First of all let me tell you a few basic facts about Credit Cards: 1)The credit card industry is huge.
You know why? Because...
please read below 2)Americans' credit card debt had reached $972 billion in 2009 3)The average amount of credit card debt for households that have a balance is around $11,000 4)The average American household has over ten (!) credit cards Wow..
..
Pretty overwhelming facts, are not they? I am pretty frugal by nature, and I try to use common sense, and get a good knowledge of the subject in everything I do.
When it comes to credit cards, there is no black and white approach.
You definitely need to do some thinking and researching on how you would like to deal with them, and whether you would like to use them or not.
Here is my personal approach on handling credit cards and getting out of debt.
You may hate it or love it.
1.
Remember that Credit Cards are actually your debit cards, since they put you in debt, if you do not know how to use them (read the fine print!) and/or use them irresponsibly.
Please take your time and read carefully all the disclosures, and remember: Credit Card Companies can change them at any time.
Good news is that according to a new Credit Card Act any changes to Credit Card Terms and Conditions, most importantly, interest rate increases, must be given advance notice of 45 days before any changes can be made.
And also monthly statements are now required to list pertinent information in plain sight.
There will also be a section that indicates how long it will take to pay off the current balance if you are only making the minimum payment.
2.
Do not hurry to shred your Credit Cards to avoid debt, just get the cards that actually will work for you, not against you.
I would recommend that people have two and no more than three credit cards that earn frequent flyer miles, 1% cash back and/or various rewards, and have none or low annual fee.
By doing that I personally gain the following goodies over a certain period of time: 1)A free ticket to Europe to visit my family every 3 to 5 years that saves me around $2,000 just by using my Flex Perks Visa Credit Card or 2 free tickets anywhere in the country every couple of years.
2)I also get various free gift cards and discounts by using my American Express Card.
3)I receive convenience checks with 0.
99% interest rate for 6 months using my Chase Card.
It is very convenient when you have a project, e.
g.
kitchen remodel, and need a certain amount of money that you can pay off in a few months.
4)If you want to be free of debt, try to pay off all of your card balances every month.
That is a golden rule.
This way it is You who benefits from all of the rewards from your credit cards, but not your Credit Card Companies (!).
Remember though that the new law does not put a limit on how high your credit card interest rate can go.
You will have more notice to changes in your terms, but you are not protected against skyrocketing rates.
3.
Be aware that sometimes when you charged a certain (substantial!) amount of money to your credit card, Credit Card Companies tend to raise your interest rate by as much as 5-6%, even if you have never defaulted on your payment.
That can be really hard, especially in these tough economic times.
If that happens, you have the following options: 1 - Pay it off (the best one if you have cash to do so) 2 - If you have a good credit, I am sure you get a lot of convenience checks in the mail with very low promotional rates like 0.
99% for 6 months or 4.
99% for a year.
Using those checks you could pay off your high-interest credit card balance.
That would be the best bet.
Just remember they usually charge at least 3% transaction fee for those kind of transactions, just like for cash advances.
If you have a large balance that it would take you a year or longer to pay it off, then it would be worth transferring balances from one card to another.
But you really need to do your math before you do that.
3 - If you have a bad credit, low salary, no money to pay it off.
This is what you need to do: 1) Call the Credit Card Company and try to negotiate your rate.
Tell them you could afford payments while the interest rate was low, but now you probably will have to default on your payments.
Most likely regular Customer Service Representative will not be able to help you, so you ask to speak to a Supervisor.
Miracles happen, and they could lower your interest rate for a little while.
If they are not negotiable, you options are the following: 2) Stop using your credit cards.
If you do not have cash to pay for it, you should not buy it (whatever it is).
Put your cards in a freezer.
If you get tempted to by something, you have to defrost them.
This trick gives you some time to change your mind about the purchase.
3) Get a second job! Yes, you put yourself in this situation, so you need to do something about it! Get a second job to pay all of your cards off, and also build an emergency fund.
After that you will be much smarter in spending money, because it was so hard to get out of debt.
I knew a guy who travelled to Japan and Europe for several months, and got himself into a big debt of over $15,000.
It was hard for him to pay it off since he was making only $10 per/hour.
The only way for him to pay his debt off was to work nights.
So he was working as a teller during the day and was stocking shelves at Wal-Mart at night.
He did not have time to spend his money, he hardly slept, but he was very proud of himself when he paid his debt off after over a year and a half of hard work.
4) If you have more debt than you can actually handle even having 2 jobs, I would recommend to hire a professional to negotiate your debt and get your credit score raised by 50 to 100 points in just few months.
I know some companies that will charge you only $49/per month until they get you in a better place financially.
I would say it is dirt cheap considering you are gaining your financial freedom back and control over your finances and credit.
5) This one is very important! Learn from your mistakes.
I can not emphasize that enough! Do not step in the same mud hole twice as we say it in Russia.
Remember: Wanting something and needing something are to completely different things.
May be it is very trivial to say, but think for a moment about people in other countries: India, Africa, Latin America..
..
They would be happy just having a plate of food on a regular basis and a decent place to sleep.
Do you think they would need a designer bag or a Hermes scarf to be happy? Objects do not make us happy, if they do, may be just for an hour or a day...
Great people, wonderful relationships, awesome life achievements, close friends and family make difference in our life, and make us feel happy and more accomplished.
Have you ever heard someone saying: I love giving gifts more than receiving them? Well, sharing is caring, and it makes us feel happy thinking about someone who is going to receive your gift.
This is the way I feel when I send a bunch of gifts to my family in Belarus, knowing that they can not afford to buy hardly anything for Christmas.
I love feeling that I make difference in their lives.
May be it is just one family out of million out there that I can help, but it makes me extremely happy imagining how they open my packages with gifts that came from 10,000 miles away, smiling and sharing news with each other and everyone they know.
These are the moments worth living for...
So shred your credit cards or put them far away for emergencies and learn how to live your life in full: watching the sunset from your patio at the end of your working day or sharing a nice home-made meal with close family and friends, getting to know your neighbors, helping some elderly people or anyone in need or making a donation to a Good Will Store.
Goods consumption will make you happy for just an instant, but those things will make you feel not only happy, but accomplished and a better person for a long time.
This is how we can make a world a better place to live.
One person at a time.
No matter where you live, who you are and what country you are from...
You totally deserve to be happy!
You know why? Because...
please read below 2)Americans' credit card debt had reached $972 billion in 2009 3)The average amount of credit card debt for households that have a balance is around $11,000 4)The average American household has over ten (!) credit cards Wow..
..
Pretty overwhelming facts, are not they? I am pretty frugal by nature, and I try to use common sense, and get a good knowledge of the subject in everything I do.
When it comes to credit cards, there is no black and white approach.
You definitely need to do some thinking and researching on how you would like to deal with them, and whether you would like to use them or not.
Here is my personal approach on handling credit cards and getting out of debt.
You may hate it or love it.
1.
Remember that Credit Cards are actually your debit cards, since they put you in debt, if you do not know how to use them (read the fine print!) and/or use them irresponsibly.
Please take your time and read carefully all the disclosures, and remember: Credit Card Companies can change them at any time.
Good news is that according to a new Credit Card Act any changes to Credit Card Terms and Conditions, most importantly, interest rate increases, must be given advance notice of 45 days before any changes can be made.
And also monthly statements are now required to list pertinent information in plain sight.
There will also be a section that indicates how long it will take to pay off the current balance if you are only making the minimum payment.
2.
Do not hurry to shred your Credit Cards to avoid debt, just get the cards that actually will work for you, not against you.
I would recommend that people have two and no more than three credit cards that earn frequent flyer miles, 1% cash back and/or various rewards, and have none or low annual fee.
By doing that I personally gain the following goodies over a certain period of time: 1)A free ticket to Europe to visit my family every 3 to 5 years that saves me around $2,000 just by using my Flex Perks Visa Credit Card or 2 free tickets anywhere in the country every couple of years.
2)I also get various free gift cards and discounts by using my American Express Card.
3)I receive convenience checks with 0.
99% interest rate for 6 months using my Chase Card.
It is very convenient when you have a project, e.
g.
kitchen remodel, and need a certain amount of money that you can pay off in a few months.
4)If you want to be free of debt, try to pay off all of your card balances every month.
That is a golden rule.
This way it is You who benefits from all of the rewards from your credit cards, but not your Credit Card Companies (!).
Remember though that the new law does not put a limit on how high your credit card interest rate can go.
You will have more notice to changes in your terms, but you are not protected against skyrocketing rates.
3.
Be aware that sometimes when you charged a certain (substantial!) amount of money to your credit card, Credit Card Companies tend to raise your interest rate by as much as 5-6%, even if you have never defaulted on your payment.
That can be really hard, especially in these tough economic times.
If that happens, you have the following options: 1 - Pay it off (the best one if you have cash to do so) 2 - If you have a good credit, I am sure you get a lot of convenience checks in the mail with very low promotional rates like 0.
99% for 6 months or 4.
99% for a year.
Using those checks you could pay off your high-interest credit card balance.
That would be the best bet.
Just remember they usually charge at least 3% transaction fee for those kind of transactions, just like for cash advances.
If you have a large balance that it would take you a year or longer to pay it off, then it would be worth transferring balances from one card to another.
But you really need to do your math before you do that.
3 - If you have a bad credit, low salary, no money to pay it off.
This is what you need to do: 1) Call the Credit Card Company and try to negotiate your rate.
Tell them you could afford payments while the interest rate was low, but now you probably will have to default on your payments.
Most likely regular Customer Service Representative will not be able to help you, so you ask to speak to a Supervisor.
Miracles happen, and they could lower your interest rate for a little while.
If they are not negotiable, you options are the following: 2) Stop using your credit cards.
If you do not have cash to pay for it, you should not buy it (whatever it is).
Put your cards in a freezer.
If you get tempted to by something, you have to defrost them.
This trick gives you some time to change your mind about the purchase.
3) Get a second job! Yes, you put yourself in this situation, so you need to do something about it! Get a second job to pay all of your cards off, and also build an emergency fund.
After that you will be much smarter in spending money, because it was so hard to get out of debt.
I knew a guy who travelled to Japan and Europe for several months, and got himself into a big debt of over $15,000.
It was hard for him to pay it off since he was making only $10 per/hour.
The only way for him to pay his debt off was to work nights.
So he was working as a teller during the day and was stocking shelves at Wal-Mart at night.
He did not have time to spend his money, he hardly slept, but he was very proud of himself when he paid his debt off after over a year and a half of hard work.
4) If you have more debt than you can actually handle even having 2 jobs, I would recommend to hire a professional to negotiate your debt and get your credit score raised by 50 to 100 points in just few months.
I know some companies that will charge you only $49/per month until they get you in a better place financially.
I would say it is dirt cheap considering you are gaining your financial freedom back and control over your finances and credit.
5) This one is very important! Learn from your mistakes.
I can not emphasize that enough! Do not step in the same mud hole twice as we say it in Russia.
Remember: Wanting something and needing something are to completely different things.
May be it is very trivial to say, but think for a moment about people in other countries: India, Africa, Latin America..
..
They would be happy just having a plate of food on a regular basis and a decent place to sleep.
Do you think they would need a designer bag or a Hermes scarf to be happy? Objects do not make us happy, if they do, may be just for an hour or a day...
Great people, wonderful relationships, awesome life achievements, close friends and family make difference in our life, and make us feel happy and more accomplished.
Have you ever heard someone saying: I love giving gifts more than receiving them? Well, sharing is caring, and it makes us feel happy thinking about someone who is going to receive your gift.
This is the way I feel when I send a bunch of gifts to my family in Belarus, knowing that they can not afford to buy hardly anything for Christmas.
I love feeling that I make difference in their lives.
May be it is just one family out of million out there that I can help, but it makes me extremely happy imagining how they open my packages with gifts that came from 10,000 miles away, smiling and sharing news with each other and everyone they know.
These are the moments worth living for...
So shred your credit cards or put them far away for emergencies and learn how to live your life in full: watching the sunset from your patio at the end of your working day or sharing a nice home-made meal with close family and friends, getting to know your neighbors, helping some elderly people or anyone in need or making a donation to a Good Will Store.
Goods consumption will make you happy for just an instant, but those things will make you feel not only happy, but accomplished and a better person for a long time.
This is how we can make a world a better place to live.
One person at a time.
No matter where you live, who you are and what country you are from...
You totally deserve to be happy!
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