How to Recover From Inaugural Event Purchases

                                                              

Many Americans got caught up in hype to participate in the 2013 presidential inauguration since many were not able to participate during the first inauguration of President Obama due to the recession.  Over 1.8 million attended the inaugural ceremony on the mall in 2009 and there were 20 official inaugural balls. 

However, in 2013 there were only 2 official balls and approximately 1,000,000 were in attendance at the inauguration ceremony on the mall. There were hundreds of activities that revelers could participate in starting the week prior to the inauguration.  Individual tickets to the official inaugural balls ranged from $60 to $250,000 with perks included for higher cost tickets. This allowed for anyone the opportunity to attend the event if you had the money and even if you didn’t. 

This was made possible by the shiny plastic we call credit cards. Individual tickets were snatched up faster than you could say Happy New Year!  Websites were crashing and phones were ringing off the hook while others missed out on participating because their credit cards were maxed out.

Now that all the celebrations have ended, very soon those same revelers will come to terms with their decision to spend money they didn’t have when they receive their February credit card statement. Participating in the inauguration ceremonies provides last lasting memories but at what cost. 

The presidential inauguration occurs every 4 years so every had 4 years to save up enough money to purchase tickets to at least one event. Yet many waited until the last minute to purchase tickets and missed out on the low cost tickets and deals.  As a result they were forced to spend more money than necessary all for the sake of memories and having a good time.  Now that the good times are over here are 6 ways to prevent going into debt when partying and attending events.

1. Plan ahead. If you want to attend an event find out the date in advance.  Some events offer early bird ticket prices.
2. Pay down debt. Pay down debt on your credit card.  If you have to purchase a ticket with your credit card you want to make sure you have enough available credit.
3. Save. Start saving money towards the ticket purchase for the event you want to attend to prevent going into debt by using your credit card.
4. Shop around.  Search multiple companies that are offering tickets to the same events to see which is offering a cheaper price.  In some instances buying multiples tickets can save you a few dollars.
5. Ask. Ask friends, relatives and your social network about discounts or ways to purchase tickets to events, information about guest lists and free or low cost events to save money.
6. Volunteer. Consider volunteering for the company giving the event. Sometimes volunteers get free tickets to events.

 

How to Get In Debt

Most Americans have had or currently have at least one bad spending habit. Bad spending habits are just that habits and habit can be broken. It takes 23 days to develop a habit. Habits can be good or bad. Habits that are bad should be broken.

You should always try to become a better at everything you do and this includes breaking bad financial habits and replacing them with good ones. Stop doing at least one of these things to help you get out of debt and say no to debt. Then gradually make another step a habit and keep repeating. The following is a list of some things that can lead to being in debt.

1. No Budget
2. No Health Insurance
3. No Savings or Emergency Fund
4. Stop overextending yourself at Christmas
5. Stop Living Above Your Means
6. Don’t use credit cards for everyday purchases
7. Don’t use credit instead pay with cash
8. Stop Impulse Shopping
9. Avoid Cash Advances/Pay Day Loans
10. “Robbing Peter to Pay Paul" – using money for one bill to pay another bill and still having one bill unpaid
11. Balance Transfers - using credit cards to pay off other debt
12. No retirement account
13. Borrowing from your 401K
14. Co-signing for a loan
15. Having a joint account with someone other than a spouse
16. Deferring student loans or filing forbearance
17. Getting student loans for more than the cost of your college tuition
18. Using check cashing businesses or a liquor store to cash paychecks
19. Doing business with "bad credit no problem" companies
20. Not contacting companies regarding delinquent accounts
21. Repeating the same financial mistakes over and over

Avoiding these bad spending habits can help you say no to debt and say yes to savings and being debt free. Say yes to having a better financial life. Money can generate wealth or generate debt, you make the choice.

Balance Transfers Impact Credit Scores

Repost from Creditcardguide.com

Need money for a small home remodeling job, or to make much needed car repairs? Or do you simply want to use a zero percent balance transfer offer to pay down high-interest credit card debt?

Th_balance-transferBefore you apply for that new balance transfer card, make sure you know the ins and outs of how balance transfers impact FICO scores so you can minimize potential disadvantages.

Taking out a balance transfer may lower your FICO score in the short-term. But it can also help boost your score over time. Here are the three ways in which taking out a balance transfer will impact your credit score.

1. Opening a new account will shorten the average length of your credit history. Any time you open a new credit card, it will shorten the average length of your overall credit history.

“About 15 percent of your FICO score takes into account the length of your credit history,” says Kim McGrigg, Community and Media Relations Manager at Money Management International. “Part of that average is all your accounts, so when you open a new account, obviously it affects the average length of credit history. If you close the old credit account, it will impact scores even more.”

The good news is that the impact on credit scores from opening a new account is small and relatively short-lived, as long as you follow good credit management practices on the new account. The key is to keep that old account open and use the card occasionally so it’s still active.

2. Credit inquiries will ding your FICO score.
Each time you apply for credit, a lender will check your credit history to determine if you’re a good credit risk. This will show up on your credit report as a “hard inquiry,” which can lower your score.

According to FICO, one credit inquiry every once in a while will have minimal impact, shaving as little as four to eight points off credit scores, and the effect, again, is relatively short-lived. However, frequent credit inquiries affect FICO scores proportionately more and the impact lasts longer.

3. Your credit utilization rate will suffer or improve, depending on how you use your balance transfer. Next to paying bills on time, your credit utilization rate, or debt-to-credit ratio, is one of the most important components of your FICO score. It makes up a full 30 percent of scores.

And when you take advantage of a balance transfer offer, it can hurt or help your credit utilization rate, depending on how you use the loan.

For example, if you open a zero percent APR balance transfer credit card in order to fund a small home remodeling project or large purchase that you plan to pay off gradually, your debt-to-credit utilization will increase, lowering your score. The impact may be blunted by the fact that your overall credit limit will also increase. However, if the loan is large enough, your score will still be negatively impacted until you pay down the loan.

On the other hand, if you take out a balance transfer to pay off existing high-interest debt on another credit card, your overall utilization will decrease. The amount of debt that you have will stay the same, but with the new credit card, you will have a greater overall credit limit, so the total debt-to-credit utilization will improve.

In addition, your within-card utilization may also improve, which help boost your score. For example, let’s say you apply for a new balance transfer credit card and get a card with a $10,000 limit. If you transfer $5,400 from a card with a $6,000 credit limit to a card with a $10,000 limit, you will lower your overall credit utilization — and you will lower the within-card utilization as well (from 90 percent utilization to 50 percent).

Your credit score may be temporarily dinged by opening a new account. However, because credit utilization accounts for a full 30 percent of your score and opening new accounts only affects 10 percent of your score, the overall impact will still be positive.

However, with that said, be aware that having extra credit available could also turn out to be a credit score liability if you’re not careful, warns McGrigg, especially if you keep your old account open and active.

“It’s true that if you don’t close the old account, you might actually have a chance to improve scores,” says McGrigg. “However, that’s only true if you don’t charge the account right up again. For many people, having an account with a zero balance is too tempting, and they might end up twice as much in debt as before.”

It’s also important that you don’t get complacent, warn experts. Transferring your debt to a lower interest balance transfer card may be a step in the right direction — but there’s still more work to be done.

“So many people think that [by] moving to a better account with a better interest rate, their problems are solved,” warns credit repair expert and financial literacy advocate Harrine Freeman, “But they’re really just moving money. Don’t get fooled by tricks and gimmicks. You don’t know what will happen in another year; you could move, you could lose your job. It’s best to just pay your debt the old-fashioned way.”

Read more at www.creditcardguide.com/creditcards/balance-transfer/balance_transfer-impacts-fico_score-1266/#ixzz1dAZGynNK

Extraordinary Ways to Pay Off Debt

The recession is not over. Unemployment is still at 9.1%. Over 1,000,000 Americans have foreclosed on their homes last year. If you employed and are in debt, get out of debt as soon as possible. The future is unknown. Americans have to plan for their future which includes eliminating debt, saving and investing. It took a long time to get into debt and will take a long time to get out of debt – but with patience, sacrifice and dedication you can live a debt free life.

A budget is a critical component of paying down debt and determining how much money you earn, you owe and you spend. This can be done using a tool or pen and paper either daily, weekly or monthly. One critical component of getting out of and staying out of debt is creating an emergency fund.

A unique way to get out of debt is to follow the Voluntary Simplicity Movement which only allows for purchasing basic necessities. Pay down debt using online banking or automatic paycheck deductions. Here are 13 ways to pay down debt.

Car Loans

1. Shorten time. Get a car loan for 4 years or less. Then pay off the loan before the payoff date. Cars depreciate quickly and lose most of their value for loans that are extended beyond 5 years.
2. Interest. If your interest rate is higher than 6%, after six months refinance to get a lower interest rate.
3. Maintenance. Keep your car well maintained and visit a mechanic using the factory suggestions which helps saves money. Keep your car for at least 7 years instead of trading it in to get a new one.
4. Insurance. Keep your car properly insured with affordable deductibles. Paying high deductibles saves you money upfront but causes you to spend more money on accident repairs and delays getting much needed repairs.

Mortgage

1. ARMs. Avoid getting ARMs or balloon payments. These are risky options. If you must get an ARM or balloon payment get mortgage insurance that pays your mortgage payment if you become disabled or lose your job.
2. Refinance. If your interest rate is higher than 6%, after six months refinance to get a lower interest rate. This will reduce your monthly payment and save you money over the life of the loan.
3. Pay off. Send extra money towards your principal to pay your mortgage off faster. Don’t retire until your home is paid off. Once you have at least 20% equity in your home under a conventional loan you no longer have to pay PMI so ask your lender to re-assess your home to have it removed. This will save you money on your monthly payment.
4. Avoid borrowing equity. Avoid borrowing equity against your home to pay down credit card or other debt, go on vacation or pay for home repairs. If you default on the home equity loan or home line or credit you risk losing your home and this will lower your credit score.

Credit Cards

1. Pay more. Pay more than the minimum monthly payment. Pay the balance in full each month or pay multiple times a month by sending a payment each week or during each pay period.
2. Stay low. Keep credit card balances at 20% or less of the credit limit to keep debt low. Debt should be no more than 15% of your total monthly budget after taxes. Credit cards with balances at 30% or above the limit will lower your credit score.
3. Stop spending. Skip using your credit card like a debit card. Charges can add up quickly. Leave your credit cards at home. Use credit card for emergencies only. Pay for items with cash. If you don’t have the money to pay for it, don’t buy it.
4. Avoid quick fixes. Avoid getting a cash advance or balance transfers. Interest rates on cash advances are higher than the regular credit card interest rate and can cause your credit card balance to quickly increase. A balance transfer is just a band-aid solution and can cause you to go deeper into debt once the promotion expires.
5. Waive fees. If your account is in good standing call the credit card company and ask them to waive any late fees or other fees.

Think Twice About Transferring Credit Card Debt

Credit card companies make it so easy to transfer one credit card balance to another and at the time it may seem like the best option, but use caution. Transferring your balance from one card to another is basically the same as consolidating your debt without actually going through the process of a formal debt consolidation loan. Transferring balances may actually lower your credit score because it could be an indication that you are unable to manage your money and need to transfer your balance to make it easier to pay your debts.

The only reason you should transfer one credit card balance to another card is to save money and reduce your total debt owed. To take advantage of the low introductory you must pay off the full balance before the introductory rate special ends. If you are unable to pay off the balance before the introductory rate ends the balance transfer is not worth it. Do some comparison shopping before selecting a credit card that offers an introductory balance transfer rate. Two good sites to use when comparison shopping are bankrate.com and cardreport.com.

You may end up in more debt than you originally owed due to the guidelines of the new low interest credit card. To pay the new balance off faster you must pay more than the minimum monthly payment; try to pay at least double the minimum monthly payment. Here are 9 tips to use when considering transferring debt to another credit card.

1. Find out the APR or interest rate of the new card, if the interest rate is too high don't transfer the debt.

2. Ask if you will be charged a fee for transferring your balance, if there is a charge shop around for another credit card.

3. Find out what the guidelines are for the new card.

4. Find out how long the balance transfer will take and make sure you continue to make payments on the old account until the transfer is complete.

5. Check your monthly statement to verify that your old credit card company is reporting your balance as zero. But don't be tempted to charge on the old account.

6. Check your monthly statement on your new credit card to verify the balance is reported correctly. If not, write a letter to have your account balance updated.

7. Some companies offer transfer checks that can be used to transfer balances. Some companies charge a fee for using the transfer checks so keep this in mind when adding up all the fees that can come along with transfer of an old balance to a new credit card.

8. Ten percent of your credit score considers new accounts and your score may decrease as a result of opening the new account. If you decide to close the old account, the account was in good standing and you had the account for at least 2 years closing it could decrease your credit score.

9. If you know your credit score from each of the three major credit bureaus Equifax, Experian and TransUnion call each bureau and ask how transferring your balance to a new card will affect your score.

A Free Way to Get Out of Debt

If you are struggling with debt and don’t know where to turn try consulting self-help books such as my book, “How to Get Out of Debt: Get an “A” Credit Rating for Free by Harrine Freeman, published by Adept Publishers. My self help book talks about personal finance topics such as:

1. Warning Signs of Bad Credit
2. How to Create a Spending Plan
3. Life After Bankruptcy
4. Women and Their Credit
5. Increasing Your Credit Score
6. Keeping Good Credit
7. Dealing with Creditors
8. Identify Theft

My book also contains sample budget spreadsheets and sample letters to setup payment plans with creditors and fix errors on your credit reports. My book also contains tons of resource information listed by state as well as information on your rights as a consumer.

My book has been previously featured in Essence, Black Enterprise, Ebony magazines, Market Watch, Wall Street Journal, the Michael Baisden Show, Yahoo.com, Bankrate.com, and Creditcards.com.

My book is available at all major bookstores (Borders, Barnes & Noble, Walden Books, B. Dalton). For more information about my company visit hefreemanenterprises.com.

New Guidelines for College Students and Credit Cards

There have been several bills proposed in the past to combat the unfair and deceptive practices of credit card companies soliciting college students to obtain credit. The Credit Card Accountability Responsibility and Disclosure Act of 2009 signed by President Obama on May 22, 2009 goes into effect on February 22, 2010.

The law states that no credit card may be issued to a consumer who is not 21, unless the consumer has submitted a written application to the card issuer: (1) by providing the signature of the parent, legal guardian, spouse, or any other individual over the age of 21 who can repay debt incurred by the consumer; (2) submission by the consumer of financial information indicating an independent means of repaying any obligation; or (3) completion of a financial literacy or financial education course designed for young consumers.

The law will ensure the following for students under 21:
1. Students under 21 will require a co-signer or proof of repaying credit card debt. Previously, a college student only needed a mailing address and their signature to get approved for a credit card.

2. College students will no longer receive from iPods, iPhones, car rides, CD/DVDs, food or other gifts in exchange for a free credit card. No more freebies or knickknacks on-campus.

3. Prescreened offers cannot be sent to students under 21 and credit card limits cannot be increased without the permission of the co-signer.

4. Colleges and universities and alumni organizations will have to annually disclose the terms of any marketing or promotional agreements they make with credit card companies. Schools often receive millions of dollars from credit card companies in exchange for soliciting credit cards to college students. Credit card companies also must file annual reports with the Federal Reserve Board detailing all marketing, promotional agreements with colleges and universities, alumni associations and school-related foundations.

5. The law encourages colleges and universities to adopt policies that restrict credit card marketing on their campuses. The law also encourages the colleges to require credit and debt management seminars as a part of new student orientation programs.

This is a huge step for college students and consumers under age 21. When I went to college I was bombarded by credit card companies on campus and signed up for a credit cad in exchange for a free t-shirt.

I had no income and was only 17 but was approved for my first credit card and by the time I was 21 I had 13 credit cards. This law will greatly help other college students who made or will make the same mistakes I did while in college. This will also help college students better manage their finances and be more accountable for their spending so when they graduate they will owe less money in credit card debt and hopefully be in a better financial situation.

What the CARD ACT Means For Consumers

The Credit Card Accountability, Responsibility, and Disclosure Act (CARD) has been floating around Congress for several years. In 2005 it was called S499 but died, in 2007 it was called HR1461, in 2008 it was called S3252 and it was finally approved on May 22, 2009 by President Obama as S414.

The Act provides the most significant changes to the credit card industry since 1969. President Obama stated the act will "restrict practices he says contributed to consumers' financial problems during the recession. We're not going to be giving people a free pass and we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives."

The Act is a huge win for consumers and college students who have been victims of the unfair practices of credit card companies. A few highlights of the Act are:

1. Banning unfair rate increases
2. Prevents fee traps
3. Requires easy explanation of disclosures
4. Statements will tell consumers how long it will take to pay off a balance by making only the
minimum monthly payment
5. Eliminate credit card rate hikes
6. Provide credit card agreements online
7. Consumers will be mailed statements 21 days before the due date
8. Payment dates will no longer be shifted
9. Consumer approval required for over-the-limit transactions
10. Restrictions on interest rates and credit cards offered to college students under age 21 without
verifying employment or getting parent's permission

Unfortunately the Act does not put a cap on credit card interest rates so interest rates can still increase but consumers will have to be notified before the rate increase becomes effective.

This Act will provide a more level playing field allowing consumers to shop around for the best deal and hopefully offer a more competitive market instead of the market being dominated by a few top banks and credit card companies.

Make sure you read everything that comes in the envelope with your statement each month and if you don't understand something contact the credit card company right away. If you feel you are being a victim of unfair practices notify the company and file a complaint with the Federal Trade Commission or your state Consumer Affairs Office.

The credit card companies are waiting for you to mess up or throw away something that you should have read, don't let them win.

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.

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.

Do You Know Why You Are In Debt?

In the past few weeks, I have had several conversations with clients and other experts in the personal finance industry. I have come to some conclusions about debt: 1) many people do not know how they got into debt; 2) many people are in denial that they are in debt; 3) many people do not know how to get out of debt; 4) many people believe that it is normal to be in debt or that you are supposed to be in debt for the rest of your life.

Unfortunately only 3% or Americans live debt free. First, let me say you don't have to be in debt no matter what some company or creditor tells you. Many people are living debt free lives with good credit, some people have even paid off their mortgage before the 30-year loan date! The only bill I have is my mortgage. The balance on my mortgage decreases each month because I send additional money towards my principal.

Now, the first step to getting out of debt is admitting that you have poor spending habits or that you are in financial trouble. This may be hard to do, but you can do it. If you believe that you can be debt free you will be. Next, develop a plan to take action and take action immediately. Do this by creating a budget for yourself. If you get a steady paycheck this will be easier to accomplish. However, if you do not earn the same amount of money each pay period then you can still create a budget. You create a budget by listing all of your monthly expenses (everything you spend money on during the course of a month) and list your net monthly income (after taxes), then subtract the two figures, if you have any money left over use that money to start paying off your debts and look for other ways to reduce expenses. If you have no money left over, find ways to reduce expenses, make sacrifices and think of creative ways to save money. Some good websites to use to find ways to creative ways to save money are Budgetdial and The Dollar Stretcher.

For large expenses that do not occur monthly you can spread the payment over a period of time, i.e. six months or a year. For example, if you pay $1200 in car insurance and you do not get a steady pay check, put aside $100 a month towards you car insurance so that when you quarterly or bi-yearly bill arrives you will have the money to pay for it and won't feel overwhelmed about paying the bill.

Remember if you are in debt, you don't have to stay that way, you can be debt free. I was once $19,000 in debt and was able to get myself out of debt without filing for bankruptcy. I had to make huge sacrifices such as catching public transportation, I stopped eating and going out, didn't buy any new clothes or shoes, didn't go to hairdresser appointments, etc. Nevertheless, it was worth it. I now have excellent credit, can go to any bank, and get approved for a loan.

If you have questions on how to create a budget or any other personal finance issues send me an email at hfreeman@hefreemanenterprises.com. Good luck to you!