credit card debt http://www.wisebread.com/taxonomy/term/5884/all en-US Paying Your Debts in the Wrong Order Could Be Costing You http://www.wisebread.com/paying-your-debts-in-the-wrong-order-could-be-costing-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/paying-your-debts-in-the-wrong-order-could-be-costing-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_shopping_online.jpg" alt="Man shopping online" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you've resolved to pay off your debt, that's good. But how do you determine which debts to pay off first? The answer can be different for everyone.</p> <p>There's no doubt that Americans have a lot of debt. The Center for Microeconomic Data found that U.S. household debt reached a new peak in the fourth quarter of 2017, rising to $13.15 trillion. The CMD said that balances rose 1.6 percent on mortgage loans, 3.2 percent on credit cards, and 1.5 percent on student loans during the quarter.</p> <p>The odds are high that you, too, are dealing with plenty of debts each month. Here are some factors to consider when deciding which ones to attack first.</p> <h2>When to attack unsecured, high-interest debts first</h2> <p>For most people, it makes sense to attack the highest-interest debts first. These are usually unsecured debts such as credit cards and personal loans. With an unsecured debt, there is nothing for the lender to repossess if you don't make payments.</p> <p>Student loans are another example of an unsecured debt, but they generally don't come with sky-high interest rates. You'll save more money by paying down a $5,000 credit card balance at 18 percent interest than you will a student loan with an interest rate of just 4.5 percent. Debt with higher interest rates grows much faster. If you only make the minimum payments on your credit cards, it could take you years, and loads of interest, to pay them off in full. (See also: <a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil?ref=seealso" target="_blank">All the Ways Minimum Payments Are Evil</a>)</p> <p>But sometimes you'll hear different advice. Namely, some experts say you should pay off cards with the <em>lowest balances</em> first, even if they don't necessarily have the highest interest rates. The theory is that paying off a debt in full provides an emotional lift that can inspire you to continue attacking your other debts.</p> <p>This is commonly referred to as the debt snowball method. It isn't the approach that will save you the most money &mdash; but it may still be the best choice if it helps you stay motivated and therefore ensures you don't give up before you've paid off all your debts. If you know you need small victories to stay motivated, the debt snowball method may be right for you. (See also: <a href="http://www.wisebread.com/6-secrets-to-mastering-the-debt-snowball?ref=seealso" target="_blank">6 Secrets to Mastering the Debt Snowball</a>)</p> <h2>When to attack secured debts first</h2> <p>Secured debt is tied to some kind of asset. Your auto loan, for instance, is secured by your car. If you don't make the payments on your auto loan, your lender can repossess your car. Your mortgage loan is secured by your home. If you stop making payments on your mortgage, your lender could foreclose on your house.</p> <p>If you fall behind on your credit card payments, the financial institution behind the card can't seize any of your assets. It can hit you with late payment penalties, of course, and cause your credit score to plummet. Debt collectors can even garnish a portion of your wages if you fall far enough behind in payments and they win a court judgment against you. But that's not as bad as losing the roof over your head or the vehicle you need to get to work.</p> <p>If you are extremely behind on mortgage or auto loan payments and worried about defaulting, make those payments your priority, even if the interest rates on these loans are much lower than those on your credit cards. It may not be the cheapest method of paying back debts, but it's better than losing the roof over your head. (See also: <a href="http://www.wisebread.com/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts?ref=seealso" target="_blank">Why You Need to Know the Difference Between Secured and Unsecured Debts</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/paying-your-debts-in-the-wrong-order-could-be-costing-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-youre-retiring-with-debt">What to Do If You&#039;re Retiring With Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts">Why You Need to Know the Difference Between Secured and Unsecured Debts</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-better-less-debt-or-more-savings">What&#039;s Better: Less Debt or More Savings?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-debt-after-you-die">What Happens to Your Debt After You Die?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/refinance-these-4-common-debts-before-year-ends">Refinance These 4 Common Debts Before Year Ends</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management credit card debt high interest rates mortgages secured debt snowball method student loans unsecured debt Mon, 16 Apr 2018 09:00:06 +0000 Dan Rafter 2125055 at http://www.wisebread.com 6 Things to Consider Before Making a Big Purchase for Rewards Points http://www.wisebread.com/6-things-to-consider-before-making-a-big-purchase-for-rewards-points <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-things-to-consider-before-making-a-big-purchase-for-rewards-points" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/smiling_woman_with_credit_card_and_laptop.jpg" alt="Smiling woman with credit card and laptop" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It can be thrilling to chase credit card rewards. When you use a <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">travel rewards credit card</a>, you earn points and miles that you can redeem for a free trip. And when you use <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash back cards</a>, you're essentially earning a nice little refund on your purchases.</p> <p>Making big purchases on your credit card is one way to rack up points quickly. A home remodel or wedding can cost tens of thousands of dollars, and as long as you're not spending extra just to rack up rewards, using a rewards credit card can be a way to defray those large costs.</p> <p>This strategy can be more complex than you think, however. Here are six things to think about before making a large purchase for rewards.</p> <h2>1. Will the merchant accept credit cards?</h2> <p>Before you can even consider using your credit card to make a large purchase, you have to find out if the store or vendor will even accept them. Every time a merchant accepts a credit card, it must pay the processor a merchant fee of about 2% to 3% of the transaction. Understandably, this makes many companies hesitant to accept credit cards, especially for their largest sales.</p> <p>For example, home improvement contractors often won't accept credit cards because they know that the merchant fees will directly impact their bottom line. You may, however, be able to work out a deal where you can, for instance, buy some of the project supplies with your credit card from a home improvement store. It never hurts to ask. (See also: <a href="http://www.wisebread.com/best-credit-cards-to-use-for-a-home-renovation?ref=seealso" target="_blank">Best Credit Cards for a Home Renovation</a>)</p> <p>Some car dealers might also have policies preventing you from using your credit card to pay for a vehicle, while others may allow you to use your credit card for a certain percentage of the transaction and use cash or other financing for the rest of the sale. (See also: <a href="http://www.wisebread.com/should-you-buy-a-car-with-a-credit-card?ref=seealso" target="_blank">Should You Buy a Car With a Credit Card?</a>)</p> <p>Finally, double check that the merchant is part of your rewards card's payment network. For example, some merchants don't accept <a href="http://www.wisebread.com/american-express-credit-card-offers-applications-reviews?ref=internal" target="_blank">American Express</a>.</p> <h2>2. Will the company impose a surcharge to use your credit card?</h2> <p>Some companies are happy to accept credit cards for large transactions, but they will impose a surcharge that will cost you more than any rewards that you might earn. For example, it's not uncommon for companies to impose a 3% to 5% surcharge on credit card transactions, and bury that information in the fine print of the agreement. And conveniently for the companies that do this, their surcharges are often in excess of their credit card processing fees, allowing them to make a profit.</p> <p>Thankfully, there are 10 states where it's actually illegal to add a surcharge to a credit card transaction. If you are doing business in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, or Texas, and a merchant is adding a surcharge to credit card transactions, you might want to inform them that the practice is illegal. If you are polite about it, the merchant may reconsider its surcharge and let you pay for your purchase with a credit card at no additional cost. Just be aware that the government and publicly regulated utilities are often exempt from the laws prohibiting credit card surcharges.</p> <h2>3. Does the company offer a cash discount?</h2> <p>Most states allow merchants to offer a cash discount on the advertised price instead of imposing a credit card surcharge. And even if a cash discount is not expressly advertised, you might be able to negotiate one before using your credit card, especially if it's for a large purchase. If the value of your discount is greater than the rewards you could earn, then it can be better to use cash.</p> <h2>4. Will the card issuer approve the charge?</h2> <p>Once you've figured out that the merchant will accept your credit card, you should double check that your card issuer will authorize the charge. Not only do you need to have a large enough line of available credit, but even if you do, a card issuer might flag an unusually large purchase as potentially fraudulent. For these reasons, it's a good idea to inform your card issuer in advance of a large charge, so they can make a note in their systems to expect it.</p> <p>And if you would like to make a purchase in excess of your current credit limit, you may be able to do so if you call your card issuer. It may grant you a credit limit increase, or, if you've got more than one credit card from that issuer, it may be willing to move a portion of your credit limit from one card to another.</p> <h2>5. Will you be able to avoid interest by paying your balance in full?</h2> <p>Whether your purchase is large or small, it only makes sense to chase rewards when you can avoid interest charges by paying your entire statement balance in full. When you're incurring interest on your debts, then your first priority should be to save money while paying it off.</p> <p>Rewards cards tend to impose higher interest rates than cards that don't offer rewards. So if you know you'll need to run a balance to pay off your large purchase, your best strategy is to use a card with a low interest rate or a card with <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal" target="_blank">0% APR on new purchases</a> for a promotional period. These cards tend to offer skimpier rewards, if any, but the interest you'll save should more than make up for the lack of rewards. Forget about rewards until you're in a place to pay off your balance in full every month. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <p>Other options are to delay the purchase until you have saved up enough money to pay for it without incurring debt, or seek other low-interest forms of finance.</p> <h2>6. How will this purchase affect your credit?</h2> <p>A large portion of your credit score is determined by your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a> &mdash; the amount of debt you have compared to how much credit you have available. Even when you pay off your statement balance in full, that balance is reported to the major consumer credit bureaus as debt for the month, and that can have a temporary impact on your credit score.</p> <p>If you have an excellent credit score and a large amount of available credit, then you shouldn't expect much of an impact. But if you have a limited amount of credit, then consuming it with a large purchase could cause your credit score to drop dramatically. One way to avoid this is to make a large payment before your statement period ends. Doing this will reduce your statement balance and its impact on your credit score.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-things-to-consider-before-making-a-big-purchase-for-rewards-points&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Things%2520to%2520Consider%2520Before%2520Making%2520a%2520Big%2520Purchase%2520for%2520Rewards%2520Points.jpg&amp;description=6%20Things%20to%20Consider%20Before%20Making%20a%20Big%20Purchase%20for%20Rewards%20Points"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Things%20to%20Consider%20Before%20Making%20a%20Big%20Purchase%20for%20Rewards%20Points.jpg" alt="6 Things to Consider Before Making a Big Purchase for Rewards Points" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/6-things-to-consider-before-making-a-big-purchase-for-rewards-points">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-store-card-pitfalls-to-watch-out-for">5 Store Card Pitfalls to Watch Out for</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-5-credit-cards-for-groceries">The Best Credit Cards for Groceries</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt">2-Minute Guide: How to Use Balance Transfers to Pay Off Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-calculate-the-value-of-your-credit-card-rewards">How to Calculate the Value of Your Credit Card Rewards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-ease-into-credit-card-rewards-after-debt-repayment">How to Ease into Credit Card Rewards After Debt Repayment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Shopping credit card debt credit card rewards credit card tips earning points and rewards shopping tips Thu, 29 Mar 2018 09:30:21 +0000 Jason Steele 2123634 at http://www.wisebread.com 2-Minute Guide: How to Use Balance Transfers to Pay Off Credit Card Debt http://www.wisebread.com/2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_with_credit_card_and_laptop.jpg" alt="Woman with credit card and laptop" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Balance transfer credit cards can help you get out of debt, once you know a few things. Take a couple of minutes to learn the basics about what they are and how to use them.</p> <h2>What is a balance transfer credit card?</h2> <p>A <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">balance transfer card</a> has a low interest rate or none at all for an introductory period &mdash; typically six to 21 months. You move your debt from high-interest cards to the balance transfer card and get a low- or no-interest period in which to clear your debt.</p> <h2>Who qualifies for a balance transfer card?</h2> <p>To get the best terms, you'll need excellent credit. There are balance transfer cards for people with fair credit, but they may have shorter introductory periods and higher interest rates.</p> <h2>How do balance transfers work?</h2> <p>Once you're approved for a balance transfer card, you'll use it to pay off the balances from your old cards, usually over the phone or via the web. Then you can pay down the debt on the balance transfer card during the promotional period without any interest added to your payments. Every penny you pay toward your debt comes directly off your credit card balance. (See also: <a href="http://www.wisebread.com/step-by-step-guide-to-doing-a-balance-transfer-on-credit-cards?ref=seealso" target="_blank">Step-by-Step Guide to Balance Transfers</a>)</p> <h2>What are the costs?</h2> <p>Most of these cards charge a balance transfer fee of 3%&ndash;5% of your balance upfront (though a handful do not). You'll need to do the math to make sure you still come out ahead by transferring the balance.</p> <h2>What are the dangers?</h2> <ul> <li> <p>If you fail to pay off your balance before the introductory period ends, whatever debt is left will be subject to interest rates, which can be higher than the rate you were paying previously.</p> </li> <li> <p>If you pay late or fail to make your minimum payment, you could lose your introductory offer and be hit with a higher interest rate right away.</p> </li> <li> <p>Once you transfer a balance, it may be tempting to start running a balance on the old card again. That could put you in a worse situation than when you started. (See also: <a href="http://www.wisebread.com/6-hidden-dangers-of-credit-card-balance-transfers?ref=seealso" target="_blank">6 Hidden Dangers of Balance Transfers</a>)</p> </li> </ul> <h2>5 tips for balance transfer success</h2> <ul> <li> <p>Look for a card that <a href="http://www.wisebread.com/5-best-credit-cards-with-no-balance-transfer-fees?ref=internal" target="_blank">doesn't charge a balance transfer fee</a>.</p> </li> <li> <p>Create a plan to pay off your debt during your card's introductory offer.</p> </li> <li> <p>Don't use your <a href="http://www.wisebread.com/why-new-purchases-on-a-balance-transfer-card-can-cost-you?ref=internal" target="_blank">balance transfer card for purchases</a>. It will keep you in debt longer, and you'll forgo your <a href="http://www.wisebread.com/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs?ref=internal" target="_blank">grace period</a> on new purchases as long as you carry a balance.</p> </li> <li> <p>Don't quit making payments on your old cards until you know your balances have been transferred. Missing a payment or <a href="http://www.wisebread.com/how-late-payments-affect-your-credit?ref=internal" target="_blank">paying late</a> can damage your credit score.</p> </li> <li>Keep old cards open. Closing credit cards can also lower your credit score. (See also: <a href="http://www.wisebread.com/your-comprehensive-checklist-for-a-successful-balance-transfer?ref=seealso" target="_blank">Comprehensive Checklist for Successful Balance Transfers</a>)</li> </ul> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F2-Minute%2520Guide_%2520How%2520to%2520Use%2520Balance%2520Transfers%2520to%2520Pay%2520Off%2520Credit%2520Card%2520Debt.jpg&amp;description=2-Minute%20Guide%3A%20How%20to%20Use%20Balance%20Transfers%20to%20Pay%20Off%20Credit%20Card%20Debt"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/2-Minute%20Guide_%20How%20to%20Use%20Balance%20Transfers%20to%20Pay%20Off%20Credit%20Card%20Debt.jpg" alt="2-Minute Guide: How to Use Balance Transfers to Pay Off Credit Card Debt" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/holly-johnson">Holly Johnson</a> of <a href="http://www.wisebread.com/2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/step-by-step-guide-to-doing-a-balance-transfer-on-credit-cards">Step-by-Step Guide to Doing a Balance Transfer on Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/re-age-your-credit-card-debt-to-protect-your-credit-score">Re-Age Your Credit Card Debt to Protect Your Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-things-to-consider-before-making-a-big-purchase-for-rewards-points">6 Things to Consider Before Making a Big Purchase for Rewards Points</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management balance transfers credit card debt credit card tips debt repayment Paying Off Debt Mon, 26 Mar 2018 09:30:23 +0000 Holly Johnson 2123636 at http://www.wisebread.com 6 Personal Finance Rules to Live By in Your 40s http://www.wisebread.com/6-personal-finance-rules-to-live-by-in-your-40s <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-personal-finance-rules-to-live-by-in-your-40s" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/portrait_of_a_beautiful_woman.jpg" alt="Portrait of a beautiful woman" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your 40s can be a stressful time. Your children might be moving on to college, changing the dynamics of your household. Your own parents are aging and might need to move into a nursing home or assisted living facility. And you might be feeling extra pressure at work to move up to higher-paying positions as a way to maximize your earning potential.</p> <p>But your 40s can also be a time to secure your financial health and pave the way toward a brighter retirement. You can increase your odds of achieving this goal by following the personal finance rules below.</p> <h2>1. Focus on building your retirement savings</h2> <p>The main goal in your 40s should be to boost your retirement savings as much as possible. Retirement might still seem a long way away, but it's closer than you think.</p> <p>If you are saving money in your company's 401(k) plan, be sure to maximize your regular contributions and take advantage of any company match. Do the same with any investments you make in a traditional IRA or Roth IRA. The more you save today, the brighter your retirement years will be. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p> <h2>2. Don't let college costs derail your retirement savings</h2> <p>You want to help your kids pay for their college educations. That's understandable, but don't let your desire to help your children derail your retirement savings.</p> <p>If you spend too much money helping your kids pay for college, you'll struggle to build your retirement savings. In your 40s, saving for retirement should be your top priority, outweighing even your goals of chipping in to pay for your children's college education.</p> <p>Remember, your children have options for paying for college. They can borrow money. They can choose less expensive schools. They can seek out scholarships or attend a community college for two years. You don't have nearly as many options when it comes to your retirement savings. (See also: <a href="http://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement?ref=seealso" target="_blank">How to Keep Student Loans From Wrecking Your Retirement</a>)</p> <h2>3. Reduce your debts</h2> <p>Nothing ruins your plans to save money quicker than debt. And no other is as costly as credit card debt. Do everything you can in your 40s to eliminate it.</p> <p>Some debt is better than others. Auto loans and mortgages, for instance, generally come with lower interest rates. And you are receiving a benefit &mdash; a house to live in, a car to drive &mdash; while making those monthly payments. But credit card debt is another story. This debt comes with sky-high interest rates that can snowball by hundreds of dollars every month. That's why it's so important to pay it off as quickly as possible. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <p>Remember that your primary goal in your 40s is to build your retirement savings. Think of how many additional dollars you could save if you weren't sending so much money each month to your credit card providers.</p> <h2>4. Grow your emergency fund</h2> <p>Another thing that can quickly derail your efforts to save for retirement is an unexpected emergency. Say your roof springs a leak or your furnace conks out in the middle of January. You must fix these problems, and that won't be cheap.</p> <p>That's where an emergency fund comes in. As the name suggests, this type of fund is filled with dollars that you only tap when an unexpected financial emergency pops up. By having a well-stocked emergency fund, you won't have to resort to credit cards to pay for unexpected home or auto repairs, or even a surprise medical bill.</p> <p>Financial experts recommend that you have enough in your emergency fund to cover at least six months' to a year's worth of daily living expenses. That might seem daunting, but even starting an emergency fund with small payments every month can build up. Say you deposit $200 every month in an emergency fund. After a year, it will grow to $2,400. (See also: <a href="http://www.wisebread.com/7-easy-ways-to-build-an-emergency-fund-from-0?ref=seealso" target="_blank">7 Easy Ways to Build an Emergency Fund From $0</a>)</p> <h2>5. Avoid the co-signing temptation</h2> <p>When you're in your 40s, your children might be ready to apply for auto loans or credit cards of their own. It can be challenging for young adults with limited credit histories to earn approval for these loans. It's not unusual for them to ask their parents to co-sign on an application.</p> <p>While it might be tempting to want to help your kid, be careful: If your son or daughter makes their payments late, your credit score will take a fall, too. That's because when you co-sign, you become equally responsible for a debt. If your children default on a loan, you're on the hook for making those missed payments &mdash; putting you in a dangerous financial predicament that could completely derail your retirement savings.</p> <p>Don't co-sign unless you're positive your children won't miss any payments. Even then, it's probably not in your best interest to be a co-signer. (See also: <a href="http://www.wisebread.com/should-you-cosign-your-teenagers-credit-card-application?ref=seealso" target="_blank">Should You Co-sign Your Teenager's Credit Card Application?</a>)</p> <h2>6. Make sure you have enough life insurance</h2> <p>What would happen to your children or spouse if you suddenly died? Would your spouse be able to pay the monthly mortgage? Would your family have to move to a new, less expensive home?</p> <p>Life insurance can prevent financial stress for your family if you should die unexpectedly. Make sure that you have enough life insurance coverage to protect your loved ones. Your 40s is a good time to review your life insurance coverage and make changes if necessary. (See also: <a href="http://www.wisebread.com/why-your-group-life-insurance-is-not-enough?ref=seealso" target="_blank">Why Your Group Life Insurance Is Not Enough</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-personal-finance-rules-to-live-by-in-your-40s&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Personal%2520Finance%2520Rules%2520to%2520Live%2520By%2520in%2520Your%252040s.jpg&amp;description=6%20Personal%20Finance%20Rules%20to%20Live%20By%20in%20Your%2040s"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Personal%20Finance%20Rules%20to%20Live%20By%20in%20Your%2040s.jpg" alt="6 Personal Finance Rules to Live By in Your 40s" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/6-personal-finance-rules-to-live-by-in-your-40s">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/build-a-secure-future-starting-with-your-next-paycheck">Build a Secure Future Starting With Your Next Paycheck</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-things-you-should-make-your-adult-child-pay-for">4 Things You Should Make Your Adult Child Pay For</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-your-money-is-being-a-jerk-and-how-to-fight-back">5 Ways Your Money Is Being a Jerk (And How to Fight Back)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-building-an-emergency-fund-always-a-good-idea">Is Building an Emergency Fund Always a Good Idea?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-signs-your-emergency-fund-is-too-big">4 Signs Your Emergency Fund Is Too Big</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 40s co-signing college savings credit card debt debt repayment emergency fund money moves retirement savings Thu, 22 Mar 2018 10:00:06 +0000 Dan Rafter 2113613 at http://www.wisebread.com Financial Experts Share Their Biggest Credit Mistakes http://www.wisebread.com/financial-experts-share-their-biggest-credit-mistakes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/financial-experts-share-their-biggest-credit-mistakes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/mature_man_shopping_with_credit_card.jpg" alt="Mature man shopping with credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit mistakes don't have to leave you with poor credit for the rest of your life. Other people have overcome their credit problems, and so have I. You can do the same, with a little bit of time and patience.</p> <p>When I was in my early 20s, I made a lot of unfortunate financial decisions that cost me both time and money. One of those decisions, which I still regret to this day, was the <a href="http://www.wisebread.com/3-reasons-why-you-should-never-buy-a-new-car?ref=internal" target="_blank">purchase of a new (read: expensive) car</a> when I made less than $10 per hour.</p> <p>I'm not sure why I thought I could swing the car's ridiculous monthly payments, or if I even cared how the purchase might impact my other financial goals. Heck, I'm not even sure I had financial goals. I wanted a new Mitsubishi Galant, apparently at all costs, so I did what I had to do. And boy, did I pay for it.</p> <p>Over the years, that car held me back in a huge way. While I kept up with the $500+ payments because I always had a job, I ultimately had to move back in with my parents to focus on repaying my car loan.</p> <p>I eventually paid off that car and vowed <em>never</em> to take out a car loan again. The entire experience was painful, but it also taught me something I probably needed to learn the hard way: Mistakes can be overcome if you don't let them take over your life. I bought an overly expensive car for sure, but I didn't let that ruin my credit for good. Instead, I fixed my mistake, slowly but surely, by doing the right thing.</p> <h2>More proof that credit mistakes can be overcome</h2> <p>I'm not the only one. Over time, many financial experts have made credit mistakes they've had to mend one way or another. Fortunately, this means that you, too, can fix your credit snafus if you apply logic to your mistakes and take actionable steps to remedy them.</p> <p>If your credit is suffering for any reason, it's possible to get on the right track to fix it this year. Here are some of the mistakes you may have made, plus the best ways to move forward.</p> <h3>Paying interest on a rewards credit card</h3> <p>Earning credit card rewards can be advantageous if you are able to use credit cards without getting into debt. But what happens when you pursue rewards without a plan to pay off your balance immediately?</p> <p>Deacon Hayes, founder of the Well Kept Wallet blog, found out exactly what happens the hard way. When he and his wife were married, they put their honeymoon on a credit card in order to rack up cash-back rewards. They had a great trip, he says, but they ended up paying a lot more in interest than the paltry 1%-2% cash back they earned. Why? Because it took them months to pay off their honeymoon bill, and all of that was at their credit card's 15% APR. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">Fastest Method to Eliminate Credit Card Debt</a>)</p> <p>Rewards credit cards typically have higher interest rates than other types of cards. People who carry balances would be better off forgetting about rewards and getting a card with a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=internal" target="_blank">low interest rate</a> or <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal" target="_blank">0% purchase APR</a>.</p> <p>From that point forward, Hayes says he and his wife became determined not to repeat this mistake. &quot;We learned the hard way to pay off our credit card in full each month to keep from paying hundreds of dollars in interest to the lenders,&quot; he says.</p> <p>The bottom line: If you've earned rewards but wound up carrying a balance, there's not a lot you can do now other than pay it off. But in the future, stick to low- or no-interest credit cards if you know you can't pay off your balance right away.</p> <h3>Being too scared to build credit</h3> <p>Growing up, money blogger Caroline Vencil was told by family members that credit cards were &quot;the devil.&quot; As a result, she never bothered to get a credit card or build her credit in any way.</p> <p>This strategy worked fine until Vencil graduated college and wanted to finance a vehicle. Because she had no credit history, she was unable to get a car loan. Things got worse for Vencil when she followed the advice of the car dealership and got four new credit cards right away to &quot;build her credit.&quot; Because too much new credit can hurt your credit score, Vencil's FICO score quickly tumbled. (See also: <a href="http://www.wisebread.com/the-5-things-with-the-biggest-impact-on-your-credit-score?ref=seealso" target="_blank">The 5 Things With the Biggest Impact on Your Credit Score</a>)</p> <p>Vencil did end up getting a car loan, but not from that dealer, and she paid a high interest rate on it. She eventually worked to build her credit by using her new credit cards responsibly, making her payments on time, and not carrying a balance. However, she learned a huge lesson from the ordeal: Learn about credit and credit cards from experts and not necessarily from well-meaning but ill-informed relatives. Just because your parents think credit is dangerous doesn't mean you won't need a credit score, so make sure to build credit slowly and responsibly &mdash; or else, risk not having credit when you need it.</p> <p>And never jump to sign up for four new credit cards just because a car dealership says so. Most of the time, you'll be a lot better off if you build credit slowly over time.</p> <h3>Using a cash advance to invest</h3> <p>Joseph Hogue, a chartered financial analyst and founder of Peer Loans Online blog, says one of his biggest credit mistakes was using a cash advance from his credit card to borrow $3,000 to invest in stocks. Hogue says the year was 1999 and the stock market was hot, so he figured he could easily gain at least 14 percent annually on his investment. Unfortunately, his hopes were dashed when, around a year later, he wound up losing $800 of the money he borrowed.</p> <p>But things were even messier than that since Hogue was also paying interest on the money he charged. <a href="http://www.wisebread.com/how-a-credit-card-cash-advance-costs-you-more-than-a-purchase?ref=internal" target="_blank">Credit card cash advances</a> are a notoriously expensive way to borrow. They come with cash advance fees, and interest rates tend to be higher than the card's regular purchase APR. Hogue says the moral of the story is this: &quot;Never invest on borrowed money and be careful how you use your credit cards.&quot;</p> <p>These days, Hogue says he only uses credit for purchases he can pay off right away, and he is much better off for it.</p> <h3>Charging a huge purchase without a concrete plan to pay it back</h3> <p>Chris Peach, who blogs at MoneyPeach.com, says his biggest credit mistake was one that seemed super smart at the time. When he and his wife were married in 2008, Peach says they saved up $10,000 for a $20,000 wedding and charged the rest. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <p>They pretended they were making sophisticated financial decisions by promising themselves they would pay off the balance as soon as possible. Unfortunately, life happened and that wasn't as easy as they thought. &quot;The wedding lasted less than six hours and it took us almost four years to pay off the balance,&quot; he says.</p> <p>Looking back, the blogger says it was the dumbest financial decision they have ever made. They charged $10,000 without any sort of plan to pay it back, and even convinced themselves they were making a financially savvy decision.</p> <p>Today, Peach says they no longer mess around with debt or credit cards for that matter. Instead, they use a simple method to pay for groceries, shopping, and travel: cash. (See also: <a href="http://www.wisebread.com/is-an-all-cash-diet-right-for-you?ref=seealso" target="_blank">Is an All-Cash Diet Right for You?</a>)</p> <p>This story, like the others on this list, shows that it's possible to make poor decisions with your credit and still go on to live a financially fruitful life. We all make mistakes, but it's how we handle them that sets the tone for the rest of our lives.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Ffinancial-experts-share-their-biggest-credit-mistakes&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FFinancial%2520Experts%2520Share%2520Their%2520Biggest%2520Credit%2520Mistakes.jpg&amp;description=Financial%20Experts%20Share%20Their%20Biggest%20Credit%20Mistakes"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Financial%20Experts%20Share%20Their%20Biggest%20Credit%20Mistakes.jpg" alt="Financial Experts Share Their Biggest Credit Mistakes" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/holly-johnson">Holly Johnson</a> of <a href="http://www.wisebread.com/financial-experts-share-their-biggest-credit-mistakes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt">2-Minute Guide: How to Use Balance Transfers to Pay Off Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dealing-with-post-holiday-credit-card-debt">Dealing with Post-Holiday Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-negotiate-credit-card-debt">4 Ways to Negotiate Credit Card Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management credit card debt credit card mistakes credit mistakes financial experts Spending Money Wed, 21 Mar 2018 09:30:19 +0000 Holly Johnson 2121235 at http://www.wisebread.com 5 Reasons Why Your Credit Score Dropped Out of the Blue http://www.wisebread.com/5-reasons-why-your-credit-score-dropped-out-of-the-blue <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-reasons-why-your-credit-score-dropped-out-of-the-blue" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/worried_woman_calculating_accountancy_reading_a_letter.jpg" alt="Worried woman calculating accountancy reading a letter" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You pay your credit card accounts on time each month. You never miss a mortgage payment. You haven't run up loads of debt. So why did your credit score suddenly drop 20 points?</p> <p>You know the big reasons why your credit score might fall: late payments and a large amount of new credit card debt. But there are other reasons that aren't so obvious. And if your credit score did take an unexpected dip, one of these less-obvious reasons might be behind it.</p> <h2>1. You canceled a credit card</h2> <p>You might think that canceling a credit card that you no longer use is a smart financial move. If it prevents you from running up charges on that card, it might be. But closing a credit card can also cause your credit score to drop.</p> <p>This is because of something called your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a>. This ratio measures how much of your available credit you are using. The lower this ratio, the better it is for your credit score. Say you have three credit cards each with a limit of $6,000. That's a total credit limit of $18,000. Now say you have $6,000 of credit card debt. You are using $6,000 of $18,000 of total available credit, which is a credit utilization ratio of about 30 percent. Lenders like to see this ratio around this level or lower.</p> <p>If you close one of those cards, you'll suddenly be using $6,000 of just $12,000 of total available credit &mdash; a credit utilization ratio of 50 percent. That jump could cause your credit score to take an unexpected fall.</p> <h2>2. You've been building up credit card debt gradually over time</h2> <p>Closing a credit card account isn't the only way to increase your credit utilization ratio. Maybe you've been steadily building up new credit card debt for months. You're making your credit card payments on time, but you're also increasing the total balances on your cards. This, too, can gradually cause your credit utilization ratio to rise and result in a dip in your credit score.</p> <p>The better move is to pay off enough of your credit card debt each month so that the amount of your available credit is steadily declining instead of rising. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <h2>3. You've applied for new credit card accounts</h2> <p>Applying for new credit cards or lines of credit can also cause your credit score to drop, at least a little. Every time you apply for a new credit card or line of credit, notice of the inquiry will be added to your three credit reports &mdash; one each maintained by the national credit bureaus of TransUnion, Equifax, and Experian.</p> <p>Each &quot;hard&quot; inquiry for new credit can cause your score to drop slightly. And if you've applied for several new credit card accounts at the same time, that drop can be higher.</p> <p>The good news is that drops from applying for new credit are usually minor ones. myFICO reports that inquires for new credit only account for 10 percent of your total credit score. (See also: <a href="http://www.wisebread.com/how-credit-inquiries-affect-your-credit-score?ref=seealso" target="_blank">How Credit Inquiries Affect Your Credit Score</a>)</p> <h2>4. You've co-signed for someone who's missed payments</h2> <p>Have you ever co-signed on a loan for one of your children? It's not uncommon for parents to do this to help their kids, say, qualify for an auto loan if their credit isn't mature enough yet to qualify on their own. The plan is that the person you co-signed for pays his or her payments on time each month.</p> <p>But what if that person doesn't pay? Because your name is on the loan, you are also responsible for the monthly payments. Those missed payments will go on your credit reports, too. And that can send your score tumbling quickly. (See also: <a href="http://www.wisebread.com/should-you-cosign-your-teenagers-credit-card-application?ref=seealso" target="_blank">Should You Co-sign Your Teenager's Credit Card Application?</a>)</p> <h2>5. You didn't pay a medical or utility bill</h2> <p>There are plenty of bill payments that aren't reported to the credit bureaus. Experian, TransUnion, and Equifax don't receive information about your payments to doctors, utilities, cellphone providers, and, in most cases, the rent you pay to your landlord each month.</p> <p>However, missing these payments can eventually cause your credit score to drop. After enough missed payments, the creditors behind these bills might send your account into collections. This will send a debt collection agency after you. It will also result in a notice on your credit reports that you have accounts in collections.</p> <p>This can cause your credit score to take a severe fall. So don't ignore any bill, even if you think missing a payment won't end up on your credit report.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-reasons-why-your-credit-score-dropped-out-of-the-blue&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Reasons%2520Why%2520Your%2520Credit%2520Score%2520Dropped%2520Out%2520of%2520the%2520Blue.jpg&amp;description=5%20Reasons%20Why%20Your%20Credit%20Score%20Dropped%20Out%20of%20the%20Blue"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Reasons%20Why%20Your%20Credit%20Score%20Dropped%20Out%20of%20the%20Blue.jpg" alt="5 Reasons Why Your Credit Score Dropped Out of the Blue" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-reasons-why-your-credit-score-dropped-out-of-the-blue">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-mistakes-that-wont-hurt-your-credit-score">5 Financial Mistakes That Won&#039;t Hurt Your Credit Score</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight">Pay These 6 Bills First When Money Is Tight</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-late-payments-affect-your-credit">How Late Payments Affect Your Credit</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-need-to-know-the-difference-between-secured-and-unsecured-debts">Why You Need to Know the Difference Between Secured and Unsecured Debts</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bills co-signer collection agency credit card debt credit score credit score drop fico hard inquiries late payments Mon, 19 Mar 2018 10:00:07 +0000 Dan Rafter 2111741 at http://www.wisebread.com Here's What to Do If Your Wages Are Garnished http://www.wisebread.com/heres-what-to-do-if-your-wages-are-garnished <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-what-to-do-if-your-wages-are-garnished" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/chain_and_padlock_around_dollar_bundle.jpg" alt="Chain And Padlock Around Dollar Bundle" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The concept of wage garnishment is frightening. And while having your wages taken to pay off a creditor is considered an extreme &quot;last resort&quot; to collect on a debt, it is more common than you may think.</p> <p>A 2013 report by ADP Research Institute found that approximately 7 percent of the 13 million employees assessed in their survey had experienced wage garnishment that year, the majority of which were workers aged 35 to 44. The most common reasons for this drastic form of collection were unpaid taxes, child support, consumer debts, and student loans.</p> <p>If you have fallen behind repaying what you owe, and creditors are threatening to or have already garnished your wages, here are the things you should do. (See also: <a href="http://www.wisebread.com/be-careful-who-you-owe-heres-who-can-garnish-your-wages?ref=seealso" target="_blank">Be Careful Who You Owe: Here's Who Can Garnish Your Wages</a>)</p> <h2>Understand what wage garnishment means</h2> <p>First, it is important to understand what wage garnishment is and how it works. In a wage garnishment, creditors have sued and won a judgment against you. A court issues an order requiring your employer to withhold a portion of your paycheck. This is done until your debt is paid in full. Different garnishment rules apply to different types of debt and each state sets its own legal limits on how much of your paycheck can be garnished.</p> <p>Nonwage garnishment, which is also known as a bank levy, is a legal action that allows creditors to tap directly into your bank account. Typically, the funds in your account are frozen, and the bank is ordered to remove the necessary funds to satisfy the debt.</p> <p>Once a judgment is entered against you, the person or entity that won the lawsuit gains access to a portion of your wages by providing a copy of the court order to local law enforcement. Law enforcement sends the court order to your employer. Your employer must notify you of the garnishment and begin withholding part of your wages. Your employer is also responsible for ensuring the garnished funds are sent to your creditor. (See also: <a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans?ref=seealso" target="_blank">What Really Happens When You Don't Pay Your Student Loans</a>)</p> <h2>Know your rights</h2> <p>If you have defaulted on a loan, stopped paying your credit card bill, or have incurred massive amounts of medical expenses, creditors can't just take money from your paycheck. There is a process that must be followed.</p> <ul> <li> <p>You have to be sued.</p> </li> <li> <p>A judgment must be entered against you.</p> </li> <li> <p>A court ordered wage garnishment must be issued.</p> </li> <li> <p>You have to be notified of the court order (by your employer, and most times the creditor).</p> </li> <li> <p>You have the right to appeal the decision.</p> </li> </ul> <p>It is also important to note that federal law places limits on how much creditors can take from your paycheck. The amount that can be garnished is capped at 25 percent of your net income or the amount by which your weekly wages exceed 30 times the minimum wage, whichever is the lowest. Some states set lower garnishment limits so it is important to know the laws that apply to your particular situation.</p> <h2>Know the exceptions to the rules</h2> <p>While the above rules govern most cases of wage garnishment, there are a few exceptions. For example, when it comes to child support, half your net earnings can be taken without a court order. If you don't have a spouse or other children whom you support, a whopping 60 percent can be taken. And an additional 5 percent can be tacked on if you are more than 12 weeks in arrears.</p> <p>If you owe money to the IRS, tread carefully. It can take a big bite out of your wages, without a court order. The amount it can take depends on the number of dependents you have and your standard deductible amount. However, before snatching your money, the IRS must notify you of their intent first. They are required to send a wage levy notice to your employer, who is required to supply you with a copy. (See also: <a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit?ref=seealso" target="_blank">10 Reasons You Should Really Fear an IRS Audit</a>)</p> <p>State and local tax agencies can also garnish your wages without a court order. Most states have laws limiting how much they can take. The information concerning the rules and limits is available at your state's department of labor.</p> <p>The bottom line is unless you owe child support, back taxes, or student loans, your creditors cannot garnish your wages without going through the appropriate steps and obtaining a court order.</p> <h2>If possible, avoid the process altogether</h2> <p>When facing a situation where you know you can't pay a debt &mdash; of any kind, but especially child support &mdash; the best course of action is to be proactive. Contact your creditors (or petition family court) and try to reach a restructured payment arrangement.</p> <p>If you don't show up to court or you lose your case, the creditor automatically wins a judgment against you to garnish your wages or bank account.</p> <h2>Try to settle the debt</h2> <p>If you know a creditor is considering taking legal action, see if you can settle the debt. This is especially effective with credit card companies. Often times, most creditors (including the IRS) are willing to accept a settlement &mdash; which is a partial payment of the total amount due &mdash; in lieu of going to court. This allows you to avoid a lawsuit, wage garnishment, and even more damage to your credit. (See also: <a href="http://www.wisebread.com/4-ways-to-negotiate-credit-card-debt?ref=seealso" target="_blank">4 Ways to Negotiate Credit Card Debt</a>)</p> <h2>Understand the court order</h2> <p>If a judgment is issued against you, carefully review the court documents. Make sure all the information is accurate. Creditors can make mistakes. Check to ensure the outstanding amount is correct and it's not something you've already paid. Also, examine the debt carefully to be sure that it is indeed your debt. We live in an era of security breaches and identity theft. It is important to ensure that you are not being sued for someone else's fraud.</p> <p>It is also important to know that in some circumstances, some states provide protection for a portion of your wages &mdash; these are called exemptions. When you receive the garnishment notice, research the laws in your state and find out if and how much wage protection you are entitled. File a petition in state court requesting the exemption.</p> <h2>Challenge the judgment</h2> <p>When a judgment is issued against you, you have the right to appeal it. If you believe the judgment is flawed, is unreasonable, will cause undue financial harm, or is being improperly executed, you can contest the court's ruling. You will be notified of the ruling and of the process to appeal. Pay attention to rules governing the appeal and file immediately &mdash; in some cases, you may have as little as five business days to voice your objection. If you fail to show up in court, the creditor automatically wins a judgment against you.</p> <h2>Accept the judgment</h2> <p>Accepting the judgment isn't necessarily a bad thing. You are forced to face and remedy a situation that has probably caused you copious amounts of stress. You can simply allow your wages to be garnished and make your payments that way.</p> <h2>Don't file for bankruptcy or quit your job</h2> <p>Bankruptcy immediately stops garnishment proceedings, however it is ill-advisable to file just for this reason. Bankruptcy carries with it a litany of consequences and implications and shouldn't be considered lightly. Filing bankruptcy to avoid wage garnishment would be akin to extinguishing a match with a fire-hose. Always consult a professional before you take any drastic measure that can have detrimental and long-term consequences.</p> <p>Quitting your job is equally ill-advisable. You're doing nothing but prolonging and complicating the process. If you fear retaliation from your employer, understand that under federal law, you cannot be fired if your wages are garnished to pay off one debt. These protections lessen, however, if more than one creditor has garnished your wages.</p> <p>It's also important to note that becoming unemployed doesn't negate the judgment. The judgment will be enacted on the next job you get and is still part of your credit history. Continuously trying to skirt payment could result in the court taking more aggressive action which could include serving jail time.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fheres-what-to-do-if-your-wages-are-garnished&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHeres%2520What%2520to%2520Do%2520If%2520Your%2520Wages%2520Are%2520Garnished.jpg&amp;description=Heres%20What%20to%20Do%20If%20Your%20Wages%20Are%20Garnished"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Heres%20What%20to%20Do%20If%20Your%20Wages%20Are%20Garnished.jpg" alt="Here's What to Do If Your Wages Are Garnished" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/denise-hill">Denise Hill</a> of <a href="http://www.wisebread.com/heres-what-to-do-if-your-wages-are-garnished">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/be-careful-who-you-owe-heres-who-can-garnish-your-wages">Be Careful Who You Owe: Here&#039;s Who Can Garnish Your Wages</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-about-the-statute-of-limitations-on-debts">What You Need to Know About the Statute of Limitations on Debts</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-easy-ways-to-get-richer-in-2018">4 Easy Ways to Get Richer In 2018</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-times-to-hire-a-lawyer-immediately">9 Times to Hire a Lawyer Immediately</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-when-a-creditor-sues">What to Do When a Creditor Sues</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bank levy credit card debt Creditors IRS judgment paychecks student loans sued taxes unpaid debds wages garnished Tue, 27 Feb 2018 09:00:08 +0000 Denise Hill 2110071 at http://www.wisebread.com What to Do If Your Balance Transfer Limit Is Too Low http://www.wisebread.com/what-to-do-if-your-balance-transfer-limit-is-too-low <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-if-your-balance-transfer-limit-is-too-low" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_woman_online_shopping.jpg" alt="Young woman online shopping" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're trying to fix an expensive financial mistake: You ran up too much debt on your credit cards, and now you're carrying a balance of thousands of dollars from month to month. The interest that this balance generates makes it even harder to pay down the debt.</p> <p>Consumers often turn to a balance transfer &mdash; moving high-interest credit card debt to a new <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">card offering a promotional 0% APR</a> &mdash; to help tackle their debt repayment. Once you move your debt to your new card, you'll have a window (usually between six and 18 months) to pay off the balance before that promotional APR window closes and the card's actual interest rate kicks in.</p> <p>But what if the balance transfer limit on your new card is too low to accommodate your existing credit card debt? What steps can you take to reduce the burden that high interest is adding to your credit card problem?</p> <h2>Call the financial institution behind your balance transfer credit card</h2> <p>Your first step should be to call the bank or financial institution that issued your new credit card (you'll find the number on the back of the card). Simply ask a representative if you can have a higher balance transfer limit. Explain that you want to transfer the entire balance from another card, and that the limit on your new card isn't high enough to accommodate this.</p> <p>Now, there's no guarantee that this will work. The issuers of credit cards rely on a formula to determine your credit limit. That formula includes your credit score, debt-to-income ratio, and the income you earn. If your financial numbers aren't strong enough to justify the higher limit, your issuer probably won't budge. You won't know, though, until you ask. (See also: <a href="http://www.wisebread.com/7-important-things-you-should-know-about-balance-transfer-cards?ref=seealso" target="_blank">7 Important Things You Should Know About Balance Transfer Cards</a>)</p> <h2>Transfer as much of your balance as you can</h2> <p>Say you owe $10,000 in credit card debt, but your new balance transfer card comes with a limit of just $7,000. You can always transfer $7,000 of your $10,000 debt to your 0% interest credit card, and leave the remaining $3,000 on your current card. That's not ideal, but at least you are eliminating high interest on a good portion of your debt.</p> <p>Just make sure to pay down both of your balances. And make sure to pay off the amount on your 0% interest card before that card's actual interest rate kicks in. Otherwise, you are defeating the purpose of a balance transfer. (See also: <a href="http://www.wisebread.com/step-by-step-guide-to-doing-a-balance-transfer-on-credit-cards?ref=seealso" target="_blank">Step-by-Step Guide to Doing a Balance Transfer on Credit Cards</a>)</p> <h2>Apply for a personal loan</h2> <p>You might also apply for a personal loan from a bank, credit union, or other financing source, and use the money from this loan to pay off your credit card debt.</p> <p>Once you take out a loan, you'll have to pay it back in monthly installments. There are some advantages to this approach. First, you'll have a set payment each month, so you can budget for it more easily. Secondly, making payments on a personal loan, as long as you make them on time each month, will help your all-important credit score. Moving debt from a credit card into a personal loan will also help something known as your credit utilization ratio.</p> <p>Your credit utilization ratio measures how much of your available credit you are using. The higher this ratio, the worse it is for your credit score. If you have a combined credit limit of $20,000 on your credit cards, and you have $10,000 of credit card debt, you are using 50 percent of your available credit. If you pay off $5,000 of that debt with a personal loan, you are now using just $5,000 of your $20,000 of available credit, instantly improving your credit utilization ratio. Yes, you still have the same amount of debt &mdash; some of it has simply been moved to a personal loan &mdash; but your credit score will improve. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso" target="_blank">This One Ratio Is the Key to a Good Credit Score</a>)</p> <p>The key with a personal loan is to find one that comes with a significantly lower interest rate than the ones attached to your credit card debt. Otherwise, there is no point.</p> <h2>A final tip</h2> <p>Once you initiate a balance transfer on your credit card debt, get serious about paying it off. Your goal is to eliminate this debt before the 0% APR offer disappears and your new card's interest rate kicks in. You'll also need to get your spending under control. Don't continue to run up massive amounts of debt on any of your credit cards. If you do, even that 0% interest rate won't be much help. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso" target="_blank">When to Do a Balance Transfer to Pay Off Credit Card Debt</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhat-to-do-if-your-balance-transfer-limit-is-too-low&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhat%2520to%2520Do%2520If%2520Your%2520Balance%2520Transfer%2520Limit%2520Is%2520Too%2520Low.jpg&amp;description=What%20to%20Do%20If%20Your%20Balance%20Transfer%20Limit%20Is%20Too%20Low"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/What%20to%20Do%20If%20Your%20Balance%20Transfer%20Limit%20Is%20Too%20Low.jpg" alt="What to Do If Your Balance Transfer Limit Is Too Low" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-to-do-if-your-balance-transfer-limit-is-too-low">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-balance-transfer-offer-a-good-deal">Is a Balance Transfer Offer a Good Deal?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/2-minute-guide-how-to-use-balance-transfers-to-pay-off-credit-card-debt">2-Minute Guide: How to Use Balance Transfers to Pay Off Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil">All the Ways Minimum Payments Are Evil</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-you-need-to-know-before-taking-out-a-personal-loan">10 Things You Need to Know Before Taking Out a Personal Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management APR balance transfers credit card debt credit limits interest rates personal loans Wed, 21 Feb 2018 09:31:05 +0000 Dan Rafter 2104966 at http://www.wisebread.com Are You Paying Off Credit Card Debt the Wrong Way? http://www.wisebread.com/are-you-paying-off-credit-card-debt-the-wrong-way <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/are-you-paying-off-credit-card-debt-the-wrong-way" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_with_credit_card_using_laptop_in_apartment.jpg" alt="Woman with credit card using laptop in apartment" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you have more than one credit card to pay off, there are many ways to go about tackling your debt. You could pay off cards with highest interest rates first, or you could pay off cards with the smallest balances first. Or, you could make bigger payments toward cards with larger balances, and smaller payments toward cards with smaller balances.</p> <p>It matters which order you pay off credit cards if you want to get out of debt quickly. Unfortunately, most people are going about it the wrong way.</p> <h2>Going above the minimum</h2> <p>When you get your credit card bill, it will state the minimum monthly payment you are required to make, typically 2 to 5 percent of your account balance. This minimum payment amount will avoid you having to pay late fees and will keep your credit score stable, but that's about all it will help with. Depending on the interest rate, it could take you over 30 years to pay off a credit card making only minimum payments. If you want to pay off your credit cards in a reasonable amount of time, you will need to make more than the minimum payment every month. (See also: <a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil?ref=seealso" target="_blank">All the Ways Minimum Payments Are Evil</a>)</p> <p>How should you distribute additional payment funds that are above the minimum payment amount? Which card (or cards) you pay down first can make a big difference in terms of how long it takes to get out of debt and how much it costs to pay off the debt. It turns out that most people are using a repayment strategy that takes longer and costs more than necessary.</p> <h2>The trouble with balance-matching</h2> <p>According to a recent study conducted in England, a majority of people who are making payments on multiple credit cards are using a repayment strategy that can be described as &quot;balance-matching.&quot; Credit card payments are allocated in proportion to the balance on each account &mdash; in other words, bigger payments go toward cards with bigger balances, and smaller payments go toward cards with smaller balances.</p> <p>The problem with the balance-matching repayment strategy is that it completely ignores the interest rate on credit accounts, which is a major driver of how long it takes to pay off debt. If credit card payments are allocated only based on the account balances, higher interest accounts can rack up interest and you can end up stuck in credit card debt longer and paying more before you finally get the debt paid off.</p> <p>Why do people use a repayment strategy that ends up costing more? The likely reason is that people are more familiar with their credit card balances than the interest rates on various cards. The balance is easy to find on the credit card bill in contrast with the interest rate, which can be buried in the small print. So when people decide how much to pay toward their credit cards, the balance tends to be the biggest factor &mdash; or the only factor &mdash; in deciding how to allocate payments. (See also: <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=seealso" target="_blank">5 Ways to Pay Off High Interest Credit Card Debt</a>)</p> <h2>The right way to pay off credit cards</h2> <p>If you want to pay off credit card debt in the shortest time for the lowest cost, the optimal payment strategy is to direct additional payments to the highest-interest rate card <em>first</em>, and continue making minimum payments on your other cards. When your highest-interest card is paid off, you'll direct extra payments to the next highest-interest card, and so on, until your debt is eliminated. This strategy is sometimes described as the <em>debt avalanche</em> method. The debt avalanche method ignores the balance of credit cards and uses only the interest rate to determine how to allocate payments. The result of following the debt avalanche strategy is that balances at the highest interest rate are paid off as quickly as possible, minimizing the cost of interest. (See also: <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?ref=seealso" target="_blank">Snowballs or Avalanches: Which Debt Reduction Strategy Is Best for You?</a>)</p> <p>Another effective payment strategy for a lot of people is the <em>debt snowball</em> method. In this approach, you direct additional funds to the card with the smallest balance while making minimum payments on the others. Once you pay off your card with the smallest balance, you move on to direct extra payments toward the card with the next smallest balance, and so on. The debt snowball method provides psychological reinforcement as credit accounts are paid off. Even though this strategy ignores interest rates, seeing quick results of paying off credit accounts with lower balances can motivate people to stay focused on paying off debt. (See also: <a href="http://www.wisebread.com/6-secrets-to-mastering-the-debt-snowball?ref=seealso" target="_blank">6 Secrets to Mastering the Debt Snowball</a>)</p> <h2>Consider a balance transfer</h2> <p>If you are really committed to a debt payoff goal, a <a href="http://www.wisebread.com/your-comprehensive-checklist-for-a-successful-balance-transfer?ref=internal" target="_blank">balance transfer</a> can save you thousands in interest and help you meet your goal earlier. By transferring your balance to a credit card with a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">0% balance transfer offer</a>, you can buy time, interest-free, while paying off your debt. Now, this is assuming you would qualify for a new card with a high enough credit limit to make it worthwhile. But if your credit is solid (you just have a lot of debt), this could be the best option to getting your debt paid once and for all. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fare-you-paying-off-credit-card-debt-the-wrong-way&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FAre%2520You%2520Paying%2520Off%2520Credit%2520Card%2520Debt%2520the%2520Wrong%2520Way_.jpg&amp;description=Are%20You%20Paying%20Off%20Credit%20Card%20Debt%20the%20Wrong%20Way%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Are%20You%20Paying%20Off%20Credit%20Card%20Debt%20the%20Wrong%20Way_.jpg" alt="Are You Paying Off Credit Card Debt the Wrong Way?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/are-you-paying-off-credit-card-debt-the-wrong-way">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-easy-first-steps-to-paying-off-debt">7 Easy First Steps to Paying Off Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-prevent-a-debt-spiral">5 Ways to Prevent a Debt Spiral</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-better-less-debt-or-more-savings">What&#039;s Better: Less Debt or More Savings?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/paying-your-debts-in-the-wrong-order-could-be-costing-you">Paying Your Debts in the Wrong Order Could Be Costing You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management avalanche method balance matching credit card debt interest rates minimum payments snowball method Tue, 13 Feb 2018 10:00:06 +0000 Dr Penny Pincher 2097699 at http://www.wisebread.com 5 Credit Card Mistakes to Get Over by Age 30 http://www.wisebread.com/5-credit-card-mistakes-to-get-over-by-age-30 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-credit-card-mistakes-to-get-over-by-age-30" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/happy_online_shopping.jpg" alt="Happy online shopping" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your 30th birthday is fast approaching. There's no denying it now: You're an adult. But when it comes to those credit cards in your wallet, are you still acting like a kid?</p> <p>Credit cards are an important financial tool. When you use them properly, they can help you build your credit score and even rack up useful rewards. But if you misuse your cards, you'll wind up facing a growing mountain of high-interest debt &mdash; one that only grows as you move past your 30s.</p> <p>You need to stop making these credit card mistakes by the time you're 30. If you do, you might be surprised at how much better your financial health gets as you grow older.</p> <h2>1. Making only the minimum payments</h2> <p>The problem with credit card debt is the high interest rates. The debt grows quickly, especially if you carry a large balance from month to month. And if you only make the minimum required monthly payment, it can take you years to pay off your credit card debt.</p> <p>Say you have $6,000 in credit card debt at an interest rate of 18 percent. If you only make your minimum payment (usually calculated at 3 percent payment &mdash; or even less &mdash; of your balance) each month, it will take you 210 months, or more than 17 years, to pay it off. You'll also pay more than $5,600 in interest on that debt. And those figures will be even worse if you continue to add to your debt while you're making those minimum payments.</p> <p>The lesson is clear: Pay more than the minimum, each month, until that debt is paid off. (See also: <a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil?ref=seealso" target="_blank">All the Ways Minimum Payments Are Evil</a>)</p> <h2>2. Paying late</h2> <p>Paying your credit card bill late can have a devastating impact on your credit score. One late payment can send your score tumbling by 100 points. Your late payment will also remain on your credit reports for seven years.</p> <p>Fortunately, a payment won't be listed as officially late for credit score purposes until it is 30 days past due. But the card company will still probably charge you a late fee of $27 or more. If you're a couple of weeks late, make that payment immediately. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <h2>3. Not paying at all</h2> <p>Your credit card debt might be so overwhelming that you decide to stop paying on it completely. This is a big mistake. If you miss your credit card payments for six months, your credit card company will issue what is known as a charge-off; a declaration that the institution considers your credit card debt a loss on its balance sheet. By the time your credit card account gets to this point, your creditor will have probably shut it off, meaning that you won't be able to use your card for future purchases.</p> <p>This doesn't mean that your credit card issuer won't try to get you to pay up. You are still responsible for paying off your credit card debt. You might now, though, have to deal with a collections agency. (See also: <a href="http://www.wisebread.com/account-in-collections-heres-how-to-fix-it?ref=seealso" target="_blank">Account in Collections? Here's How to Fix It</a>)</p> <p>A charge-off will show up in your credit reports for seven years. It will also seriously weaken your credit score. If you are struggling to pay even your minimum monthly payment, don't ignore the problem, or your bill. Instead, call your credit card company. Your creditor might be able to come up with a solution that lets you stay current on your payments.</p> <h2>4. Not reading your credit card statements</h2> <p>As more of us pay our credit card bills online, it can be easy to ignore the monthly statements that come with them. This, though, can be a costly mistake. What if someone has been making fraudulent purchases with your card? You'll never know if you don't read the statement.</p> <p>Yes, it can be boring. But take time to read your statements &mdash; even if you no longer receive paper versions &mdash; before you make your credit card payments. If you do find suspicious transactions, call your credit card company immediately.</p> <h2>5. Closing unused cards</h2> <p>You might think it makes good financial sense to close a credit card account that you rarely use. But doing this can hurt your credit score because of something called your credit utilization ratio.</p> <p>This ratio measures how much of your available credit you are using. The higher your ratio, the more of a negative impact it has on your credit score.</p> <p>Say you have $12,000 of available credit and you owe a total of $5,000 on your cards. You are using about 42 percent of your total available credit. Now say you close a card with a credit limit of $2,000. You just lowered your overall available credit limit. You are now using up $5,000 of $10,000 in available credit, which will have boosted your credit-utilization ratio from 42 percent to 50 percent without making a single purchase. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso" target="_blank">This One Ratio Is the Key to a Good Credit Score</a>)</p> <p>Keep those credit card accounts open, even if you don't plan on using all of them. You want your credit utilization ratio to be as low as possible.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-credit-card-mistakes-to-get-over-by-age-30&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Credit%2520Card%2520Mistakes%2520to%2520Get%2520Over%2520by%2520Age%252030.jpg&amp;description=5%20Credit%20Card%20Mistakes%20to%20Get%20Over%20by%20Age%2030"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Credit%20Card%20Mistakes%20to%20Get%20Over%20by%20Age%2030.jpg" alt="5 Credit Card Mistakes to Get Over by Age 30" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-credit-card-mistakes-to-get-over-by-age-30">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-millennials-guide-to-avoiding-credit-card-debt">The Millennials Guide to Avoiding Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-6-mistakes-newbies-make-with-their-first-credit-cards">Avoid These 6 Mistakes Newbies Make With Their First Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-when-your-credit-card-debt-is-charged-off">What Happens When Your Credit Card Debt Is Charged Off?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil">All the Ways Minimum Payments Are Evil</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards 30 closing accounts credit card debt credit score credit utilization ratio interest late payments middle aged minimum payments Mistakes Wed, 07 Feb 2018 10:01:04 +0000 Dan Rafter 2097693 at http://www.wisebread.com 4 Things You Should Make Your Adult Child Pay For http://www.wisebread.com/4-things-you-should-make-your-adult-child-pay-for <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-things-you-should-make-your-adult-child-pay-for" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_daughter_and_mid_age_mother_daydreaming.jpg" alt="Young daughter and mid age mother daydreaming" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The USDA estimates that a child born in 2015 will cost their parents $233,610 by their 18th birthday. This staggering number is based on two-income, middle-class households and accounts for shelter, food, and other child-related expenses. It does not include college.</p> <p>Parents expecting a clean break at age 18 might be in for another costly surprise. NerdWallet recently commissioned a study which found that 80 percent of parents with adult children are chipping in with financial support. This support could be costing them up to $227,000 in retirement savings.</p> <p>Parents are paying for big-ticket items like tuition and student loans, as well as routine bills like cellphone payments and car insurance. To pay or not to pay? That is an ongoing question. Before deciding whether or not to take on an expense for your adult child, you should consider two questions.</p> <h2>Can you afford it?</h2> <p>First, can you afford the cost? Think not only of the monthly payment, but the entire financial obligation. If you have to take on debt to support your adult child's lifestyle, chances are you can't afford to help. Let your cash guide your decision.</p> <h2>Are you really helping?</h2> <p>Next, will paying their bills actually help your child? Covering an adult child's living expenses can teach a destructive lesson. Parents should consider whether the financial support is helping or hindering their child's growth. There may be other, long-lasting ways to support your kid that don't stunt their independence or zero out your savings.</p> <h2>What they should pay for</h2> <p>As a parent, I know there is an undeniable drive to take care of our children and smooth the rough patches. I imagine that never goes away. But, we must balance our desire to help our kids with the necessity of teaching them financial independence and maintaining our own financial security. We can help strike that match by making our adult kids pay for the following things. (See also: <a href="http://www.wisebread.com/are-you-ruining-your-retirement-by-spoiling-your-kids?ref=seealso" target="_blank">Are You Ruining Your Retirement by Spoiling Your Kids?</a>)</p> <h3>Cellphones and service</h3> <p>Paying for an adult child's cellphone bill will cost you $1,200 in lost retirement savings in just one year, according to the NerdWallet study. Bump that up to five years, and you're missing out on over $5,300 in savings.</p> <p>A cellphone business model is a perfect tool to help your young adults learn responsibility and understand the consequences of missing a payment. Not only will the service become unavailable, but their friends will know they didn't pay their bill. Avoiding public shame can be a huge motivator.</p> <h3>Rent and housing expenses</h3> <p>If adult children cannot afford to pay their living expenses, parents should step back. Suggest they find a roommate, move to a less expensive location, or move in with family. Sometimes life throws a curveball, and a move back home with parents is necessary.</p> <p>Paying for ongoing living expenses only allows adult children to avoid facing their financial realities, and it will seriously dent your retirement savings. One year of support alone will cost you over $16,000. If this trend continues, you could miss out on more than $75,000 over five years. Help your child stand on their own two feet and keep your retirement plan on track.</p> <h3>Direct PLUS loans (and other student loans)</h3> <p>A Direct PLUS loan is an unsubsidized loan for the parents of dependent students. Taking out one of these loans to help fund your child's expensive college tuition and expenses is a bad idea.</p> <p>If you've exhausted all funding sources and still need to rely on a PLUS loan, it's time for your child to consider a more affordable education alternative. Direct PLUS loans are not awarded based on the borrower's ability to repay. Parents can easily find themselves overwhelmed with large bills exactly when they need to be more focused on saving for retirement.</p> <p>A 2015 study by the University of Southern California and the University of South Carolina found that parents borrow an average $21,000 for their children's college education, and more than 200,000 people are still paying these loans past retirement age. According to NerdWallet, helping adult children repay student loans costs parents $80,000 in savings. It's time to pass that bill on to your child.</p> <h3>Credit card payments</h3> <p>If young adults are racking up excessive credit card debt, their parents may be tempted to swoop in, pay off some of those high-interest balances, and give their kids a fresh start.</p> <p>Not so fast.</p> <p>Paying this bill robs your child of the valuable lessons learned in digging themselves out of a financial hole. Whether they are forced to file bankruptcy and rebuild their credit, or make the sacrifices necessary to pay back the borrowed funds, that experience forces them to confront their irresponsible choices and contend with the related discomfort. Pain leaves lasting reminders.</p> <p>Adults with parents who rescue them from the pain of poor decisions have no incentive to think through the consequences of their actions.</p> <p>Adult children need our love, support, and encouragement. They don't need us to prop up their lifestyle or mute the consequences when they make unwise decisions. By not providing financial support indefinitely into adulthood, you're doing what's best for you both &mdash; now and in the future. (See also: <a href="http://www.wisebread.com/7-money-conversations-parents-should-have-with-their-adult-kids?ref=seealso" target="_blank">7 Money Conversations Parents Should Have With Their Adult Kids</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F4-things-you-should-make-your-adult-child-pay-for&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F4%2520Things%2520You%2520Should%2520Make%2520Your%2520Adult%2520Child%2520Pay%2520For.jpg&amp;description=4%20Things%20You%20Should%20Make%20Your%20Adult%20Child%20Pay%20For"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/4%20Things%20You%20Should%20Make%20Your%20Adult%20Child%20Pay%20For.jpg" alt="4 Things You Should Make Your Adult Child Pay For" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/toni-husbands">Toni Husbands</a> of <a href="http://www.wisebread.com/4-things-you-should-make-your-adult-child-pay-for">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-help-your-adult-children-become-financially-independent">How to Help Your Adult Children Become Financially Independent</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-personal-finance-rules-to-live-by-in-your-40s">6 Personal Finance Rules to Live By in Your 40s</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-lessons-kids-can-learn-from-the-tooth-fairy">7 Money Lessons Kids Can Learn From the Tooth Fairy</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-why-your-credit-score-dropped-out-of-the-blue">5 Reasons Why Your Credit Score Dropped Out of the Blue</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-manage-money-when-you-hate-thinking-about-it">How to Manage Money When You Hate Thinking About It</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Family adult children bills cellphones credit card debt financial independence financial support parents retirement savings student loans Thu, 25 Jan 2018 09:30:10 +0000 Toni Husbands 2087457 at http://www.wisebread.com The Millennials Guide to Avoiding Credit Card Debt http://www.wisebread.com/the-millennials-guide-to-avoiding-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-millennials-guide-to-avoiding-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_doing_online_shopping.jpg" alt="Woman doing online shopping" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Americans owe billions of dollars in credit card debt, and the high interest rates that come with it can lead to a debt spiral that is very challenging to overcome.</p> <p>Millennials, having lived through the financial crisis and other economic downturns, appear to be more wary of credit cards than other generations, according to several recent surveys from sources including Bankrate and TransUnion. This wariness is healthy, but it's important for this younger generation to know that credit cards by themselves can be harmless and perhaps even beneficial if used wisely. (See also: <a href="http://www.wisebread.com/why-millennials-should-embrace-credit-cards?ref=seealso" target="_blank">Why Millennials Should Embrace Credit Cards</a>)</p> <p>If you're a millennial, consider these tips on how to use credit cards while avoiding getting into dangerous debt.</p> <h2>Pay attention to interest rates</h2> <p>Sometimes when you're in a financial pinch, you may be relieved to see a new credit card application come in the mail. But it's a bad idea to apply without looking at the terms first. Not all credit cards are created equal, and some have very high interest rates that could cripple you financially. An annual percentage rate of about 15 percent is standard, but some can go well above 20 percent, and it's possible to find rates below 12 percent. Be sure to read the fine print on all cards, and compare rates to find the best card available for you. (See also: <a href="http://www.wisebread.com/best-credit-cards-for-millennials?ref=seealso" target="_blank">Best Credit Cards for Millennials</a>)</p> <p>Also, don't get too enamored with low introductory rates; remember that all introductory rates eventually aren't introductory anymore. If you're struggling to get out of debt, it may be helpful to transfer a balance to a card with a 0% introductory APR, but be aware that rate will jump after a certain amount of time. (See also: <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=seealso" target="_blank">The Best 0% Balance Transfer Credit Cards</a>)</p> <h2>Avoid fees</h2> <p>Some credit cards will charge you an annual fee just to have them. Sometimes, this annual fee allows you to receive special benefits, but the average person should never feel the need to pay money just to have access to credit. You may feel like you've &quot;arrived&quot; because you are spending $550 per year for that platinum card, but it's a silly expense if you're only using the card to pay for lunch and fill your gas tank. These <a href="http://www.wisebread.com/the-5-best-premium-credit-cards?ref=internal" target="_blank">premium credit cards</a> come with many perks and benefits that only benefit certain people. (See also: <a href="http://www.wisebread.com/how-to-decide-if-an-annual-fee-credit-card-is-worth-it-for-you?ref=seealso" target="_blank">How to Decide if an Annual Fee Credit Card Is Worth It for You</a>)</p> <h2>Pay on time</h2> <p>The nice thing about credit cards is that if you pay off the balance every month, on time, you're not charged any extra fees or interest. There's really no down side to using a credit card to buy items and paying the bill in full each month.</p> <p>Paying your bill on time is the number one factor in determining your credit history. Miss a payment, and you are subjecting yourself to late charges and a hefty amount of interest. Additionally, you could see your credit score suffer. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <h2>Watch the revolving balance</h2> <p>Even if you pay your bill on time every month, your credit score could be hurt if you have a high balance each month. Credit bureaus don't like it when you are bumping up against your credit limit on a regular basis. In fact, as much as one-third of your credit score is based on &quot;credit utilization,&quot; or the amount of debt you have versus the amount of credit you have available. In other words, you should still try to avoid racking up a large credit card bill, even if you're diligent about paying on time. (See also: <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=seealso" target="_blank">This One Ratio Is the Key to a Good Credit Score</a>)</p> <h2>Use them to build credit</h2> <p>When used responsibly, credit cards can help you build a credit history and make it easier to get favorable terms when borrowing money elsewhere. If you are applying for a mortgage, for example, a lender will review your credit score and payment history to determine the rate and size of the loan that you are eligible for. Without a lengthy credit history, lenders may find it hard to give you good terms, or you may be turned down altogether. (See also: <a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast?ref=seealso" target="_blank">5 Ways to Improve Your Credit Score Fast</a>)</p> <h2>Have multiple cards, but be careful</h2> <p>People with high credit scores tend to have more cards than those with lower scores. This is because your credit score is partially based on how much debt you have compared to your overall availability of credit. Since more cards will generally mean more available credit, there is an advantage to having multiple cards. The very, very big caveat to this is that if you have more cards, you have more ability to borrow and rack up debt.</p> <p>Having multiple cards can give you flexibility, because not all cards are accepted everywhere. Additionally, it may be helpful to have credit cards with varying kinds of rewards. There is no universal rule of thumb regarding the optimal number of credit cards, but it's likely that you can get away with having two or three.</p> <h2>Track your spending</h2> <p>One nice advantage to using credit cards is that it will allow you to keep a real-time record of your purchases. If you use cash instead, recording your spending is more of a manual chore.</p> <p>Most credit card companies allow you to check your transactions online and will even categorize your purchases, thus helping with budgeting. If you use credit cards, don't just mindlessly pay your bill when it comes. Take the time to review what you spent during the previous month, and try to identify where you may be able to cut expenditures and boost your savings.</p> <h2>Use your rewards</h2> <p>There's a healthy competition among credit cards to offer rewards to cardholders when they make purchases. Some cards give you cash back. Many offer airline points or other travel rewards. There are cards offering cash back to be used at Disney theme parks, and some that allow you to direct money into retirement accounts.</p> <p>When used responsibly, these credit cards can save you a lot of money. Do some research to find the credit cards with the best rewards for you, and try to stay away from cards with an annual fee, if possible. (See also: <a href="http://www.wisebread.com/6-tricks-to-making-the-most-of-your-reward-miles?ref=seealso" target="_blank">5 Tricks to Making the Most of Your Reward Miles</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthe-millennials-guide-to-avoiding-credit-card-debt&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThe%2520Millennials%2520Guide%2520to%2520Avoiding%2520Credit%2520Card%2520Debt.jpg&amp;description=The%20Millennials%20Guide%20to%20Avoiding%20Credit%20Card%20Debt"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/The%20Millennials%20Guide%20to%20Avoiding%20Credit%20Card%20Debt.jpg" alt="The Millennials Guide to Avoiding Credit Card Debt" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/the-millennials-guide-to-avoiding-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-tell-if-a-credit-card-offer-is-a-good-one">6 Ways to Tell If a Credit Card Offer Is a Good One</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-boost-your-credit-with-a-balance-transfer">How to Boost Your Credit With a Balance Transfer</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-you-need-to-know-before-taking-out-a-personal-loan">10 Things You Need to Know Before Taking Out a Personal Loan</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-actions-to-take-when-youre-denied-a-credit-limit-increase">9 Actions to Take When You&#039;re Denied a Credit Limit Increase</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-important-things-you-should-know-about-balance-transfer-cards">7 Important Things You Should Know About Balance Transfer Cards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Credit Cards balance transfers cash back credit card debt credit score credit utilization ratio fees interest rates millennials rewards Mon, 22 Jan 2018 10:00:06 +0000 Tim Lemke 2086607 at http://www.wisebread.com 5 Ways Your Money Is Being a Jerk (And How to Fight Back) http://www.wisebread.com/5-ways-your-money-is-being-a-jerk-and-how-to-fight-back <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-your-money-is-being-a-jerk-and-how-to-fight-back" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/sad_businesswoman_holding_empty_wallet.jpg" alt="Sad businesswoman holding empty wallet" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>They say money is the root of all evil. That&rsquo;s debatable, but it can certainly be at the center of a lot of problems. You want to get out more, but your money says no. You want to retire someday, but your money gives you the finger. You want to take a vacation to Europe, your money laughs in your face. Money can be a real jerk sometimes. But, you can fight back. Take control of your finances, and you&rsquo;ll be the one calling the shots.</p> <h2>1. Your credit cards are tempting you to spend, spend, spend</h2> <p>Oh, those credit cards with their promotional APRs, low-rate balance transfers (with a 3 percent fee, of course), and flashy rewards programs. Your mailbox is stuffed with offer after offer of five-minute applications and 60-second approvals. Credit lines are upward of $10,000. That&rsquo;s $10K you can spend on whatever you want, whenever you want, and you don&rsquo;t even have to pay it all back at once.</p> <p>Want a new coat? Swipe the card. Have your eye on a new watch? Grab that plastic. Thinking about a new car? The down payment is in your pocket. And when you have so many of these cards, it feels like a license to spend. The thing is, credit cards aren't free money, and it&rsquo;s way easier to spend with them than it is to pay them back.</p> <h3>How to fight back</h3> <p>Credit cards are financial tools, and if used correctly, they can be very good to you. They help you build credit, <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">offer travel rewards</a> and <a href="http://www.wisebread.com/11-credit-card-perks-that-make-life-easier-and-way-more-fun?ref=internal" target="_blank">perks that make life easier</a>, and are safer and easier to carry than cash. <em>But</em>, you must use them wisely.</p> <p>Do not spend money on a credit card unless you can afford to pay off the balance in full at the end of each billing cycle. If you don&rsquo;t have the money to do that, well, maybe you shouldn&rsquo;t be buying the item you cannot afford. Once you stop paying the full balance, interest is added. And the longer you keep a balance, the more interest is added on. If you&rsquo;re not careful, the debt will bury you over time. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <h2>2. Your monthly debt payments are ripping off your budget</h2> <p>You look at the amount of money you have coming in every month and you&rsquo;re happy with it. But then you look at your debts and monthly obligations; The credit cards. The car payment. The mortgage. The student loan. By the time you&rsquo;ve paid those bills, you barely have enough left to buy groceries. And money for fun, like going out to eat or a weekend away? Forget about it. Your debt is like a ball and chain around your whole life.</p> <h3>How to fight back</h3> <p>The first thing you need to do is get your financial house in order. Analyze your monthly bills, and make a list of your debts, the payments, and the length of time needed to pay them all off. If this already makes your head hurt, consider meeting with a financial adviser who can help you break the process down into simpler steps. (See also: <a href="http://www.wisebread.com/5-day-debt-reduction-plan-search-and-destroy?ref=seealso" target="_blank">5-Day Debt Reduction Plan: Search and Destroy</a>)</p> <p>Once you have all your ducks in a row, look at ways to pay down the debt. You may have to make some sacrifices to get this done. No trips to Starbucks for a while. Go for cheaper generic brands (which, to be honest, are usually made in the same facility as the expensive brand names). Pack your lunches every day. Free up as much money as possible, and do something with your debt called &ldquo;snowballing.&rdquo; Put every cent you can toward paying off the smallest debt first, and make minimum payments on the others. When that debt is paid off, move onto the next in line, applying the maximum to it, and the minimum to the others. It&rsquo;s a satisfying way to tackle debt because it progresses quickly. (See also: <a href="http://www.wisebread.com/6-secrets-to-mastering-the-debt-snowball?ref=seealso" target="_blank">6 Secrets to Mastering the Debt Snowball</a>)</p> <p>At the same time, look into other ways to generate extra cash. Can you refinance your home and pay off a debt while still hanging onto a substantial chunk of the equity? Paying 4 percent interest per month is way better than the 22 percent interest some credit cards charge.</p> <h2>3. Your &ldquo;savings&rdquo; account is laughing at your dreams</h2> <p>Savings; that&rsquo;s wishful thinking. For a lot of us, a savings account is just a temporary resting place for our money until the next emergency beckons it.</p> <p>A recent GOBankingRates study found that 34 percent of Americans have no savings at all, and 35 percent have less than $1,000. Sure, you want to go on that trip to Europe, or finish the basement for the kids. But guess what? The water heater just went on the fritz. Or the furnace just curled up its toes and died. Instead of looking forward to some time away, or something to make home life a little easier, you&rsquo;re staring into a savings account filled with cobwebs and shattered dreams.</p> <h3>How to fight back</h3> <p>Every financial adviser will offer you the following piece of advice: Pay yourself first. Sure, it&rsquo;s easier said than done, but you need to get into the habit of squirreling away a percentage of your income each month automatically.</p> <p>A dedicated emergency fund is critical for surprise expenses that threaten to wipe out your other savings &mdash; savings you may have wanted to use for that overseas trip or basement remodel. Many experts recommend having between six and 12 months' worth of your expenses covered in this fund. If you have nothing set aside in an emergency fund, now is the time to start building one.</p> <p>Set up an automated transfer from your checking account to a savings account and your emergency fund. Find small ways to save money without even thinking about it. There&rsquo;s an app called Earny that checks price drops on purchases you have made, and automatically claims the difference on your behalf (Earny takes 25 percent of the refund). Put any Earny refunds into your savings account or emergency fund.</p> <p>Other apps like Digit, Chime, and Acorns can help you save money without even noticing it. Acorns simply rounds up purchases to the nearest dollar, and puts the change into an investment account (fees range from $1 per month for balances under $5,000, to 0.25 percent for larger balances). Do whatever you can to make saving a monthly, or even weekly, habit. (See also: <a href="http://www.wisebread.com/11-ways-life-is-amazing-with-an-emergency-fund?ref=seealso" target="_blank">11 Ways Life Is Amazing With an Emergency Fund</a>)</p> <h2>4. Your retirement fund is MIA</h2> <p>You&rsquo;re sitting on a beach with a cool breeze kissing your face. The sun is out. The waves are lapping around your feet. You're sipping a PiƱa Colada. And then you hear that record needle scratch, open your eyes, and realize it&rsquo;s a dream; a far-off dream. Your 401(k) is looking about as healthy as a fly that just splattered against the windshield of your car. You have been working your butt off for 20 years, and have very little to show for it. At this rate, you&rsquo;ll be dreaming of retirement for the rest of your life.</p> <h3>How to fight back</h3> <p>Start by taking a breath. Hopefully retirement is still a good 20 or 30 years away, and that gives you time to beef up your fund and take advantage of compound interest.</p> <p>If you are employed by a company, you probably have a 401(k) match of some kind. The first thing you need to do is max out that match. If it&rsquo;s 6 percent, put in 6 percent of your salary each month. You&rsquo;ll actually be saving 12 percent of your salary, and that&rsquo;s an excellent start. If it&rsquo;s a maximum amount each year, hit that figure.</p> <p>Next, look at the kind of 401(k) fund you have. You should be able to choose what kind of risk you want to take, and if retirement is 25 years from now, you can afford to be in an aggressive fund; one that&rsquo;s going to be a bigger roller coaster ride for your money, but will lead to bigger gains over time. (See also: <a href="http://www.wisebread.com/7-roadblocks-to-retirement-and-how-to-clear-them?ref=seealso" target="_blank">7 Roadblocks to Retirement (And How to Clear Them)</a>)</p> <h2>5. You&rsquo;ll be making the minimum payment &hellip; forever!</h2> <p>Those accounts whisper in your ear constantly; &ldquo;There&rsquo;s no need to empty your bank account to pay me off. Just make this teeny, tiny minimum payment. You&rsquo;ll hardly notice it.&rdquo; Yeah, well, that might seem better in the short term, but in the long run those small minimum payments are keeping you in a never-ending cycle of debt.</p> <p>When you make the minimum payment, most of the money goes toward the interest that was applied to the balance. You pay it, forget about it, and next month you do it again. And again. And again. The balance never seems to go down, and that&rsquo;s what the credit card companies want. Before you know it, you&rsquo;ve spent five years paying the minimum and the end is nowhere in sight. (See also: <a href="http://www.wisebread.com/all-the-ways-minimum-payments-are-evil?ref=seealso" target="_blank">All the Ways Minimum Payments Are Evil</a>)</p> <h3>How to fight back</h3> <p><em>Never</em> make the minimum payment unless it&rsquo;s part of a debt snowball plan mentioned earlier. Paying just 2&ndash;3 percent of the balance is only making the credit card companies richer.</p> <p>You also need to stop using the credit card. By paying the minimum and adding to the balance, you&rsquo;re putting yourself in the pocket of the credit card company for the rest of your life. Instead, cut down expenses and find other ways to make purchases until you can get this balance down to zero.</p> <p>Look for <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">0% balance transfer credit card offers</a>. Some will give you 18 months or more at zero interest. Once you grab one of those, all of the money you pay each month goes toward the principal. Find ways to cut costs from your monthly budget and apply that to the payment on this card. The 0% interest combined with a much bigger monthly payment will really help you shrink that balance significantly. Just make sure to pay off the balance transfer card in full within the promotional APR window to avoid interest.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-ways-your-money-is-being-a-jerk-and-how-to-fight-back&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Ways%2520Your%2520Money%2520Is%2520Being%2520a%2520Jerk%2520%2528And%2520How%2520to%2520Fight%2520Back%2529.jpg&amp;description=5%20Ways%20Your%20Money%20Is%20Being%20a%20Jerk%20(And%20How%20to%20Fight%20Back)"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Ways%20Your%20Money%20Is%20Being%20a%20Jerk%20%28And%20How%20to%20Fight%20Back%29.jpg" alt="5 Ways Your Money Is Being a Jerk (And How to Fight Back)" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/5-ways-your-money-is-being-a-jerk-and-how-to-fight-back">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-smart-things-you-can-do-with-your-finances-even-if-youre-broke">15 Smart Things You Can Do With Your Finances, Even if You&#039;re Broke</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-personal-finance-rules-to-live-by-in-your-40s">6 Personal Finance Rules to Live By in Your 40s</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-money-mistakes-to-stop-making-by-50">5 Money Mistakes to Stop Making by 50</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-reasons-why-financial-planning-isnt-just-for-the-wealthy">6 Reasons Why Financial Planning Isn&#039;t Just for the Wealthy</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-to-use-savings-to-pay-off-debt">When to Use Savings to Pay Off Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance broke credit card debt emergency fund interest money problems paycheck to paycheck retirement savings Tue, 16 Jan 2018 09:00:07 +0000 Paul Michael 2086756 at http://www.wisebread.com The 5 Biggest Dangers of Credit Card Debt http://www.wisebread.com/the-5-biggest-dangers-of-credit-card-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-5-biggest-dangers-of-credit-card-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/bank_card_and_a_bunch_of_dollars.jpg" alt="Bank card and a bunch of dollars" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Worried that your credit card debt is rising too quickly? Wondering how you'll ever pay off your plastic? You're far from alone. Many Americans who carry balances on their credit cards struggle to pay it off.</p> <p>According to a 2017 household debt survey by NerdWallet, American households that have credit card debt owe an average $15,654 on their cards. Carrying balances that large can put a huge strain on your finances. And because it's credit card debt, it tends to have even higher interest costs than other types of debt.</p> <p>Here are the five biggest dangers of carrying credit card debt, and why paying it down is so important. (See also: <a href="http://www.wisebread.com/6-scary-facts-about-credit-card-debt?ref=seealso" target="_blank">6 Scary Facts About Credit Card Debt</a>)</p> <h2>1. It grows too fast</h2> <p>The biggest problem with credit card debt? The high interest rates. It's not unusual for credit card companies to charge interest rates of 20 percent or more. Then, if you don't pay off your balances in full each month, they grow too quickly to keep up with.</p> <p>Many consumers make the mistake of only making their minimum required payment each month. When you have thousands of dollars of credit card debt, though, doing this means that you might never chip away at enough principal to pay off your balance.</p> <p>Here's an example: Say your credit card balance is $8,000 and your interest rate is 18 percent. If you make only your minimum required payment each month, it would take you 320 months &mdash; or more than 26 years &mdash; to pay off your debt. And during this time, you'd pay more than $11,420 in interest. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <h2>2. It will damage your credit score</h2> <p>Having too much credit card debt will lower your credit score. According to myFICO.com, 30 percent of your credit score is based on your credit utilization ratio. That's how much revolving debt you have &mdash; including what you owe on your credit cards &mdash; compared to how much available credit you have. The higher your credit utilization ratio, the more likely it is that your overall credit score will suffer. And if your score is too low, you'll struggle to qualify for new credit and loans.</p> <h2>3. Missed credit card payments are even tougher on your credit score</h2> <p>Missed payments have a disastrous effect on your credit score. One late payment &mdash; which is noted on your credit reports once it's 30 days past due &mdash; can send your score tumbling by 100 points or more.</p> <p>Even worse, late payments remain on your three credit reports (maintained by TransUnion, Experian, and Equifax) for seven years. Every time you apply for a new loan or credit, lenders and banks will see that missed payment, which might make them leery of loaning you money.</p> <h2>4. Your wages can be garnished</h2> <p>You can't go to jail for not paying your credit card debt: The United States does not have debtor's prison. But that doesn't mean that defaulting on your credit cards won't come with financial pain. Your creditors can sue if you don't pay your debt. And if your creditors win, they can garnish your wages to force you to pay back what you owe.</p> <h2>5. It can keep you from building a financial safety net</h2> <p>Building an emergency fund is a key step in protecting yourself from unexpected expenses. If a major, necessary cost suddenly pops up &mdash; say your hot water heater breaks, or your car needs a new transmission &mdash; you can pay for it with cash. Ideally, you should have from six to 12 months' worth of expenses saved up in your emergency fund. If you need $3,000 a month to live, you should have between $18,000 and $36,000 in your emergency fund.</p> <p>It can be tough saving up this kind of money. If you're paying off thousands of dollars of credit card debt at the same time, it's even more challenging. It's difficult to put $300 or more into an emergency fund every month when you also need to devote hundreds of dollars to your credit cards. And because credit card debt comes with such high interest, you really should focus on paying that debt off first. (See also: <a href="http://www.wisebread.com/7-easy-ways-to-build-an-emergency-fund-from-0?ref=seealso" target="_blank">7 Easy Ways to Build an Emergency Fund From $0</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthe-5-biggest-dangers-of-credit-card-debt&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThe%25205%2520Biggest%2520Dangers%2520of%2520Credit%2520Card%2520Debt.jpg&amp;description=The%205%20Biggest%20Dangers%20of%20Credit%20Card%20Debt"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/The%205%20Biggest%20Dangers%20of%20Credit%20Card%20Debt.jpg" alt="The 5 Biggest Dangers of Credit Card Debt" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-5-biggest-dangers-of-credit-card-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-money-moves-to-make-the-moment-your-credit-cards-are-paid-off">9 Money Moves to Make the Moment Your Credit Cards Are Paid Off</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-foolish-ways-to-pay-down-debt">6 Foolish Ways to Pay Down Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/get-out-of-debt-why">Get Out of Debt? Why?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/never-do-these-5-things-when-youre-in-debt">Never Do These 5 Things When You&#039;re in Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-to-bounce-back-after-you-miss-a-credit-card-payoff-goal">7 Ways to Bounce Back After You Miss a Credit Card Payoff Goal</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management credit card debt credit score emergency fund garnished wages high interest debt missed payments owing money Tue, 09 Jan 2018 09:30:10 +0000 Dan Rafter 2080127 at http://www.wisebread.com These Are the Best Credit Card Strategies for Married Couples http://www.wisebread.com/these-are-the-best-credit-card-strategies-for-married-couples <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/these-are-the-best-credit-card-strategies-for-married-couples" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/spending_money_is_fun.jpg" alt="Spending money is fun" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Every couple has to come up with a way to manage their money. Some merge their personal finances and manage them as a single household, while others choose to have separate accounts. Either way, couples need to find with the best way to manage their credit cards.</p> <h2>The basics of credit cards and marriage</h2> <p>A credit card issuer doesn&rsquo;t care that you are married. It will look at your personal credit report and credit score when making the decision to approve your application for a new credit card or to increase your line of credit. In fact, you are able to report your household income when applying for a line of credit. This allows nonworking spouses to apply for credit card accounts in their own name, so long as they have a reasonable expectation of access to their spouse&rsquo;s income for the purpose of repaying the debt. (See also: <a href="http://www.wisebread.com/7-credit-card-application-tips-for-the-best-chance-of-approval?ref=seealso" target="_blank">7 Credit Card Application Tips for Getting Approved</a>)</p> <h2>Managing finances separately</h2> <p>If you and your spouse are <a href="http://www.wisebread.com/5-reasons-to-keep-your-money-separated-after-marriage?ref=internal" target="_blank">managing your finances separately</a>, there are still several strategies you can take to get the most from your credit cards. First, it&rsquo;s a good idea for each of you to have credit cards in your own name, and pay for them with funds from your individual accounts. This will allow each to enjoy the convenience and security of a credit card, while building your own credit history and credit score.</p> <p>If a couple is managing their finances separately, and one spouse occasionally needs to make purchases on behalf of the other, then they should each <a href="http://www.wisebread.com/what-you-need-to-know-about-adding-another-user-to-your-credit-card?ref=internal" target="_blank">make the other spouse an authorized user</a> on at least one credit card they each hold. Authorized cardholders can make purchases with their credit card, but are unable to redeem rewards or make changes to the account. And the primary account holder will always be responsible for repayment of any charges made by any authorized cardholders, including a spouse.</p> <h2>Managing your finances together</h2> <p>When a couple manages finances together, it offers them opportunities to achieve their goals more efficiently. For example, if a couple is trying to pay down their credit card debt, then they can transfer their balance to the credit card that has the lowest interest rate, regardless of which spouse is the primary cardholder. This is especially helpful if one of the credit cards has a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">0% APR balance transfer offer</a>. Let&rsquo;s say, for instance, that Margie has a high credit score and a card with a 0% APR offer. Her husband Bernie has a low credit score and his only credit card has a $5,000 balance that he&rsquo;s paying off at 20% interest. It makes sense for Bernie to transfer his balance to Margie&rsquo;s card and then pay off the balance before the promotional period ends.</p> <p>When a couple has no long-term credit card debt, they will probably be interested in maximizing the rewards they earn from their credit cards. In this case, couples can use several strategies to earn the most points, miles, and cash back from their credit cards. First, both spouses can apply for the same credit card when it offers an <a href="http://www.wisebread.com/5-best-sign-up-bonuses-for-airline-miles-credit-cards?ref=internal" target="_blank">exceptional sign-up bonus</a>. Even if the card charges an <a href="http://www.wisebread.com/the-5-best-credit-cards-with-annual-fees?ref=internal" target="_blank">annual fee the first year</a>, it may be worth paying to get the bonus.</p> <p>Alternatively, you may decide the fee is not worth paying twice. In this case, you could still get some of the same benefits that two separate account holders get by making one person the primary cardholder and the other an authorized user on that account. This allows both to receive the additional rewards offered by a premium credit card, without having to pay the annual fees twice. Why pay for two of the same cards that offer, for example, three points per dollar spent on restaurants, when you can just pay for one account that both spouses can use?</p> <p>Another reason this is a good strategy is that spouses can often share the <a href="http://www.wisebread.com/7-ways-your-credit-card-benefits-will-save-you-money?ref=internal" target="_blank">extra perks of a single credit card account</a>. For instance, if an airline credit card offers a free checked bag, it usually applies to several traveling companions on the same reservations. So there would be no reason for both spouses to have the airline credit card for use when traveling together. Also, some cards that offer <a href="http://www.wisebread.com/5-best-credit-cards-with-free-airport-lounge-access?ref=internal" target="_blank">airport lounge access</a> extend it to the cardholder and any traveling companions.</p> <h2>Managing credit card accounts</h2> <p>One way that couples can keep track of their credit card accounts more efficiently is to have just one person manage the accounts. Whichever spouse takes over that duty can pay the bills, track rewards, and make decisions about opening and closing new accounts. This avoids the possibility of failing to pay a bill that they thought the other was taking care of, or paying the same bill twice.</p> <p>One of the benefits of marriage is the efficiencies inherent in living together, sharing resources, and dividing responsibilities. By employing the best credit card strategies, couples can get more out of their credit cards than they ever might have been able to on their own.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthese-are-the-best-credit-card-strategies-for-married-couples&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThese%2520Are%2520the%2520Best%2520Credit%2520Card%2520Strategies%2520for%2520Married%2520Couples.jpg&amp;description=These%20Are%20the%20Best%20Credit%20Card%20Strategies%20for%20Married%20Couples"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/These%20Are%20the%20Best%20Credit%20Card%20Strategies%20for%20Married%20Couples.jpg" alt="These Are the Best Credit Card Strategies for Married Couples" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/these-are-the-best-credit-card-strategies-for-married-couples">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-6-reasons-why-using-cash-only-rocks">Top 6 Reasons Why Using Cash-Only Rocks</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">The Best 0% Balance Transfer Credit Cards</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-lessons-kids-can-learn-from-the-tooth-fairy">7 Money Lessons Kids Can Learn From the Tooth Fairy</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-spring-clean-your-debt">How to Spring-Clean Your Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Family credit card debt credit card strategies managing finances money management saving money Fri, 05 Jan 2018 09:30:10 +0000 Jason Steele 2083206 at http://www.wisebread.com