Posts Tagged ‘consumer’

Debt Problems – How To Turn Them Around

November 17th, 2011

Being in debt refers to the situation of a person who cannot pay his rates and interests to a credit card company or a consumer loan. This usually discourages many people and that’s the reason why they actually stop trying to find the money and do nothing. This is the worst thing anyone can do, as the interest and penalty fees sum up each month.

The first sign showing that you are having debt problems is when you realize you don’t have any savings. This proves that you have no additional cash at the end of the month and you always use credit cards for daily use or emergencies. It can also turn out to be a problem when you only make a minimum payment each month and even that is usually done pretty late. Other warning signs are: denied credit, overdraw of bank accounts and at least one credit card near or over the credit limit.

When a person does not pay his credit card debts, the bank flags him as a delinquent card member, and calls him often to remind him to pay. After a number of missed payments, they turn the account to a collection agency that tries to convince you to pay, whatever they collect being their profit. Even though there are many speculations of going to jail for not paying, those are not at all true, since incurring debt is not considered a criminal act. However, if a contract was signed, breaching it could turn into a criminal case.

One of the worst debt problems is the negative effect it has over your credit history. If your credit history is affected, it will be really hard to make other loans in the future. It may even badly influence your chances of getting a good job. However, at some point your debt will be erased from the computers, but that may mean a very long period of time.

The worst debt problems that a person can have are not being able to buy a house or a car in the future without saving cash and also having to deal for a very long time with phone calls and threatening letters from the collection agencies. The collection agencies can even involve your family and friends, and you would really feel embarrassed.

The first and major solution that can solve all of these problems is not to be in debt in the first place. Try to pay all your rates and interests and don’t stay behind with any monthly fee. If the income is not enough to pay all your debts, you can consider taking a second job. Even though it may be hard and you may not have time for anything, it can only be for a short while until you manage to save up some money.

Another way to get rid of debt problems is to use the snowball technique. Save up some cash (it may mean you have to give up some of your favorite activities that cost money) and pay off your credit card debt from the smallest to the largest one. If you succeed in paying the small ones, you will have more money to make payments for the bigger ones.

If you still find trouble in paying your monthly debts, dividing them in two can be a good solution. This way you can also make them smaller, thus easier to pay and you can minimize the interest rate.

Whenever you have debt problems, you should prioritize payments and try as much as possible to avoid spending money on things that you don’t really need. Getting on the banks’ “black list” may stop you in the future from buying a car or a house.

Posted in Debt Solution

Choosing Secured Credit Cards to Strengthen Limited Credit Histories

November 6th, 2011

Consumers who are looking to boost a very low credit score after debt settlement may want to consider the benefits of applying for a secured credit card account. Secured credit cards are typically easier to get than traditional unsecured credit cards but there are some guidelines for selection and use. Not all secured credit cards offer the same benefits and if you are trying to strengthen your credit score, it is important to make the right financial decisions for your spending habits and your lifestyle.

Understanding Secured Credit Cards

Secured cards differ from traditional cards in that consumers are required to make an initial cash deposit into an account with the card provider. That deposit amount varies by provider but will become the credit limit for the cardholder. When purchases are made, account holders will receive a statement in the mail similar to traditional statements. The balance should be paid in full within each billing cycle to ensure you have full spending power.

Choosing the Right Card

There are several things you should look for in a new secured credit card to make it advantageous to your current financial situation and future credit goals. These considerations include:

Credit Reporting

A very important term of a secured credit card for the cardholder trying to improve a weak credit history is to ascertain whether or not the card provider will report account activity back to the consumer credit reporting bureaus. Secured cards from providers who do not report account data to these agencies are not beneficial to your credit improvement goals. If there is not evidence of the provider reporting credit data to consumer credit bureaus, contact the company directly to inquire before selecting a card.

APR Terms

Since secured credit cards are often offered to those who may be a credit risk to card providers or those who have a limited credit history, the annual percentage rate on this type of card will generally be higher than APRs on traditional credit cards for consumers with good credit ratings.

Fees and Penalties

Again, secured cards are often used by those not yet proven to be creditworthy to traditional lenders. As a result, many secured card providers tack on fees for multiple services including monthly account maintenance. Secured cards may also have stiffer penalties for late payments or for overextending your credit card’s spending limits. These fees and penalties will be outlined in the fine print of the card agreement so be sure to read it thoroughly and carefully.

Deposit Requirements

While many secured credit card providers will require between $300 and $500 in upfront deposits, some providers may insist on more. Find a card that has a deposit requirement that is reasonable for your personal budget but will also give you some spending power after monthly account fees have been deducted.

Using a Secured Card

Secured credit card use is the same as using a traditional credit card. You should be careful to never exceed your limits and that you have the financial capabilities to repay what you have spent. Even though money was deposited into the account beforehand, you still have an obligation to pay back what you have charged on a secured card. Additionally, you should make a point to pay the bill on time and in full each and every month if you expect it to boost your credit rating.

Using your card regularly for specific purchases like gas and groceries can allow you to better track your spending and stay in control of your personal budget at all time while on the road to a better credit score. After using a secured card for several months or for as long as a year with good management of your account, you may improve your credit history enough to qualify for a traditional card with a good interest rate.

Posted in Credit Card Debt