Consumers can have love-hate relationships with credit cards; they love the convenience and benefits offered by credit card companies, but paying high interest and fees makes it difficult to reduce credit card balances even when paying more than the minimum amount required each month.
Legislation designed to protect consumers is meeting with mixed reactions from credit card companies. Anxious to recoup losses associated with the new rules, some credit card companies are raising interest rates, increasing or imposing membership fees, and are reducing “niche” credit cards tied to retailers and services that reflect consumers’ interests and spending habits.
The economic downturn has caused some credit card issuers to slash credit lines and reduce or charge more for other financial services including checking and savings accounts. While consumers with good to excellent credit can negotiate with credit card issuers and financial institutions, consumers with fair or poor credit ratings may not be able to negotiate lower rates and fee waivers.
Good Credit? Here’s Some Good News
Effective debt management requires paying close attention to who and how much you owe. Credit card companies compete for business by offering low introductory rates to open a new account. These offers can also encourage transferring balances from your existing credit card accounts to your new credit card account. This can be a great way to reduce the cost of debt if:
- You can pay off the debt transferred within the introductory period of no to low interest.
- Transfer fees (typically 3 to 5% of each balance transferred) plus the introductory interest rate on the new credit card are significantly less than the annual percentage rate you’re paying on your credit card balances.
- There are no membership fees or other fees that reduce your potential savings.
- You can stop using credit cards once you’ve completed your balance transfers.
Newsweek reports that some credit card issuers are lowering rates they charge during introductory periods and extending the length of the introductory periods, which can vary from six months to a year or more. This can help you pay off credit card balances at less cost.
Bad Credit? Consumer Credit Counseling and Debt Consolidation Programs Offer Solutions
Credit counseling and debt consolidation services may be able to help if you cannot qualify for low cost balance transfer offers or debt consolidation loans. Credit counseling and debt consolidation services typically work with clients to find affordable solutions to repay credit card debt. This process requires reviewing your financial situation and determining how much you can afford to pay toward credit card debt.
Credit counselors can also help you design a cash based budget and negotiate the terms of your debt repayment plan with your creditors. These programs provide the added benefit of debt consolidation because you make one scheduled payment to your credit counseling service and they pay your creditors.
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Loading ...Are Americans Getting Smarter About Debt?
When looking at some recent financial data, it appears that more Americans are shunning debt.
Credit Card Debt Declines
Outstanding consumer debt has fallen over the past year, most recently at $1.59 trillion in November, according to data from the Federal Reserve. Revolving debt, which is mostly credit card debt, was $874 billion.
Personal Savings Rate
The declining numbers do indicate that some people are embracing the trend that it’s hip to be frugal and are paying off debt. The personal savings rate was at 4.5% in November, according to the latest figures from the Bureau of Economic Analysis (BEA). It was near zero before the economic crisis.
But a recent article at TheStreet.com makes the point that the lower overall debt level is probably due in part to credit card debt and other loans being written off, bankruptcies, and loan forgiveness programs. The article concludes that many Americans really haven’t learned their lesson about taking on too much debt.
Debt Reduction Strategies
The fact is that consumer debt levels have dropped, and there are ample opportunities to get help with debt to improve your finances.
So what can you do to dig your way out of a financial mess?
- Negotiate a debt settlement with your creditors
- Get debt help from a reputable debt counseling firm
- Consolidate credit card debt to lower the amount of interest paid out
- Stop buying stuff you don’t need and can’t afford
Credit Debt Relief
In the end it doesn’t matter what other people are doing. It’s up to you to secure your own financial future, and dumping debt and boosting savings can help you do that.
(No Ratings Yet) Loading ...Cutting Back on Dining Out Can Save Big Bucks
Recently my family went to a diner and noticed that the menu had changed. Previously they had offered dinner specials that included an entrée, soup, salad, and dessert all for one price. But that day, the menu indicated that you had to pay an extra $3 for the soup, salad, and dessert. My theory is that too many people were buying the dinner combos and splitting them to save money, so the diner decided to charge more to make up for lost sales.
Whatever the reason for the price increase, it’s just another example of how food costs have gone through the roof this year. That’s why many people are cutting down on eating out or dining at less expensive restaurants. About 43% of those polled by Booz & Co. said they are eating out less because of the economy, and 35% said they are packing their lunch to take to work.
(2 votes, average: 5 out of 5) Loading ...Layaway Regains Popularity in Tough Economy
A few years back I remember hearing some colleagues making fun of someone they knew who purchased things using layaway, which allows you to have items held until you complete payments on them. They hooted and hollered about how it was so tacky and beneath them to even think of using layaway to purchase anything. I was pretty mystified by the whole thing and mentioned that when I was a kid layaway was standard practice by almost every family I knew – especially when it came to back-to-school shopping and Christmas gifts. They acknowledged that it was common practice years ago, but all of these people said they wouldn’t be caught dead using layaway.
My, how times have changed. Apparently layaway is regaining popularity as the economy’s woes deepen. While many retailers did away with layaway years ago, places like Kmart and Burlington Coat Factory still offer this payment plan. Kmart is even highlighting its layaway plan in its holiday advertising.
(4 votes, average: 5 out of 5) Loading ...Don’t Stick Your Head in the Sand and Ignore Retirement Funds
I just peeked at my IRA account and it wasn’t pretty. At least I looked. Quite a few people have told me in the past couple of weeks that they refuse to look at their retirement accounts to see how much money has been lost as the stock market has gyrated.
I’m not surprised people are taking the losses so hard since Americans have lost about $2 trillion in retirement savings over the past 15 months. But I am surprised that so many people don’t even want to look at their portfolio to see where they might be able to make changes to minimize their losses.
(3 votes, average: 5 out of 5) Loading ...Should You Keep Your Money in the Bank?
With all the financial turmoil and the collapse of 13 banks this year, many people are wondering whether it’s safe to leave their money in the bank. Stories have abounded of fearful people rushing to withdraw their money from savings accounts, causing runs on some banks. But before you withdraw your money and hide it under a mattress, here’s what you need to know about how your deposits are insured.
Recently, the Federal Deposit Insurance Corporation (FDIC) temporarily raised the limit on deposit insurance to $250,000 from $100,000. That measure was taken to discourage people from grabbing their money and to help support the government’s bailout package. But as the economy has continued to struggle, government officials have discussed whether the limits should be entirely removed, in effect insuring all bank deposits.
(2 votes, average: 5 out of 5) Loading ...Compare Gas Prices Before Leaving Home
A spokesperson for AAA Wisconsin was quoted in the Capital Times newspaper as saying that the average price of a gallon of regular unleaded gas could fall below $3 this fall. Although that’s good news to consumers, the fact is that U.S. gas prices are still much higher than just a year ago. According to AAA, the average price of gas is $3.62 a gallon, compared with $2.79 a year ago.
Looking for Cheap Fuel
Not all gas stations charge the same price, so it pays to have some help scouting out the best places to fill up. GasBuddy has become my go-to site for finding the cheapest fuel in my area. All I have to do is click on my state and put in my zip code to get a list of stations in my area with the best prices.
(3 votes, average: 5 out of 5) Loading ...Negotiating Debt Can Pay Off
Being hounded by debt collectors is annoying and stressful. But the fact of the matter is if you have a lot of debt it’s your responsibility to pay it back. Since most people don’t have a lump sum of cash lying around it may be necessary to contact creditors to negotiate your debts. Here’s how to do it.
Speak Up
Many people assume there’s nothing they can do about their credit cards and other debts but that’s not always true. Lenders may be open to negotiating interest rates and other terms for credit cards. But people are more likely to get a rate decrease if they are current on payments or have a better offer from another credit card company. Lower interest rates could potentially save hundreds or thousands of dollars annually.
(5 votes, average: 5 out of 5) Loading ...Masters of the Universe and Financial Armageddon
You’d have to be living under a rock to not know that the economy is sputtering and showing little sign of improving at the moment. As I tuned in to CNBC this week and watched the play-by-play of the Lehman Brothers bank collapse, Merrill Lynch being swallowed up by Bank of America, and AIG rescue, I found myself thinking about the millions of Americans who are confused about what all the brouhaha on Wall Street means to them.
The media has had a field day with watching the demise of the so-called Masters of the Universe – big investment bankers who’ve dominated Wall Street for decades. Financial reporters and commentators on a variety of news shows adopted the appropriate tone of seriousness when they solemnly looked into the cameras and pronounced that America is experiencing “financial Armaggedon.”
(3 votes, average: 4.67 out of 5) Loading ...Yard Sale Results in Extra Spending Money
My husband and I held a yard sale recently to clear out some of the stuff cluttering up our attic and basement. I wasn’t convinced we’d get much of a turnout, but my husband took the initiative to organize and price our stuff and place ads in local papers and on Craigslist.
Our ads said the sale would start at 10 a.m. on a Saturday, but early birds swarmed onto our front lawn around 9:15 a.m. while we were still setting up. We had steady traffic practically until the end of our sale at 3 p.m. and most people said they’d seen one of our ads. Many of them were looking for antiques and we did have a few that were snapped up quickly. Other items that went quickly were collectibles, clocks, a wicker plant stand, and glow in the dark plastic stars you can stick on a ceiling.
(3 votes, average: 5 out of 5) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
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