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Archive for March, 2012

Credit Card Myths That Can Cost You

Written by Toi Williams on Mar 31st, 2012 | Filed under: credit cards

There are many myths floating around about credit cards and the best techniques for using them.  Believing these myths about credit cards can leave you with high debt levels and cost you a significant amount of money that you may be paying off for years.  Here are some of the most common myths about credit cards and why the myths should be ignored.

Paying With Credit Costs The Same As Paying With Cash

Many people believe that their purchase will cost them the same amount of money regardless of whether they pay with cash or with a credit card.  Unfortunately, paying with a credit card will always cost more because of added interest and fees applied to the balance of the account.  As time goes by, these charges can add up, resulting in a significant addition to the original cost of the items purchased.  You should try to pay for purchases with cash or a debit card to avoid having to pay more than the item is worth to own it.

Rewards Credit Cards Are Always Beneficial

During the early 2000’s, many credit card companies offered free items, cash back, or rewards points for using your credit card at specific merchants or for buying items that fit into a particular category.  Today, the rewards are more difficult to earn and you must spend more than you may be comfortable with to get the rewards that you want.  Instead of choosing a credit card based on the rewards, you should choose the one that offers the highest credit limit with the lowest interest rate that can be used at any retailers you desire.

You Will Be Fine Paying Only The Minimum

Some people just pay the minimum payment amount indicated in their credit card statement because it is all that’s required to keep their account in good standing.  Unfortunately, if you just make the minimum payment, it can take more than 10 years to pay off the entire balance plus all associated interest charges.  It is better to keep the balances of your credit cards as low as possible by paying off as much of the balance as you can every month.


You Should Never Have To Pay These Fees

Written by Toi Williams on Mar 30th, 2012 | Filed under: saving

At times, it can seem like fees are everywhere and are levied for everything. However, there are some fees that you should never have to pay and you should avoid these fees at all costs, because they provide you with little to no benefit.  Here are some of the worst fees and some simple steps that can be taken to help you can avoid them.

Late Fees

Avoiding late fees can be as simple as getting organized about your regular bills to ensure that they are all paid on time.  If you can, automate the payments of household utilities and other recurring bills by setting up bill payments to be charged to a credit card or deducted from a checking account.  Many banks offer free bill pay programs through their online banking offerings to make it easy for their customers to set up automatic bill payments and avoid late fees.

Overdraft Fees

An overdraft fee is typically charged when a person neglects to check the balance of their account before spending and spends more than the account allows.  There are several methods that you can use to ensure that you will avoid triggering overdraft fees, including checking the balance of the account before to leave to spend money or keeping a ledger for each account that documents the money going into the account and the money coming out.

ATM Fees

Many banks charge ATM withdrawal fees if you withdraw money from an ATM that is not branded for the bank the account is stationed with.  These fees can range between $1 and $3 per occurrence and although some banks waive fees for all ATM transactions on any ATM machine, most don’t.  Avoid this fee by using only ATM machines where your bank will not charge the fees or make withdrawals directly at your bank.


A Poor Credit Score Can Make Life Difficult

Written by Toi Williams on Mar 29th, 2012 | Filed under: credit score

Everyone knows that a poor credit score can make it difficult to obtain additional credit, but many people do not know that a poor credit score can affect many other areas of their life as well.  Your credit report and credit score may be reviewed for many different reasons and a poor credit score will reflect badly on your efforts to obtain whatever you are seeking.  Here are some ways that a poor credit score can make life more difficult for you.

Obtaining Housing

Where you are able to live can be affected by a poor credit score.  Your credit score can disqualify you from obtaining a mortgage to purchase a house or from renting a home or an apartment.  Landlords review the credit reports of rental applicants because they want to be reassured that they will receive their payments on time and that the renter will honor their obligations.  Individuals with a poor credit score have a harder time being approved for a rental than those with credit scores that are good or excellent.

Obtaining Employment

Having a poor credit score can also limit your employment opportunities.  A poor credit score automatically disqualifies you from certain types of employment, including some banking professions and security positions.  Having a credit score below a certain threshold can also result in being passed over for a promotion or a demotion to a position that requires less responsibility.  There are several different ways that a poor credit score can affect your employment so you should keep in mind that keeping your credit score high increases your ability to make money and change employment in the future.

Obtaining Transportation

A poor credit score will increase the price that you will be paying to obtain private transportation.  Individuals that have a poor credit score are not qualified for an auto loan at most traditional vehicle dealerships, so they must purchase their vehicle from a ‘buy here, pay here’ dealership or on the secondary market where they may have to pay significantly more than the vehicle is worth to obtain transportation.  A poor credit score can have many negative effects on your life so it is in your best interest to do what you can to keep your credit score as high as possible.


Why Is My Credit Report Important?

Written by Toi Williams on Mar 26th, 2012 | Filed under: credit score

One of the most important pieces of personal information in your adult life is your credit report.  The credit filed used to compile your credit report contains a great deal of information about you, including how much credit you have available to you, your payment record with nearly every account you have, and whether you have defaulted on any of your debt obligations in the recent past.  Most of the information included on a credit report will remain there for a period of between 5 to 10 years, depending on the laws of the state that you reside in.

Employment

Your credit report has the ability to affect many different areas of your life, including your current employment prospects and your future financial stability.  Employers will request permission to view your credit report if you apply for certain types of employment positions, such as those handling money or those where you have any responsibility for the finances of the company.  These employers want to make sure that you are not experiencing any type of financial situation that would lead you to do anything detrimental to the company.

Housing

The information in your credit report can also affect your ability to obtain housing.  Everyone knows that mortgage lenders look at the credit reports of people applying for a mortgage, but many people do not know that landlords and apartment complexes will check your credit report as well.  If you are going to be renting a home, condo, or apartment, the owner wants to know whether you have a history of paying on time and whether you have been able to meet all of your current financial obligations.

Finances

A mistake in your credit report can be costly, resulting in hundreds of dollars in penalties and missed opportunities each year.  An error in your credit report that negatively impacts your credit history can result in a decrease in your credit score and the rejection of applications for positions that require a clean credit history.  You should review your credit report at least once annually to check for any errors that could be causing you difficulty financially.


Common Myths Regarding Student Debt

Written by Toi Williams on Mar 20th, 2012 | Filed under: student loans

For the first time ever, student debt is poised to exceed credit card debt in total volume, highlighting the fact that more students than ever are using loans to finance their higher education.  The increase in student debt has prompted many to take another look at student loans and similar types of financial products and reevaluate their value to society.  There are some common myths about student debt that continue to circulate, but these myths can be easily dispelled with some general information about student debt.

Myth 1 – Student Debt Isn’t Worth It

The number of college graduates without jobs in the current economic environment has caused many to question the value of a college education.  What these people fail to take into account is that the unemployment percentage for individuals without a college degree is much higher.  The cost of college tuition is high and student debt is expensive, but people that have a college degree still make more money and have the better employment prospects than those without.

Myth 2 – Student Debt Is Bad Debt

The current popular mantra is all debt is bad debt and that debt should be avoided at all costs.  However, the cost of higher education can be too high for many students to pay for without debt.  Many of the jobs that would pay enough for a student to cover their entire annual tuition are full time positions, leaving the student with little time for their studies and increasing the chances that they will drop out before completing their degree.  Many student loans have reasonable repayment terms that give the student time to find a job once they have graduated before they must begin repaying the losn.

Myth 3 – College Graduates Are The Only Ones That Worry About Student Debt

People that have graduated college are not the only people that have student debt to worry about.  Many of the people that started college but never finished their degree also have student debt that they must repay and they often don’t have jobs that pay as much as college graduates earn, making repaying their student loans more difficult.  People that have dropped out of college are four times more likely to default on their student loans than those that have earned a degree.


What Debt Collectors Cannot Do

Written by Toi Williams on Mar 19th, 2012 | Filed under: collectors

In recent years, many people have fallen behind on their payments and are now somewhere in the debt collection process.  Calls from debt collectors generally include admonishments for not taking care of your obligations and demands for repayment, but there are some things that they cannot say and cannot do during their collection efforts.  Although the rules governing debt collection have been in place for some time, some bad players in the industry ignore these rules and perform these actions anyway.  Knowing what debt collectors cannot do will help level the playing field in your dealings with them.

Debt Collectors Cannot Bug You At Work

Once you tell a debt collector your employment may be in jeopardy if they continue calling you at work, they must stop calling you there.  The Fair Debt Collection Practices Act, which regulates the actions of debt collection companies, is clear on this point and there are no loopholes for the debt collection companies to wriggle through.  If a debt collection company continues to call you at work after you have told them not to, they can be reported to the Federal Trade Commission for investigation.

Debt Collectors Cannot Talk About Your Debt To The Public

Under the Fair Debt Collection Practices Act, debt collectors are prohibited against discussing your debt with neighbors, relatives who are under no obligation to pay the debt, or coworkers.  Debt collectors are allowed to discuss your debt with you, a cosigner, your spouse, or your attorney.  Debt collectors are only permitted to contact third parties to locate you and once you have been found, the contact must stop.

Debt Collectors Cannot Sue For Debts Past The Statute Of Limitations

Every state has issued a statute of limitations on debts that make debts older than a certain age not collectible.  The statute of limitations for collections generally runs for four to six years from the date you last made a payment and collection accounts may be reported to the credit monitoring bureaus for seven years.  However, debt collectors are under no obligation to tell you that they cannot sue you or legally add anything to your credit report if you refuse to pay debts that are past the statute of limitations.


A Financial Rescue Plan That Anyone Can Follow

Written by Toi Williams on Mar 17th, 2012 | Filed under: debt relief

Getting out of debt is becoming the goal of a large percentage of the population as more and more people find themselves facing difficulties due to their financial situation.  Many households are having trouble coping with the downturn in the economy, a decline in their ability to obtain credit, and the disappearance of any equity that they had in their home, which is causing them to recognize just how deeply in debt they are.  People finding their credit cards maxed out and no other financing options available can find it very difficult to extract themselves from their situation, but by following a few simple steps, you can reduce your debt by a significant amount within a matter of months and rescue your finances from certain disaster.

Believe That You Can Reach Your Goal

The first step in your financial rescue plan is believing that getting out of debt is possible.  The process may be difficult but getting out of debt can be accomplished.  You have to be able to stick to your financial rescue plan long enough to eliminate your debt and to do that, you have to believe that the plan will work.  It will take time to produce results, but signs that the plan is working will appear quicker than you think.

Stop Creating Debt

The hardest part of any financial rescue plan designed to get you out of debt is changing your spending habits to stop creating more debt.  Every dollar spent on other items is a dollar not going towards paying off debt.   If you are going to accomplish your goal of debt elimination, you will have to keep that in the front of your mind at all times.  Determine where unnecessary purchases are occurring in your life and cut them out of your budget.  This is one of the fastest ways to reduce your monthly expenses so that you can pay off excessive debt.

Save For An Emergency

Having to borrow money, either through credit cards or from a loan, to pay for a financial emergency is the most common reason that people begin to drown in debt.  Having savings available to use in these situations will give the person more options for managing the issue and reduces the chances that the person will have to use their credit card or take out a loan to handle the situation.


How Can we Teach Kids the Value of Money?

Written by admin on Mar 14th, 2012 | Filed under: mindset

Financial experts believe that kids need a basic understanding of how the economy works, particularly in relation to their own family’s requirements.

Introduce your child to the concept of money, as soon as they can count. Speak about money on a regular basis, as repetition is central to learning for children. It is important to emphasize how to save money and how to spend it wisely.

Young kids should be taught the difference between genuine needs and simple “wants”. This incredibly valuable information will allow them to make sound spending decisions as they grow up.

It is important to impress upon children that everyone must have a job of some description and that the individual’s or family’s lifestyle is directly linked to the amount of money they earn and how wisely they use that money.

Learn to budget, set goals and save

Kids are normally capable of understanding the concept of budgeting from the age of seven. Learning about finances is without doubt the most valuable gift you can give a child, as this knowledge will aid them for the remainder of their lives.

It is also important to allow kids to make spending choices. It is by making bad choices initially that children learn to eventually make correct and carefully thought out choices.

The best way to learn about the value of money is to set goals. Toys and non-essential items that a kid may ask for can all become goals for which they work. This type of goal setting assists kids to become responsible for their own wishes.

Encourage kids to save, rather than to spend and explain the importance of earning interest income on money that has been saved. Parents can pay interest on money that their kids have put aside at home, to best illustrate this concept.

Encourage your children to calculate the interest they are earning and they will see how fast their money is accumulating. As an extra incentive, parents can even offer to match what kids save by themselves.

Small denominations and record keeping

A child’s allowance is best given to them in small denominations and they should be encouraged to save a percentage of it.

Kids need to learn how to keep a record of their money. It is important that they know how much they have spent, saved or invested. Keeping receipts from all purchases will help your children with their record keeping.

Open a savings account

Kids should be encouraged to open a savings account at an early age. Children can also be given bonds as gifts, with the understanding that these will increase in value, if they do not spend them immediately.

Junior individual savings accounts such as http://www.moneysupermarket.com/savings/junior-isas/ are a perfect way for kids in the UK to save money. These savings accounts are the start of a nest egg and will provide a level of financial backup when the child leaves school.

In many instances, these junior individual savings accounts can be used to cover university fees or as a down payment on the young person’s first house.

As part of a sound money education, kids should also be taught that they are members of a larger community and as such, have a responsibility to others as well. Teaching your child a sense of social ethics will of necessity include teaching them a sense of charity as well.

 


These Bad Habits Can Hurt Your Finances

Written by Toi Williams on Mar 12th, 2012 | Filed under: mindset

Many people have bad financial habits that they are not even aware of that can harshly affect your financial stability in various ways.  Removing yourself from the damage that these habits cause can be much more difficult than you think, with some cases taking years to repair all of the damage done.  If you have any of the following bad financial habits, you should take steps to correct these habits now to save your financial future.

Having Many Credit Cards

Many people fall into the trap of applying for an accepting every credit card that is offered to them.  Many stores offer their own branded credit cards and offer a discount for using that credit card, but the interest rates and fees for the credit card are typically higher than average, neatly erasing any savings realized by opening the credit card.  If the only reason you are opening a credit card is for the store discount, you would be better off waiting for a sale.

Having many different credit cards can cause a multitude of problems as well, including missing payment dates, incurring overdraft and late payment fees, and spending more than you can afford to repay.  Multiple credit card accounts also reduces your credit score, as part of the formula for calculating credit worthiness involves the number of credit accounts you have open.  It is best to have one or two high-limit credit cards that can be used anywhere and avoid opening store branded credit cards.

Forgetting To Check Your Credit Report

One-quarter of the credit reports held on individuals today are believed to contain inaccuracies that could negatively affect the person’s credit score, according to experts.  These mistakes can be corrected more easily when they are discovered quickly.  In most cases, the only way to find these mistakes is to obtain a copy of your credit report and review it carefully for any inaccurate information.  The credit reporting bureaus are required by law to investigate any claims of inaccurate information on a credit report.


Control Your Spending With These Simple Tips

Written by Toi Williams on Mar 7th, 2012 | Filed under: mindset

There are many people looking for ways to control their spending, including those looking to get out of debt and stay out of debt for a significant period of time.  Controlling your spending is becoming more and more complicated with all of the demands on your finances that typically occur in a normal household, but it can be done effectively and efficiently.  Here are some of the simplest methods to use to control your spending successfully.

Keep Track Of Your Spending

Keeping track of how much money you are spending each month and what you are spending money on will help you keep control of your spending.  With careful documentation, you will be able to identify areas where money is being wasted and make the necessary adjustments to your spending.  Tracking your spending also reduces frivolous spending, increases your savings, and increases your financial security.  Spending can be tracked in a basic checkbook ledger or by using a computer program designed to categorize spending.

Compare Prices

The first price you see for an item may not be the best price that you can get on that item.  There are many ways to review the prices of particular items over multiple retailers, including websites on the internet that pull prices from different retailers and sales flyers that detail what items specific stores have on sale that week. Comparing prices can save you money on everything from groceries to clothing to electronics, allowing you to get a lot more for the money you are spending.

Resist Using Credit Cards

Every purchase made with a credit card will end up costing you more than advertised because of the interest and fees charged by the credit card company.  Credit card companies also make billions in pure profit from over-limit charges and late payment fees every year from consumers that make honest mistakes with their credit card.  If you absolutely hate carrying cash, you should consider using a debit card that takes the money from your purchases out of your checking account so that you will not have to worry about interest payments or spending more than you can afford to pay back.