Credit Repair and Debt Consolidation

Credit cards are terribly convenient. But in many cases the main word in that sentence is “terribly” as unrestrained use can put your finances in a world of hurt. Learn some ways to avoid problems caused by overspending with credit cards:

Tips to Avoid Overspending on Credit Cards
 by: Dennis Becker

Shopping or buying things is one of the guilty pleasures in life and with the presence of credit cards, spending seems to be more like a habit and way of life. Credit cards make one’s life easier but it could also make one’s life a living hell once you find yourself drowning with credit card debt.

For people that are not yet in this situation, good for you (and read on anyway to make sure you recognize the danger signals) but for those who are just inches away from that situation (or worse), pay attention because this might actually save your life from overspending your credit cards.

1. Know your credit limit

The first thing that you should know is your credit card limit so that you know if you are going overboard. Always keep in mind that once you cross that limit, there is no turning back.

2. Set your own credit limit

Aside from the credit limit set by the credit card company, it is advisable that you set your own credit limit that you can follow. It would be good if it is significantly lower than your standard credit limit so that you could actually be in control.

3. List down all your expenses

Having a list is really helpful in determining the things that you are buying and purchasing. Listing it will help you track down the things that you put your money into and trust me, half of it is really not that important to your life.

4. Don’t succumb to the following sales pressures

Advertising on TV, radio, or elsewhere is meant to not only inform but to tempt you into making purchases you would otherwise do without. Some common techniques are associating the product with heroes, as a status symbol, as a way to be more attractive, sexy, or smart. Avoid purchase decisions based on advertising techniques because they are cleverly done solely as a way to get you to transfer your money to the company that’s doing the advertising.

5. Avoid shopping unless it is really needed

It is not easy to resist temptation especially if the name of that temptation is the word, “sale”. Avoiding stores would help you overcome the instinct of buying and using your credit card unnecessarily. It would be better if you did not see the things that would tempt you. Just use your imagination! Also avoid buying just because there is a coupon, free gift, or other incentive attached, unless you really need the item.

6. Keep your credit cards at home

If you are the type of person that carries at least 5 types of credit cards in their wallet, I suggest that it would be better if you just carry one or two so that you will not be tempted to use all of them. If you cannot avoid the shops, then just leave your non-emergency credit cards at home.

7. Keep your receipts

If you are still not aware that you are on the verge of overspending, keep your receipts for a week and then total all the expenses that you did for that week. This would really be an effective wake-up call, more so even than coffee for your body!

8. Carry cash

Instead of making the habit of paying through credit cards, develop a habit to depend on paying transactions by cash so that you could really be able to keep track of your expenses. Cash is easier to count rather than card transactions. It will also make you more resistant to impulsive purchases.

Do this exercise: Sit down and try to remember the major purchases you’ve made in the last year or more (or go through your old receipts to jog your memory). How many of those purchases would you consider to be a “bad” purchase? In other words, was it something that you haven’t really used, worn, or wasn’t as important as you thought at the time?

Of those major purchases (items that cost maybe $100 or more that weren’t necessities), how many of those purchases would you repeat if you knew then what you know now?

You’ll probably find that at least half of your purchases were “bad”. So use that as a guideline to help you avoid making similar bad purchases in the future, perhaps by postponing instant gratification by “sleeping on the decision”. More often than not, you’ll wake up in less of a buying mood than you were the day before, and you won’t miss the item you would have purchased in the slightest.

9. Recognize the signs that you are overspending

Once you realize that you are having a hard time paying your monthly credit card statement, that is already a sign that you are losing your control over the matter. Be aware of these things because it is a warning to be heeded.

10. Know your limitations

Being aware of yourself could actually save you a lot of money because you already know the things that you need and the things that you don’t. Knowing your limitations could help you stop the unnecessary spending through the use of credit cards.

Credit cards are convenient to use, and absolutely necessary sometimes, but if one abuses the usage of their convenience, overspending results and it can really be a big burden for a person.

The credit card is arguably one of the greatest inventions of the 20th century, right up there with the airplane, television, though maybe not quite up to par with the electric light bulb. Think about what life would be like without credit cards (depending on your age, you may remember those days, or life without television). But credit cards can and do cause problems, here’s an article explaining how to avoid them:

Mical Johnson

By far the greatest invention the banks have ever come up with came out in the 20th century. Also the new field of Credit Management was born with the invention of the credit card. It is the most available out of any financial product out there. In fact more than 80% of the U.S. households have at least one credit card. If you want to consider yourself as the “Average” American then you have about 8 credit cards burning a hole in your wallet right now. To make sure that you don’t get yourself in any trouble (again) try and follow these 10 Simple Steps for Credit Management.

1. Ignore the bank’s/lender’s rule on what is an “acceptable” level of debt. Your debt-to-income ratio, as they like to call it, is how much debt you can carry to the amount of money you bring make. Depending on how well you have managed your credit in the past it can fluctuate quite a bit. The average is about 25%. The ideal number is of course ZERO but for starters work on getting it down to 10-15%.

2. Remember what a credit card is…A Credit Card. Just because they have waved their magic wand and sent you your “Pre-Approved” Card doesn’t mean go out and use it. The bank does not know your situation or your lifestyle all they look at is the number that you should be able to pay off using most of your “extra” money. They will keep you paying them for the rest of your life if you let them.
Which brings me to the next point…

3. Don’t pay just the minimum balances, unless of course you like paying 400% or more in interest. A typical Credit Card debt of $4,500 would take you about 44 YEARS to pay off! And you would end up paying about $17,000 total by the time you are done. When you stop and think about it, does that sound like a good deal to you?

4. Play the Game- Remember that you are the customer and “the customer” is always right. When it come to annual fees and higher interest rates ask for a lower rate. And if you slipped up and got a late fee ask to get it waived (make sure you promise never to do it again…well at least for six month) Remember that it is a lot more cost effective for them to keep a customer happy than it is for them to go get another one. Your $29-$35 late fee does not come close to the money they will have to spend to get a new one of you.

5. While you are playing the game don’t get blindsided by the fees. The banks have come up with some very creative ways to make money at your expense. They have the ones that everyone knows like over the limit fee, late fee, and extra card fee. However, they also have the less obvious fees like account transfer fee, and a fee for talking to a live person instead of a recording. Make sure you look at your statement and check out all the charges. Some of them may surprise you.

6. Know how you stack up- BILLIONS AND BILLIONS of dollars are charged annually to consumer on mark ups in interest rates. That’s a lot of money when you look at your share. Your credit information is something you should look at and make sure it is accurate. About 25% of all credit reports have erroneous information contained in them. Make sure your information is accurate and keep an eye on it regularly.

7. Know you limits- When you know you will have a hard time paying even the minimum balance STOP charging. It may sound simple but for millions of Americans it is very hard to do. Of course the easy way Hind sight 20/20 don’t get in the situation.

8. If you are one of those people that are disciplined enough to pay off your balance at the end of the month then make sure you are getting some bonus for being such a great user. Get the free stuff that you can use. Some extra Flying miles, free gifts, Cash back reward (my favorite). If you are going to use it might as well get something for your efforts.

9. Only have what you need- You Should have 2 cards, one for what you use regularly and pay off every month and the other for emergencies or business. When you start trying to take advantage of all the deals out there the only one who gets taken advantage of are you. Overkill on your credit cards are not necessary, but being really good at managing a couple of cards is.

10. The statistics are in and they are mind boggling. Bankruptcies are at record numbers and the consumer debt for the U.S. is over 1.7 Trillion dollars! Teach your kids now to not make the mistakes that you did. Financial Literacy is a must for the next generation as we are heading into a cashless society. It’s harder to manage what you cannot see. Make sure they understand that the credit card is what pays for food on the table and gas in the car as well as the play station games they love.

About the Author

Mical Johnson is affiliated with Rock Financial, Inc., a Licensed Correspondent Mortgage Lender, Florida Department of Finance. Mr. Johnson hosts Home Buyer’s Seminars which are open to the public each month in the TampaBay area in Florida. To obtain a free copy of Mr. Johnson’s Home Buyer Handbook contact him at www.TampaMortgageGuy.com He is also a contributing author at www.Debt-Free-Personal-Finance.com

It’s important to know the fundamentals of credit, credit reports, credit scores, and associated topics. Here’s a quick article to fill you in, if you need more information, there’s all sorts of it all over this site, so get comfortable and stay awhile:

Cindy Morus

This year, it’s not just the kids who are heading back to school — it’s a good time to check your credit! Keeping your credit report accurate can reduce interest rates on credit cards and other loans, minimize your insurance rates and eliminate employment or promotion hassles. In addition, checking your credit report regularly will help you spot identity theft early.

Fundamentals of the credit reporting system.

From the big three credit reporting agencies to your rights under the Fair Credit Reporting Act, this course will help you navigate the credit reporting maze.

The Credit Reporting Agencies - TransUnion, Equifax and Experian (formerly TRW) are the three national credit reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers and employers to update and distribute your information to the appropriate institutions. Here’s an example of how the system works:

1. When you apply for a new credit card the creditor requests a copy of your financial history from the reporting agencies.

2. The creditor uses your credit reports and scores along with income and debt information to determine what rates to offer.

3. You start to use the new credit card and the creditor reports your activities to the credit reporting agencies every 30 days.

4. The credit reporting agencies update your credit report as they receive new information from creditors or lenders.

5. Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.

Your Credit Report - Your credit report is divided into six main sections: consumer information (address, birthday and employment), consumer statement, account histories, public records, inquiries and creditor

When you open a new account, miss a payment or move, these sections are updated with new information. The old records will stay on your credit report for about 7 years. Not all creditors report to all three agencies and the agencies don’t share their data so your reports from TransUnion, Equifax and Experian could be substantially different from each other. That’s why it’s important to check your three credit reports every few months to ensure that the information is accurate and up-to-date.

Correcting Inaccuracies - Under the Fair Credit Reporting Act, consumers are protected from having inaccurate information on their credit reports. If you find an inaccurate record on your report, try contacting the creditor or lender associated with the mark first. These companies can usually correct the mistake and send an update to the credit reporting agencies. If you can’t make progress this way, you can also dispute the inaccuracy directly with the credit reporting agencies.

Working the System - Keeping your credit reports healthy will improve your credit scores and help get you the best rates on major purchases. We recommend that you check your credit reports every 3-6 months in order to guard against damaging inaccuracies and identity fraud. Routine check-ups along with paying your bills on time, keeping your credit card balances below 35% of their limits and correcting any negative inaccuracies will help you maintain a healthy credit profile

Cindy S. Morus (www.phelps-creek.com) is a Certified Financial Recovery Counselor and Certified Credit Report Reviewer specializing in showing women and their families how to achieve financial well-being and peace of mind. Contact her at 541-387-2995 or cmorus@phelps-creek.com She is also the publisher and editor of “Women’s Financial Freedom Monthly”, an internet gazette dedicated to helping women and their families achieve financial well-being and peace of mind.

Attention Ezine editors/Site owners: Feel free to reprint this article in its entirety in your ezine or website as long as you leave all links in place, do not alter the content and include our resource box as listed above. If you do use the material please send us a note (cmorus@phelps-creek.com) so we can take a look. Thanks.