Credit Card Debt Reduction Takes Time and Persistence
Credit cards work wonderfully until their balances grow out of control. Unfortunately, but this point the debtor finds himself just managing the payments without even trying to work down the debt balance itself anymore. This leads to a slow but painful death spiral where the credit card payment eat up more and more of a person’s cash flow month after month.
Turning a revolving debt balance around is hard but it can be done without any special programs. The trick is to find a way to cut down monthly spending in such a way that the debtor can make a payment that not only pays the minimum interest but also takes bit out of the principal balance. Over time, even the most basic amount of payments will reduce debt until it is gone.
Alternatively, if a person has too much debt over too many credit card accounts, he’s likely juggling multiple card bills at different times of the month. A debt consolidation loan can be the answer. This approach takes one jumbo loan and pays off the various credit cards. The jumbo loan involves a fixed rate and payment over a time period, usually five years. This forces the debt to be paid down and it consolidates all the bills into one charge per month. By following with a closure of the paid credit cards, the debtor can be assured as long as he makes his payments on the consolidation loan the amount will go down and eventually be paid off.
A third method involves putting aside funds and saving them to then make a lump sum payment to remove a credit card. While this approach will end up paying more in interest rather than immediately putting the money towards the outstanding credit card account, it feels pretty darn good when the lump sum is ready to just pay off the account completely once and for all. It also gets a person in the practice of saving money. Once a saver understands how hard it is to save up to a figure, he gains a new appreciation for that money.
In all of the above approaches, it is critical to rein in spending and not incur more debt. Effective debt management requires that a person spends less than he brings in and doesn’t add more charges on his credit cards. Doing otherwise defeats the whole purpose of managing the credit card debt. While this discipline is easy to talk about, it can be hard to implement. However, most people if they look hard can find a number of areas where spending can be stopped.
Debit or Credit Card? You Decide!
Using your card as a debit card or a credit card? Think that there is no difference? Think again! Even though you can use your debit card for just about any transaction that you would normally use a credit card for, you might be surprised to learn that the risks are actually far greater when you use your debit card, and there are definitely some places where you’ll want to reconsider using your debit card at all.
ATM Machines
Where do you typically go to get cash? Do you go directly to your bank? Most people don’t. In fact, most of us will simply go to an ATM machine…any ATM machine, even if there’s a small fee associated with the use of an ATM machine that doesn’t belong to our personal bank. But, how secure is that ATM machine? Is it in a well lit area? Is it affiliated with an actual bank, or is it a generic machine that is outside the local convenience store? Is it inside or outside?
The location of an ATM machine is actually very important – ATM machines that are not located in high traffic, well lit areas are at a high risk for criminal activities, such as skimming. Skimming is a process where a machine is attached to the ATM machine and the machine then captures the information on the magnetic strip for later use. Criminals can then reproduce an exact replica of your debit or credit card and use it to make all kinds of purchases in your name. Even worse, if the criminals also recorded the PIN number associated with your card (using a hidden camera), then they can withdraw cash from your bank account, all the way up to the total amount in your account.
So, think about your next ATM visit – make sure that the machine is either in a high traffic, well lit area, or is actually located inside the bank or the mall. And, pay attention to the actual machine itself – if something doesn’t look right, don’t use it! Go somewhere else.
Restaurants, Bars & Other Retail Outlets
How many times have you gone out to dinner and, when it’s time to pay the check, simply put your debit or credit card into the slot of that little black folder and entrusted your card with the waiter or waitress who happened to serve you that particular evening? And then you just went on chatting away with your dinner companions while the server takes your card to the cash register and rings up your bill…
Can you see the server while he/she has possession of your credit card? Do you even look? If you are like 95% of the people in this country, the answer is no. And, if you’re like 50% of the people in this country who have been a victim of fraudulent charges on your debit or credit card, this is where a large percentage of this type of theft occurs. In fact, we actually make it EASY for our information to be stolen – we hand them our cards, and we don’t pay any attention to where they take the card, or how long they have it. And, it is so easy – all they need is a copy of the debit card receipt, or they simply copy down your debit card information in private and use it later, or they can even take a picture of the front and back of the card with a cell phone…
Definitely, in restaurants, bars, and even many retail transactions, get in the habit of using your credit card instead of your debit card! (And, if you aren’t already aware of it, nearly all debit cards can be used as credit cards, too.)
Gas Stations
Just like your local ATM machine, gas stations can be a target for thieves to steal your information. Not only are gas stations normally poorly staffed, with only minimal supervision of the pumps (and the pay at the pump swipe), but they are also easier to target than banks. Most gas stations don’t have video cameras on the pumps and that lone clerk that works the night shift is often stocking the shelves, or filling the coolers, during the slow times. Then, it’s easy for a thief to sneak up to the pumps, slip the skimmer onto the pay at the pump device, install a camera, and just sit back and collect card and even PIN numbers.
Again, using your credit card instead of your debit card will provide that extra layer of protection between the transaction and your bank account!
Online Transactions
Okay, so we all love shopping online! But, how do you normally pay for your purchases? Do you use a credit card or do you use your debit card? Most eCommerce sites will let you do both – but, you should ALWAYS use your credit card!
Not only do you have the risk of the unscrupulous employee at the other end of the transaction stealing your information from the physical location, but you also run the risk of your information being stolen via malware on your computer or on the merchant’s computer, or even via criminals “listening in” on your wireless network.
Simply put, credit cards offer far more protection than debit cards in dealing with most cases of theft, fraudulent use, and even when you receive goods or services that are not as promised.
When credit card users report fraudulent charges, the charges are typically credited to your card within a few days, but when thieves have stolen money from your checking account, it can take MONTHS for reimbursement!
Can you afford to wait MONTHS if thieves were to clean out your checking account? Use your debit and credit cards wisely!
Fraud Alert- Watch Out For Credit Score Scams
When do you want to check your credit score? Well, almost always I guess, especially when you are building up debts or opting for debt relief programs. Your credit rating generally outlines your borrowing, charging, repayment activities and credit worthiness. A good rating helps you to reach your financial goals, buy a home and get a job, whereas a poor rating limits your financial opportunities. It is extremely important to keep an eye on your credit rating to check whether you are paying your loans and bills on time or taking on excessive debts or not.
It would best if we could just go online, type in our name, and have the score pop right up. But to our utter disappointment, it doesn’t quite work that way. Most of the time, we have to pay something to know our credit rating. However with scammers mushrooming in the credit market, we can be easily misled and the scam agencies can pertain to our credit score. Therefore, it is highly recommended to be mindful and watch out for these credit score scams.
Offering “free” annual credit score
It can not be regarded a full-on scam, but it’s a situation that plays upon the prevalent confusion about credit ratings and free credit reports. By law, you are entitled to obtain free annual report from each of the three credit reporting bureaus Equifax, Trans Union and Experian. However, most consumers don’t know the fact that this report does not come with a score. Once you’ve ordered the report, ransacked it, then only you realize there’s no score incorporated. You have to buy the score from the credit reporting bureau. Therefore if you come across a site which claims to provide the official free annual credit score, it must be a scam: as there is no such government mandate which provides free scores, yet.
Phishing scam
Sometimes you come across online credit score offers which ask you to provide sensitive personal data or passwords. This must be an attempt to get your information so that one can steal your identity, or sell the information to someone who will. Identity theft and forgery is quite common in the credit market. Therefore you must stay careful and only order products from reputable sources that you can verify. If you are prompted to re-submit you payment information or any other sensitive personal information, call the company and recheck the authenticity of the concern because this is often an indication of a phishing scam.
Final thought
Make sure the possibility of a scam should not deter you from getting a copy of your credit score. Knowing your credit score well certainly help you to avoid unpleasant surprises, set spending practices and get loans at more favorable rates. Stay vigilant and keep the above mentioned points in mind to watch out for credit score scams.
Paying Off Your Christmas Credit Card Bills
Christmas is over. The presents have all been unwrapped. The decorations are all stored away until next year. And now you’re just waiting for the January surprise…that’s right, your credit card bills will soon start to arrive in your mailbox!
If you’ve been careful and tracked your spending habits, your January “surprise” may not be much of a surprise. If not, well…we all know that sinking feeling as you open those bills and realize just how much the holidays cost this year.
Unless you want to spend most of the New Year paying off last year’s bills, you’ll definitely want to pay off those credit cards as quickly as possible. Here are a few tips to help you get started:
- Stop spending! Many people get Christmas bonuses, monetary gifts from relatives, and the like, and then not only spend that money, but continue to use their credit cards to buy the things they wanted for Christmas and didn’t get. Or they feel entitled to it, since so much money was spent on everyone else during the holidays. Don’t fall into this trap. Stop spending. Stop using the credit cards and start spending responsibly again.
- Always pay more than the minimum amount due! If you can possibly afford it, pay as much as you can towards the balance on your cards. Consider putting that Christmas bonus, or that extra cash you received as gifts, toward paying down, or paying off, your credit card bills.
- Consider a balance transfer to a card with a lower interest rate, or even a 0% introductory interest rate, that will allow you to transfer the balances of all your credit cards to one account. Then, pay the account off before the introductory period expires. (And don’t use the other cards in the meantime!)
- File your income tax return as quickly as possible, if you normally get a refund, and use your refund to pay off your credit card balances.
And finally, a quick tip for next Christmas:
- Set a responsible budget for holiday spending and stick to it! Many people get so wrapped up in Christmas and trying to get everything that everyone wants, that they forget about all the bills that are piling up. Don’t allow this to happen to you. Keep track of what you spend on each and every person on your gift list, and of what you put on each and every credit card that you have. That way, there’s no January “surprise” in your mail box next year!