Credit Card Tips Blog

With the current state of the economy, the unemployment rate is creeping up and is higher than ever in many areas. Although the consumer is unemployed, the payments that are due on credit card accounts and other sources of consumer debt are simply not stopped, so how does one deal with debt while they are without work? Here are some tips and techniques that you can use to effectively manage your debt load – despite your unemployed status.

Rely on Your Savings. In the case that you have developed an emergency fund or savings account, this is the time to use it. The time between now and when you are seeking a new job is the crunch time when it comes to your finances. Use your emergency fund wisely to cover only what you need, not what you want. Now is the time to set a budget and really determine your wants and you needs, only when you learn to differentiate between these two is when you can truly begin to save the money that you require for your expenses.

Use Credit card insurance to cover minimum payments. If you have enrolled in credit card insurance than now is the time to use it. This credit card insurance is used in times like these to ease the stress on the finances that can come with unemployment. Although these costs may come at a monthly fee – you will be thankful that you have signed up for protection in the past.

Cut back. While you are unemployed and searching for a job it is time to cut your expenses down to the bare minimums. Consider cutting back the cable programs that are available or getting rid of the extra cost of a cell phone each month. Wherever you can find a way in the budget to save a couple of bucks, your wallet is going to thank you in the end.

Know your expenses. Now it is time to determine what your monthly expenses are. Knowing these monthly expenses allows you to find the money in the budget to repay debt when you know exactly how much is to be paid to each account, every month. Do not allow yourself the opportunity to overspend in any one category, as it can lead to stresses on other parts of the finance.

Find more money. Liquidate your assets or take advantage of personal loans from friends and family members. Now is the time that you should do whatever it is that you need to that will enable you to make it from month to month. Searching for a new job can be stressful; you don’t want to add on the stress of being unable to pay the monthly bills.

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Using a credit card is not rocket science, but unfortunately, especially for first time card holders the card does not come with an instruction manual. Confused card holders that are unaware of policies are often the card holders that end up in debt with high interest rates, balances that have been carried from month to month and the fees associated with late payments and the card holder allowing the balance to exceed the credit limit that has been granted. Simple credit card “rules” could prevent these credit mistakes that could leave you in debt and cost you the good credit rating that the card holder has worked so hard for.

Don’t Carry a Balance

Carrying a balance can cost the card holder money each month in convenience fees referred to as interest. The monthly payment will often increase if there has been a balance on the card and are accounted as the cost of using money that isn’t yours! Many consumers are unaware that repaying the credit card up to twenty days later means that the purchases were repaid within the grace period of the credit card and therefore are not subject to interest fees. However, the card must be balance free from to month to save money this way.

Pay at Least the Minimum Payment… Pay More if You Can

Missing the minimum payment on the credit card can cost you more than high levels monthly payment and fees for missing the payment. It can cost you the good interest rate that you have been granted. Once a payment is missed on the credit card the credit card company can raise your interest rate, as you have begun to show risky payment behavior! If you are carrying a balance, your monthly payment can increase as much as ten percent.

Paying the minimum monthly payment to a credit card that is at its limit could take up to ten times longer to repay than paying double, or even triple the monthly payment. These minimum payments are designed to repay interest, with a tiny portion of the balance. Paying only the minimum payment is a great way to get into debt, and stay there.

Watch out For Fees

When using a credit card, it is important to remember that they are often one of the highest costing financial services that are available to consumers. There are many fees associated with the card including over limit fees, late payment fees, foreign transfer exchange fees, balance transfer fees and even annual fees that allow for use of the credit card. Watch these fees and you can save hundreds of dollars per month throughout the lifetime use of the credit card.

Using these tips, you should be able to use the credit card wisely and reduce the chances that you could be facing credit card debt in the future. Be sure to use the card wisely and purchase only what you can afford to repay – any other behavior is ultimately going to lead to debt.

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Credit card debt can be overwhelming, when minimum payments seem high and there is just not enough money within the income to make all of the payments and pay for your day to day expenses. There are five steps that you can use to successfully overcome credit card debt,

1. Recognize the Debt

   It is impossible to get out of credit card debt until the consumer realizes how dire the situation can be. Recognizing the debt and establishing amounts that owe to each creditor is the first step of the debt repayment process. Take a pen, paper and recent statements to tally up just how much debt has been accrued. Be sure to include credit card debt, personal debt with loans to friends and family members and any outstanding bills, loans and credit lines. Tallying it up is an eye opener which can often shock the card holder into beginning an aggressive debt repayment plan.

2. Stop Spending

   Put the credit cards away for this portion of the debt repayment plan. Whether you have to freeze the accounts with the credit card company or literally put the credit cards on ice – it is important to avoid accumulating any additional debt once the repayment plan has been started. After the credit cards have been put away it is time to establish a repayment plan!

3. Make a Plan to Repay the Credit Card Debt

   A plan to repay the credit card debt can include the list that you have created in step one. In addition to these total amounts owing, calculate the amount that these debts are costing each month by multiplying the interest rate by the balance of the outstanding debt. Tally the list and arrange the debts from most expensive to least expensive. Number one is going to be the most expensive debt which you will repay first, when number one has been repaid you will work your way down the list repaying the same amount that you have established in the budget for debt repayment.

   How do you know how much should be allocated towards debt repayment? For optimal results, fifteen percent of the income should be allocated towards debt repayment. Any less than fifteen percent and you could risk the debt taking over your life for years to come and any more could mean stress on other parts of the budget.

4. Create a Budget

   A budget will need to be created that allows you to allocate fifteen percent of your income every single month towards debt repayment. This budget should include portions for fixed and variable expenses, savings as well as the debt repayment. Variable expenses are often cut in half when the consumer has been spending outside of their means to accumulate high levels of debt. Sacrifices now will mean financial preparedness later!

5. Stick to Your Budget and Repay the Credit Card Debt

   Seeing statements arrive in the mail that outline the zero balance of the credit card are some of the most rewarding moments through the debt repayment process. Sticking to your budget will enable you to establish some sort of financial security and repay the debt while learning valuable personal finance skills that can help you in the future.

Choosing a credit card can be a difficult decision, after all, there are thousands of credit cards available from various financial institutions offer different rewards programs. The credit card should be chosen on the merits that benefit the consumer and fit in with their lifestyle and spending habits. Here are some things to keep in mind when choosing a credit card – whether it is your first or your fifth credit card:

What is the Interest Rate?

The interest rate of the credit card can directly affect the expense of the credit card on a monthly basis. The interest rate should be as low as possible – or as low as your credit rating will allow. Consumers with high credit ratings are offered lower interest rates than those consumers that have a lower credit score.

The interest rate will be multiplied by the balance to come up with the minimum payment amount. Keep this in mind if you intend to carry a balance on the credit card that you are choosing. Credit card companies have three tiers of interest rates; premium interest rates, elite interest rates and standard interest rates.

Maintain a high credit rating to get the lowest interest rate.

Are Rewards Programs Available with the Credit Card?

If the credit card comes with the choice to collect rewards, there are three options for these rewards; cash back rewards, rewards points which are often given for each dollar purchased with the credit card and travel rewards that can help you to collect points with your favorite airline or travel rewards system.

There are many rewards cards available, the choice is up to you – many programs offer flexible redemption programs to change which types of rewards are redeemed through the program. Look for a rewards card that has no monthly or annual limits on the amount of rewards that can be redeemed or earned as well as a rewards credit card that comes without a separate enrollment fee – aside from that of the credit card.

What Types of Fees Are Associated with the Credit Card?

For most credit cards, there is more than just an annual fee associated with the credit card. The annual fee is the usage fee for the credit card and is often put into place when cards are associated with rewards programs.

There are many other fees which should be priced before using the credit card to ensure it is used wisely; over-limit fees, late fees for payments that have not been received on time and balance transfer fees. Knowing these fees and the amounts that they could cost the card holder has a sobering effect and could help to avoid bad credit card behavior.