Credit cards should always be used wisely. You don’t ever want credit card debt because the more you have the harder it is to get out on top. However, it’s even harder to watch credit card spending during times of economic hardship like the current credit crunch we are facing. Here are a few tips on how to avoid increasing your credit card debt during a credit crunch:

1. If anything, you should be aggressively paying down your credit card debt. Things are getting worse and interest rates are going up so if you can, pay them off.

2. Be weary of using credit cards to pay for frivolous things. Ask yourself, do you really need the item? Is it a necessity? Forgo those purchases unless you know you can pay them off once the bill arrives. Not being able to pay off these items will cost you much more in the long run because you will be paying the high interest rates. 

3. If you have no choice but to put daily necessities on your credit card such as food and gas, pay off those items as soon as you can. Lenders these days are reducing credit limits while increasing interest rates so if you’re not paying off the bill then those items are costing you double or even triple the price if you were to pay in cash. 

The  main thing to keep in mind is that you should be spending wisely and saving aggressively so you can pay down any credit card debt you may have. It’s not worth ruining your credit over. 

Learn more about budgeting and how to use credit cards wisely.

Budgeting should be something that you do year round rather than just during a rough economic time. However, budgeting during economic downturns is much more difficult. Here are some tips on how to budget correctly:

1. Always plan for the worst case scenario such as someone losing their job. If possible, you should try to save at least 3 months worth of bills including rent or mortgage payments.

2. Cut frivolous spending like buying coffee from a cafe a few times a week or going out to eat. Instead, make your own coffee or get it from work. Simple as this may seem, these small cut backs add up in the long run. This can also encourage more bonding time between you and your family. Making dinner together can be a fun event.

3. Coupons, coupons, and more coupons! Clip coupons, pay attention to grocery store and department store advertisements, and stock up on items that are on sale that you use regularly. 

4. Contact your creditors if someone has lost their job and let them know about the situation you’re in. Sometimes they may be able to help by putting in place lower payment plans. The last thing you want to do now is to get into higher credit card debt. Always be aware of how your actions now affect your credit score. The last thing you want is to increase credit card debt or ruin your credit. Think long term.

5. Keep a journal or spreadsheet of what you are spending including food and all bills. Compare how you’re doing month over month. By doing this simple exercise, you’ll realize where all of your money goes and will make you more aware of your spending habits.

Click here to learn more about budgeting to save, and how to use credit cards wisely.

The National Bureau of Economic Research said today that the U.S. has been in a recession since December of 2007. They said that the massive decline in jobs in 2008 was one of the key reasons they decided to state why the recession started last year. They estimated that employers have cut jobs by 1.2 million. 

In a statement, White House Deputy Press Secretary Tony Fratto said that even though the recession is now official, it is more important to focus on the steps being taken to fix the economy.

“The most important things we can do for the economy right now are to return the financial and credit markets to normal, and to continue to make progress in housing, and that’s where we’ll continue to focus,” he said. “Addressing these areas will do the most right now to return the economy to growth and job creation.”

So, if you are in need of an economic stimulus package, look into credit repairing your credit. It’s one of the biggest factors lenders look at when determining your risk. Your credit score will also determine your loan rate. The lower the score, the higher the interest rate. You may be able to save hundreds of dollars a month by avoiding high interest rates on your credit cards, auto loans, and home loans. 

To read more, visit: 

http://money.cnn.com/2008/12/01/news/economy/recession/index.htm?postversion=2008120112

Question

I just found out my husband has bad credit and a lot of debt in his past.  The collections bills are now starting to roll in and we just had a debt collector come to our door the other night for 8000.00.  What are my options?

Blake H.

Answer

Blake

Sorry to hear about this but this is a common problem in marriages; spouses bringing in old credit history into the new marriage.  It is very important for you both to sit down, talk about your combined financial picture and work out a plan together.  Above all, keep communicating to each other!

As far as the debts go, you have a few options…

1)      Debt Acceleration.  If you get on a spending plan together, you may see you have extra money coming in each month.  If you do, start applying this extra monthly month to one of these bills.  Once you have paid off one, apply all the money that was going to the now paid off account and apply it to the next bill.  You can continue to do this until all your bills are paid off.

2)      Family and Friends.  It is getting more common now to borrow from family and friends.  If this option is available, make it official.  Sign a note with them that clearly spells out the repayment terms and the interest rate and by all means pay them back on time!

3)      Credit Counseling.  There are non-profit companies out there that can renegotiate the payment terms with your creditors.  They will draft your account once a month and handle all of the re-payment process.

4)      Debt Settlement.  There are agencies out there that can negotiate a settlement for less than full balance of what you owe.  This could be a good way to save money on some old debts.

5)      Bankruptcy.  If all else does not work, bankruptcy may be an alternative.  You would have to meet with an attorney in your state and discuss whether a Chapter 7 or a Chapter 13 would help in your situation.

Blake, if you would like to have a free referral to a debt specialist, give us a call @ 800-445-8540 and we can match you to a reputable partner.

Good luck.

Candice

Question

I am overwhelmed in credit card debt and would like to try the debt settlement.  A company called Zwicker and Associates has already taken over my Discover card.  What can they do to me?  Is debt settlement a good idea?

Julianna H.

Answer

Julianna-

Debt settlement is usually a good program for old unpaid collections, charge offs, judgments or tax liens.

Usually, in the cases I just listed, you can get a 40 to 60% reduction in the balance that you owe.

There a few pitfalls to be aware off.

1)      The remaining balance that you do not pay on your settlement may be considered income by the IRS and is taxable as ordinary income.

2)      Your credit report will be updated as a “settlement for less than full balance” which can be a red flag for future creditors that you may apply for new credit with.

3)      Lastly, some settlement companies will take monthly payments from you until you have enough to equal the settlement amount.  Be aware that these monthly payments are going to the settlement company and not your creditors.  This means that the creditors still have the right to attempt to collect the debt including garnishing your wages, getting a judgment or seizing your assets.

Let us know if we can be of any assistance finding a reputable partner for you.

Candice

They teach a lot of things in school. One thing they often fail to teach, adequately teach, is financial wellness. In fact the average American holds four credit cards yet credit cards are often warrant less than an hour’s worth of conversation throughout the typical 4-year degree at most US colleges.  What do Americans know about credit cards?

Americans typically know what their minimum monthly payment is, their credit card limit, how to finance education on a credit card, or perhaps general knowledge that a higher credit score will allow you to hold a higher number of credit cards. 

Here are 10 things you may not know about Credit Cards.

Let’s face it, America is a shopaholic nation. And this insatiable desire to shop is fulfilled by the use of credit cards, with 1 in 7 Americans carrying 10 or more credit cards. Americans can’t get enough of this lifestyle, meaning that Americans continue to spend more, year over year.   

But the wind of change is blowing and this time the American consumer is looking to simplify their lives and cut back their once insatiable desire to buy SUV’s, plasma screens, and extravagant homes. In fact, 84% are looking to buy “less stuff”. It’s an interesting and monumental change in consumer sentiment. Read on to find some intriguing signs on how this may be The End of Credit Card Consumerism.

Loaded up with Credit Card Debt? Free Information on Controlling Your Credit Card Debt is one click away.