January 13th, 2011 by achi
This is an undeniable truth: credit cards are very helpful when used properly. Proper use entails paying all you owe full when they are due. This means paying everything monthly. A credit card becomes a problem when the use of it gets out of hand, and the card holder ends up with debts well beyond his capacity to pay.
Always Pay on Time
This is rule number one (1) in debt management: always pay on time.
When you are always current with your payments, you will have peace of mind. Remember that peace of mind is priceless. It also shows so much about your character as a borrower. Paying on time helps your credit score and it assures swift future loan approval.
Paying on time will also help you pay off your debt more quickly. This is because by being current, you avoid late fees which can substantially add up to your payables when left unsettled. Finishing off early will also free you from future interest rate hikes.
Always Pay More than the Minimum Payment
This is rule number two (2) in debt management: pay more than the minimum payment.
If you pay more than what is required, or when you pay extra, you will greatly reduce the principal balance much faster. You will save money on interest charges over the years.
On the opposite, when you only pay the minimum payment on your credit card, it will take you years to pay off your loans.
For instance, you have two credit cards. When you pay extra, there is a chance that you will finish off the first card and have an excess fund from that first card. What you can actually do is apply the extra payment to your second card. This allows the power to build and speed off your debt paying process much more quickly.
Manage your Debt to Income Ratio
This is rule number three (3) in debt management.
What is Debt to Income Ratio?
Debt to Income Ratio or DTI is a figure that calculates how much of a person’s income is spent paying his debts. When the DTI is high, it means that most of the income of the person is used to pay back his debts. This is not a very good financial situation to be in.
It is very important to manage your Debt to Income Ratio. This is because DTI is used by lending and banking institutions to evaluate a person’s creditworthiness. With a very high DTI, financial institutions believe that a person is a “high risk” since there is a very big possibility he might not be able to pay back his debts.
Lenders may approve loans of people with high DTI’s. However, to buffer the risks they are taking, they will charge you with a very high interest rate.
Debt to Income Ratio is computed by following this simple formula: monthly debts owed divided by monthly income.
Break the Credit/Debt Cycle
Avoid using your credit cards when buying. Better yet, avoid purchasing anything on credit. This is rule number four (4) in debt management.
The key to financial freedom is wise and sound financial management. This means managing your money, and not your money managing you.
In order to manage your money properly, it is vital to stop going into debt. Avoid using your credit cards and/or borrowing money to make purchases for things other than your home. Moreover, buy only the thing you need. In a nutshell, most financial gurus would give this advice: live within your means. Spend only what you can actually afford.
Begin Building Wealth
Save enough money for the things you want rather than buying them on credit. You can also use any extra money that you have saved to invest. By investing, you begin building wealth. Remember that it’s not how much you earn that makes you rich; it’s how much you save!
August 13th, 2010 by achi
Getting married is a wonderful thing and gives birth to a new life together as a couple. Part of being married means working together as a team in all aspects of our lives-physically, spiritually, emotionally and financially as well. In fact, questions of finance and debt have led to disagreements and splits between both married couples.
The main area of concern when it comes to finances is the area related to personal debt, especially credit card balances. Many couples go into marriage without being aware of the debt of his girlfriends. In fact, although debt is a personal burden, while you are single, married couples will finally have to face the debt problem together after being married. This can cause stress in marriage, which is why 70% of divorces in the United States are caused by financial problems.
It is best to exercise sound financial planning consolidated after marriage. This means that you should try to clear any outstanding debts you may have before you’re married. The union of these in marriage can mean asking your spouse to bear for a debt that he or she will not get into in the first place. Cancel credit cards that charge high interest rates and leave one or two that offer favorable rates. You can always inform the credit card companies that are getting married and are looking at closing some of its accounts.
The best way to eliminate your credit card debt is by planning your monthly expenses and budget an amount each month to pay its debt. You can transfer some of their outstanding balances to 0% APR cards lighten your load, you pay monthly. Also, do not pay any more to your credit card unless really necessary, since only increase the value of the debt you’re trying to bear fruit.
Apart from that, the both of you may also want to check their credit reports so that discrepancies can be sorted out as soon as possible. Doing so now, you will help prevent later disagreements arising from the debt you and your spouse had no knowledge of.
After your credit card debt is cleared, achieving a mutual agreement between the both of you on the type of expenditure to be charged to credit cards and those that should be paid with cash. In addition, make sure that the both of you understand that credit card balances must be paid each month. Another alternative is to have your credit cards issued under separate names even after marriage so that any credit problems do not affect the status of your spouse’s credit.
July 28th, 2010 by achi
Properly used, credit cards can mean some benefits such as being able to have emergency money, or not having to carry large sums of cash with us when we pay a lot of money.
However, due to its purchasing power, often credit cards are misused, making us spend more than they should, and making accumulating high debt and pay high interest rates.
And this does not happen to see a few tips that will help us better control of our credit cards as well as some advice for your safety:
Controlling costs
The first tip is to control the use of credit cards, knowing that the cards should not be used for everyday purchases, but to be used only in emergencies or to get us out of some trouble.
One way to control the use of credit cards is kept and not take them with us when we go shopping, avoid impulse purchases.
Another way to handle credit card charges is to acquire the habit of keeping all receipts of purchases we make, so that thereby, at any time know that we are using our cards.
Controlling debt
The following advice is to control debts generated by credit cards, knowing that because of its ease of use and high interest rates they charge, is very easy to get to accumulate high debt.
One way to control debt is to pay the cards in the month in which the use (and not have to pay interest) or, in any case, always pay more than the minimum required amount, a payment above the minimum amount decreases reduce debt and within it.
Another way is to cancel the debts before the due date (which is specified in the statement), and thus avoid being charged more interest or surcharge for not paying on time.
And not to mention always avoid spending more than we can spend, to avoid always reach the top of our line of credit, except in the case of an emergency.
Having the fewest possible cards
Another tip about using credit cards is to have as few cards as possible and remove all those that we not use.
Even when not to use credit cards, they always generate fees or commissions, such as payments for membership.
What is recommended is to cancel all our credit cards and stay only with one, that we generate the lowest rate of interest or having the most convenient payment terms.
Consolidating debts
Should have high debt generated by the use of credit cards; an advice is to consolidate our balances on a single card.
By consolidating our credit cards into one, not only accede to a lower interest rate, but simplifying the payment process, because we’ll just make one.
To consolidate our cards just have to approach the financial institution that issued the card to give us the lowest rate of interest, and seek to consolidate all our credit card debts into one.
Always check your statement
No one is free from any error or abuse recovery by financial institutions.
So it is advisable to acquire the habit of always thoroughly review the statements of our credit card, making sure the opening balance matches the closing balance of previous statement and that the expenses listed are actually the costs we done.
If there are any errors or incorrect charging must immediately notify the financial institution.
Security
Finally, we must always protect our personal information and prevent theft or cloned our card.
To do this, we should avoid providing information on our credit card over the phone or if you shop online, avoid them objectionable sites or that we do not generate sufficient confidence.
We must also always keep in a safe location card numbers and telephone numbers where we can report your lost or stolen, and in case this happens, immediately communicate with those numbers.
This is an undeniable truth: credit cards are very helpful when used properly. Proper use entails paying all you owe full when they are due. This means paying everything monthly. A credit card becomes a problem when the use of it gets out of hand, and the card holder ends up with debts well beyond his capacity to pay.