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!