Now don’t get an anxiety attack. Talking about debt and credit cards is TOTALLY scary. But ignoring the ugly truth, will only drown you. It’s not as bad as you think, read on:
We all know the basic dangers of credit card debt. Having it, isn’t terrible, but it certainly isn’t fun. The average person holds around $7300 worth of credit card debt! Now THAT is a scary number. There was a point, where THAT was my balance. AHHH! I’ve had 3 major cards and 2 store cards in my life. Out of the 5, I have two left that I just need to see go away. All the money I put towards them now, I could be spending on a car payment. I didn’t go crazy, my majors helped with books for school, my dental bills, hospital bills, the occasional interview outfit, plane tickets, rental cars, Ok…MAYBE even a dinner or two here and there, but I have never maxed them out on pair of Louboutins or a new Hermes scarf! I bought my Ooh-la-la splurges with cash, it was the only way to justify them for myself. My store cards I opened when I was 18, so I could establish my credit. One of which I purchased a brand new computer for school. I even had to take out a couple small loans to cover some medical bills, that I have since paid off, which is why my cards got the back burner on the priority list.
Now, let’s talk about the affect of good and bad credit. Everyone knows, bad credit will limit a lot of things for you. There are plenty of places that run credit checks, that you may be unaware of. Loans, obviously, renting an apartment, even jobs! Employers can run credit checks on you, especially if you work in a financial industry. So what about that credit score? A FICO credit score range is from 350-850, the higher the better. This score is used to give a quantitative value on what type of candidate you will be when someone loans you money.
Here are a couple things that can HARM your credit score:
- Having your credit report checked too often
- Applying for loans or credit cards will automatically have your credit report checked. Doing this too many times is a warning that you are in dire need of money which means you could be a high risk candidate and might not be able to pay it back (default)
- Missing a payment / late payment
- Not only do you get slammed with fee’s, but a late payment on a loan or credit card puts a nice big X on your history . If you can’t make the minimum payment, call the company and ask for a deferment. In the event of losing a job, or a death of head of household, they can work with you. A late payment is just silly. Pay that on time! If you have the money the week after, budget the following month to make sure you’re on time. Live on Ramen to catch up on your paycheck cycles, and you’ll be back on track. #1 Rule: you must ALWAYS make at least the minimum payment on time.
- Maxing out your cards
- Hurts your debt to credit ratio. If your limit is $5000, a good ratio is 30% of your limit, or about $1500 debt balance. This shows the credit companies, that while you were offered a high limit, you are responsible and spend within your means. Carrying a high balance on revolving accounts shows that are living outside your means and are having trouble paying it off.
- Closing your accounts
- This plays into Maxing out your cards. While sometimes, you just want to show them who’s boss and close the account, you are actually cutting your own credit limit. Say you have 3 cards, $2000 limit each. You have maxed them all out. You pay one off, so now your balance is $4000 in debt, but your line of credit available is still $6000 and your debt to credit ratio would be 66% because you left the card open. If you closed that account, your line of credit available would be $4000, and now your ratio is 100% debt to credit available. It’s best to pay them off, and keep them open. But check up on them from time to time, because sometimes they incur fees like dormant fees, inactivity fees or just annual fees. If you miss paying those because you think you’ve already paid it off, it still counts as a late/missed payment.
- Only paying the minimum
- Not only does this almost guarantee a lifetime of paying a small bill off, but it costs you a ton of money. For a $3000 balance, only paying $40 a month with a high APR will have you spending close to $9000 to pay it off for 10 years. UGH! The worst! Budget for 3x the minimum at LEAST. If you have more than one card, which ever has the highest balance, pay down first, once they are around the same level, pay off the one with the highest APR. Some people will tell you to pay off the highest APR first, regardless of balance, but it is important to keep your balances low.
That pretty much covers the basics. Here are a few tips to paying those suckers down.
1. Stop. Using. Them. Plain and simple. Not for gas, not for miles, not for rewards.
2. Stop applying for them. If you have at least 2, keep it that way.
2a. UNLESS, they offer an amazing balance transfers, introductory 0% APR for at least 6 months, and a fixed APR that is LOWER than what you’re paying now, then consider taking it.
3. CALL them and ask to have your APR lowered. I just did it this weekend, and I’ll tell you about my experience in a minute.
4. Instead of using your tax return to buy that new flat screen, pay off your cards. I do this a lot. THEN, with the money you’ve saved over the year from not having to make credit card payments, you could probably buy your TV around Christmas in CASH.
5. Never miss or make a late payment. Just, don’t do it. You can even set up an automatic payment schedule through your checking account to ensure you’re always on time.
6. Worst comes to worst, you can call your credit companies, and ask for a settlement. They will close your account, and offer you a lower amount for you to pay. This isn’t great for your credit score, but if you come across an emergency, sometimes real life has to take over. You can always get build your score later, but weigh your options.
MY AGGRAVATING STORY:
Now, I’ve called a couple times over the years, and asked for a lower APR, unsuccessfully. I have an impeccable payment history, nothing but punctual high payments on each card. The person who answers the phone, is the gate keeper. It is rare you will ever have much accomplished in your favor, especially when it will cost the company money, such as lowering your APR. Ask your question, and get denied. Ask again, get denied…THEN… ASK FOR A SUPERVISOR. These guys are the ones who can get stuff done for you, unwillingly of course. I have always stopped at the gate keeper. But not anymore.
After Obama signed the Credit Card Accountability, Responsibility, and Disclosure Act, I got more mail from my credit companies than I could shake a stick at. It was mail overload, full of new changes, new actions, new promos etc. Very overwhelming. There are all sort of factors that got played into it, but the goal was for consumers not to have the wool pulled over their eyes, and instead, we wound up with information overload. With that, came caps on interest rates and fees.
BUT, here is the kicker. The knife in the back doesn’t hurt going in, only when you twist it. Credit card companies rushed to beat the deadline of the enforcement date, and a lot of people saw HUGE jumps in their APR’s. Although at the time, totally legal, but how do they justify it? Here’s how:
They reviewed your account more thoroughly, and since they are the lenders, they are allowed to change the agreement (read the fine print, it’s there), if they thought you were a high risk candidate (which in some cases, not EVERYONE was, but it was a blanket affect) here’s what happened next: They lowered your line of credit.
Why is this bad? Well, remember that debt to credit ratio we discussed? If your limit was $5000, and you had a $3000 balance. When they lower your limit it to say, $3100… you now only have $100 of available credit left. Making your ratio almost 100%. What’s worse, is they DO send you a notice, but after getting 10-15 pieces of credit card mail per week, who pays attention? A small amount. You go to charge an expense, perhaps a car fix, and now your card is denied. When you try to max out your card, sometimes it does go through, but you wind up paying an absurd fee, getting hit with penalties, and going over your limit, is similar to an over-draft at your bank. In addition, when your risk goes up, you’re more than likely going to see a jump in your APR
This is exactly what happened to me (not in that high amount though). So when I noticed and called, they said I was a high risk candidate because my ratio was too high, after explaining to them ‘but you guys were the one who lowered my limit!’ They didn’t seem to care. My standard APR (NOT introductory rate) has always between 9%-11%. My cards have been sky rocketed to 21%. Isn’t that ridiculous!?
So fast forward a year later and one card down, I have two left, and I call them to have them lowered. I have a beautiful history, a semi-low ratio, a great credit score and I always pay at least 3x the minimum. I go through supervisor to supervisor and get ONE card lowered by 4%. Not bad. The other card, no budge whatsoever. After 35 minutes and all the managers I asked to get transferred to, they weren’t moving. So, I told them I will be calling back next month to try again.
I highly recommend calling, if you’re in good standing, and your APR is just ridiculous, just suck it up and do it. Be prepared to be denied and play hard ball, but this is YOUR money you’re dealing with. That’s how credit card companies make such amazing profits, off of intimidated customers who won’t stand and stick up for themselves. You can save yourself a couple thousand dollars per YEAR in interest charges just by making a simple phone call (I sound like a Geico ad). But it’s true. Look at your bill next time. What is your interest charge each month? $35? $45? That’s so CRAZY! And that gets tacked on to your principal. Think about it, for each payment, if you’re paying the minimum, say $50, only $5 is being paid towards the principal? The rest, is just being flushed down the drain by stupid fees.
So one of this year’s Dezolution, is to pay off at least one of the two cards I have left. I am still paying off that crazy dental loan , but with some serious budgeting, and perhaps a few odd jobs, I just might be able to do it.
Good luck! Any tips, advice or stories you’d like to share, feel free!
*Disclaimer: I am not a financial advisor, budget counselor or debt manager. I am simply a consumer who is sharing helpful information and my story with other consumers. If you need additional debt credit counseling, please contact a professional*
Now don’t get an anxiety attack. Talking about debt and credit cards is TOTALLY scary. But ignoring the ugly truth, will only drown you. It’s not as bad as you think, read on:
We all know the basic dangers of credit card debt. Having it, isn’t terrible, but it certainly isn’t fun. The average person holds around $7300 worth of credit card debt! Now THAT is a scary number. There was a point, where THAT was my balance. AHHH! I’ve had 3 major cards and 2 store cards in my life. Out of the 5, I have two left that I just need to see go away. All the money I put towards them now, I could be spending on a car payment. I didn’t go crazy, my majors helped with books for school, my dental bills, hospital bills, the occasional interview outfit, plane tickets, rental cars, Ok…MAYBE even a dinner or two here and there, but I have never maxed them out on pair of Louboutins or a new Hermes scarf! I bought my Ooh-la-la splurges with cash, it was the only way to justify them for myself. My store cards I opened when I was 18, so I could establish my credit. One of which I purchased a brand new computer for school. I even had to take out a couple small loans to cover some medical bills, that I have since paid off, which is why my cards got the back burner on the priority list.
Now, let’s talk about the affect of good and bad credit. Everyone knows, bad credit will limit a lot of things for you. There are plenty of places that run credit checks, that you may be unaware of. Loans, obviously, renting an apartment, even jobs! Employers can run credit checks on you, especially if you work in a financial industry. So what about that credit score? A FICO credit score range is from 350-850, the higher the better. This score is used to give a quantitative value on what type of candidate you will be when someone loans you money.
Here are a couple things that can HARM your credit score:
- Having your credit report checked too often
- Missing a payment / late payment
- Maxing out your cards
- Closing your accounts
- Only paying the minimum
That pretty much covers the basics. Here are a few tips to paying those suckers down.
1. Stop. Using. Them. Plain and simple. Not for gas, not for miles, not for rewards.
2. Stop applying for them. If you have at least 2, keep it that way.
2a. UNLESS, they offer an amazing balance transfers, introductory 0% APR for at least 6 months, and a fixed APR that is LOWER than what you’re paying now, then consider taking it.
3. CALL them and ask to have your APR lowered. I just did it this weekend, and I’ll tell you about my experience in a minute.
4. Instead of using your tax return to buy that new flat screen, pay off your cards. I do this a lot. THEN, with the money you’ve saved over the year from not having to make credit card payments, you could probably buy your TV around Christmas in CASH.
5. Never miss or make a late payment. Just, don’t do it. You can even set up an automatic payment schedule through your checking account to ensure you’re always on time.
6. Worst comes to worst, you can call your credit companies, and ask for a settlement. They will close your account, and offer you a lower amount for you to pay. This isn’t great for your credit score, but if you come across an emergency, sometimes real life has to take over. You can always get build your score later, but weigh your options.
MY AGGRAVATING STORY:
Now, I’ve called a couple times over the years, and asked for a lower APR, unsuccessfully. I have an impeccable payment history, nothing but punctual high payments on each card. The person who answers the phone, is the gate keeper. It is rare you will ever have much accomplished in your favor, especially when it will cost the company money, such as lowering your APR. Ask your question, and get denied. Ask again, get denied…THEN… ASK FOR A SUPERVISOR. These guys are the ones who can get stuff done for you, unwillingly of course. I have always stopped at the gate keeper. But not anymore.
After Obama signed the Credit Card Accountability, Responsibility, and Disclosure Act, I got more mail from my credit companies than I could shake a stick at. It was mail overload, full of new changes, new actions, new promos etc. Very overwhelming. There are all sort of factors that got played into it, but the goal was for consumers not to have the wool pulled over their eyes, and instead, we wound up with information overload. With that, came caps on interest rates and fees.
BUT, here is the kicker. The knife in the back doesn’t hurt going in, only when you twist it. Credit card companies rushed to beat the deadline of the enforcement date, and a lot of people saw HUGE jumps in their APR’s. Although at the time, totally legal, but how do they justify it? Here’s how:
They reviewed your account more thoroughly, and since they are the lenders, they are allowed to change the agreement (read the fine print, it’s there), if they thought you were a high risk candidate (which in some cases, not EVERYONE was, but it was a blanket affect) here’s what happened next: They lowered your line of credit.
Why is this bad? Well, remember that debt to credit ratio we discussed? If your limit was $5000, and you had a $3000 balance. When they lower your limit it to say, $3100… you now only have $100 of available credit left. Making your ratio almost 100%. What’s worse, is they DO send you a notice, but after getting 10-15 pieces of credit card mail per week, who pays attention? A small amount. You go to charge an expense, perhaps a car fix, and now your card is denied. When you try to max out your card, sometimes it does go through, but you wind up paying an absurd fee, getting hit with penalties, and going over your limit, is similar to an over-draft at your bank. In addition, when your risk goes up, you’re more than likely going to see a jump in your APR
This is exactly what happened to me (not in that high amount though). So when I noticed and called, they said I was a high risk candidate because my ratio was too high, after explaining to them ‘but you guys were the one who lowered my limit!’ They didn’t seem to care. My standard APR (NOT introductory rate) has always between 9%-11%. My cards have been sky rocketed to 21%. Isn’t that ridiculous!?
So fast forward a year later and one card down, I have two left, and I call them to have them lowered. I have a beautiful history, a semi-low ratio, a great credit score and I always pay at least 3x the minimum. I go through supervisor to supervisor and get ONE card lowered by 4%. Not bad. The other card, no budge whatsoever. After 35 minutes and all the managers I asked to get transferred to, they weren’t moving. So, I told them I will be calling back next month to try again.
I highly recommend calling, if you’re in good standing, and your APR is just ridiculous, just suck it up and do it. Be prepared to be denied and play hard ball, but this is YOUR money you’re dealing with. That’s how credit card companies make such amazing profits, off of intimidated customers who won’t stand and stick up for themselves. You can save yourself a couple thousand dollars per YEAR in interest charges just by making a simple phone call (I sound like a Geico ad). But it’s true. Look at your bill next time. What is your interest charge each month? $35? $45? That’s so CRAZY! And that gets tacked on to your principal. Think about it, for each payment, if you’re paying the minimum, say $50, only $5 is being paid towards the principal? The rest, is just being flushed down the drain by stupid fees.
So one of this year’s Dezolution, is to pay off at least one of the two cards I have left. I am still paying off that crazy dental loan , but with some serious budgeting, and perhaps a few odd jobs, I just might be able to do it.
Good luck! Any tips, advice or stories you’d like to share, feel free!
*Disclaimer: I am not a financial advisor, budget counselor or debt manager. I am simply a consumer who is sharing helpful information and my story with other consumers. If you need additional debt credit counseling, please contact a professional*