Late Payments  ●  Bankruptcies  ●  Tax Liens  ●  Charge Offs  ●  Repossessions  ●   Collections  ●  Identity Theft/Fraud  ●  Judgments  ●  Foreclosures 

Credit Cards

A credit card is a credit system used to pay for goods and services with the convenience of a small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards, the lender lends money to the consumer (or the user). It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged.

Credit cards make up for 2/3rds for the amount of consumer debt. Whether you are a student in college just starting out, an established business owner or just the average working American. Chances are if you have any type of credit it will more than likely include some type(s) of credit card.

Lack of financial discipline carries a stiff price. One can easily find themselves in financial debt when misappropriate use is a factor.

You will only want to use the cards for things you would have bought anyway, and I always pay the bill in full. If you can understand the full aspects of this method you will find that credit will always be a great financial tool for you.

Most consumers, however, overwhelmingly see credit cards as a quick way to get into debt. Truth is the average consumer simply does not know how to fully use credit for their benefit. More than a third of credit card holders will use their cards for the purchases of goods that they really can’t afford. No wonder, by some estimates, the average American household with at least one credit card has more than $10,000 in credit card debt. This number may not be direct overdue debt, however if you were to fall into some serious financial hardship what would it take to get you debt free is the true question?

- Based on actual studies more than 90 percent of people surveyed did not know how long it would take to pay off a credit card if they made only the minimum payment. More than half underestimated the time to pay off a $1,000 bill, which is seven to eight years.

- Nearly 80 percent realize they should check their credit score periodically, but only half do so occasionally. And while 72 percent understand they may benefit by consolidating balances on a single card, only 22 percent have done so.

- Most credit card holders don't like the card they have but don't do anything to try to find a better one. When asked why they simply have no reasonable explanation. Nearly 90 percent shred or throw away promotional offers they get in the mail and only one in five has searched actively online for a card suited to his or her needs.

There are many types of credit cards as well as accounts. Many credit cards offer different types of incentives. There are many benefits of owning a credit card. Some are good and some may be bad. It all depends on the ways that use them. If you are one of the many Americans that are in debt for the sole reason of credit card misuse or maybe you have fallen into some type of hardship the first thing that you will want to do is contact your creditors and cancel all of those accounts (leaving at least one open). The one card that you choose to leave open will be the one with the lowest balance and lowest apr. This card will be for paying bills and reestablishing your credit. At the same time you will need to set up some type of repayment arrangement. Do not just neglect those accounts and let them fall into collections. You want to prevent this from happening. Many creditors will work with you as long as you come to them before they send the accounts to collections. Most creditors will not discuss repayment once your account has been sent to collections.

If you don’t have a credit card and would like to obtain one shopping around for a credit card can save you money on interest and fees. You’ll want to find one with features that match your needs. Two great credit cards that I recommend are no-fee and cash-back-rewards credit cards. By using the appropriate card for each purchase (each gives higher rewards with certain merchants, such as grocery stores or gas stations). With these types of cards one can easily find themselves making a profit by using their cards. You can find good rates as well as reasonable offers at CreditCards.com or other sites such as CreditorWeb.com. You can also do a simple Google search with the keywords “credit card” and find others. You understand that the better your credit is then the better the rates you will receive. In other words the higher your credit score is then the lower the rates will be. That goes both ways. The lower your credit score is then the higher you should expect the rates to be.

 

Debt

Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy.

A debt is created when a creditor agrees to lend a sum of assets to a debtor. In modern society, debt is usually granted with expected repayment; in many cases, plus interest. Historically, debt was responsible for the creation of indentured servants.

If you find yourself in this ugly situation called debt you will want to consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. Debt negotiation is yet another option. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

Developing a Budget:
The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your “fixed” expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums. Next, list the expenses that vary — like entertainment, recreation, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

Your public library and bookstores have information about budgeting and money management techniques. In addition, computer software programs can be useful tools for developing and maintaining a budget, balancing your checkbook, and creating plans to save money and pay down your debt.

Contacting Your Creditors
Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.

Dealing with Debt Collectors
The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.

Managing Your Auto and Home Loans
Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Most automobile financing agreements allow a creditor to repossess your car any time you’re in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the creditor may sell the car. If you see default approaching, you may be better off selling the car yourself and paying off the debt: You’ll avoid the added costs of repossession and a negative entry on your credit report.

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who’s having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you.

Debt Consolidation
Debt Consolidation is a solution that solves your debts. Debt is a financial hazard. It occurs when you borrow money for some personal expenses and is unable to pay the amount back to the creditors on time. With this overpowering impact of consumer goods, individuals today are deep down in debts or prone to it. Debt has thus spread like a curse across the nation and become a threat for almost every individual.

Debt problems have taken the high tide with a huge number of people struck with the disease of debt everyday. Almost the majority population suffers from debts. The criminal activities in the country have also gone high and one of the most responsible factors behind this is the debt crisis.

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.

Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.

Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.

Student loan consolidation
In the United States, federal student loans are consolidated somewhat differently, as federal student loans are guaranteed by the U.S. government. In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year.

Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans, 9% for PLUS loans. The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.

Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.

Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus.

Concerns of consolidation
In recent years, reports in the media have raised concerns about the use of consolidation loans. The worry is that many people are tempted to consolidate unsecured debt into secured debt, usually secured against their home. Although the monthly payments can often be lower, the total amount repaid is often significantly higher due to the long period of the loan. Debt consolidation sometimes only treats the symptoms of debt and does not address the root problem. In some circumstances, snowballing debt may be a better solution.

There are other alternatives to a debt consolidation loan, where unsecured debt is not "shifted" to secured debt, but is eliminated through a settlement or payment plan. Debt consolidation can be confusing for many people, so it is helpful to learn about all of your options, and sometimes with the help of an advisor.