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Can you really save money if you have a lot of credit card debt and other bills?

While it may seem impossible to build a nest egg with all your other financial obligations, there are things you can do to reach your savings goals.

1. Review: Carefully review your income and spending to determine exactly where your money is going. Do whatever you can to trim your expenses, including cutting services you don’t need or use, switching utility plans, cutting out impulse shopping trips, etc. The money you cut from your budget can go toward debt reduction or savings.
2. Consolidate: Consolidate credit card debt and other bills to cut down on interest charges. Paying less interest over time allows you to allocate more income to paying down debt or adding to savings. Obviously, once your debt is paid off, there will be more money available to boost savings accounts.
3. Get Counseling: Use a debt counseling service to get your finances back on track. If you’ve done everything you can to save money and pay off debt with little results, you may need help. Debt counseling can help you learn to budget and manage your money better. Look for a reputable debt counseling firm that clearly describes its services and fees before you sign up.
4. Negotiate: Negotiate a debt settlement with creditors to get a lower payoff amount. Generally, credit card companies won’t begin to discuss a debt settlement program until you’re at least two months behind on payments.
5. Save: Once you have paid off credit card debt and other loans, redirect money that previously went toward debt payments to your savings. Set up automatic deductions so that part of your paycheck goes directly toward your savings goal.

Having a lot of debt can keep you from reaching savings goals. Debt reduction should one of the first steps toward building a savings. Once you’ve knocked out that debt you can get down to the real business of putting away money for various savings goals.

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The U.S. government received a wake up call this week when Standard & Poor’s revised its credit rating outlook to negative from stable and affirmed its ‘AAA/A-1+’ sovereign credit ratings on the United States.

“Because the U.S. has, relative to its ‘AAA’ peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable,” S&P said in a statement.

More pressure to cut debt

The S&P report steps up the pressure on the government to get the federal deficit and debt under control before it loses its AAA rating. It also is a reminder that many Americans need to step up efforts to get their own debt under control.

Check your credit report to see what needs to be done and then consider the following things that can help get your credit in order.

• Debt counseling: Don’t think you have to go it alone when trying to wipe out credit card debt. Find a reputable debt counseling firm that can help put together a plan for tackling your bills. Look for an agency that helps you learn to budget and offers educational programs aimed at improving overall money management.
• Credit card debt settlement: Being behind on credit card payments by a few months may actually work in your favor for negotiating a debt settlement. Contact your creditors to see if you can negotiate a lower payoff. It may take several attempts to reach the right person who can set up a debt settlement, but it’s worth the effort. In some cases consumers have been able to settle credit card debt for less than half of what was actually owed.
• Credit consolidation: Consolidating your bills may allow you to get a lower monthly payment. While lower payments can help while you’re trying to repair credit, it’s a good idea to continue paying as much as possible toward debt if you can afford it. Finally, debt consolidation only works if you avoid running up more debt.

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The Federal Reserve reports that although consumer debt levels are increasing, which indicates more consumer spending, credit card debt levels are falling. As of January 2011, consumer debt increased to $2.412 trillion, the fourth consecutive monthly increase. Credit card debt decreased by $4.2 billion or 6.4 percent during January. Although some of the decrease could reflect issuer charge offs or consumer bankruptcy filings, it’s also likely that consumers are learning the lesson that carrying high cost revolving debt is similar to being stuck on a high-speed hamster wheel. If you’re ready to free yourself from the cycle of incurring credit card debt and paying high interest and penalties, here are some tips for succesful debt management.

Managing credit card debt: no instant success

1. Understand that debt doesn’t go away over night: Falling into a financial hole is easier than digging your way out. Your commitment to eliminating credit card debt is required for success.
2. Establishing and writing down your goal: Review your credit card balances, make a list of them and set a goal for becoming debt free. It’s important to be realistic and plan your debt repayment schedule based on existing income. Don’t count on the lottery, your relatives or a windfall to bail you out of credit card debt.
3. Apply all “found money” toward your debt: Tax refunds, raises, bonuses, funds from garage sales and online auctions can help you reduce your debt faster. That jar of change you’ve been saving for years? Take it to the bank and pay down your debt.
4. Change your spending habits: Don’t carry credit cards in your wallet. If you have to consciously seek out a credit card before shopping, you may think twice about using it. You can use debit cards with major credit card logos anywhere that credit cards are accepted. Knowing your expenditures are coming out of your checking account can help you put the brakes on impulsive spending.
5. Cooling off before buying: It’s not realistic to expect that you won’t engage in any discretionary spending, but try to enforce a “cooling off period” before purchasing items you want rather than need. Think about it overnight, review your debt management plan and ask yourself if $150 for a new pair of shoes would be better applied toward reducing credit card debt.
6. Engaging the support of friends and family members can help you stay on track. Suggest alternative activities to recreational shopping and “girls day at the mall.”

Seeking help from credit card debt consolidation and consumer credit counseling programs can provide debt solutions if you’re having trouble achieving your debt management goals.

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The newly formed government agency, U.S. Consumer Finance Protection Bureau, reports that the Credit Card Accountability, Responsibility, and Disclosure (CARD)Act has caused the U.S. credit card industry to revise policies while reducing and eliminating some penalty fees. Highlights of the report include:

• Over-limit fees have all but disappeared.
• Prior to the CARD Act, 15 percent of credit card issuers reset credit card interest rates annually, but now approximately 2 percent of issuers are resetting interest rates each year.
• Assessed late payment fees fell to $427 million in December 2010. This represents a decrease of more than half of the January 2010 amount of $901 million.
• Since the inception of the CARD Act, credit card late fees have fallen from an average of $35.00 to $23.00.

These developments are a step in the right direction toward helping consumers with debt management. Here are some tips for applying CARD Act principles to your own credit card debt.

CARD Act: Gaining personal control over credit card debt

Credit cards: Evaluate your credit card accounts and usage. Reduce the finance charges you’re paying by using a debt consolidation loan or transferring high cost balances to lower cost accounts.

Accountability: Understanding how and why you got into debt can help you find debt solutions appropriate to your situation. Taking responsibility for your debt doesn’t require being your own loudest critic, but it does require being honest with yourself and seeking debt help if needed.

Responsibility: Taking control of your finances by establishing a cash-based budget and an affordable debt management plan is essential to gaining freedom from debt. While acknowledging past mistakes, focus on your new budget and debt management plan for eliminating credit card debt.

Disclosure: No, you don’t have to tell your neighbors that you’re awash in a sea of debt, but “disclosing” to yourself how much you owe, what it costs and understanding how credit card debt compromises financial security is an important step in the process of managing, reducing, and eliminating debt.

High finance charges and penalty fees can rapidly cause credit card debt to expand out of control. If you need debt help, consider talking with a financial advisor or consumer credit counseling service. Debt consolidation and credit counseling services can help you develop a budget, and may negotiate affordable payment terms with credit card companies. Avoid scams by checking out debt help services with the Better Business Bureau or other consumer advocacy service. Reputable debt help organizations typically offer free consultations and do not expect any payment until they have implemented a debt management plan for you, and you have agreed to all the terms of the plan.

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Although “good” is a subjective term, we can clarify positives and negatives related to using debt consolidation as a method for debt management. Debt consolidation functions in a manner similar to refinancing a home mortgage; you’re trading one or more debts for a single new debt, typically one offering lower finance charges. Potential benefits associated with debt consolidation include:

• Streamlining debt management: Dealing with a stack of credit card bills and loan payments each month increases your chances of missing a payment. Credit card debt consolidation can help by rolling several balances into one.
• Cleaning house, and your head: If you’re stressing due to debt, using debt consolidation can help you regain some feeling of control. Paying off multiple debts with a debt consolidation loan or consumer credit counseling can eliminate problems with debt collectors calling you at home and work, along with helping you focus on paying off your debt consolidation balance in place of several credit card debts with changing balances and finance charges.
• Lower finance charges: When shopping debt consolidation loans, it’s important to compare the annual percentage rate (APR) for the debts you’re consolidating along with the APR for debt consolidation options you’re considering. Your goal is to consolidate debt to one account with a lower APR than the debts you’re consolidating. APR provides a more accurate estimate of actual debt costs because it includes interest rates, penalty fees and lender fees.

Debt management: Debt consolidation can help, or not

• Using your home for collateral: Unsecured debt consolidation loans can be difficult to find if you have bad credit. In today’s economic climate, with housing values declining, it may also be difficult to qualify for a home equity loan or line of credit with less than admirable credit. If your home has lost value, you may not have enough home equity to qualify for debt consolidation through home equity financing or refinancing your mortgage.
• Credit card balance transfers: Although these can be useful to consolidate a few low credit card balances, it’s easy to lose potential benefits if you fail to pay off your balance transfers prior to the expiration of the introductory period.
• More debt than before: This is a frightening scenario that can happen. Clearing up debts with a debt consolidation can provide a false sense of security which can lead to more debt. Credit card debt consolidation can lead to a vicious cycle of paying off, consolidating and incurring more debt.

Those struggling with debt can benefit from programs offered through non-profit debt consolidation programs. These programs can help you determine why you’re in debt, and establish debt management options through budgeting and affordable repayment plans.

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The New York Times reports that Congress is gearing up to debate whether or not to increase the federal government’s debt ceiling. Hello? Isn’t it about time for our elected officials and so called leadership to start setting an example for we, the consumers? We are constantly reminded of the importance of financial prudence; meanwhile our government is spending like a fleet of drunken sailors. At some point, the government and debt-ridden consumers have to know when to say “when.” The government’s balance sheet is too big to tackle here, so let’s concentrate on reducing personal credit card debt.

Drowning in debt: Has this become America’s new favorite past time?

Recent reports of increased credit card usage among consumers seem to suggest a revival of consumer confidence, if not carelessness. Carrying credit card debt doesn’t make sense, particularly in uncertain economic times.  Here are some reasons to think twice before running up credit card debt:

• Variable interest rates: Many credit cards carry variable interest rates, which can go up if the financial index the card is tied to increases.
• Minimum payments and unpaid interest: Minimum credit card payments typically do not cover all of the accrued interest, and unpaid amounts are added to your unpaid credit card debt.
• Finance charges: Although legislation has limited how and when credit card companies can impose penalty fees, these fees can add to your debt if you forget to make a payment or exceed your credit limit. If you incur a penalty fee for the first time, it’s worthwhile to call your credit card company and request a waiver of the fee.
• Job insecurity: Financial analysts and economists report that the economy is rebounding, but unemployment remains high. Carrying credit card debt takes a bite out of your budget that can be disastrous if you lose your job or your income is reduced.
• Temptation: Somehow paying with credit cards can lead to more spending. Avoid the temptation to spend lavishly or unnecessarily by carrying cash or a debit card instead of credit cards.
• Emergency savings: Relying on credit cards for emergencies can create costly debt. It’s important to establish and fund an emergency savings account. The amounts you’re paying toward credit card debt could have gone to savings instead of debt.
• Credit scores: Like it or not, credit scores can impact more than your ability to qualify for loans and credit. Employers and insurance carriers may check your credit scores as part of their approval processes. Although the bad economy has thrown a monkey wrench into the allegedly reliable models used by credit scoring companies to predict consumers’ creditworthiness and overall reliability, the system remains unchanged, and poor credit scores can create more than financial problems.

Seeking debt help is essential if you’re struggling with credit card debt. Contacting consumer credit counseling and debt consolidation programs is the first step toward finding affordable debt management solutions. Insurmountable debt causes physical and emotional stress, can strain interpersonal relationships and cause problems at work. Don’t wait. Please get the debt help you need today.

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Long after the holidays have passed, you may find yourself paying off credit card debt. The problem with credit card debt is its high expense and making minimum payments can take years to eliminate your credit card balances. Worse, if you lose your job or become ill, it can become impossible to make any payments. It takes very little time for an unplanned event to trash your finances and ruin your credit.

Credit card debt: Finance charges, account terms hinder debt reduction

Fine print, volumes of paper and busy lifestyles contribute to not knowing credit card terms and costs. A good starting point for a debt management plan is to make a list of all credit card accounts, their balances and the annual percentage rate (APR) for each account. The APR includes interest and penalty fees for your account; the APR can change according to the interest rate and status of your account. Some credit card companies assess penalty fees or raise interest rates if you make late payments. The higher your APR, the more money you’re throwing away. If you can’t pay off your credit card debt within a couple of months, contact each company and ask for a reduction in the card interest rate and a waiver of fees incurred on a one time basis. Credit card debt settlement options don’t usually include reducing balances unless you’re several months delinquent and ready to file bankruptcy.

Negotiating with credit card companies: Mind your manners and lose the expletives

Tips for negotiating include:

• When calling credit card companies, have your credit card number handy, along with the APR you’re currently paying. Write down pertinent details including your current balance and how long you’ve had the account; this can be helpful when requesting lower rates or fee waivers.
• Dealing with customer service personnel who answer calls and respond according to scripts rather than attempting to address your requests can be frustrating, but it’s important to keep your cool. Don’t swear or raise your voice. If a customer service rep says they cannot help you, ask to speak with a supervisor.
• Don’t close your accounts.  It’s easy to tell credit card companies to take their cards and…well, you know, but closing accounts reduces the amount of credit you have available, and raises your credit utilization ratio. A higher credit utilization ratio can lower your credit scores.

Maintain civility, hang up quietly, and seek credit counseling and debt consolidation help from a credit counseling service.

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The Wall Street Journal reported that New York Representative Maurice Hinchey (D) has introduced a bill that would limit the maximum interest rate charged on credit cards to 15 percent. Citing abysmally low rates for savings accounts and certificates of deposit (CDs), Hinchey seeks to even the scales between what credit card issuers can charge customers and the interest rates financial institutions pay on deposit accounts. It’s not uncommon to find credit card rates over 15 percent and retail credit cards that charge interest rates over 25 percent.

“A spiral of debt” plaguing American consumers

Citing current economic conditions, increased bankruptcies and consumers struggling to make ends meet, Rep. Hinchey asserts that regulating finance charges on credit cards would contribute to a healthy economy. Hinchey says it’s time to end “legalized loan sharking,” but it’s unlikely that his bill will pass due to the split in power between the Republican majority in the House of Representatives and the Democratic majority in the Senate. Citing recent significant financial legislation, critics of Hinchey’s bill don’t believe that lawmakers are inclined to address further financial regulation this year. Nonetheless, Rep. Hinchey asserts that American consumers are being swept up in a “spiral of debt.”

Non profit debt consolidation services provide low cost debt help

If you’re struggling with credit card debt and can’t wait for lawmakers to act responsibly in favor of consumers, don’t continue paying high finance charges to credit card companies. Here are some options to get out of debt yourself and to seek affordable debt help.

• Personal debt management plan: Establish a repayment plan for your debts and set it up so that you can track your progress. Paying off debts with the highest annual percentage rates (APR) first can help reduce finance charges you pay over time.
• Debt consolidation loans: Borrowing money to repay debts can be difficult, but you may qualify for a debt consolidation loan online or through your financial institution. Unsecured debt consolidation loans require no collateral and are typically offered at higher rates and lower amounts than secured debt consolidation loans. These include home equity loans and lines of credit and vehicle title loans.
• Debt consolidation services: Non-profit debt consolidation services provide credit counseling and also work with your creditors to arrange affordable payment terms. You have to close active credit card accounts, and are required to pay administrative fees, but these services can help you get out of debt when you can’t do it yourself. Although they don’t reduce your credit card balances, debt consolidation services may be able to arrange reductions or waivers of interest rates and other finance charges.

Before filing bankruptcy, please consider getting debt help. Make 2011 your year to gain freedom from credit card debt.

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If there’s anything positive about the economic downturn, it’s news that Americans are continuing to reduce their credit card debt. Credit Karma reports that average consumer credit card debt levels fell by about $1000 between January 2009 and now, which puts average credit card debt at about $6400. While paying off debt is an important financial goal, the truth may be less than uplifting. Reasons for decreases in consumer debt may include:

• Economic concerns: Cutting discretionalary spending, saving more and paying cash all make sense when consumers are unsure about job security, pay raises and home values.
• Disappearing home equity: A few years ago, homeowners were riding a seemingly endless wave of increasing property values that rapidly escalated their ability to qualify for home equity loans and lines of credit. Now that this source of funds for paying off credit card debt has all but disappeared; the spending spree is over for many consumers.
• Credit restrictions: Credit issuers are issuing fewer cards and accounts that are approved carry lower credit lines.
• Charge offs and bankruptcies: Credit card issuers charge off bad debt after several months, which removes it from active status. Debt discharged through bankruptcy courts is also removed from active status.

In spite of paying down credit card debt, the average credit score for American consumers decreased by one point to 668. This inconsistency could be the result of debt reduction through bankruptcy or foreclosure, and may also reflect missed or late payments due to lay-offs and unemployment.

Wisconsin currently leads the nation in consumer debt reduction; its residents have paid off 31 percent of their credit card debt, while Nevadans have cut credit card debt by 11 percent. Here are some ideas for cutting your own credit card debt.

Is debt consolidation a good way to liquidate credit card debt?

If you have good to excellent credit, you may qualify for a low interest debt consolidation loan from your bank or credit union, but it’s important to note that unsecured debt consolidation loans can be difficult to obtain in today’s restrictive credit environment. A few basic math skills, a spreadsheet program and a lot of willpower can go along way toward setting up a debt management and payoff program on your own. Keys to success include:

• Tracking your progress: Watching debt disappear is a great incentive to stick with your credit card debt payoff plan. Setting goals for paying off debt and raising your credit scores can provide the motivation you need to avoid “slipping up.”
• Don’t carry credit cards with you: You cannot pay off credit card debt if you continue to use credit cards. What’s in your wallet? A debit card and cash should be there instead of credit cards.

Consumer credit counseling and debt consolidation services offer assistance at low or no cost to qualified consumers struggling with credit card debt.

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The Federal Reserve reports that American consumers have boosted their debt for the second consecutive month as of November. The good news is that this debt includes student loans and installment loans such as vehicle financing. Credit card debt levels continue to fall as consumers fearing uncertain economic conditions and unemployment continue to pull back on discretionary spending.

Debt: The Good and the Bad

When it comes to debt, it may seem that no debt is good debt, but financial experts frequently suggest that debt including a home mortgage and student loans can be considered “good debt,” or worthwhile investments. Debt including credit card balances and discretionary purchases of expensive vehicles (which quickly depreciate in value) and other non-essential goods are considered “bad debt” due to the costs associated with carrying balances. Think about it; if you’re carrying balances for expensive nights out, theater tickets, and buying the latest fashions on credit, you’ll  be paying off credit card debt after the meals and performances were enjoyed and the latest fashions have become yesterday’s news.

Credit card debt: A direct obstacle to financial security

What exactly is financial security? In times of economic challenges, being able to pay your monthly bills may represent financial security in the short term, but most of us must also plan for supplementing social security and/or pensions received from employers. It’s also important to have liquid savings on hand for taking care of emergencies and meeting living expenses when you become unemployed or cannot work. Paying off credit card debt is one of the best “investments” you can make. Here’s why.

Investment and savings income typically lower than credit card debt costs

We’re not suggesting that you should not contribute to savings, but if you compare the annual yields (interest paid) on savings accounts, certificate accounts, and most investments, they’ll be less than the annual percentage rates (APR) paid on credit card debt and other unsecured consumer debts. Let’s say the APR on your maxed out credit card is 12.99 percent. By paying off this balance, you’ll effectively be receiving a 12.99 percent return on funds used for repaying the debt. Gaining debt relief through paying off credit card balances is a strong first step toward putting your financial house in order.

Finding debt relief when you’re in too deep

Credit card debt can quickly increase due to poor budgeting, high finance charges, and the addition of penalty fees for late payments. If you’re running out of cash before pay day, or juggling bills each month, these are signs of debt problems that can potentially lead to credit problems and filing bankruptcy.

If you’re facing insurmountable debt, please seek debt help from a credit counseling and debt consolidation program.

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