Free Debt Management Tips

Find the best ways to manage your credit card debt

How to Put Your Wallet on a Diet By Eliminating Credit Card Overload

credit cardsDoes your wallet look as if it were 8 ½ months pregnant? Does it take you five minutes to sort through your credit cards before finding the one you want to use for a particular purchase? If so, you’re probably suffering from CCO or Credit Card Overload. Millions of Americans suffer from this affliction. In fact, according to CreditCards.com 18% of all Americans carry 3 or 4 credit cards, and 9% carry 5 or 6. If you count up the number of cards in your wallet and find you have 7 or more, you’re part of a group that numbers 8% of our population.

When you see numbers like this, it’s easy to understand why so many Americans are having a problem with credit card debt. Creditcards.com has also reported that Americans with credit cards are carrying $5121 in debt, and American households now have more than $16,000 in credit card debt.

How to put your wallet on a diet

If you’re one of the many Americans suffering from credit card overload, take heart. You could actually replace all of those cards with just one.

Where this starts is by doing an analysis of why you habitually carry a balance on those credit cards, and the kinds of rewards that are most important to you.

If travel is your thing

If you travel frequently then you should be able to slim down to the one credit card that offers the best travel rewards. As an example of these, the Capital One® Venture® Rewards Credit Card is currently offering 40,000 bonus miles after you spend $3,000 in the first 3 months of approval. And its rewards rate is two miles per dollar.

The BankAmericard Travel Rewards® Credit Card gives 1.5 points per $1 spent on purchases, and 20,000 bonus miles once you meet certain purchase requirements. And the Chase Sapphire Preferred® Card gives 50,000 bonus points and 2X points on travel and dining.

Of course, if you get one of these cards, you’ll need to shred all your others or all you’ll have done is added to your wallet bloat.

Credit cards if you carry a balance

If you have credit card debt, there’s one simple reason. You’re carrying your balances forward from month-to-month. Credit card debt can be very expensive. Your one credit card should be whichever one has the lowest interest rate. Check your statements. If you’re carrying balances on cards with interest rates of 17%, 18%, or even 19% then you’re spending a lot of money that’s just unnecessary. If you don’t have a low interest credit card, find one with an interest rate like the BankAmericard® Credit Card, where the interest rate can be as low as 11.49%, and transfer all your balances to it. Or, even better, if you can qualify for one of those cards that offers a 0% interest introductory rate for as many as 18 months, transfer your balances to it.

If you spend in just a few areas

Do you spend the most money in just several budget categories such as groceries, restaurants, or gasoline? Then, you’ll want to get rid of all those credit cards and replace them with one card that offers the best rewards on those things. As an example of these, the Chase Freedom Visa offers 5% cash back on bonus categories that rotate every three months. These categories typically include restaurants, gas, groceries, and wholesale clubs. The BankAmericard Cash Rewards™ Credit Card offers 3% back on gas, and 2% back at grocery stores and wholesale clubs. And American Express’s Preferred(r) Card Will give you an amazing 6% cash back at US supermarkets (up to $6000 per year in purchases)

If you hate fees

The biggest negative of those credit cards that offer whopping rewards is their fees. The harsh fact is that the premium travel cards generally have the highest fees but the most generous rewards. One of these can be worth it if the rewards you accumulate are big enough to outweigh the fee. If not, then your best bet is probably a cash back card that has no fee.

Before you close those cards

Closing all those credit cards but the one you’ve chosen is good but it can also be bad. Fifteen percent of your credit score is the length of your credit history or how long you’ve had credit. So, instead of closing those cards that have now become unnecessary, consider shredding them.

In summary

If you put your mind to it, and do the kind of analysis you’ve just read in this article, you should be able to eliminate credit card overload, slim down your wallet, and simplify your financial life.

The Best Apps for Debt Management

happy-young-man-with-fixed-car-300x199It’s hard to believe that the iPhone is just a bit more than 10 years old. Who would have thought we could have a computer in our pockets that would also let us make phone calls and write text messages.

It’s clear that practically all of us now take our smartphones for granted. If you don’t believe how important these little devices have become just go sit in a waiting room somewhere. We’d be willing to bet several dollars that at least 80% of the people will be doing something with their smartphones.

What are your most popular apps?

Is the camera your most popular app? Is itGoogle, Chrome or Safari, ESPN, Twitter, or your music app. We love all of these. We also love our bank app that now allows us to make deposits. All we have to do is take a picture of the front of a check and it’s back and presto! The money is immediately deposited in our account.

Financial apps

There are now almost more financial apps than you can count. One of the most popular is Prosper Daily (formally known as BillGuard), which will not only track your spending but also protect your credit cards from fraud and mistakes. There’s also Level Money that acts kind of like a mobile money meter and helps track your daily cash flow. LearnVest will monitor your money, and Level Money will tell you how much you can afford to spend on a day-to-day basis. Qapital will entice you to save through gamification and small actions you take every day. If you have trouble saving money, there’s Digit, which will save money for you, and Acorns that utilizes a smart system called “round-ups” that will help you save money practically painlessly.

Good and bad debt

The above-mentioned apps can help a lot with your finances, but what if your problem is that old demon debt?

Some experts believe there is such a thing as good debt and bad debt. Good debt to them is where you use the money to do or buy something that will increase in value. The number one example of good debt to them is a mortgage, as the house is almost certain to increase in value over the years. They think that borrowing money for educational purposes can also be good debt.

Just about everything else is bad debt, and at the top of this list is variable debt, and especially credit card debt.

A personal loan is generally considered to be bad debt as is a personal line of credit. However, these loans usually have fixed interest rates. This means their interest rates remain the same throughout the life of the loan. They also normally have a fixed term. For example, a personal loan might have an interest rate of 9% and a term of three years. At the end of those three years, the loan has been paid off and the borrower owes nothing more.

Credit card debt is very bad debt for two reasons. First, it usually has variable interest so that the credit card issuer can change the interest rate just about whatever it wants to. Second, credit cards are based compound interest. What does this mean? Here’s an example. Let’s suppose you owe $1000 on a credit card at 12% interest. The next month you will owe $1012 and will then pay 12% interest on it.

Apps for debt management

There are debt management apps that can help you with your struggle. One of the most popular of these is Ready for Zero. It’s designed to help you pay off your debts and build your wealth. Other popular apps for managing debt are Pay Off Debt, which has been around since 2009, and Debt Manager, which can help you track and pay off all your debts using the fastest and cheapest way possible.

There is also Debt Tracker Pro, which has a very simple user interface that allows you to focus directly on paying off your debts. It’s built around the debt snowball system, where you would be encouraged to first pay off the debt with the lowest balance.

Debt Payoff Assistant also uses the snowball method for getting out of debt. It will track multiple debts, and has built-in calculators and charts that showing your progress towards becoming debt-free.

In conclusion

If your finances are a mess, and if you’re seriously in debt, take heart. As you have read, there are apps available that could help you get your finances under control, and more importantly, to get your debts paid off in a timely fashion. Spend a few minutes online reading about these apps, and then choose one. You’ll be glad you did.

.

 

3 Important Tips for Managing Credit Card Debt

serious worried manOf all possible debts, the worst by far is credit card debt.

The reason it’s so bad is because it’s what’s called variable debt. Other debts like a mortgage or auto loan are fixed debts. They have one payment a month and a fixed term, so you’d know exactly when you’ll have the debt paid off. For example, auto loans typically have terms of five, six, or seven years. Personal loans typically have a term of three or five years.

That old demon called compounding

Fixed debts also have fixed interest rates. As an example of this, the interest rate on a personal loan can be as low as 5.99%, though most come with higher rates. The interest rates on a 30-year mortgage are still near all-time lows. In addition, the interest on these loans is built into their monthly payments. When you make your last payment on one of these loans, that’s it. You owe nothing more.

Unfortunately, it’s different with credit card debts. While they do have fixed interest rates, your debts are compounded each month. Let’s suppose you owe $1000 on a credit card at 15% interest. At the end of the first month, when interest charges are applied, your balance will then be $1013, and so on. It gets even worse if you owe $5000 on a credit card with an APR of 16%. If this is the case and you make just the minimum payment of $125 a month, it would take you 4.8 years to pay off your balance and would cost you $2000 in interest.

Tip #1: Avoid credit card debt

The best thing you can do with credit card debt is avoid it like Ebola. If you have more than one credit card, choose the one with the lowest interest rate, and then freeze the rest in a block of ice. That way you won’t be tempted to use them. You can use the remaining one, but never charge more than you can pay off when you get your statement. This offers two benefits. The first is the obvious, which is that you won’t be running up debt. The second is if you use that credit card sensibly, you’ll have a record of your spending that you could use in budgeting.

Tip #2: Negotiate with your credit card providers

If you’ve run up a serious amount of debt on several credit cards, contact your card issuers and negotiate with them. One of the upsides of credit card debt is that it’s unsecured debt. Almost all unsecured debts can be negotiated, and credit card debts are no exception.

Four things can usually be negotiated with credit card companies. The first is your interest rates. If you have credit card debt at 19%, you might be able to negotiate it down to, say, 13%, which would mean lower monthly payments. The second thing that can usually be negotiated is to have your payments waived for a few months. This would give you time to get your balances under control or to catch up on your payments.

Third, you could negotiate to have your credit card debt converted into a fixed, monthly loan. While you wouldn’t be able to use the card anymore, you’d at least know what your monthly payment will be each month, and when you will have the debt completely paid off.

The fourth thing that you might be able to negotiate is your balance. This is the hardest by far because you need to be experiencing a serious financial emergency to get the credit card company to agree. This could be that you’ve lost your job, just went through a divorce where you were stuck with almost all the debt, or were hit with huge medical bills. And you may be required to provide documentation that proves your emergency.

Tip #3: Settle your debts

A secret that credit card companies would rather you didn’t know is It’s possible to negotiate settlements. Let’s suppose you owe that $5000 we mentioned earlier. You could contact the credit card issuer and offer to make a lump sum payment of maybe $1500 to settle the debt. Your offer probably won’t be accepted but with a little back-and-forth you might be able to settle it for $2500. Of course, you would need to have the money available to immediately send the credit card company.

In summary

If you’re struggling with credit card debt to the point where you’re several months behind, take heart. You do have alternatives that could help you better manage or even pay it off in a reasonable amount of time. The important thing is to choose a strategy and start contacting your credit card companies.

5 Amazingly Simple Tips for Debt Management

portrait of a young beautiful man surprised face expressionBeing seriously in debt is just no fun. It can keep you lying awake nights wondering what you’ll do about it. Debt can even have a bad effect on your health, as the stress related to it can cause fibro myalgia, a spastic colon, arthritis, high blood pressure, and even heart disease.

Fortunately, there are tips for managing those debts, and to ultimately get them paid off. And these tips are amazingly simple.

1. Make a plan

This is something you might dread, but making a plan to pay off your debts is absolutely critical. You wouldn’t start tearing your engine apart without a plan for repairing it and the same is true of your debts. The easiest way to organize them is with a spreadsheet such as Microsoft Excel or the free Google Sheets. Be sure to list all your debts with the names of your creditors, your balances owed, and the interest rates.

There are two popular ways to pay off debts. The first is called the avalanche method. It’s where you order your debts with the one with the highest interest rate at the top down to the one with the lowest interest rate. You then focus on paying off the debt at the top of your list as this will save you the most money. The second pay off plan is called the snowball method. Instead, of organizing your debts with the one with the highest interest rate at the top, you organize them so that the one at the top is the debt that has the lowest balance. If you focus all of your attention on paying if off, you should get it repaid fairly quickly, which will give you momentum to pay off the debt with the second lowest balance, and so on.

2. Consolidate your debts

A second good tip is to consolidate your debts. You can do this several ways, depending on the type of debt. Is most of your debt credit card debts? You could consolidate them by transferring all their balances to a new card with a lower interest rate, or better, yet one of those 0% interest balance transfer cards. You would then have only one payment to make a month, which should be much easier to remember. Plus, those monthly payments will be lower than the total of the monthly payments you’re currently making.

Is your problem student loan debts? In this case, you have two alternatives. The first would be to get a federal Direct Consolidation Loan. The interest rate on this loan would be based on the weighted average of the interest rates on the loans you’re consolidating, and then rounded up to the nearest one-eighth of 1%. So, your new payment should be for a good deal less than your current payments.

Second, you might be able to get a private debt consolidation loan. Interest rates on loans such as this are now at practically an all-time low. In addition, there are a number of online lenders, where you should be able to find a pretty good deal.

3. Get counseling

Just as, if you were having serious marital problems you might go to a marriage counselor, you could go to a debt counselor for help — in the form of a nonprofit consumer credit counseling agency.

When you contact one of these agencies, you’ll be assigned a debt counselor that will review your finances and either suggest a budget designed to help you get your debts under control or what’s called a debt management plan (DMP). This is another way to consolidate your debts because if you accept the plan, you won’t be required to pay your creditors anymore. Instead, you’ll make one affordable payment a month to the credit counseling agency, which will then disburse the money to your lenders. It typically takes from four to five years to complete a DMP, but at the end you’d be basically debt-free, and you’ll have good credit.

4. Learn to negotiate

One of the things lenders don’t want you to know is that almost any unsecured debt can be negotiated. If you’re wondering what are unsecured debts, they are the ones where you weren’t required to provide any collateral. Medical debts, credit card debts, department store credit card debts, and old cell phone bills are typical of unsecured debts that can be negotiated. A good rule of thumb is to never pay one of these debts without first trying to negotiate a settlement.

The way this works is about the same as with any negotiation. You contact one of your lenders, and offer to make a lump sum payment, for say, 40% of your balance. The lender will probably refuse this offer, but will likely make a counter offer, and you then go back and forth until you arrive at a number that’s acceptable to both of you. Of course, you must have the money available to make that lump sum payment.

5. Use the nuclear option

Bankruptcy is often called the nuclear option because it essentially blows up your credit. But it is a way to get out from under most of your unsecured debts. However, bankruptcy can’t free you from secured debts like auto loans and your mortgage. It also won’t discharge alimony, child support, family support, and student loan debts. But if your biggest problem is your unsecured debts, then filing for bankruptcy would definitely get you a fresh start.

6 Important Tips for Dealing with Debt Collectors

serious worried manMost debt collectors are probably great husbands or wives, are good to their children, volunteer for good causes, and are nice all-around people – when they’re not at work.

Unfortunately, once these people go to work, all that niceness often vanishes. Debt collectors are almost always paid on a commission basis – or a percentage of whatever they can collect. This is serious motivation for them to say and do whatever is necessary to get you to pay up. In fact, if you’re contacted by a debt collector, the best way to think of it as if a German Shepherd has gotten ahold of your leg and won’t let go.

Of course, it’s easy to get that German Shepherd let go. All you need to do is pay the debt collector whatever he demands. And in some cases that might actually be your best option. But In most cases, it won’t be. So, you need to know these six good tips for dealing with a debt collector, especially if he comes becomes abusive.

1. Learn your rights

A few years ago, our Congress passed the Fair Debt Collection Practices Act (FDCPA). It spells out very specifically what debt collectors can and can’t do. If you’re being harassed by a debt collector, you need to know your rights. For example, debt collectors cannot contact you before 8 AM or after 9 PM at night. They also cannot contact you at work unless you’ve given them your permission. They can’t contact family members to discuss your debt, and theoretically, they can’t be abusive. Go to this site, to learn about your rights when it comes to debt collectors, so that you can stand up for yourself.

2. Make sure it’s really your debt

If you’ve never made a mistake in your life, you must be some kind of a Saint. And debt collection agencies are no Saints. When you’re first contacted by a collector, be sure to get the debt verified. The debt collector has 30 days to do this. If it turns out it’s not your debt, don’t dillydally. Get it fixed. A debt collector can put negative information on your credit reports that will stay there for seven years. This can affect your ability to get an auto loan, a mortgage, other loans or cheaper insurance.

3. Protect your bank accounts

If you refuse to pay a debt collection agency, it could sue you, and ask the court to freeze your checking or savings accounts. As you can imagine, this would have a very severe effect on your family finances. What experts advise is to create separate accounts for things such as disability checks or Social Security checks, as these are exempt and cannot be used for debt payments that have been court ordered. In fact, you should probably let a debt collector know if you have a bank account that contains only exempt funds.

4. Get a consumer lawyer

If you are served with a notice that a collection agency has sued you, be sure to get an attorney that specializes in consumer law. This is critically important because if the agency gets a judgment against you, it could garnish your wages. For example, a good attorney could find that the statute of limitations on your debt has expired, and that you’re no longer liable for it. If you can’t afford an attorney, at least show up in court because if you don’t, the creditor wins.

5. Record your conversations

If the collector makes threats or uses abusive you language then you need to record your conversations to document it. Some states won’t allow you to record a conversation unless you have the other party’s permission. You will need to check it out to see if this is true where you live. But if it’s allowed, record your conversations. In fact, it could be a good idea to tell the debt collector you’re recording the call even if you’re not. He’s less likely to be abusive if he thinks you are.

6. Get any agreement in writing

Don’t send in any payments until the agreement you’ve made with the debt collector is in writing and signed by a representative of the collection agency. As part of the agreement, you should also try to get the collector to agree to report your debt as “settled for full amount due,” or similar wording. If not, it will be reported as “settled for less than full amount due”settlement,” or something comparable and this will have a very negative effect on your credit and your credit score.