The Credit Card Check Trap – One You Should Avoid

The other day I received a “special offer” from my credit card company, along with a set of blank checks. The offer stated that I could use these checks to pay for anything I wanted, for any amount (up to my credit limit) at a promotional 3.99% fixed APR until the balance is paid. They suggested I use it to make a down payment on a new car, take a vacation, or make some home improvements. Sounds wonderful, doesn’t it? Yes…until you read the fine print!

These checks once again reminded me of the trap that I talked about in an earlier blog, but is well worth reiterating this week after Christmas when most will start receiving their credit card statements for all those financed Christmas purchases. Many will be shocked by the total owed and looking for some way to ease the burden. These low-interest checks certainly appear on the surface to be an answer to a prayer, but buyer beware! There are three major gotchas with these checks that will have you crying the blues if you don’t take the time to read and understand the fine print!

1. Transaction Fee: In the fine print it states that there will be a transaction fee of 3% applied to the amount of the check. So, let’s say you write a check for $5,000 to pay for your family’s Christmas vacation. That means you will be charged $150 to write that check. Well, you say, maybe it is worth it in order to get that low interest rate until the balance is paid off.
2. Payment Allocation: That brings us to the next gotcha. In the “Important Information” on the back of the offer, the credit card company states that it MAY allocate payments to the balances with the lowest APRs before applying payments to higher APR balances. The operative word “may” really means “it has the right to” and trust me, it WILL allocate your payments to the lowest rate first. Since you probably made other purchases with your credit card and those purchases naturally accrue interest at your standard higher interest rate of say, 21%, those purchases will now be the last in line to be paid off. By writing one of those low-interest checks, your next credit card payment will be applied to that lower-rate check balance instead of toward your new, higher-rate purchases. This means your new purchases will sit there, building up interest at the higher rate, and you can't stop it without paying off the low-interest balance in full, the very balance you had hoped to pay off over time. So, unless you make no other purchases, of what possible benefit are these low-interest checks?
3. Grace Period: The final gotcha is that there is no grace period on these checks. Interest starts accruing from the transaction date.

Instead of falling prey to one of these offers that can actually compound your credit card debt problem, use this time to make a resolution and begin a plan to put yourself on the path to financial freedom in 2008.

Get Out of Debt While Cutting Your Monthly Payment

If you’re one of the thousands of people with high credit card debt (over $10,000), have minimal savings and are the one in six who pays only the minimum due every month, then you need a realistic plan to get yourself out of debt and start working towards improving your credit rating. By enrolling in a debt settlement program, you could realistically be out of debt in months instead of years and often for less money per month than what you are currently paying, including interest and penalties. For more information about what debt settlement is, how it can help you, and who you should contact, Click Here.

Don’t let embarrassment, stigma, or the sense that negotiating your way out is not the moral way to get out of debt. The Credit Card Industry is one of the most profitable industries in the United States. Citibank alone earns more profit than both Wal-Mart and Microsoft. Yet this industry has more complaints filed against it than any other industry in the U.S. Getting debt free and starting a financial plan to build wealth instead of debt is one of the best things you can do for yourself and your family.

Consumers with Low Credit Scores Are Being Targeted

Christmas is just around the corner and the lending institutions are peddling credit cards like there’s no tomorrow. This week alone, I received 6 credit card offers in three days -three of which were from the same bank. Is it just the anticipation of so many consumers using credit to fund their must-have holiday gifts and vacations that’s driving all these offers? Partly…but there’s a lot more going on here than the hope of cashing in on holiday mega-spending. There is a major shift in lending that is coming to the forefront.

Banks and other lending institutions are shifting away from mortgage and home equity lending. The shift is a direct response to the fallout from the sub-prime mortgage crisis and the drop in home values. Home foreclosures have reached the 1 million mark and are rising. Home values in some areas have dropped by as much as 40%. Many homeowners needing to sell, in order to get out from under rising mortgage payments they can no longer afford, can’t. Home equity values across the board are at record lows, due to lower home values and tapped-out equity borrowing, and with nearly 5 million adjustable rate mortgages due to hit within the next year, those in the financial industry are skittish about the next bubble to burst. Even the government is getting involved, trying to come up with a plan to help out sub-prime mortgage holders (it's really the impact on the banks they are worried about) in an effort to keep the economy stable.

Where once there was plenty of money to be made in mortgage refinancing and home-equity lines of credit, the growing crisis has led many to tighten their lending belts - that is, all except for one area. Credit cards have become the new cash cow! In fact, in 2007 the sub-prime market (households with low credit scores of around 600) has become a major target. Some creditors have as much as doubled their direct mail credit card offers to sub-prime customers as compared to 2006. But this isn’t particularly good news for those with less than stellar credit.

The Pitfalls of Sub-Prime Credit Card Offers
These sub-prime targeted credit card offers have some major pitfalls. These offers come with higher interest rates - 25% to even 35%, lower credit limits, usually have annual fees and some even impose an account setup fee, and typically they come with higher fees and penalties. If you accept one of these offers, you can also be assured that the issuer is going to monitor your entire credit activity and general bill paying carefully and if you are late on any other bills you have, they will most likely use it as a reason to raise your interest rate even higher. The sad truth is they can do all of this legally and it’s all in the fine print – if you took the time to read it and were actually able to understand it. They want your business, but if you default on your card, they are going to make sure they have made as much as they could on you in the form of interest, late fees, overdraft charges, and annual fees. After all, that’s where the money is anyway. In 2006 alone, the credit card industry made some $90 billion in interest and $55 billion in late fees.

Instead of falling prey to compounding credit card debt, use this time to make a resolution and begin a plan to put yourself on the path to financial freedom in 2008.

Get Out of Debt While Cutting Your Monthly Payment
If you’re one of the thousands of people with high credit card debt (over $10,000), have minimal savings and are the one in six who pays only the minimum due every month, then you need a realistic plan to get yourself out of debt and start working towards improving your credit rating. By enrolling in a debt settlement program, you could realistically be out of debt in months instead of years and often for less money per month than what you are currently paying, including interest and penalties. For more information about what debt settlement is, how it can help you, and who you should contact, read my blog dated September 29, 2006.

Don’t let embarrassment, stigma, or the sense that negotiating your way out is not the moral way to get out of debt. The Credit Card Industry is one of the most profitable industries in the United States. Citibank alone earns more profit than both Wal-Mart and Microsoft. Yet this industry has more complaints filed against it than any other industry in the U.S. Getting debt free and starting a financial plan to build wealth instead of debt is one of the best things you can do for yourself and your family.

Current Debt Could Jeopardize Your Retirement

The days of being able to retire at 65 with a decent pension along with social security benefits are virtually over. Pension plans are practically history and certain analysts, along with our President, warn us that our social security system will be out of money down the road if we don’t fix it soon! With thousands of workers affected by the growing troubles of many American manufacturers, especially the automotive industry, an ever increasing number of hourly workers are finding themselves out of work or in jeopardy of losing their jobs. This coming at a point in their lives when they should be looking forward to their approaching retirement instead of looking for another job. To compound the problem, home values are decreasing in many areas and foreclosures are skyrocketing, all due to the overbuilding spurred by glutinous developers, home builders and speculative real estate investors, along with the questionable lending practices of some high-profile mortgage institutions. Now, gasoline prices are over $3.00 per gallon - projected to hit $4.00 per gallon by next year. But even all of this is just the tip of the iceberg. The real threat is what lurks under the waters disguised as “Living the American Dream” – It’s the growing consumer debt.

Consumer Debt Hits an All-time High
According to the Federal Reserve, the total U.S. consumer revolving debt, which includes credit cards, was up to $904 Billion in June of this year. The average American household now holds more than $9,000 in credit card debt and the sad reality is that 70% of hourly workers are living paycheck to paycheck.

All of this means that many Americans aren’t saving. The current collective savings rate for Americans is less than zero and I heard a recent claim that the average 60 year old has only saved around $50,000 towards retirement. Saving money has taken a back seat to paying on debt. While the credit card industry is getting rich, Americans are slowly going broke. In fact, the credit card industry takes in over $40 billion a year in fees and penalties alone. This is money Americans should be putting away towards their retirement.

An example of what debt is doing to savings:

Let’s assume you owe $15,000 in credit card debt at 25% interest and pay only the monthly minimum payments. It will take you 20 years and 8 months to pay off this debt. The total interest you will have paid will be a whopping $16,139. That’s more than the original amount charged and it doesn’t even include any late fees or penalties. It also equates to over thousands of dollars each year that could have gone towards retirement savings.

You may question whether this is a realistic scenario. The truth is people don’t typically start out with that much debt all at once. What really happens is they rack up debt over time on multiple cards, making only the minimum payments each month. The balances keep growing, as do their monthly payments. They can afford the payments, but can’t afford to pay them off, so they keep charging. Then one day, they find themselves $15,000 in debt, living virtually paycheck to paycheck, with a total minimum payment due of $600. Suddenly they can barely afford the minimums let alone have any hope of paying off their mortgage or putting money aside for retirement. So the actual interest they are paying on their charges is well above the $16,000 we used in the example.

Debt as a Threat to Retirement
This kind of debt picture is threatening the likelihood of being able to retire for thousands of Americans. The longer they wait to start saving, the more they will have to set aside out of each week’s paycheck to have any hope of building a nest egg sufficient to be able to retire. But with years of debt staring them in the face, what can they do? When can they hope to start saving? We can’t depend on our government and social security to take care of us in our old age.


Get Out of Debt in Months Instead of Years
If you’re one of the thousands of people with high credit card debt (over $10,000), have minimal savings and are the one in six who pays only the minimum due every month, then you need a realistic plan to get yourself out of debt and back on track to start saving for your retirement. I recommend you consider debt settlement. By enrolling in a debt settlement program, you could realistically be out of debt in months instead of years.

What is Debt Settlement?
Debt Settlement is a program in which a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. Under this type of program, each of your creditors agrees to accept a portion of what you owe them, in lump sum payouts, as payment in full. You’ll get out of debt for less than what you owe and in a fraction of the time it would take to pay off the debt just making the minimum monthly payments. Because they are settling hundreds of thousands of dollars of debt for hundreds of clients, they have leverage with your creditors that you don’t have.

Who should you contact? – There is one company than stands out because of their excellent track record (quality service and results) and their unique approach. I recommend that you start with this company for a free debt consultation.

The program is Credit Card Relief™.

Unique Attorney-Driven Approach - Their program is unique in that Credit Card Relief uses a network of participating program attorneys, local to their clients, provide a free initial consultation to determine if debt settlement is the best solution. Once enrolled, your creditors are contacted and told that you now have representation in settling your debt. You now have a professional working for you. That’s where your relief starts. The debt is then mediated by a nationally known debtor mediation law firm.

Great Track Record - Credit Card Relief has years of experience, settling over $100,000,000 (one-hundred million) of debt for thousands of clients.

Operates in 46 states.

Low Monthly Payment – Credit Card Relief can cut your monthly payment by as much as 50%.Your Money is Safe - In addition, each Credit Card Relief client is part of a unique Enrolled Member Trust, through which all their funds are deposited into a totally insured, risk-free trust account with a national bank. No money leaves your account without your permission.Satisfied Clients - Credit Card Relief provides superior service, with on-going support throughout the duration of the program, through their full-time Client Care and Compliance departments. They have Zero open complaints with the more than 400 Better Business Bureaus (BBB’s) and the over 16,000 local, state, and federal regulatory agencies monitoring the industry. You can obtain a free debt consultation from Credit Card Relief™ by clicking here.

Or call (866) 960-5454

They can help you determine the best solution for getting you free of debt. For more information, read my blog dated September 29, 2006.

Don’t Delay! Don’t let embarrassment, stigma, or the sense that negotiating your way out is not the moral way to get out of debt. The Credit Card Industry is one of the most profitable industries in the United States with annual earnings around $30 Billion. Citibank alone earns more profit than both Wal-Mart and Microsoft. Yet this industry has more complaints filed against it than any other industry in the U.S. Getting debt free and starting a financial plan to build wealth instead of debt is one of the best things you can do for yourself and your family.

Waiting too Long to Seek Debt Relief Help– Mounting Credit Card Debt Mistake # 5

With the average American household carrying around $9,000 in credit card debt and many of those facing rising mortgage payments due to higher property taxes and rising interest rates, it’s easy to see how so many people can become overwhelmed – feeling as though there is no way out! Believe it or not, if you are in serious debt, one of the biggest mistakes you can make is to do nothing!

In this series of blogs, I have been discussing 5 of the biggest mistakes people make when faced with mounting debt, especially credit card debt, and providing some ways you can avoid or correct your mistakes. In my prior blogs I covered the problem with only paying the minimums on your credit card bills, using your home’s equity for credit card debt consolidation, using balance transfer card offers to move debt and using cash advances to make credit card payments. Today I will cover the fifth mistake: Waiting until it’s too late to negotiate with your creditors.

5. Wait until it’s too late to negotiate: If you are one of the thousands of people who find themselves struggling to pay even the minimums, the worst thing you can do is wait until it is too late to face up to your problem and take action. Don’t wait until you find yourself unable to pay.

Once you fail to make your required minimum payments, the credit card company considers your account to be delinquent or “at-risk” which weakens any leverage you may have to settle with your creditors. Delinquent or at-risk accounts are usually turned over to either an internal collection department or an external collection agency, which, in turn, begins contacting you for payment. The longer your account is at-risk, the more likely it is that your creditors will take action against you.

In some cases your account may be sold to a third-party collection agency (for usually pennies on the dollar). Once this happens, the collection agency owns the debt and begins hounding you for payment. The credit card company is now out of the loop and no longer interested in working with you; they’ve technically “gotten their money” from the collection agency.

Failure to pay on your part will likely lead creditors to take legal action against you for breach of contract. Yes, that's right, you signed a contract when you accepted that attractive credit card offer. Once you have a lawsuit filed against you, it is very difficult to negotiate a settlement. You could end up losing your home and having your credit ruined!

Before it’s too late you should check out whether debt settlement is an option for you. Don’t wait until you have lost your leverage to negotiate with your credit card companies on the balances you owe.

How Debt Settlement Works
Debt Settlement is a program in which a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. Under this type of program, each of your creditors agrees to accept a portion of what you owe them, in lump sum payouts, as payment in full. You’ll get out of debt for less than what you owe and in a fraction of the time it would take to pay off the debt just making the minimum monthly payments. Because they are settling hundreds of thousands of dollars of debt for hundreds of clients, they have leverage with your creditors that you don’t have. Also, the debt settlement company is in a better position to hold off creditor lawsuits because your creditors recognize that they will likely get more of their money working with the settlement company than they would by harassing or suing you. While your credit rating will drop as a result of being in a settlement program, you won’t ruin your credit for years like you would with a “failure to pay” judgment against you, or with bankruptcy or even consumer credit counseling.

How did Debt Settlement come about? – Debt Settlement, or Debt Negotiation as it is some times called, is a rapidly growing financial service industry that grew out of the exponentially mounting consumer debt and the realization that consumer credit counseling, with its 60-70% dropout rate, just wasn’t working for those seriously in debt.

But it is important to know that not all debt settlement/negotiation companies are alike.

Who should you contact? – There is one company than stands out because of their excellent track record (quality service and results) and their unique approach. I recommend that you start with this company for a free debt consultation.

The program is Credit Card Relief™.

Unique Attorney-Driven Approach - Their program is unique in that Credit Card Relief uses a consortium of attorneys. A network of participating program attorneys, local to their clients, provide a free initial consultation to determine if debt settlement is the best solution and once enrolled, offer limited representation. Your creditors are contacted and told that you now have representation in settling your debt. You now have a professional working for you. That’s where your relief starts. The debt is then mediated by a nationally known debtor mediation law firm.

Great Track Record - Credit Card Relief has years of experience, settling over $100,000,000 (one-hundred million) of debt for thousands of clients.

Operate in 46 states.

Low Monthly Payment – Credit Card Relief can cut your monthly payment by as much as 50%.

Your Money is Safe - In addition, each Credit Card Relief client is part of a unique Enrolled Member Trust, through which all their funds are deposited into a totally insured, risk-free trust account with a national bank. No money leaves your account without your permission.

Satisfied Clients - Credit Card Relief provides superior service, with on-going support throughout the duration of the program, through their full-time Client Care and Compliance departments. They have Zero open complaints with the more than 400 Better Business Bureaus (BBB’s) and the over 16,000 local, state, and federal regulatory agencies monitoring the industry.You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. For more information, read my blog dated September 29, 2006.

Using Credit Card Cash Advances – Mounting Credit Card Debt Mistake # 4

In this series of blogs, I am discussing 5 of the biggest mistakes people make when faced with mounting debt, especially credit card debt, and providing some ways you can avoid or correct your mistakes. In my three prior blogs I covered the problem with only paying the minimums on your credit card bills, using your home’s equity for credit card debt consolidation and using balance transfer card offers to move debt. Today we will discuss the fourth mistake.

4. Rob Peter to pay Paul: Use credit card cash advances: Cash advances may seem like a way to hold the wolf at bay, but borrowing cash from one credit card to pay on other cards or bills will really cost you and only delay the inevitable. Many people don’t realize that cash advances typically carry both a transaction fee like balance transfers of around 3% and a higher finance charge (interest rate) than applied to other purchases. This means that when you borrow money at, say, 3% fee plus 24% APR to pay on a bill at, say, 12% APR, you’re robbing Peter to pay Paul with money that is costing you more and digging that debt hole you’re already in even deeper.

• Be sure to read your credit card statement each month. You may occasionally find that a charge that you considered a “purchase” was actually treated as a cash advance by the credit card company. If you use an ATM machine for a cash advance, there can be an additional charge by the ATM’s bank.
• Another gotcha occurs when you make a payment toward your balance. Most issuers apply payments to purchases before they apply payments to cash. If you carry a balance on your card, this means that you will continue to pay that higher interest rate on your cash advances until you pay off your entire balance.
• And there is one more legal gotcha on cash advances: If you get into debt and have to consider bankruptcy, cash advances are exempt from Chapter 7 discharge of debts. You will still have to pay back any cash advances.

You’re in serious trouble if you are borrowing more money to make payments on money you already owe. Becoming dependent on cash advances to "make ends meet" can be a sign of serious debt problems.

If You Are In Serious Debt Trouble Do Consider Debt Settlement

If you have credit card debt over $5,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. Debt Settlement is a program in which a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. Under this program, each of your creditors agrees to accept a portion of what you owe them, in lump sum payouts, as payment in full. You’re now out of debt for less than what you owe and in a fraction of the time it would have taken to pay off the debt just making the minimum monthly payments.

Background – Debt Settlement, or Debt Negotiation as it is some times called, is a rapidly growing financial service industry that grew out of the exponentially mounting consumer debt and the realization that consumer credit counseling, with its 60-70% dropout rate, just wasn’t working for those seriously in debt.

Who should you contact? – There is one company than stands out because of their excellent track record (quality service and results) and their unique approach. I recommend that you start with this company for a free debt consultation.The program is Credit Card Relief™.

What Makes Them Unique?

Great Track Record - Credit Card Relief has years of experience, settling over $100,000,000 (one-hundred million) of debt for thousands of clients.

Operate in 46 states.

Low Monthly Payment – Credit Card Relief can cut your monthly payment by as much as 50%.Unique Program Approach - Their program is unique in that Credit Card Relief uses a consortium of attorneys. A network of participating program attorneys, local to their clients, provide a free initial consultation to determine if debt settlement is the best solution and once enrolled, offer limited representation. The debt is then mediated by a nationally known debtor mediation law firm.

Your Money is Safe - In addition, each Credit Card Relief client is part of a unique Enrolled Member Trust, through which all their funds are deposited into a totally insured, risk-free trust account with a national bank. No money leaves your account without your permission.

Satisfied Clients - Credit Card Relief provides superior service, with on-going support throughout the duration of the program, through their full-time Client Care and Compliance departments. They have Zero open complaints with the more than 400 Better Business Bureaus (BBB’s) and the over 16,000 local, state, and federal regulatory agencies monitoring the industry.

You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. For more information, read my blog dated September 29, 2006.

Check back tomorrow for my next blog that addresses another all too common mistake and what you can do!

Mounting Credit Card Debt – Don’t Make One of These Mistakes – Con’t.

In this series of blogs, I am discussing 5 of the biggest mistakes people make when faced with mounting debt, especially credit card debt, and providing some ways you can avoid or correct your mistakes. In my two prior blogs I covered the problem with only paying the minimums on your credit card bills and using your home’s equity for credit card debt consolidation. Today we will discuss the third mistake.

3. Using Balance Transfer Card Offers to Move Debt: You’re struggling to pay on your credit card debt each month, and then you get one of those enticing offers to transfer debt from one of your existing cards and not make any payments for 3 months. Wow! It sounds great, doesn’t it? While those low introductory, 0% rates look like an easier way to get out from under your mounting debt, if you aren’t careful it can actually end up costing you more. How?

• First, if you are transferring a balance from another card, there is typically a transfer fee. The average fee is 3% of the amount transferred. This means that a transfer of $10,000 could cost you $300 in fees alone.
• Second, most issuers only grant a "grace period" on purchases if you have completely paid off your previous balance. If you transferred a balance to take advantage of the low introductory rate and you don’t plan to pay off the balance until the end of the introductory period, say 6 months, interest charges will begin to accrue on each new purchase from the day of the transaction.
• Third, issuer terms usually state that 100% of each payment you make is applied to the balance with the lowest interest rate. Since your new purchases are typically subject to a higher interest rate, they will be the last in line to get paid off. Your payments will be applied to that balance you transferred instead of toward your new purchases. So your new purchases will sit there, building up interest at the highest rate, and you can't stop it without paying off the balance transfer in full first, the very balance you had hoped to pay off over time.
• Fourth, if you don’t pay off the balance transferred during the introductory period, once the period ends, you’ll be charged higher interest on that left over balance, along with all your new purchases.

What to do instead:

If you’re trying to get away from higher interest cards:

1. Rather than transferring your balances, stop charging on your higher interest rate cards and work on paying those cards down first, while continuing to pay at least the minimums on all others.
2. You may be able to negotiate a lower interest rate (as long as your credit hasn’t been damaged), especially if a creditor thinks they might lose your business to another creditor.

If You Are In Serious Debt Trouble Do Consider Debt Settlement

If you have credit card debt over $5,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. Debt Settlement is a program in which a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. Under this program, each of your creditors agrees to accept a portion of what you owe them, in lump sum payouts, as payment in full. You’re now out of debt for less than what you owe and in a fraction of the time it would have taken to pay off the debt just making the minimum monthly payments.

Background – Debt Settlement, or Debt Negotiation as it is some times called, is a rapidly growing financial service industry that grew out of the exponentially mounting consumer debt and the realization that consumer credit counseling, with its 60-70% dropout rate, just wasn’t working for those seriously in debt.
Who should you contact? – There is one company than stands out because of their excellent track record (quality service and results) and their unique approach. I recommend that you start with this company for a free debt consultation.

The program is Credit Card Relief™.

What Makes Them Unique?

Great Track Record - Credit Card Relief has years of experience, settling over $100,000,000 (one-hundred million) of debt for thousands of clients.

Operate in 46 states.

Low Monthly Payment – Credit Card Relief can cut your monthly payment by as much as 50%.

Unique Program Approach - Their program is unique in that Credit Card Relief uses a consortium of attorneys. A network of participating program attorneys, local to their clients, provide a free initial consultation to determine if debt settlement is the best solution and once enrolled, offer limited representation. The debt is then mediated by a nationally known debtor mediation law firm.

Your Money is Safe - In addition, each Credit Card Relief client is part of a unique Enrolled Member Trust, through which all their funds are deposited into a totally insured, risk-free trust account with a national bank. No money leaves your account without your permission.

Satisfied Clients - Credit Card Relief provides superior service, with on-going support throughout the duration of the program, through their full-time Client Care and Compliance departments. They have Zero open complaints with the more than 400 Better Business Bureaus (BBB’s) and the over 16,000 local, state, and federal regulatory agencies monitoring the industry.

You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. For more information, read my blog dated September 29, 2006.

Check back for my next blog that addresses another all too common mistake and what you can do!

Mounting Credit Card Debt – Biggest Mistakes People Make – Con’t.

In this series of blogs, I am discussing 5 of the biggest mistakes people make when faced with mounting debt, especially credit card debt, and providing some ways you can avoid or correct your mistakes. Yesterday I covered the problem with only paying the minimums on your credit card bills. Today we will discuss the second mistake:

2. Using your home’s equity for credit card debt consolidation: This may seem like a good solution to mounting debt, but it has some potentially serious consequences. By borrowing against the equity you have in your home, you are trading unsecured debt for secured debt. Sure those credit card balances or medical bills are paid off, but now, if you default on what is essentially a second mortgage on your home, the lender can foreclose and you could lose your home. Putting your home at risk is not a good tradeoff, especially for those seriously in debt and already struggling to make monthly payments.

Other Drawbacks

• You could owe more on your house than it is worth - With loans typically spread over 15 – 30 years, if you do have to sell your home for any reason in the short term, you could actually owe more between your mortgage balance and home equity loan than what you make on the sale of your home. In the current real estate market with dropping home prices, this is a real threat!
• Equity loans typically have an adjustable rate. As the prime rate rises, the loan rate rises and with it your monthly loan payment.
• Some people, seeing zero balance credit cards for the first time, suddenly think they have a whole new line of spending power. They somehow forget that they are still paying on that credit card debt! They start charging again and are suddenly faced with both the equity loan and maxed out cards to repay.

What to do Instead:

You may be a candidate for debt settlement. With debt settlement, a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. With this approach, you preserve the equity in your home, while getting out of debt for less than what you owe and in a fraction of the time it would have taken to pay off the debt just making the minimum monthly payments. Read yesterday’s blog for further details on this program and who to contact.

Tomorrow I will cover Mistake Number 3.

Facing Mounting Credit Card Debt – Have You Made One of These Mistakes?

It is so easy for credit card debt to get out of control. Each month you charge a little more on your credit card, pay the minimum payment, and promise to pay off the balance soon - when you get a little extra cash. Then the car breaks down, so you charge it, then you have out of pocket expenses for unexpected medical bills, so you charge that too! Before you know it, you’re over your credit limit and the credit card company slaps you with over-limit fees and then raises your interest rate. Then another “attractive” credit card offer comes in the mail and now you’re carrying a balance on two, maybe three different cards! It’s not long before you’re over your head in credit card debt. You’re just the kind of customer the credit card companies love! As long as you carry a balance, they are making huge profits on interest and penalties. In fact, the credit card industry takes in over $40 billion a year in fees and penalties alone.

In 2006, over 50 million households carried an average of over $9,000 in credit card debt. If you are one of those households, or think you may be headed in that direction, it is easy to make mistakes in an effort to try to dig out of mounting debt.

In my next several blogs, I will be addressing 5 of the biggest mistakes people make when faced with mounting debt, especially credit card debt, and offer some ways you can avoid or correct your mistakes.

Credit Card Debt Mistake #1- Making Minimum Payments on Credit Cards
Too many individuals are lulled into a false sense of security, telling themselves, ‘As long as I can make the minimum payment each month on my credit card bills, I’ll be okay.’ This is a huge mistake for two reasons.

1. By making only the minimum payment each month, it will take you years to pay off your balance, if you ever do get out of debt! In fact, it would take you between 9 and 10 years to pay off a $2,000 debt if you made only the minimum 4% payments. Surprised? Well, you’re not alone. Now bump that debt amount up to $10,000 and you’re looking at more than 15 years, and that assumes you stop making any further charges which isn't very likely. Why so long? As you slowly pay down the debt, your minimum payment due each month goes down, dragging out the payoff. This, along with the fact that many credit card companies had their minimums set so low that they didn't even cover the interest due, were the very reasons the government, in 2005, put pressure on the credit card industry to raise their minimums from an average of 1.5% to around 4%. However, since no law has ever been enacted, not all credit card companies have made this change. When you make minimum payments only, you are basically covering the interest each month with very little applied to the principle, usually only about 1%. The brutal reality is - you will probably never be debt free paying only the minimums.
2. Just getting by each month is like walking a tightrope that could snap at any time. What if you’re late or miss a payment and, as a result, the credit card company raises your interest rate which in turn raises your minimum payment due? What happens if you suddenly find yourself out of work for any reason or get sick and have mounting medical bill? Telling yourself that you’re okay financially as long as you can make the minimum payments each month is like sitting on a ticking time bomb. Sooner or later it is going to go off unless you make some serious changes.

What to do instead:

1. You must reduce your out of pocket expenses to free up cash. You think, ‘Oh, that’s really hard to do!’ You’re right! We have all been conditioned through advertising to believe that if we want it, we should have it NOW! No point in waiting, just charge it and pay for it later. Well later is here and you can’t pay for it, right? Sit down, as a family if necessary, lay out your bills and your credit card statements, and start cutting out all those expenses you can live without. Nothing is sacred; start chopping! Carry your lunch to work instead of eating out, no more manicures, no more expensive junk food at the grocery store, no more lattes at the local coffee shop, and forgo evenings out with the boys or girls! Get yourself and your family on a budget as quickly as possible and stick to it. Almost every family can find expenses they can cut to free up cash.
2. Stop charging and start paying cash for everything you can. You will be surprised how this will help you cut your expenses even further. For the things you do charge, keep a running tally on the refrigerator to help you see how quickly it adds up over a month’s time.
3. Always pay the minimums due and don’t be late on your payments in order to avoid those credit card penalties. To ensure the money is there when the bill comes due, each week, set aside at least ¼ of the money you will need to make your credit card payments.
4. Start paying down your balance - one card at a time. Now that you have cut your expenses and hopefully freed up some cash, start paying down the credit card with the highest interest rate first, while continuing to pay at least the minimums on all others.

Do Consider Debt Settlement If You Are In Serious Debt Trouble

If you have credit card debt over $5,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. Debt Settlement is a program in which a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. Under this program, each of your creditors agrees to accept a portion of what you owe them, in lump sum payouts, as payment in full. You’re now out of debt for less than what you owe and in a fraction of the time it would have taken to pay off the debt just making the minimum monthly payments.

Background – Debt Settlement, or Debt Negotiation as it is some times called, is a rapidly growing financial service industry that grew out of the exponentially mounting consumer debt and the realization that consumer credit counseling, with its 75-85% dropout rate, just wasn’t working for those seriously in debt.

Who should you contact? – There is one company than stands out because of their excellent track record (quality service and results) and their unique approach. I recommend that you start with this company for a free debt consultation.The program is Credit Card Relief™.

What Makes Them Unique?

Great Track Record - Credit Card Relief has years of experience, settling over $100,000,000 (one-hundred million) of debt for thousands of clients.

Operate in 46 states.

Low Monthly Payment – Credit Card Relief can cut your monthly payment by as much as 50%.Unique Program Approach - Their program is unique in that Credit Card Relief uses a consortium of attorneys. A network of participating program attorneys, local to their clients, provide a free initial consultation to determine if debt settlement is the best solution and once enrolled, offer limited representation. The debt is then mediated by a nationally known debtor mediation law firm.Your Money is Safe - In addition, each Credit Card Relief client is part of a unique Enrolled Member Trust, through which all their funds are deposited into a totally insured, risk-free trust account with a national bank. No money leaves your account without your permission.Satisfied Clients - Credit Card Relief provides superior service, with on-going support throughout the duration of the program, through their full-time Client Care and Compliance departments. They have Zero open complaints with the more than 400 Better Business Bureaus (BBB’s) and the over 16,000 local, state, and federal regulatory agencies monitoring the industry.You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. For more information, read my blog dated September 29, 2006.

Check back tomorrow for my next blog that addresses another all too common Credit card debt mistake and what you can do!

Credit Card Debt – The Brainwashing of the American Consumer and How to Fight Back

We have become a nation dependent on credit and credit cards and our acceptance of this dependency is reinforced on a daily basis in media advertising. I particularly like the commercial that tells us something to the effect that ‘the world demands faster money’ which our brains translate to ‘the world requires us to use credit or debit cards everywhere we go or we will be a cog in the wheel of progress.’ Another successful advertising campaign shows people enjoying life, making credit card purchases for various items or activities and then telling us that the results of these ‘financed’ moments is “priceless.” Again, we are brainwashed into using the fulfillment and pleasure derived from these purchases as justification for charging beyond our means because, after all, we just can’t put a price on happiness!

So now that we have all bought into the necessity and joy of credit card spending, the credit card companies have us hooked. In fact, in 2005, consumers in the U.S. were hooked to the staggering total of $1.8 trillion in credit card spending. This industry can now do pretty much whatever it wants to us- and the truth is – it does! The average credit card late fee has risen 162% since 1995. And if you can even begin to understand all the fine print on your credit card contract, you will find a whole list of fees and penalties they can assess: over-the-limit fees, the universal default clause, cash advance fees, transaction fees for certain types of charges, and “trailing” or “residual” interest charges (where cardholders are charged interest on balances they’ve paid the previous month).…and on…and on. All of this prompted an investigation by The General Accountability Office (GAO), which is the investigative arm of Congress. Their report was released late last year and sited a whole list of concerns regarding the practices of this industry. Michigan Democrat Carl Levin was appalled after reviewing the report and said that consumers need a score card to keep track of all the credit card fees and penalties.

In spite of the findings in the GAO report, little is really happening to stop the consumer abuse by the credit card industry. It is interesting to note that in 2005, after huge pressure from the credit card industry, lawmakers passed legislation to make it more difficult for debtors to file bankruptcy to get out of credit card debt. But then in 2006, the credit card industry turned right around and sent out more than eight billion credit card solicitations - a 30% increase. Consumers need to wake up and realize that they are being fed “financial cocaine” and that no one, not even Congress, will protect them by taking on the big boys. It’s up to each and every consumer to fight back!

There are steps every consumer needs to take:

1. Control credit card spending to no more than what you can truly afford to pay off at the end of the month. Carrying a balance month to month will cost you big time! Those “priceless” purchases could end up costing you twice what you originally paid for them in interest, fees, and penalties by the time they are paid off. Debt Consolidation and Refinancing are no longer attractive “quick fixes.” So if you already carry a substantial balance, then work out a plan to get yourself debt free. If you think you may be in serious debt ($10,000 or more), seek help now! Don’t let embarrassment, stigma, or the sense that negotiating your way out is not the moral way to get out of debt. The Credit Card Industry is one of the most profitable industries in the United States with annual earnings around $30 Billion. Citibank alone earns more profit than both Wal-Mart and Microsoft. You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. Also, read my blog dated September 29, 2006.
2. Read the fine print of your credit card statement. If there are terms you don’t understand, then contact your credit card issuer and have them explain the terms in plain English. Read my blog dated October 13, 2006 so you understand all the Credit Card Gotcha’s.
3. Don’t be afraid to try to negotiate better credit card terms, such as a lower interest rate. If you’re paying your bills on time, there is a better than 50% chance they’ll agree to a lower rate, especially if you can site another bank willing to give you a lower rate, so…
4. Shop around for better terms and better rates.
5. If you suspect abuses, don’t be afraid to report your bank or card issuer. Contact the Office of the Comptroller of the Currency: http://www.occ.treas.gov/. The credit card industry has more complaints filed against it than any other industry in the U.S.
   
   I recommend you watch the video trailer at “In Debt We Trust.”

A Study Finds Mounting Credit Card Debt Bad for Your Health

Dealing with the stress of serious credit card debt can actually be bad for your health. This not-so-surprising finding is based on a study conducted by Ohio State University. A study of over 1,000 Ohioans found a strong relationship between worry over rising debt and increased health problems. While the study examined respondents debt in terms of the number of credit cards they held and whether they carried a balance month to month, results actually showed that the real factor in determining debt stress and health problems was based on the amount of a family’s income that was tied up in paying off debt. In fact, those people who had a higher debt to income ratio exhibited higher levels of health related issues.

What can you do if the stress of mounting debt and the worry over the amount of money being paid towards those high interest rates is affecting your health? An authority on stress management told me that taking charge of your situation is a first step to getting stress under control. Worry alone gets you no where. Inaction or status quo fuels stress. Rather, examining your situation and putting together a plan to get your debt under control can actually help relieve some of the stress. While a well thought out plan won’t make the debt miraculously go away, the action of working that plan towards a goal of being debt free will relieve some of the stress and hopefully improve your health.

If you have credit card debt over $10,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. For more information, read my blog dated September 29, 2006.

Don’t let embarrassment, stigma, or the sense that negotiating your way out is not the moral way to get out of debt. The Credit Card Industry is one of the most profitable industries in the United States with annual earnings around $30 Billion. Citibank alone earns more profit than both Wal-Mart and Microsoft. Yet this industry has more complaints filed against it than any other industry in the U.S.

You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt.

Relief From Debt - Don't Make One of These Mistakes

Growing consumer debt is a very real problem in this country. While the moguls on Wall Street continue to reap the rewards of a bull market and vehemently assert that ‘the economy is booming’, the average American on Main Street isn’t so sure. A recent Washington report states that 70% of hourly workers are living paycheck to paycheck. They struggle silently each day to make ends meet, just getting by, until the car breaks down, dad gets sick and can’t work, or mom looses her job due to the factory closing and her job moving overseas. Then, in desperation to try to resolve the situation, many make one of the all too common mistakes I discuss below which can actually make matters worse! Here is what you need to know so you don’t end up digging your debt pit even deeper!

Don’t Use Your Home
If you thought about taking out an equity line against your home or refinancing your home to use your existing equity to pay off credit card debt, be very, very careful! While it may seem like a good option since the interest rate on an equity line or a mortgage is typically less than on a credit card, there are some serious drawbacks you must be aware of before you make this choice.

Drawbacks

• Don’t trade unsecured debt for secured - By borrowing against the equity you have in your home, you are trading unsecured debt for secured debt. Sure those credit card balances or medical bills are paid off, but now, if you default on what is essentially a second mortgage on your home, the lender can foreclose and you could lose your home. Putting your home at risk is not a good tradeoff, especially for those seriously in debt and already struggling to make monthly payments.
• You could owe more on your house than it is worth - With loans typically spread over 15 – 30 years, if you do have to sell your home for any reason in the short term, you could actually owe more between your mortgage balance and home equity loan than what you make on the sale of your home. In the current real estate market with dropping home prices, this is a real threat!
• Equity loans typically have an adjustable rate. As the prime rate rises, the loan rate rises and with it your monthly loan payment.
• Some people, seeing zero balance credit cards for the first time, suddenly think they have a whole new line of spending power. They somehow forget that they are still paying on that credit card debt! They start charging again and are suddenly faced with both the equity loan and maxed out cards to repay.

Watch Out for Low Introductory Rate or Balance Transfer Card Offers
While those enticing low introductory, 0% rates look like an easier way to get out from under your mounting debt, if you aren’t careful it can actually end up costing you more. How can this happen?

• First, if you are transferring a balance from another card, there is typically a transfer fee. The average fee is 3% of the amount transferred. Some issuers limit the fees to $75, but a growing number are doing away with the limits. This means that a transfer of $10,000 could cost you $300 in fees alone.
• Second, most issuers only grant a "grace period" on purchases if you have completely paid off your previous balance. If you transferred a balance to take advantage of the low introductory rate and you don’t plan to pay off the balance until the end of the introductory period, say 6 months, interest charges will begin to accrue on each new purchase from the day you buy them.
• Third, issuer terms usually state that 100% of each payment you make is applied to the balance with the lowest interest rate. Since your new purchases are typically subject to a higher interest rate, they will be the last in line to get paid off. Your payments will be applied to that balance you transferred instead of toward your new purchases. So your new purchases will sit there, building up interest at the highest rate, and you can't stop it without paying off the balance transfer in full, the very balance you had hoped to pay off over time. The only way around this is to take out the low introductory rate card and use it exclusively to pay off your old balances. Make all new purchases on another card until the old balance is paid off. Focusing only on the introductory rate without reading all the terms and conditions could leave you paying more in interest and fees than you did on your old card.
• Fourth, if you don’t pay off the balance transferred during the introductory period, once the period ends, they start making higher interest on that left over balance, along with all your new purchases.There is one more potential gotcha buried in the fine print. If you happen to be late on your payment for any reason during the introductory period, your rate will immediately skyrocket, in some cases as high as 30%. Before you sign up, be sure you know what all the terms are for that seemingly wonderful new card offer!

Don’t Assume Bankruptcy Is The Easy Or Only Option
If you thought your best option was to just file bankruptcy and start over…think again! Under the new bankruptcy laws, it is substantially more difficult to file bankruptcy as a means of escaping mounting debt. Under the new laws, before you can file bankruptcy, you must first complete financial counseling. You will have to attend classes and provide detailed records of your income, expenses, and tax records. (Remember, under a “consumer credit counseling” program, you will still be required to pay back the entire debt.) Only if the counseling agency determines that you are financially unable to complete a payment plan will you be able to proceed with filing bankruptcy.

Chapter 7 Bankruptcy discharges (wipes out) your debt. Chapter 7 qualifiers usually have little to no assets. Under Chapter 7, your assets (less those exempt by your state) are sold to pay your creditors as much of the debt you owe as your assets will cover. The remaining “eligible” debt is discharged. However, there is some debt that is not dischargeable and you will still be required to pay in full, such as taxes, spousal and child support, student loans, and certain luxury purchases. Under the new law, items deemed as “luxury” of $500 or more purchased within ninety days of the bankruptcy filing (or $750 within seventy days) are not dischargeable. If your income is too high, you won’t be able to qualify for Chapter 7 and will have to file Chapter 13.

Chapter 13 Bankruptcy is a debt payment plan. You will agree to pay most or all of your debts over a period of time, three to five years. The courts will assign a trustee who will review your finances and determine how much you will pay each month. Again, your Credit Report will show a bankruptcy.

Drawback to Bankruptcy: For many, bankruptcy is the only option, but it isn’t a “get out of debt free” card. It might be a way to stop those harassing phone calls but it is a painful process in and of itself and the wound doesn’t heal quickly. A bankruptcy stays on your credit report for ten years and will stay on your court records for 20 years. Many applications, including those for jobs, loans, or certain types of insurance ask you if you have ever filed for bankruptcy. More and more, companies are conducting background checks on prospective employees and a bankruptcy will show up on the report. Bankruptcy should really be your last resort. There is a better way out!

Do Consider Debt Settlement If You Are In Serious Debt Trouble
If you have credit card debt over $5,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. Debt Settlement is a program in which a qualified settlement or mediation company works for you with your creditors, to “negotiate” a reduction in your unsecured debt. Under this program, each of your creditors agrees to accept a portion of what you owe them, in lump sum payouts, as payment in full. You’re now out of debt for less than what you owe and in a fraction of the time it would have taken to pay off the debt just making the minimum monthly payments.

Background – Debt Settlement, or Debt Negotiation as it is some times called, is a rapidly growing financial service industry that grew out of the exponentially mounting consumer debt and the realization that consumer credit counseling, with its 60-70% dropout rate, just wasn’t working for those seriously in debt.

Who should you contact? – There is one company than stands out because of their excellent track record (quality service and results) and their unique approach. I recommend that you start with this company for a free debt consultation.The program is Credit Card Relief™.

What Makes Them Unique? Great Track Record - Credit Card Relief has years of experience, settling over $100,000,000 (one-hundred million) of debt for thousands of clients.Operate in 46 states.Low Monthly Payment – Credit Card Relief can cut your monthly payment by as much as 50%.

Unique Program Approach - Their program is unique in that Credit Card Relief uses a consortium of attorneys. A network of participating program attorneys, local to their clients, provide a free initial consultation to determine if debt settlement is the best solution and once enrolled, offer limited representation. The debt is then mediated by a nationally known debtor mediation law firm.Your Money is Safe - In addition, each Credit Card Relief client is part of a unique Enrolled Member Trust, through which all their funds are deposited into a totally insured, risk-free trust account with a national bank. No money leaves your account without your permission.Satisfied Clients - Credit Card Relief provides superior service, with on-going support throughout the duration of the program, through their full-time Client Care and Compliance departments. They have Zero open complaints with the more than 400 Better Business Bureaus (BBB’s) and the over 16,000 local, state, and federal regulatory agencies monitoring the industry.You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. For more information, read my blog dated September 29, 2006.

Don’t Be Lured By Too-Good-To-Be-True, Get-Out-Of-Debt Options
Advertisements to get you out of debt for pennies on the dollar are all over television and the radio these days, but if it sounds too good to be true, it probably is! If they’re quoting you 50% or more in debt reduction or 12 months to be debt free, ask them if they will put that in writing! Then listen to them back-peddle. Some of these companies have a list of filed complaints with their local Attorney Generals or the Better Business Bureau that are a mile long and some are being scrutinized quite closely. The reality is, most credit card companies will negotiate the balance owed, but not for a mere pennies on the dollar.

Graduating and In Debt - What to do Now!

Congratulations to all the recent college graduates and welcome to the real world of job hunting, learning to live on your own, and paying off that debt you racked up.

It has been reported that the average college graduate leaves college with $3,000 in credit card debt and at least four credit cards. While $3,000 may not sound like a lot, a surprising few, even with a college degree, have stopped to figure how long it is going to take to pay off that debt while quite probably going further in debt financing a car, buying a new wardrobe for that new job, etc. That $3,000 may only be the tip of the iceberg for those with the added burden of student loans. Paying only the minimum monthly payment on the $3,000 balance (assuming 4% minimum payments), it will take over 11 years to pay off. And that assumes no further charges!

Unfortunately, there are a surprising number of students who have more than $10,000 in credit card debt and as many as ten-twelve cards. How does this happen?

It is amazing to see the ease with which mere kids are able to obtain credit with little to no disposable income. Even more amazing are the number of students who admit they were never educated on the cost of credit – how credit cards work in terms of how interest is calculated, late fees, penalties and how it all affects a person’s credit score. Few knew that the spring break trip they charged is going to affect the interest rate they pay to finance their new car or determine whether they can even get approved to rent an apartment. They simply operated under the premise that upon graduation, they would start to pay off their debts. It never occurred to them that the $10 pizza they charged could end up costing a $100 or more depending on the interest rate charged and any late fees or penalties that apply if late on even one payment or unable to pay the minimum.

Why are so many willing to hand out credit like candy? Because they are all fighting to gain your loyalty as early as possible and ultimately your long-term financial business for auto loans, mortgages, credit lines, and of course, your ongoing credit card purchases. (See what Robert Manning, author of Credit Card Nation, has to say about the tactics of credit card companies.)

Decide now to become a financially responsible adult.

1. Read my blogs dated October 2006 on Credit Card Gotchas.
2. Then read your credit card statements carefully so you understand the terms you have agreed to and exactly what you are paying in interest, late fees, etc.
3. Set up a plan to pay down that debt as quickly as you can, starting with your highest interest credit card, without being late on any of your other cards.

Parents, if you care about your young adults starting out on the right foot, help them get their finances on solid ground. Sit down with them and go through the above steps together, with understanding (not recrimination) and encouragement.

Think You Might Be in Serious Credit Card Trouble? If you have credit card debt over $5,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. For more information, read my blog dated September 29, 2006.

Don’t let embarrassment, stigma, or the sense that negotiating your way out is not the moral way to get out of debt. The Credit Card Industry is one of the most profitable industries in the United States with annual earnings around $30 Billion. Citibank alone earns more profit than both Wal-Mart and Microsoft. Yet this industry has more complaints filed against it than any other industry in the U.S.

You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt.

Read This Before You Spend Your Tax Refund Check

If you’re one of the lucky American taxpayers expecting money back from the IRS instead of owing Uncle Sam, you need to read the following before you make plans to spend your federal tax refund check.

The average American family owes more than $8,000 in credit card debt, and pays more than $1,000 per year in interest payments alone. Paying only the minimum 2 to 4% each month can mean years before many will ever be debt-free and that’s assuming they don’t continue to put more on their cards each month. If you can relate to this typical American profile, then please stop and think before you view that refund check as “new found money” and make plans to spend it on food, fun, or luxury goods.

Stop – The money you are being refunded is NOT new-found money. It is money you earned that, instead of paying off those expenses you incurred or earning interest in a savings account, was “loaned” to the government in the form of overpaid taxes. It was yours all along; you’re just getting it back, and without interest I might add!

I am reminded of an episode of Everybody Loves Raymond where Raymond’s brother Robert was having financial difficulties, so Raymond, feeling sorry for his brother and wanting to help, loaned him $1,000. Robert was, needless to say, very touched and very grateful. But a couple days later, to Raymond’s shock and disbelief, Robert informed his family that he was headed to Vegas for a vacation. When Raymond asked him how this was possible given his financial woes, Robert basically told him that it was all thanks to the $1,000 Raymond had given him – money he said he wouldn’t otherwise have had. Robert’s warped logic was that, for a few days, he would feel free of his financial problems. Too many people view their debt in the same manner. It feels like it is always going to be there so why not take the money and have some fun, at least for as long as the tax refund lasts.

Think – Don’t be like Raymond’s brother Robert. If you were to pay only the minimum 4% each month at an average 18.9% APR, against a debt balance of $8,000, it would take you over 14 years to pay off that debt. But if you applied your $1,000 (or whatever amount you get back) refund check each year to your debt balance, you could cut years off the life of your debt and save thousands of dollars in interest, assuming you don’t continue to charge more than you can pay off each month. Don’t think short-term fun like Robert. Think long-term financial health. It’s not too late to make 2007 your year to become fiscally fit.

Act – Commit to a plan now before the refund check comes. Start with your highest interest credit card and plan to pay down that balance first. You can go to www.dinkytown.net and use one of their many financial calculators to evaluate your personal debt situation and how much of an impact this strategy can have over the life of your debt. Once you determine your plan, then stick with it! Sound a little hard to do? Okay, then take $50 of the refund and treat yourself to a nice dinner as your reward for doing the fiscally smart thing with your refund!

Drowning in Debt? If you are one of a growing group of Americans who are literally drowning in debt and feel that your tax refund would barely put a dent in the thousands of dollars you owe, then you may qualify for debt settlement. Your refund check can help you get started to actually negotiate down and then eliminate much of your unsecured debt. You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting free of debt. To learn more about how such a program can help you get debt free, read my blog dated September 29, 2006.

What You Can Do To Avoid Identity Theft

A friend sent me the following, regarding Identify Theft. I thought it contained some valuable suggestions for things you could do to lower your risk of identity theft, so I am passing these tips along to you. Note that nothing here will PREVENT thieves from trying to steal your identity, but every precaution you take can make it more difficult.

A corporate attorney sent the following out to the employees in his company.

1. The next time you order checks have only your initials (instead of first name) and last name put on them. If someone takes your checkbook, they will not know if you sign your checks with just your initials or your first name, but your bank will know how you sign your checks. (I’m not convinced that every bank is that diligent in looking at check signatures, but you could use this to prove that you didn’t write the checks.)
2. Do not sign the back of your credit cards. Instead, put "PHOTO ID REQUIRED." (This doesn’t work if you go anywhere that allows you to scan your card without them ever looking at the back. This practice is becoming the norm in most stores.)
3. When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the "For" line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.
4. Put your work phone # on your checks instead of your home phone. If you have a P.O. Box, use that instead of your home address. If you do not have a P.O. Box, use your work address. Never have your SS# printed on your checks.(DUH!) You can add it if it is necessary. But if you have it printed, anyone can get it.
5. Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place. I also carry a photocopy of my passport when travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a name, address, Social Security number, credit cards.

Unfortunately I, an attorney, have firsthand knowledge because my wallet was stolen last month. Within a week, the thieve(S) ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a Gateway computer, received a PIN number from DMV to change my driving record information online, and more. But here's some critical information to limit the damage in case this happens to you or someone you know:

1. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.
2. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).
3. But here's what is perhaps most important of all: (I never even thought to do this.) Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and Social Security number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name. The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away. This weekend someone turned it in.It seems to have stopped them dead in their tracks.Now, here are the numbers you always need to contact about your wallet, etc., has been stolen:

• Equifax: 1-800-525-62852.
• Experian (formerly TRW): 1-888-397-37423.
• Trans Union: 1-800-680-72894.
• Social Security Administration (fraud line): 1-800-269-0271

I would add the following advice:

You don’t have to lose your wallet, credit cards or checkbook to be a victim of identity theft. Look at your bank account balances on a weekly basis. If you have access to your credit card transactions on-line, look at those as well. If you do that, you’ll know if there are any fraudulent charges and be able to act while the banks and credit card companies will take ownership of the problem.

Are You Already in Credit Card Trouble?

It's not to late to start Your New Year’s Resolution Now To Get DEBT FREE!

If you have credit card debt over $5,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. For more information, read my blog dated
September 29, 2006.