards and technology advances.
19. Consult a professional.  Contact a financial advisor or financial planner to help you determine your financial goals, where you want to live, the age you want to retire and the lifestyle you would like to have when you retire.

 

7 Reasons to Pay On Time

The recession has caused many Americans to become unemployed; the current unemployment rate is 9.4%. Being unemployed has a domino effect, many Americans lost their homes, their health insurance coverage, cars, stability, spouses, their pride and more.

Loss of a job also causes Americans to make late payments, overdraw on their accounts and search for unconventional ways to make ends meet. For those Americans who had not made late payments, you may be rewarded.

I have one credit card with my credit union and have been a member for over 10 years. I recently lost my credit card and while reporting my lost credit card I was asked if I wanted a credit limit increase. This was done without a credit check my limit was increased $1,000. I have not made a late payment in over 10 years that may be a rare thing in this economy. I was happy to be rewarded for being a good customer and my credit limit is still under $10,000. Here are 7 benefits of paying your credit card bills on time.

1. Fees. If you pay your credit card balances in full each month you don't have to pay finance charges or late fees which saves you money.

2. Credit score. If you pay your credit card bills on time this helps to increase your credit score over time.

3. Bank relationship. Paying your credit card bills on time helps to maintain a good relationship with your credit card company and they will be more willing to work with you if you have a financial crisis in the future.

4. Discounts. Paying your credit card bills on time will afford you rewards such as: credit limit increases, a decrease in interest rates, discounts, incentives, promotions, and other offers.

5. Options. Paying your credit card bill on time allows you to choose from various payment options: online, automatic deduction, by mail, or over the phone. When making late payments you have to send your payment overnight or pay over the phone which will cost you more money.

6. Future. Paying your credit card bills on time makes you look more favorable if you wish to buy a home in the future.

7. Reduces stress. Paying your credit card bills on time prevents creditors calling you asking for a payment and reduces the stress or worry about how you will make your payments.

Warning: You May Pay for Not Using Your Credit Card

Due to the bailout and current recession we have been experiencing for the past year or so many banks and financial institutions are afraid of losing more money. As a result, they are changing the rules and implementing new guidelines for credit card holders. If you haven't used a credit card in the past 6 to 12 months you are at risk for having your account closed or your credit limit reduced. If your limit is reduced or the account is closed this will lower your credit score. If doesn't matter what your previous payment history was or what your credit score is.

Some credit card companies that are practicing this are: Citibank, HSBC, Chase, Capitol One and Washington Mutual. Many credit card companies are doing this without notifying customers. If you have been a victim of this check your credit card disclosure agreement. If you don't have a copy asked the credit card company to send you a copy. Read it carefully. If it is not mentioned in your credit card disclosure agreement then call the company and complain. Here are 5 ways to reduce your changes of having your limit reduced or your credit card account closed.

1. Order a copy of your credit report from annualcreditreport.com. If you have already received a copy within the past 12 months you can still order a copy from the website but you will have to pay a small fee of $6 per report from each credit bureau: Experian, Equifax and TransUnion.

2. Check your balances. Review your credit card accounts and pay down debt on the cards with the highest balances to prevent the accounts from being closed or the limits reduced. For accounts that have not been used in a while and that have a larger limit, buy something cheap like milk and bread or a pair of socks and pay the bill off right away. Do this every 3 months to show activity on the accounts. Don't worry about credit cards with balances less than $1,000 or new accounts opened within the past 24 months because they won't impact your credit score as much if they are closed.

3. Ditch the small potatoes. You may want to close any credit card accounts that haven't been used in 1 to 2 years that have a limit of $500 or less and have a zero balance. If you have more than one credit card in this category only close one of these types of accounts every year. This will prevent your credit score from being impacted as much. This will prevent the credit card companies from closing your account and reporting this on your credit report. In some cases, credit card companies will report "closed by creditor", "account closed by credit grantor", "closed at creditor's request" or something similar. This greatly lowers your credit score.

4. Negotiate. If you have an account that has been closed and you use your credit card to make ends meet or pay for basic necessities I would recommend calling the credit card company and letting them know that you need your credit card. They should be sympathetic and re-open your account if it was closed or increase your limit if it was reduced. If that does not work call back and ask to speak to a supervisor. Follow-up all correspondence in writing. If that fails file a complaint against the credit card company with the Better Business Bureau and Federal Trade Commission.

5. Find extra money. Sell new and unused items on eBay or Craigslist. Get a part-time job and find ways to reduce expenses to get extra money to pay for basic necessities to make up for the loss of using a credit card that was closed or the limit was reduced.

How Banks are Helping Customers Pay Down Debt

Due to the bailout and current recession many businesses have gone bankrupt and closed their doors forever or have downsized such as Lehman Brothers, Circuit City, Linens 'N Things, Steve & Barry's, Sharper Image, KB Toys, Mervyns to name a few.

Some companies are so desperate for revenue that they are offering incentives to help customers pay back debt like Citibank which offers to match a percentage of credit card payments made over the minimum monthly payment if the customer agrees to pay off a percentage of their credit card balances quicker. However, Citibank does have a cap on the match up to $550 and the customer has to agree to stop using their credit card during participation in the matching program.

If you are struggling to pay back debt contact your creditor right away to negotiate. Try setting up a payment plan; ask for late fees, over-the-limit-fees or other penalties waived, a reduced interest rate or a reduced minimum monthly payment. If the creditor refuses to work with you call back and ask to speak to a supervisor. If that fails file a complaint against the company with your state Better Business Bureau, Consumer Affairs office, Attorney General's Office or the Federal Trade Commission. Be sure to follow-up all phone calls with a letter.

5 Reasons to Use Debit Instead of Credit

Use Debit Instead of Credit

According to The Nilson Report, debit card purchases are expected to increase 13% in 2008 to $1.2 trillion versus a 3% increase for credit card purchases or $1.9 trillion. This year, Visa debit card transactions could exceed credit card transactions.

For banks this is not good because they are not able to collect interest on debit transactions but helps their accounting department because they don’t have to report any losses when consumers fall behind on credit card payments.

However, banks also charge overdraft fees for debit card transactions when consumers do not have enough money in their accounts to cover an item purchased. Fourteen out of fifteen of the largest banks in the U.S. charge overdraft fees for consumers who exceed their funds.

Overdraft fees ranges from $20 to $35 per occurrence. Banks are responding much quicker to consumers who exceed their funds by charging overdraft fees the same day or the next day. In the past banks would wait a few days before charging the overdraft fee.

To combat this practice the Federal Reserve has proposed rules to restrict these abusive practices by banks.

Here are 5 reasons why use should use a debit card versus a credit card:

1. You don’t pay interest or finance charges

2. You can only spend the money you have in your account, however, some banks do allow you to exceed your funds but you are charged an overdraft fee

3. You can use debit cards or Visa check cards at many of the same retailers that accept credit cards

4. Helpful for those with bad credit who are unable to get approved for a credit card

5. Can be used like a credit card by swiping the card without entering a PIN

Why You Shouldn't Get a ContactLess Credit Card

There is a new type of credit card that is available developed last year called a contact less credit cards that allows consumers to charge items using their credit card but without actually signing a credit card receipt. The technology called RFID or Radio Frequency Identification allows scanners to use radio signals at various distances to read personal information regarding your credit card on a computer chip. The new credit cards can transmit your name, credit card number and expiration date to anyone that is located relatively close to you with a scanner.

The RFID technology has been used for years for tracking shipments and storing inventory. The contactless credit cards can be scanned without having to remove them from your wallet or pocket. The Visa contactless credit cards use an encrypted security code to verify a transaction that is supposed to protect against certain types of fraud but doesn't protect against someone getting your name and credit card number.

New versions of the Visa contactless credit cards do not transmit the consumers name during the transaction. Contactless credit cards either have a visible microchip or vertical wave bands on the front or the back of the card.

I won't be signing up for a contactless credit card. I still pay for everything with cash. I only use my credit card to make travel arrangements. Do you research before signing up for any new type of technology.

Good luck!