Debt Management http://www.wisebread.com/taxonomy/term/7681/all en-US 7 Times You Definitely Will Be Charged Credit Card Interest http://www.wisebread.com/7-times-you-definitely-will-be-charged-credit-card-interest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-times-you-definitely-will-be-charged-credit-card-interest" 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_paying_by_credit_card_shopping_online.jpg" alt="Young woman paying by credit card shopping online" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Credit card interest is the worst. For one thing, most cards have APRs of nearly 17% on average, according to CreditCards.com. That's compared to less than 4% for a mortgage or 11% on a personal loan.</p> <p>When you use credit cards, you should aim to avoid paying interest whenever possible. Every time you open a credit card bill, check the line at the top that shows how much interest you have been charged. If this amount is not zero, figure out why you got charged interest so that it doesn't happen again.</p> <p>If you're paying your full balance before the payment due date each month, that number should be zero. Here are some times when credit cards charge you interest.</p> <h2>1. When you pay late</h2> <p>Most cards offer a <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>, which means that a new purchase is not subject to interest until after the payment due date. The law requires interest-free grace periods to be at least 21 days. But the grace period applies only if you <em>do</em> <em>not have a balance</em> at the beginning of the billing period.</p> <p>Let's say you have a new card with no balance. You charge $100 on your card on July 1, the billing cycle closes on July 28, and payment is due on August 18. You have until August 18 to pay your $100 balance off in full without paying any interest. This means that in effect, you're getting nearly two months of an interest-free loan.</p> <p>However, if you forget to send your payment and it's late, you'll pay a late fee as well as interest on the balance, including on the late fee. While you might think that if you pay your balance two days after the due date, you'll be charged two days' interest, you will actually be charged much more than that. By paying late, you've lost your grace period retroactively, and interest is calculated starting July 1 &mdash; the day you made the purchase.</p> <p>How much will you be charged? Credit cards disclose how they calculate the interest they'll charge in those thin-papered, lengthy disclosures they send you, but in general, for every day that you have a balance during that month, you'll owe that day's balance multiplied by your daily periodic rate. You get your daily periodic rate by dividing your APR by 365. So the daily rate for a 20% APR is 0.054%. Depending on the card issuer, this rate may compound daily, meaning you will pay interest upon your interest each day.</p> <p>You'll see charges for this balance on next month's bill. You started the new billing period with a balance, so you won't have a grace period in the new billing cycle, either. At the end of the new month, you'll pay for the interest on last month's balance, which runs into the new month's balance as well, plus interest on any new charges you make all month, and of course, a late fee for not paying on time. In addition, you may pay &quot;trailing interest&quot; the following month. More on that in a moment.</p> <h2>2. When you pay on time, but not the full balance</h2> <p>As we mentioned before, the grace period that cards offer only applies when you start the billing cycle with no balance. If you charged $1,000 last month, but only paid $900, you are starting the new billing cycle with a $100 balance. You might think that the bank would start charging interest only on the $100 balance that starts at the new billing period. But that's not so.</p> <p>As we saw in the example above, interest is charged <em>retroactively </em>if a purchase is not paid in full within the grace period. So you'll be charged interest on the full $1,000 for the duration of last month's billing cycle until the date the payment for the $900 was received by your issuer. At that point, your balance dropped to $100, and interest will then be calculated on that new balance until this month's statement closes.</p> <p>Want that grace period back? You'll need to pay off the $100 balance plus the interest shown on your current month's statement. But that's not all. You may also be charged interest in the days between when the statement is issued and when your payment is received. This is sometimes called &quot;trailing interest&quot; or &quot;residual interest,&quot; and it's most pronounced if you pay your bill with a check, which takes a few days to reach the issuer and clear.</p> <p>For example, imagine you started February with that $100 balance. You receive a statement dated February 5 and send your check for the $100 plus interest on February 10. The issuer applies payment to your account on the 15th. Next month, you receive another statement saying you currently have a balance of $3.23. That's the amount of the residual interest, which was charged to your account between February 5 and February 15. One way to avoid this is to use online payments, but even then you should call the bank and ask exactly how much you will owe if you make your online payment on February 5. Then pay that amount in full on February 5.</p> <p>Unfortunately, even doing that is no guarantee. Some credit cards require you to have no revolving balance for two full billing cycles before you get your grace period back.</p> <h2>3. When a promotional 0% interest offer ends</h2> <p>There are a number of credit cards that offer a promotional period of <a href="http://www.wisebread.com/5-best-credit-cards-with-0-apr-for-purchases?ref=internal" target="_blank">0% interest on your purchases</a>. You won't be charged any interest during the promotional period. But you <em>will</em> be charged interest on any new purchases as soon as the promotional period ends &mdash; and those interest rates can be high. That's why it's important to pay off the whole balance before the promotional period ends, and only use the card if you can pay off the full balance every month.</p> <p>Also note that you can be charged interest if you pay late or violate some other part of the card's terms and conditions. If you choose to take advantage of an offer like this, read every word of fine print to make sure you understand what you're getting into. Check each month's statement to check that you have not been charged any interest.</p> <h2>4. When you take out a cash advance</h2> <p>Your card agreement will lay this out: Your grace period usually does not apply to <a href="http://www.wisebread.com/how-a-credit-card-cash-advance-costs-you-more-than-a-purchase?ref=internal" target="_blank">cash advances</a>. Interest will start accruing the day you get the advance. Not only that, but cash advances often charge a higher interest rate than purchases and may come with a fee as well.</p> <h2>5. When you use a convenience check</h2> <p>Those paper checks that your credit card mails you are basically like low-tech cash advances, with the same disadvantages: Interest starts accruing the moment the check is deposited, probably at a higher rate than your regular rate, and there may be fees. When I get these, I immediately shred them.</p> <h2>6. When you charge a lottery ticket</h2> <p>I was surprised to find this warning in one of my credit card agreements: Purchases of &quot;cash equivalents&quot; such as lottery tickets, traveler's checks, money orders, and gambling chips are not subject to the grace period. You may be charged interest on such purchases starting the day you make them, even if you don't carry a balance.</p> <h2>7. When you transfer a balance from another card</h2> <p>Transferring a balance from a high rate card to a lower rate card can save you money, especially since many <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">balance transfer cards offer 0% interest</a> for a limited amount of time. But you should keep in mind that once you have transferred a balance to a card, you are carrying a balance until you pay it in full. That means that you will not have a grace period on that card.</p> <p>That may not matter as long as you're in the 0% promotional period and only have the transferred balance on the card. But as soon as you make a purchase on the card, it's subject to interest from the moment you bought the item.</p> <p>Not only that, but because of the way payments are allocated, it will take you longer to pay off the balance than if you'd put that purchase on a different card. According to the law, an issuer can apply the minimum payment amount to whichever balance it chooses (the 0% transferred balance or the higher-interest new purchase balance). The bank will no doubt choose to put that minimum payment toward the no-interest balance. Whatever you pay above the minimum must, by law, go to the higher-interest purchase balance. But if it's not enough to clear the purchase balance, you'll now accrue more interest charges on it next month. Bottom line: Don't put new purchases on a balance transfer card.</p> <p>And, as with the cards that offer 0% APR on new purchases for an introductory period, if you pay late or violate some other terms of the card, you could immediately lose your promotional rate and be subject to interest going forward. (See also: <a href="http://www.wisebread.com/your-comprehensive-checklist-for-a-successful-balance-transfer#avoidpurchases?ref=seealso" target="_blank">Your Comprehensive Checklist for a Successful Balance Transfer</a>)</p> <h2>Beware the penalty APR</h2> <p>If you have multiple late payments, or if you write bad checks that the company has to return to you, your credit card company might slap you with a higher APR, which would apply to all future purchases, not just the late payment. Some cards will review your account and return your APR to your previous rate if you make consecutive on-time payments immediately for a certain amount of time.</p> <h2>Do you really have to pay?</h2> <p>Just because you see an interest charge on your credit card statement doesn't mean you absolutely have to pay it. If you have a sterling &mdash; and long &mdash; history with this card company, they may be understanding if you slip up only occasionally. I have successfully had customer service agents waive both late fees and interest charges when I accidentally paid a few days late or even when I forgot a monthly payment altogether. On other occasions, customer service waived the fee but not the interest. It never hurts to ask.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/7-times-you-definitely-will-be-charged-credit-card-interest">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-3"> <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/your-interest-rates-are-about-to-go-up">Your Interest Rates Are About to Go Up</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-dirty-secrets-of-credit-cards">The Dirty Secrets of 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/everything-you-didn-t-understand-about-credit-card-interest-grace-periods-and-penalty-aprs">Everything You Didn’t Understand About Credit Card Interest, Grace Periods, and Penalty APRs</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/7-important-things-you-should-know-about-balance-transfer-cards">7 Important Things You Should Know About Balance Transfer 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/now-is-the-best-time-in-years-to-do-a-credit-card-balance-transfer">Now Is the Best Time in Years to Do a Credit Card Balance Transfer</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management 0% interest APR credit card grace period interest Mon, 18 Jun 2018 08:30:26 +0000 Carrie Kirby 2148865 at http://www.wisebread.com This Is How Student Loan Interest Works http://www.wisebread.com/this-is-how-student-loan-interest-works <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-is-how-student-loan-interest-works" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/student_loan_debt.jpg" alt="Student Loan debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Student loans are a heavy financial burden for most borrowers, but the loan balance isn't the only major financial blow; the interest that accumulates is also difficult to stay on top of.</p> <p>Interest on a student loan is a major contributor to how big your monthly payment will be and how much your loan will <em>really </em>cost by the time you pay it off. Let's look at how student loan interest works and what you can do to get your loans paid off faster and for less money.</p> <h2>Factors that determine interest on your student loan</h2> <p>There are a few factors that determine how much you will pay in interest on your student loan: the interest rate, the amount you borrow, the loan term, and your payment plan.</p> <h3>Interest rate</h3> <p>When you take out a student loan, you'll need to pay back the amount you borrow, plus interest on the loan. Interest is charged as a percentage of the amount you owe. For example, a $10,000 loan at a 10 percent annual interest rate (compounded daily) will cost you $1,049 after a year. So after one year, you would need to pay back the $10,000 that you borrowed, plus $1,049 for interest.</p> <h3>Amount borrowed</h3> <p>We have seen that a $10,000 loan at a 10 percent annual interest rate costs $1,049 in interest after a year. Of course, most student loans are much bigger than $10,000 &mdash; what if you borrow more? If you borrow $20,000, the interest cost to carry this loan for a year would be $2,097. If you borrow $50,000, the interest after a year would be $5,243. The more you borrow, the more interest the loan carries.</p> <h3>Loan term</h3> <p>The loan term is how long it will take you to pay back the loan. For example, you could borrow $50,000 and pay it back over 10 years. In this case, the term of the loan is 10 years. You can reduce your monthly payments by choosing a longer loan term, but you will end up paying more in interest.</p> <p>If you borrow $50,000 at a 10 percent annual interest rate, you would pay $660.75 per month and your total cost for interest over the life of the loan would be $29,290.44. Now, let's say you want lower monthly payments, so you go with a 20-year term instead of 10 years. Your monthly payment would be $482.51, but over the life of the loan you would pay a whopping $65,802.60 in interest &mdash; about $35,000 more!</p> <h3>Payment plan</h3> <p>Student loans have more flexibility in their payment schedules than other installment loans. The simplest plan is to make the same monthly payments over the entire term of the loan. However, since new college grads typically have a lower income just after graduation and earn a higher salary over time, you can select repayment plans that start off with smaller monthly payments that increase as your income increases.</p> <p>Variable repayment plans do make it easier to make payments on student loans, but the price to be paid for this flexibility is interest. Any payment plan that has smaller payments in the early years will cost more in interest over all. (See also: <a href="http://www.wisebread.com/6-questions-to-ask-before-taking-out-student-loans?ref=seealso" target="_blank">6 Questions to Ask Before Taking Out Student Loans</a>)</p> <h2>How much of your student loan payment goes to interest?</h2> <p>When you make your monthly student loan payment, at first, most of your payment will go toward paying interest. Only a small amount will go toward paying down the principal. Over time, eventually more of your payment will chip away at the principal until your loan is paid off in full.</p> <p>Here's an example of how a payment of $660.75 per month on a $50,000 student loan at 10 percent interest would be applied to interest and principal during a 10-year term.</p> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5170/amortization.jpg" alt="" /></p> <p>At first, you can see how the majority of the payment goes toward interest. But over time, as you continue to make payments, the balance of the loan decreases, thereby reducing the interest that accumulates and allowing more of your monthly payment to go to paying down the principal of the loan.</p> <p>Most student loans give you the option to apply extra payments toward the principal. If you can pay a little extra each month, you'll bring your balance down faster and save money on interest payments over the life of your loan. For example, if you could pay $40 more per month, your loan would be paid off in nine years instead of 10, and your total interest cost would be about $3,000 less. (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>How to reduce your student loan interest</h2> <p>Once you understand how student loan interest works, you can put that knowledge to work. There are a few ways you can reduce the overall cost of your student loans.</p> <ul> <li> <p>Paying your loan off faster will reduce the cost of interest. Choose the shortest term you can afford, and make extra payments if possible.</p> </li> <li> <p>Borrowing more will increase your interest cost. Try to minimize living expenses while in school to keep your student loan balance as low as possible.</p> </li> </ul> <p>Select the student loan option with the lowest interest rate available. If your rate is still higher than you'd like, consider refinancing your student loan later to a lower interest rate. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso" target="_blank">15 Ways to Pay Back Student Loans Faster</a>)</p> <p style="text-align: center;">&nbsp;</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%2Fthis-is-how-student-loan-interest-works&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThis%2520Is%2520How%2520Student%2520Loan%2520Interest%2520Works.jpg&amp;description=This%20Is%20How%20Student%20Loan%20Interest%20Works"></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/This%20Is%20How%20Student%20Loan%20Interest%20Works.jpg" alt="This Is How Student Loan Interest Works" width="250" height="374" /></p> <p>&nbsp;</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/this-is-how-student-loan-interest-works">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/7-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan 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/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</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/dont-ignore-these-4-things-before-refinancing-your-student-loans">Don&#039;t Ignore These 4 Things Before Refinancing Your Student Loans</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-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</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-make-the-most-of-your-student-loan-grace-period">4 Ways to Make the Most of Your Student Loan Grace Period</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Debt Management Education & Training amortization college extra payments interest rates loan terms principal refinancing repayment plans student loans tuition Wed, 09 May 2018 08:30:19 +0000 Dr Penny Pincher 2138310 at http://www.wisebread.com 8 Questions to Ask Before Hiring a Credit Counselor http://www.wisebread.com/8-questions-to-ask-before-hiring-a-credit-counselor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-questions-to-ask-before-hiring-a-credit-counselor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_calculating_accountancy_at_home.jpg" alt="Woman calculating accountancy at home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're struggling with debt and don't see a light at the end of the tunnel, working with a credit counselor may be your best move. Credit counselors are trained to help you manage your debt and understand credit, cash flow, and budgeting. They will take a holistic look at your financial situation, then help you craft a plan to get out of debt and handle your money problems once and for all.</p> <p>While this may sound like exactly what you need, it's important to note that all credit counselors are not created equal. The <a href="https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor" target="_blank">Federal Trade Commission (FTC)</a> says that most reputable credit counselors work for nonprofit firms. But it warns that &quot;nonprofit&quot; status doesn't guarantee that their services are &quot;free, affordable, or even legitimate.&quot;</p> <p>Some credit counseling organizations are known for charging high fees, which they try to hide with layers of complexity. The FTC also notes that credit counselors sometimes ask for voluntary contributions to their business, even if making those contributions would put you into more debt.</p> <p>Obviously, you'll want to avoid credit counselors with high fees or shady practices. Before you choose a credit counselor, approach the situation with a list of questions to ask right away.</p> <h2>1. Is this a nonprofit credit counseling agency?</h2> <p>While this may seem like an obvious question, credit counselor Joseph Martin of Take Charge America, a national nonprofit credit counseling agency, says this question is crucial to ask right away. Because there are many different types of debt relief organizations with similar names and very different services, you should make sure you're speaking to a credit counselor instead of a different type of business, he says.</p> <p>If you think you're speaking with a credit counselor but are instead speaking with a debt settlement company, for example, you could wind up receiving advice that doesn't help you reach your goals. Credit counselors offer budgeting and financial education services. They can also help you create a plan to get out of debt by paying off your debts, often at reduced interest rates, through a long-term debt management plan (DMP). Doing so will eventually help to rebuild your credit.</p> <p>By contrast, for-profit <a href="http://www.wisebread.com/heres-how-debt-settlement-can-make-your-debt-worse?ref=internal" target="_blank">debt settlement</a> or debt relief companies focus on helping you negotiate a settlement for your debts that is less than what you owe, and this may cause your credit score to plummet. These are totally different services, and what works for one person may not work for another. (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> <p>Even though &quot;nonprofit&quot; credit counselors can charge hidden fees, you'll still want to know if you're working with a nonprofit organization, says Martin. Why? &quot;The initial financial assessment, budget, and education are always free with a nonprofit,&quot; he says.</p> <p>Since a nonprofit credit counselor offers free advice that you can use even if you decide not to move forward with their services, seeking out a nonprofit is a solid first step. (See also: <a href="http://www.wisebread.com/8-organizations-that-really-can-help-you-with-your-debt?ref=seealso" target="_blank">8 Organizations That Really Can Help You With Your Debt</a>)</p> <h2>2. Are you accredited?</h2> <p>A smart way to weed out unethical or substandard credit counselors is to find out if the credit counseling agency belongs to the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Members of these industry associations must be accredited by the Council on Accreditation and must &quot;abide by specific guidelines, ensuring consumers receive a full, comprehensive guided session to identify individualized debt and budgeting solutions,&quot; says Martin. By choosing a credit counselor that is accredited, you'll be choosing the cream of the crop.</p> <h2>3. How much do your services cost?</h2> <p>If you're talking to an accredited nonprofit credit counseling organization, services like budgeting and receiving general financial advice should always be free. Your antenna should go up if a credit counselor wants you to pay anything for those services. &quot;If an organization won't help you because you can't afford to pay, look elsewhere for help,&quot; the FTC writes on its website.</p> <p>Entering a debt management plan will usually cost more. According to CreditCards.com, most counseling agencies collect monthly fees from people who enter DMPs &mdash; up to $50 a month. A DMP usually lasts three to five years, so that means you could end up paying as much as $1,800 to the credit counselor.</p> <p>In addition to asking what recurring fees the agency charges, you should also ask whether there is an initial setup or consulting fee, says licensed insolvency trustee Michael Krieger of Krieger &amp; Company in Toronto, Canada. If your credit counselor glosses over the topic of how they get paid, definitely dig deeper, says Krieger. Or just move on and find someone else to work with.</p> <h2>4. What services do you offer?</h2> <p>Here's another common sense question that should be asked right away. Before you decide to work with a credit counselor, make sure you know what services they offer and if they're services you actually want.</p> <p>The FTC says you should look for an organization that offers several different services &quot;including budget counseling, and savings and debt management classes.&quot; The FTC also says you should avoid organizations that only offer a debt management plan (DMP) or push a DMP without fully analyzing your situation.</p> <p>&quot;Individuals very quickly head down the wrong path from counselors and financial service providers without really looking at the value they are adding,&quot; says Krieger. &quot;Those making promises that seem too good to be true usually are, yet people latch onto those promises.&quot;</p> <p>Instead of believing promises such as, &quot;everything will be okay&quot; or &quot;we'll get you out of debt,&quot; you need to find out exactly how the counselor plans to help you achieve your goals and what services they plan to use. (See also: <a href="http://www.wisebread.com/should-you-sell-your-home-to-pay-down-debt?ref=seealso" target="_blank">Should You Sell Your Home to Pay Down Credit Card Debt?</a>)</p> <h2>5. What is your monthly DMP dropout rate?</h2> <p>If you do decide to enter a DMP, go into it knowing that only about 25 percent of debtors complete their plans with a credit counselor, according to CreditCards.com. Another 25 percent report that they finish paying off their debts on their own. But that's hard to verify. So the question to ask a counselor whose advising a DMP is how many people drop out of the plans every month &mdash; 2 percent is low, 5 percent is high.</p> <h2>6. How will we meet?</h2> <p>Before you connect with a credit counselor, it's important to know exactly what you're getting into. Will you talk to them online using technology like Skype or Google Hangouts? Will you talk on the phone? Or will you meet in-person to go over your budget and financial situation?</p> <p>If you believe meeting someone in-person would be the most helpful, then you should seek out local credit counselors that offer this option. If not, Krieger says you should decide if you're OK working via the internet or phone where your service may feel less personal overall.</p> <h2>7. Can I get my family involved?</h2> <p>Whether you're receiving credit counseling in-person or over the phone, Krieger says it should be a family affair. This means that, ideally, you'll be able to sit down with your credit counselor and your spouse or partner to go over the family's finances and debts and how everyone can be involved in the solution.</p> <p>&quot;Money problems start at home and both are influenced by and impact the entire family,&quot; he says. To solve your money problems or get on the right track regarding budgeting or debt, you have to get all adults in the family involved or it may not work. (See also: <a href="http://www.wisebread.com/how-one-couple-paid-off-147k-of-debt-even-while-unemployed?ref=seealso" target="_blank">How One Couple Paid Off $147k of Debt, Even While Unemployed</a>)</p> <h2>8. How will working with you help me in the long run?</h2> <p>The FTC says that you should ask any credit counselor you're thinking of working with how their advice will help you in the future. After all, you don't just want to get out of debt &mdash; you want to stay out of debt.</p> <p>By asking your counselor about their methods, you may gain some insight into how they can prepare you for a financial future free from the debt and financial strain you're experiencing today.</p> <p>And really, that should be the whole point. You want to get out of the mess you're in, but you should also strive to avoid more problems in the future. A nonprofit credit counselor should be able to help you with both goals, but you have to ask the right questions first. (See also: <a href="http://www.wisebread.com/3-times-bankruptcy-is-the-right-move?ref=seealso" target="_blank">3 Times When Filing for Bankruptcy Is the Right Move</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%2F8-questions-to-ask-before-hiring-a-credit-counselor&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Questions%2520to%2520Ask%2520Before%2520Hiring%2520a%2520Credit%2520Counselor.jpg&amp;description=8%20Questions%20to%20Ask%20Before%20Hiring%20a%20Credit%20Counselor"></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/u5180/8%20Questions%20to%20Ask%20Before%20Hiring%20a%20Credit%20Counselor.jpg" alt="8 Questions to Ask Before Hiring a Credit Counselor" 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/8-questions-to-ask-before-hiring-a-credit-counselor">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-11"> <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-5-best-debt-tracking-systems">The 5 Best Debt Tracking Systems</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-happens-to-debt-after-divorce">What Happens to Debt After Divorce?</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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</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-easy-first-steps-to-paying-off-debt">7 Easy First Steps to Paying Off Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management credit counselor credit score debt management tips managing debt Paying Off Debt questions to ask Thu, 26 Apr 2018 08:30:10 +0000 Holly Johnson 2133920 at http://www.wisebread.com How to Manage Student Loans On a Low Income http://www.wisebread.com/how-to-manage-student-loans-on-a-low-income <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-manage-student-loans-on-a-low-income" 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_stack_pile_of_books_and_piggy_bank.jpg" alt="Woman with stack pile of books and piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Student loans are a lifeline for college students without the means to foot the full bill for higher education. But the hardships begin when they graduate. For the Class of 2016, the average student loan borrower has more than $37,000 in student debt.</p> <p>Juggling student loan payments with other bills can sometimes seem impossible if you're making a low salary. Luckily, you do have options that can make your student loan payments easier to bear. Here's what you can do.</p> <h2>Federal vs. private student loans</h2> <p>There are two broad types of student loans: federal and private. Federal student loans are the easiest to deal with. That's because there are a number of programs designed to make your monthly payments more affordable.</p> <p>Private student loans are much less flexible because it's up to the individual lender to decide whether they want to help you or not. But as we'll see below, you still have options if you've got private student loans.</p> <h2>Repayment options for federal student loan borrowers</h2> <p>If you have federal student loans, you could be eligible for one of these <a href="https://studentloans.gov/myDirectLoan/ibrInstructions.action" target="_blank">income-driven repayment programs</a>:</p> <ul> <li> <p>Income-Based Repayment (IBR)</p> </li> <li> <p>Pay As You Earn (PAYE)</p> </li> <li> <p>Revised Pay As You Earn (REPAYE)</p> </li> <li> <p>Income-Contingent Repayment (ICR)</p> </li> </ul> <p>These programs all require some hassle to set up and maintain with your loan servicer. Once in place, however, your monthly student loan payments can be lowered to 10-20 percent of your discretionary income for 20-25 years, after which they are forgiven<strong>. </strong></p> <p>The difference is in how you qualify for them and the particular details of the program. Some programs have certain income requirements and loan type requirements (yep, they are limited to even certain types of federal loans). Each program works slightly differently as well, in terms of how much you have to pay and for how long.</p> <p>It sounds like a confusing web to navigate, and it is. But if you need your monthly student loan payment lowered for the long term and take the time to research the right <a href="http://www.wisebread.com/which-student-loan-repayment-plan-saves-you-the-most?ref=internal" target="_blank">federal student loan repayment program</a> for you, it can make a world of difference for your financial health.</p> <p>One important note: Refinancing is often touted as a cure-all for high student loan payments. While it can be beneficial in certain cases, you should think long and hard before you do this with federal loans. Refinancing the loans with private lenders (a different thing than <a href="http://www.wisebread.com/what-s-the-difference-between-student-loan-refinancing-and-consolidation?ref=internal" target="_blank">consolidating all of your federal loans</a> into one loan) means that you might get a lower payment, but you <a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans?ref=internal" target="_blank">lose all the nice federal protections</a> outlined above.</p> <h2>Forbearance and deferment for federal student loan borrowers</h2> <p>If you're facing a temporary financial crisis such as a job loss, injury, or other economic hardship, it might make sense to ask for a temporary <a href="http://www.wisebread.com/what-is-student-loan-forbearance-anyway?ref=internal" target="_blank">forbearance</a> or <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans?ref=internal" target="_blank">deferment</a>. The programs can offer you up to a three-year break from making student loan payments.</p> <h2>Repayment options for private student loan borrowers</h2> <p>Unfortunately, private student loans are a bit like the Wild West. There are no federal rules requiring private lenders to work with you on a repayment plan. They're completely within their legal rights to continue charging you payments you can't afford, even if it puts you in financial jeopardy.</p> <p>Still, it doesn't hurt to call up your private student loan servicer to ask them for a break. &quot;If you're having a hard time making private loan payments, you can try reaching out and seeing if they'd agree to a modified payment schedule or forbearance, but the answer will probably be no,&quot; says Travis Hornsby, founder of Student Loan Planner, a financial coaching and consulting firm.</p> <p>After that, another option is to try to refinance your student loans with a different private lender for a lower rate. Keep in mind that many lenders require a minimum loan amount of $5,000 to refinance. You'll also need to prove that your income is high enough that you can make your new monthly payments, even though they're smaller than your current ones.</p> <p>In addition, you'll need a good credit score to qualify for interest rates that are low enough to make a refinance worthwhile. A FICO score below 640 is likely to disqualify you for a refinance.</p> <h2>Plan for what comes next</h2> <p>If you are granted student loan forbearance or deferment, use your time wisely. Plan on how to get your financial ship righted so that you <em>are</em> able to afford the monthly payments when they start back up.</p> <p>Refinancing can help lower your payments, but don't let that lull you into complacency. You should still make every effort you can to pay off the debt as soon as possible. <a href="http://www.wisebread.com/what-really-happens-when-you-dont-pay-your-student-loans?ref=internal" target="_blank">Defaulting on student loans</a> can do serious damage to your credit.</p> <p>Finally, if you sign up for an income-driven federal student loan repayment plan, make sure you know what the requirements are and that you follow them to a T. One filing slip-up can result in you being ineligible for the program.</p> <p>And if you expect a portion of your student loans to be forgiven at the end of the repayment term, remember this: The forgiven amount is considered <em>taxable income</em> by the IRS, meaning that you need to be saving for that bill, which could be considerable.</p> <h2>You can do this</h2> <p>Student loans are no fun to deal with. But you <em>can</em> get over them even if you have a low income by using the programs outlined above. It won't be easy, and it might not be quick, but thousands of people have done it before, and you can do it, too.</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%2Fhow-to-manage-student-loans-on-a-low-income&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Manage%2520Student%2520Loans%2520On%2520a%2520Low%2520Income.jpg&amp;description=How%20to%20Manage%20Student%20Loans%20On%20a%20Low%20Income"></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/How%20to%20Manage%20Student%20Loans%20On%20a%20Low%20Income.jpg" alt="How to Manage Student Loans On a Low Income" 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/lindsay-vansomeren">Lindsay VanSomeren</a> of <a href="http://www.wisebread.com/how-to-manage-student-loans-on-a-low-income">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-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan 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/this-is-how-student-loan-interest-works">This Is How Student Loan Interest Works</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/6-questions-to-ask-before-taking-out-student-loans">6 Questions to Ask Before Taking Out Student Loans</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/which-student-loan-repayment-plan-saves-you-the-most">Which Student Loan Repayment Plan Saves You the Most?</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/12-easy-ways-to-avoid-student-loan-debt">12 Easy Ways to Avoid Student Loan Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Education & Training college loans college students financial struggles low income student debt student loans Wed, 18 Apr 2018 08:30:06 +0000 Lindsay VanSomeren 2128966 at http://www.wisebread.com 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> <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%2Fpaying-your-debts-in-the-wrong-order-could-be-costing-you&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FPaying%2520Your%2520Debts%2520in%2520the%2520Wrong%2520Order%2520Could%2520Be%2520Costing%2520You.jpg&amp;description=Paying%20Your%20Debts%20in%20the%20Wrong%20Order%20Could%20Be%20Costing%20You"></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/Paying%20Your%20Debts%20in%20the%20Wrong%20Order%20Could%20Be%20Costing%20You.jpg" alt="Paying Your Debts in the Wrong Order Could Be Costing You" 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/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-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/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-2 views-row-even"> <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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-one-couple-paid-off-147k-of-debt-even-while-unemployed">How One Couple Paid Off $147k of Debt (Even While Unemployed)</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/are-you-paying-off-credit-card-debt-the-wrong-way">Are You Paying Off Credit Card Debt the Wrong Way?</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-happens-to-your-debt-after-you-die">What Happens to Your Debt After You Die?</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 7 Tough Questions About Debt, Answered http://www.wisebread.com/7-tough-questions-about-debt-answered <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-tough-questions-about-debt-answered" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/federal_debt.jpg" alt="Federal Debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We've all heard the tales of financial woe that befall people who fail to pay their debt, die without a will, or go through a nasty divorce. But what is the truth? Is there a such thing as credit jail? Can filing bankruptcy give you a clean financial slate? Are you responsible for an ex spouse's debts?</p> <p>We're answering some of your most pressing debt questions. As always, it's important that you do your own research &mdash; each situation is different and laws and regulations change on a case-by-case basis. This is your jumping off point. Now, let's get started.</p> <h2>1. Is failing to pay debts ever a jailable offense?</h2> <p>The quick answer to this question is no. And to take it one step further, according to the Federal Trade Commission (FTC), it is against the law for debt collectors to threaten you with incarceration.</p> <p>You can be sued for the debt, your wages can be garnished, your bank accounts frozen, your assets seized, and a whole slew of other nasty things can befall you for failing to pay, but going to jail isn't among the list of possible consequences.</p> <p>The caveat and exception to this rule is if you owe child support or taxes. The IRS usually doesn't impose jail time for nonpayment. Incarceration is reserved for those who lie, cheat, and try to defraud the system. In both cases &mdash; tax evasion and failure to pay child support (technically contempt of court) &mdash; you have options. You can, in most cases, maintain your freedom while you catch up &mdash; but you have to be proactive and compliant. (See also: <a href="http://www.wisebread.com/heres-what-happens-if-you-dont-pay-your-taxes?ref=seealso" target="_blank">Here's What Happens If You Don't Pay Your Taxes</a>)</p> <h2>2. Should I borrow from retirement to pay off debt?</h2> <p>This is a tricky question and the answer can vary based on your situation. In most cases, the answer is <em>no</em>.</p> <p>Most financial advisers will tell you there are a plethora of options you should explore before tapping your retirement accounts. You should seek to exhaust these options before borrowing against your 401(k) or raiding your IRA. You may be hit with early withdrawal fees and you could seriously derail your future earnings.</p> <p>Borrowing from your retirement is usually a quick solution to a deeper issue. You will treat the symptom, but fail to fix the problem. And, if you do it once, chances are you'll do it again. Don't use tomorrow's resources to pay for today's mistakes. Find another way. If you feel that this is the <em>only</em> option, please consult a financial adviser before you do. (See also: <a href="http://www.wisebread.com/6-foolish-ways-to-pay-down-debt?ref=seealso" target="_blank">6 Foolish Ways to Pay Down Debt</a>)</p> <h2>3. If I divorce my spouse, am I responsible for their bills?</h2> <p>The answer to this question is a firm, &quot;It depends.&quot; Here's where you have to do some research and may need to seek legal advice.</p> <p>Your level of responsibility as it pertains to an ex-spouse's debt depends on a few key factors. Your state's laws and whether or not you signed the credit contract are the top two issues. In most cases, if your John Hancock is on the contract, you are liable.</p> <p>During the divorce process, couples should agree on who owes what and who will pay, and have it outlined in their divorce decree. The important thing to note here is that the decree establishes who <em>should </em>pay &mdash; however, from a legal standpoint, if you signed a credit contract, you are liable if your ex-partner fails to make payments. (See also: <a href="http://www.wisebread.com/how-to-protect-yourself-financially-during-a-divorce-or-separation?ref=seealso" target="_blank">How to Protect Yourself Financially During a Divorce or Separation</a>)</p> <h2>4. Is there a statute of limitation on debt?</h2> <p>Every state establishes its own statute of limitations for debt. Each type of debt has its own time-frame. It can be as few as three years, or as many as six. You need to research the laws for your state and for your particular debt to determine the expiration period.</p> <p>That said, the fact that time has expired doesn't erase the debt. The statute of limitation limits the creditor's ability to sue you and to gain a court order for repayment. The creditor can still pursue repayment of the debt past its expiration as long as it adheres to the Fair Debt Collection Practices Act. The only way to eliminate or erase a debt is to pay it, have it canceled by the lender, or have it discharged in bankruptcy. (See also: <a href="http://www.wisebread.com/what-to-do-when-a-creditor-sues?ref=seealso" target="_blank">What to Do When a Creditor Sues</a>)</p> <h2>5. I have defaulted on a payday loan. What happens now?</h2> <p>You already know this, but I must state it for the record: Payday loans are bad news. They are expensive, and defaulting is going to cause you massive amounts of financial heartache.</p> <p>Payday lenders aggressively go after borrowers who don't pay. And if you are sued, it's not just the debt you are on the hook for &mdash; you can also be held responsible for the legal fees and additional interest that accrues during the process. It's a web that could take you a lifetime to untangle.</p> <p>If you do have a payday loan, you've got to attack it. You should prioritize it over all your other debt. Time is your enemy, so you must rush to get rid of it as quickly as possible. Work with the lender to keep the debt in good standing. Get a second job, cut all unnecessary spending, and save every single dollar to pay it off. (See also: <a href="http://www.wisebread.com/how-to-protect-yourself-from-predatory-lending?ref=seealso" target="_blank">How to Protect Yourself From Predatory Lending</a>)</p> <h2>6. Does filing for bankruptcy absolve all debt?</h2> <p>No. There are two common types of bankruptcies most people file:</p> <ul> <li> <p>A chapter 7 bankruptcy liquidates all of your nonexempt assets to pay off creditors. It's the advisable option if you have massive amounts of unsecured debt, such as credit cards and medical bills, and very little or no income.</p> </li> <li> <p>A chapter 13 bankruptcy adjusts your debt using a repayment plan. This option is advisable if you have stable income and secured debt such as a home or car loan, but are so far behind on payments that you are facing legal action (foreclosure or repossession of valuable items).</p> </li> </ul> <p>Making your debt magically disappear may seem like a great idea, but bankruptcy has a dark side. It doesn't (except in rare cases) get rid of mortgages, student loans, taxes, alimony, or child support. And the court could order that some of your property be sold to help pay off the debt. Declaring bankruptcy also wreaks havoc on you credit score for years to come. Once you file, chapter 7 remains on your credit report for 10 years and chapter 13 stays for seven.</p> <p>Before plunging into bankruptcy, you should consult a CPA or other certified financial fiduciary, and an attorney. Ensure you fully understand and consider the long-term impact bankruptcy will have on your financial life. (See also: <a href="http://www.wisebread.com/11-steps-to-take-when-bankruptcy-is-your-only-option?ref=seealso" target="_blank">11 Steps to Take When Bankruptcy Is Your Only Option</a>)</p> <h2>7. If a family member dies, am I responsible for their debt?</h2> <p>The short answer is no. According to the FTC, family members of the deceased are not obligated to pay the debts of a deceased relative. The deceased's <em>estate </em>owes the debt, not you. This means before the estate is liquidated and divvied up according to your relative's will, all debts must be paid.</p> <p>If the estate isn't sufficient to cover the debts, the debts go unpaid. Family members are not obligated to pay. However, for every rule, there is an exception. You could have to pay the debt if you co-signed the debt, live in a community property state such as California, or were married to the deceased. It should also be noted that if you are the executor of the estate, you must make sure all of your loved one's debts are satisfied before you liquidate it. If not, you could be held responsible for the debt. (See also: <a href="http://www.wisebread.com/who-pays-when-loved-ones-leave-debt-behind?ref=seealso" target="_blank">Who Pays When Loved Ones Leave Debt Behind?</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%2F7-tough-questions-about-debt-answered&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Tough%2520Questions%2520About%2520Debt%252C%2520Answered.jpg&amp;description=7%20Tough%20Questions%20About%20Debt%2C%20Answered"></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/u5180/7%20Tough%20Questions%20About%20Debt%2C%20Answered.jpg" alt="7 Tough Questions About Debt, Answered" 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/7-tough-questions-about-debt-answered">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-3"> <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/4-myths-about-divorce-and-money-debunked">4 Myths About Divorce and Money, Debunked</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/9-times-to-hire-a-lawyer-immediately">9 Times to Hire a Lawyer Immediately</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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-debt-management-questions-youre-too-embarrassed-to-ask">5 Debt Management Questions You&#039;re Too Embarrassed to Ask</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-unique-ways-millennials-are-dealing-with-student-loan-debt">7 Unique Ways Millennials Are Dealing With Student Loan Debt</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Debt Management bankruptcy bills co-signing default divorce estates jail time myths payday loans questions repayment Wed, 11 Apr 2018 08:30:09 +0000 Denise Hill 2124339 at http://www.wisebread.com What You Need to Know About the Statute of Limitations on Debts http://www.wisebread.com/what-you-need-to-know-about-the-statute-of-limitations-on-debts <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-you-need-to-know-about-the-statute-of-limitations-on-debts" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/frustrated_woman_paying_bills_at_home.jpg" alt="Frustrated woman paying bills at home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The calls and letters never seem to stop. Debt collectors are after the money you owe to your credit card provider, your dentist, or your doctor's office. It feels like this debt is always going to be a part of your life.</p> <p>But there is a loophole here: Your debt comes with a statute of limitations &mdash; a sort of expiration date. After this date passes, debt collectors and creditors can no longer win a lawsuit to force you to pay up what you owe.</p> <p>This statute of limitations won't prevent all of the misery that comes with owing money, but it's an important time frame to understand. Here's what you need to know.</p> <h2>Statute of limitations on debts</h2> <p>The statute of limitations is the time during which a debt is legally enforceable &mdash; meaning that if your credit card provider files a lawsuit against you, that entity still has a chance to force you to pay up. A court, for instance, might decide to garnish your paycheck to gradually pay back your creditors. (See also: <a href="http://www.wisebread.com/heres-what-to-do-if-your-wages-are-garnished?ref=seealso" target="_blank">Here's What to Do If Your Wages Are Garnished</a>)</p> <p>The statute of limitations on your debt depends on where you live. It also depends on the type of debt you have. Your statute of limitations might be different for open-ended debt, which includes credit card debt, and debt that comes in the form of a written contract, such as medical debt.</p> <p>Usually, the statute of limitations on your debt will be three to six years. Though in states such as Rhode Island and Kentucky, it could be as long as 15 years depending on the type of debt. Check with your state to determine how long creditors have to sue you for unpaid debts.</p> <p>It's important to note that the statute of limitations kicks in on the last date of activity on your delinquent account. Say you owe debt to a medical provider. The statute of limitations doesn't kick in when that debt becomes officially late. It kicks in after the last action you took on that account. If you're not careful, you could restart your debt's statute of limitations. Maybe you make a partial payment &mdash; that will restart the statute of limitations, no matter how much time had passed.</p> <p>The statute of limitations will restart even if you agree to enter a repayment plan, so only take action on past-due accounts if you think doing so will help you pay off the debt or reach a resolution with your creditor.</p> <h2>Don't confuse statute of limitations with credit reporting limits</h2> <p>The statute of limitations is not the same as the credit reporting limit.</p> <p>The credit reporting limit is the maximum number of years in which the three national credit bureaus (Experian, Equifax, and TransUnion) can list your delinquent accounts on your credit reports. That limit is seven years. After seven years, even if you haven't paid the debt you owe, any notices that you have delinquent accounts will fall off your report.</p> <p>That's still an important limit to know: Delinquent accounts listed on your credit report can cause your credit score to drop by 100 points or more. However, the statute of limitations on your debt is a separate figure you need to look up. (See also: <a href="http://www.wisebread.com/heres-what-happens-to-an-account-in-collections-even-when-you-pay-up?ref=seealso" target="_blank">Here's What Happens to an Account in Collections &mdash; Even When You Pay Up</a>)</p> <h2>Your debt doesn't disappear</h2> <p>It's important to realize that just because the statute of limitations has expired, it doesn't mean that your debt magically disappears. Debt collectors can continue to call you or write seeking repayment as long as they follow the regulations spelled out in the Fair Debt Collection Practices Act.</p> <p>Your creditors can even file a lawsuit against you after the statute of limitations expires. They just won't win. They might hope, though, that you agree to pay up when facing the threat of a lawsuit, even if they know such a suit is doomed. (See also: <a href="http://www.wisebread.com/what-to-do-when-a-creditor-sues?ref=seealso" target="_blank">What to Do When a Creditor Sues</a>)</p> <p>You need to be aware of the statute of limitations in your state. It's the best way to avoid paying up when you might have already decided it was in your best interests to not pay back what you owe.</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-you-need-to-know-about-the-statute-of-limitations-on-debts&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhat%2520You%2520Need%2520to%2520Know%2520About%2520the%2520Statute%2520of%2520Limitations%2520on%2520Debts.jpg&amp;description=What%20You%20Need%20to%20Know%20About%20the%20Statute%20of%20Limitations%20on%20Debts"></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%20You%20Need%20to%20Know%20About%20the%20Statute%20of%20Limitations%20on%20Debts.jpg" alt="What You Need to Know About the Statute of Limitations on Debts" 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-you-need-to-know-about-the-statute-of-limitations-on-debts">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-4"> <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-when-a-creditor-sues">What to Do When a Creditor Sues</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/heres-how-debt-settlement-can-make-your-debt-worse">Here&#039;s How Debt Settlement Can Make Your Debt Worse</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-signs-it-s-time-to-see-a-credit-counselor">5 Signs It’s Time to See a Credit Counselor</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/heres-what-happens-to-an-account-in-collections-even-when-you-pay-up">Here&#039;s What Happens to an Account in Collections — Even When You Pay Up</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-what-to-do-if-your-wages-are-garnished">Here&#039;s What to Do If Your Wages Are Garnished</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Debt Management Creditors debt collectors lawsuits owing money statute of limitations wages garnished Tue, 10 Apr 2018 08:30:09 +0000 Dan Rafter 2128155 at http://www.wisebread.com The 5 Best Debt Tracking Systems http://www.wisebread.com/the-5-best-debt-tracking-systems <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-5-best-debt-tracking-systems" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/busy_lady_working_on_a_computer.jpg" alt="Busy lady working on a computer" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>&quot;What gets measured gets managed&quot; is an adage, and it's true. If you're in debt, one of the best ways to motivate yourself to get <em>out</em> of debt is by tracking it. Debt tracking websites and apps allow you to create debt payoff plans, calculate how much interest you'll pay in the process of becoming debt-free, and predict the all-holy debt-free date. Many even let you play around to see what the effect of extra monthly payments are.</p> <p>There are a ton of free debt tracking tools, but which one is right for you? As a debt blogger, I've spent three years trying and reading extensively about various tools, and have come up with a list of five that I think are best.</p> <h2>1. Undebt.it</h2> <p><a href="http://www.undebt.it" target="_blank">Undebt.it</a> undoubtedly has the most features of any debt tracker out there. It's the Cadillac of debt-payoff trackers. This comes in especially handy for student loans and credit cards, many of which have helpful (but complicated) repayment schemes and promotional offers.</p> <p>Undebt.it also has a number of options for calculating a debt-payoff plan. You can choose from the debt snowball method (lowest balance first), debt avalanche method (highest interest rate first), or even create a custom payoff plan. (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>It even supports the <a href="http://www.wisebread.com/get-out-of-debt-faster-with-the-debt-snowflake?ref=internal" target="_blank">debt snowflake</a> method of making small, extra payments as you're able. And you can switch among all these plans whenever you want.</p> <p>The only downside of Undebt.it is that it's a bit clunky until you get used to it. The full suite of free features is nice, but it does take a bit of time navigating the website to understand all the ins and outs.</p> <h2>2. Unbury.me</h2> <p>If Undebt.it seems too confusing, try <a href="http://unbury.me" target="_blank">Unbury.me</a>. Its simple block-style layout is pleasing to the eye, and entering debts is a snap. It's almost <em>too</em> simple, which is why this debt tracker works best if your debts are relatively straightforward with no confusing, shifting APRs or payment schemes. Just remember to sign up for a free account after you enter your debt information to save your work, or it'll all be lost as soon as you leave the page!</p> <h2>3. Mint</h2> <p>You might be familiar with the popular budgeting software <a href="http://www.mint.com" target="_blank">Mint</a>, but did you know you can use it to track your debt as well? Using its Goals function, click on &quot;Pay Off Loans&quot; or &quot;Pay Off Credit Card Debt.&quot; It'll automatically populate the screen with your loans or your credit cards, and ask you to input any missing information about your interest rates and minimum monthly payments.</p> <p>By sliding the payment toggle, you can instantly see how much interest you'll save by raising or lowering your monthly payment amount, along with how long it'll take you to get out of debt. Select your payment amount, and follow Mint's instructions on where to send the extra payments.</p> <p>The beauty of the Mint system is that it updates automatically, meaning you don't have to login and update your account every time you make a payment. Plus, you get all of Mint's extra budgeting tools.</p> <h2>4. Debt Payoff Assistant</h2> <p>The <a href="https://itunes.apple.com/us/app/debt-payoff-assistant/id475099959?mt=8" target="_blank">Debt Payoff Assistant</a> app is the most basic, no-frills debt payoff tracker. It comes with three payoff plans to choose from: lowest balance first, highest balance first, and highest interest first. You can also come up with a custom plan if none of these work for you.</p> <p>Debt Payoff Assistant doesn't really offer much in the way of visualization except for a pie chart that shows you what kinds of loans make up your total debt. If you really want a graph of your debt over time, try Undebt.it or Unbury.me.</p> <h2>5. Debt Payoff Planner Calculator</h2> <p>If your debt payoff scheme confuses you, consider going with the <a href="https://itunes.apple.com/us/app/debt-payoff-planner-and-calculator/id1009323715?mt=8" target="_blank">Debt Payoff Planner Calculator</a> app. The strength of this app is that it shows you exactly how much money to send to each debt every month, with the amounts changing as you pay off certain debts. You can choose from three payoff plans: the debt snowball plan, the debt avalanche plan, or a custom plan.</p> <p>Again, this app doesn't really show you a great visualization of your debt payoff progress. Choose another debt payoff tracker if that's important to you.</p> <p>If you're not sure which tracker is right for you, choose a couple to try out for a month or two. The idea is to help you get clearer about what you owe, the best way to pay it off, and to help you stay motivated until your balances are cleared.</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-best-debt-tracking-systems&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThe%25205%2520Best%2520Debt%2520Tracking%2520Systems.jpg&amp;description=The%205%20Best%20Debt%20Tracking%20Systems"></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%20Best%20Debt%20Tracking%20Systems.jpg" alt="The 5 Best Debt Tracking Systems" 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/lindsay-vansomeren">Lindsay VanSomeren</a> of <a href="http://www.wisebread.com/the-5-best-debt-tracking-systems">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-8"> <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-happens-to-debt-after-divorce">What Happens to Debt After Divorce?</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/8-questions-to-ask-before-hiring-a-credit-counselor">8 Questions to Ask Before Hiring a Credit Counselor</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/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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-millennial-money-apps-everyone-should-use">The 5 Millennial Money Apps Everyone Should Use</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/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> </ul> </div> </div> </div> </div><br/></br> Debt Management Technology debt management tips debt tracking system debt-free financial apps money apps Paying Off Debt Fri, 06 Apr 2018 08:30:05 +0000 Lindsay VanSomeren 2127515 at http://www.wisebread.com 5 Mind Tricks to Help You Conquer Debt http://www.wisebread.com/5-mind-tricks-to-help-you-conquer-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-mind-tricks-to-help-you-conquer-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/beautiful_young_african_woman_smiling_and_thinking_0.jpg" alt="Beautiful young African woman smiling and thinking" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Paying off huge amounts of debt can be emotionally draining. You know that your financial life would be better if you dumped the debt, but sometimes our thought processes can get in our own way.</p> <p>In many cases, overcoming debt is all about putting mind over matter. Here's how you can do that so you can start making real progress on your debt repayment.</p> <h2>1. The snowball effect boosts your motivation</h2> <p>Financial experts have debated whether the <a href="http://www.wisebread.com/snowballs-or-avalanches-which-debt-reduction-strategy-is-best-for-you?ref=internal" target="_blank">snowball or the avalanche method</a> of paying off debt is the better approach. While the avalanche method (paying off debts with higher APR first) can save you money on interest, most of us are more motivated when we accomplish smaller tasks more frequently.</p> <p>A study in the Journal of Marketing Research gave participants the tedious task of retyping 150 10-character strings in a Microsoft Excel workbook. In one group, the jobs were broken down into smaller, actionable items and in the other group, the tasks were broken down into equal-sized actionable pieces that made more logical sense productivity-wise.</p> <p>The group with the smaller, actionable items completed the smaller tasks faster and sped up at the end of each task, showing an increase in motivation. Overall, this group completed the job faster when the tasks were arranged from smallest to largest.</p> <p>Researchers concluded the same concept would be effective for debt repayment. The snowball method takes that approach. List your debts from least amount to greatest amount, making minimum payments on all debts except the smallest amount. Devote any extra funds to the smallest debt until it is paid off, and move on to the next sized 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>2. Brainstorm what your life will look like debt-free</h2> <p>It's not enough to know that your life will be better debt-free. You need to create a visual and spend time reviewing it through your debt repayment process. Your visual can be a written list, a collage of images that speak to you, or both.</p> <p>Ask yourself, &quot;What would my life look like if I didn't have to pay money toward debt each month?&quot; Here are a few possible perks to focus on:</p> <ul> <li> <p>Having less stress.</p> </li> <li> <p>Choosing to work a job you enjoy for slightly less pay.</p> </li> <li> <p>Being able to work less hours and focus on a side business.</p> </li> <li> <p>Having more savings for vacations and other fun expenses.</p> </li> <li> <p>Saving for a down payment on a dream home.</p> </li> <li> <p>Saving for your children's college education.</p> </li> <li> <p>Doing more good with your money, such as donating to a cause you're passionate about.</p> </li> </ul> <p>Choose perks that speak to your core values and what you truly want out of life. When you remind yourself that you want to get out of debt so that you can start a new business or buy the home of your dreams, suddenly that impulse buy of fast food or clothes isn't worth it.</p> <p>Review these reminders often and keep them in eyesight if possible. It is easy to get pumped about your motivations at the beginning of your journey, but be prepared that the longer it takes you to pay off your debt, the easier it is to lose focus on your actual dreams. (See also: <a href="http://www.wisebread.com/4-ways-to-make-debt-repayment-fun?ref=seealso" target="_blank">4 Ways to Make Debt Repayment Fun</a>)</p> <h2>3. Stop underestimating the power of a dollar</h2> <p>Have you ever heard someone justify unnecessary spending by saying, &quot;Oh, it's just five bucks.&quot; This mentality is damaging to your finances, both in spending and paying off debt.</p> <p>Every dollar you spend is one less dollar you can devote to being financially free. Of course, you won't be able to throw your whole paycheck toward debt, but what minor expenses are eating up your budget without you noticing?</p> <p>If you could cut three dollars from daily spending and direct those funds toward your debt, you would be able to pay off $1,095 by the end of the year. (See also: <a href="http://www.wisebread.com/get-out-of-debt-faster-with-the-debt-snowflake?ref=seealso" target="_blank">Get Out of Debt Faster With the &quot;Debt Snowflake&quot;</a>)</p> <h2>4. Understand that budget cuts aren't forever</h2> <p>If you are struggling with finding extra money in your budget, take a critical look at your spending. First, look at all of your monthly subscriptions. What can you live without for a month or two? Six months?</p> <p>Next, look at your shopping trips. Every time you put something in the cart, ask yourself, &quot;Do I really need this? Is this worth being in debt for?&quot; This can help reduce impulse buys at your favorite stores. Get real with yourself. You might need to avoid going to some shops altogether if they are too tempting. For example, when I was paying off debt several years ago, I had to stop going to Marshalls and TJ Maxx. I just couldn't maintain my self-control and would waste $20&ndash;$30 each trip.</p> <p>Think of budget cuts as a fun challenge rather than a restriction. If you think, &quot;I'll never get to eat out with my friends again,&quot; you can derail your progress with negative thoughts. (See also: <a href="http://www.wisebread.com/how-a-simple-do-not-buy-list-keeps-money-in-your-pocket?ref=seealso" target="_blank">How a Simple &quot;Do Not Buy&quot; List Keeps Money in Your Pocket</a>)</p> <h2>5. Don't be embarrassed by accountability</h2> <p>Admitting to friends and family that you have a large amount of debt can be embarrassing, especially when you want those close to you to see you as financially secure.</p> <p>There really is no need to be embarrassed by your debt, since many other people are in the same boat. Instead, tell others about your debt repayment goals to your advantage. Have a friend that always wants to go out to eat or drop a few hundred dollars at the mall? Let them know you are trying to pay off a huge amount of debt this year and that they can help you by not tempting you. Similarly, let family members know your goals and that pricey family trips or gifts are not a possibility this year.</p> <p>Will everyone take the news well? Nope. In fact, when my husband and I were trying to pay off debt in our third year of marriage, we asked family members if we could forgo individual Christmas gifts. Judging by their reactions, you would have thought I asked them to cancel Christmas altogether. However, my family members aren't responsible for my financial situation at the end of the day; I am. Sometimes we have to have uncomfortable and hard talks with the people we are closest to in order to better our financial goals. (See also: <a href="http://www.wisebread.com/how-to-talk-to-friends-and-family-about-money-without-making-everyone-mad?ref=seealso" target="_blank">How to Talk to Friends and Family About Money (Without Making Everyone Mad)</a>)</p> <p>Paying off debt, no matter how much, is possible. While you can read all of the tips on how to pay off debt faster, true progress will come when you shift your thought process.</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-mind-tricks-to-help-you-conquer-debt&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Mind%2520Tricks%2520to%2520Help%2520You%2520Conquer%2520Debt.jpg&amp;description=5%20Mind%20Tricks%20to%20Help%20You%20Conquer%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/u5180/5%20Mind%20Tricks%20to%20Help%20You%20Conquer%20Debt.jpg" alt="5 Mind Tricks to Help You Conquer 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/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/5-mind-tricks-to-help-you-conquer-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-5"> <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/8-sacrifices-that-will-supercharge-your-debt-payoff">8 Sacrifices That Will Supercharge Your Debt Payoff</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-day-debt-reduction-plan-dont-ever-stop">5-Day Debt Reduction Plan: Don&#039;t Ever Stop</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/25-money-saving-strategies-that-are-actually-hurting-you">25 Money-Saving Strategies That Are Actually Hurting You</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-obstacles-you-can-expect-on-your-journey-to-financial-freedom">5 Obstacles You Can Expect on Your Journey to Financial Freedom</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-become-a-minimalist-with-your-money">How to Become a Minimalist With Your Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management accountability cutting costs debt repayment mind tricks saving money snowball effect Wed, 04 Apr 2018 09:00:07 +0000 Ashley Eneriz 2116590 at http://www.wisebread.com How to Spring-Clean Your Debt http://www.wisebread.com/how-to-spring-clean-your-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-spring-clean-your-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/coin_piggy_bank_and_green_plant_in_wood.jpg" alt="Coin piggy bank and green plant in wood" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Spring is in the air. Most people use the first blooms of the season as a signal to begin the process of spring cleaning; out with the old to make room for the new.</p> <p>The same thought process should be applied to your finances. While you are in the mindset of minimizing, organizing, and cleaning out the old, you should capitalize on this mood as it pertains to your debt. Take the time to give yourself a money makeover and tidy up your financial life by shedding lingering debt. Here are the steps you can take to do it.</p> <h2>Take stock</h2> <p>An important part of getting and keeping your finances in shape and eliminating debt is organizing them. Start by taking a realistic look at where you are financially and exactly what you owe.</p> <p>First, evaluate your debts.</p> <ul> <li> <p>Make a list of outstanding consumer debts, not including your mortgage (credit cards, car loan, student loans, personal loans, etc).</p> </li> <li> <p>Write down the total amount due for each debt and the interest rate.</p> </li> <li> <p>Add up your total consumer debts (with the exception of the mortgage).</p> </li> <li> <p>Write down the minimum payment for each debt and calculate how long it would take you to pay off the debt making only the minimum payment.</p> </li> </ul> <p>Once you have your debts organized, it's time to evaluate your budget.</p> <ul> <li> <p>Make a list of all of your non-consumer bills for the month (utilities, cable, groceries, pet expenses, gas and transportation, internet, cellphone, gym membership, Netflix, etc.).</p> </li> <li> <p>Using the figures from three months' worth of bank or credit card statements, tally up how much you spend eating out, on snacks, clothes, entertainment, and other miscellaneous items. Don't forget happy hours, movies, trips, salon visits, and hobbies.</p> </li> <li> <p>Create categories of nonessential bills based on how you spent your money. For example, your categories could be dining out, grooming, clothes, entertainment, hobbies, etc.</p> </li> </ul> <p>Once you everything written down and sorted out, it's time to play a game of <em>what if</em>. Look at the total of what you owe and figure out how much of your budget is being consumed by consumer debt. If it's over 30 percent, you need to seriously commit to bringing that percentage down.</p> <p>Next, calculate how much you could save in six months if you had no consumer debt. What if you had half your current debt? How would it change your life if your total consumer debt was zero?</p> <p>Lastly, look at all of the nonessential things that are eating away at your money, such as dining out, grooming, or needless shopping. Pick one or two of those categories and see how much you could save if you eliminated that expense. For example, what if you stopped eating out for a month and maybe cut your own hair or gave yourself a manicure in lieu of paying for it? How much cash could you free up?</p> <p>The goal of this exercise is for you to see where your money is going and take responsibility for it. It is also to show you the opportunity costs. If you changed just a few key things, you could eliminate your debt in no time and change your financial future. (See also: <a href="http://www.wisebread.com/6-common-debt-reduction-roadblocks-and-how-to-beat-them?ref=seealso" target="_blank">6 Common Debt Reduction Roadblocks &mdash; And How to Beat Them</a>)</p> <h2>Create a debt reduction plan</h2> <p>Now that you've gone through sorting through your finances and playing <em>what if</em>, it's time to start ridding yourself of the unnecessary financial weight. The easiest way to do this is by using the debt snowball method. With the debt snowball, you simply list your debts from largest to smallest. You then aggressively work to pay off the debt with the lowest balance first, while paying the minimum payments on the others. Once you've paid off the first debt, you move to the next smallest debt. Rinse and repeat. (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>The plan itself and the logic behind it is pretty basic. You begin with the lowest balance instead of the highest interest rate in order to help you build momentum and get a quick win. Winning is motivating. Losing sucks. Pretty simple stuff, right?</p> <p>The tricky part of expedited debt repayment is finding the extra money in your budget to apply to your debt. And that can be tough to do when you're living paycheck-to-paycheck. Go back to the list of expenses you made and figure out what you can cut and where you can scale back.</p> <p>From there you need to create a realistic <a href="http://www.wisebread.com/making-every-penny-count-with-a-zero-based-budget?ref=internal" target="_blank">zero-based budget</a> that reflects your true spending habits. With a zero-based budget, you give every single expenditure a name, subtract them all from your income, and if you end up with more than $0, every extra dollar goes to your debt elimination plan. (See also: <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?ref=seealso" target="_blank">5-Day Debt Reduction Plan: Pay It Off</a>)</p> <h2>Plan something fun</h2> <p>If you have committed to doing the things outlined above, it is imperative that you also plan to do something fun. You need to pause from time to time during the debt repayment process to celebrate how far you've come. It should be something you enjoy and can pay for with cash.</p> <p>Take a day trip somewhere. Treat yourself to a nice, modestly priced pair of shoes. Get your hair done or spend the day at a reasonably priced spa. Try not to look at this pause as a waste of money. The goal is to practice spending in a controlled manner on things that have meaning to you, and most importantly, that you can afford.</p> <p>These pauses will help you to establish a healthy and productive relationship with your cash. Money is a tool and it should be respected and handled wisely. You should use your purchasing power to provide for your needs and a few of your wants. (See also: <a href="http://www.wisebread.com/yes-you-need-fun-money-in-your-budget?ref=seealso" target="_blank">Yes, You Need &quot;Fun Money&quot; in Your Budget</a>)</p> <p>Handling finances is a mental and emotional activity. By going through these steps, you are forced to face your spending choices while addressing your connection to material possessions. This process will help you hold yourself accountable and set you up for a successful jump-start to your debt reduction plan.</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%2Fhow-to-spring-clean-your-debt&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Spring-Clean%2520Your%2520Debt.jpg&amp;description=How%20to%20Spring-Clean%20Your%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/How%20to%20Spring-Clean%20Your%20Debt.jpg" alt="How to Spring-Clean Your 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/denise-hill">Denise Hill</a> of <a href="http://www.wisebread.com/how-to-spring-clean-your-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-6"> <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-day-debt-reduction-plan-pay-it-off">5-Day Debt Reduction Plan: Pay It 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-secrets-to-mastering-the-debt-snowball">6 Secrets to Mastering the Debt Snowball</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/6-common-debt-reduction-roadblocks-and-how-to-beat-them">6 Common Debt Reduction Roadblocks — And How to Beat Them</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-tell-youve-become-a-financial-grownup">How to Tell You&#039;ve Become a Financial Grownup</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/the-financial-basics-every-new-grad-should-know">The Financial Basics Every New Grad Should Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management budgeting clutter debt reduction plans money management saving money snowball method spring cleaning Mon, 02 Apr 2018 08:00:07 +0000 Denise Hill 2122918 at http://www.wisebread.com What Happens to Debt After Divorce? http://www.wisebread.com/what-happens-to-debt-after-divorce <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-happens-to-debt-after-divorce" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/spouses_having_their_first_disagreement.jpg" alt="Spouses having their first disagreement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you consider that 40-50 percent of marriages in the U.S. end in divorce, it shouldn't surprise you that some marriages end in a financially messy way. Marriage typically involves the joint payment of debts just as it involves collecting joint assets, and everything &mdash; both assets and debts &mdash; must be distributed in some way when a couple calls it quits. (See also: <a href="http://www.wisebread.com/how-to-protect-yourself-financially-during-a-divorce-or-separation?ref=seealso" target="_blank">How to Protect Yourself Financially During Divorce or Separation</a>)</p> <h2>Community property vs. common law states</h2> <p>In a lot of ways, what happens to your debts and assets depends on where you live. If you reside in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) or &quot;opt in&quot; for community property in the state of Alaska, then all debts accumulated during a marriage are the responsibility of both parties no matter how they were held. This means that if your spouse ran up a secret credit card balance during your marriage, that debt is your responsibility as well as theirs in a community property state.</p> <p>If you live in one of the remaining states, then you live in an equitable distribution state (also known as a common law state). Typically, this means that debt incurred during a marriage is the responsibility of both parties, if both parties were joint owners of an account. If one spouse opens an account in their name only, on the other hand, that debt is their sole responsibility.</p> <h2>What happens to debt incurred during separation?</h2> <p>Note that debt incurred after a couple separates may be treated differently than debt incurred during a marriage. Your liability for such debt usually depends on your state, whether you took out the debt jointly or separately, and whether the debt was used for, say, a spending spree in Las Vegas or necessities for your children such as food and rent.</p> <p>Since the moment of separation is figured differently in different states, the cutoff for new debt can also vary. In some states you need to legally separate while others consider the moment of separation as starting when you begin living apart. (See also: <a href="http://www.wisebread.com/how-to-manage-your-money-during-a-spousal-separation?ref=seealso" target="_blank">How to Manage Your Money During a Spousal Separation</a>)</p> <h2>How are debts divided when you divorce?</h2> <p>Sally Boyle, a certified divorce financial analyst and author of <em>Deconstructing Divorce</em>, says that no matter whether you live in a community property or equitable distribution state, debts are divided along with assets during a divorce. This means the court system that handles your divorce will help you figure out ways to split your debts equally and fairly. (See also: <a href="http://www.wisebread.com/5-money-moves-to-make-the-moment-you-decide-to-get-divorced?ref=seealso" target="_blank">5 Money Moves to Make the Moment You Decide to Get Divorced</a>)</p> <h3>Credit card debt</h3> <p>If a couple has credit card debt that is jointly held, for example, both spouses can try to move the debt into two separate accounts.</p> <p>&quot;The challenge with joint debt is going back to the lender to split the debt up,&quot; says Boyle. It's possible your credit card issuer may not want to help you move part of the debt into a new account in one spouse's name, although they will usually cooperate if both spouses have good enough credit to qualify for an account on their own.</p> <p>As an alternative, Boyle says a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards?ref=internal" target="_blank">balance transfer card</a> can be a good way to split up credit card debt if at least one spouse can get approved. &quot;It all comes down to whether the card issuer approves or not,&quot; says Boyle. (See also: <a href="http://www.wisebread.com/how-to-divide-rewards-and-keep-your-sanity-in-divorce?ref=seealso" target="_blank">How to Divide Rewards and Keep Your Sanity in Divorce</a>)</p> <h3>Mortgage debt</h3> <p>Mortgage debt is handled similarly to credit card debt, except that there is an asset involved, since mortgage debt is secured by your home. If you own a home together and the debt is in both of your names but you get divorced, then it's possible that one spouse can keep the home. In that case, Boyle says most couples go to their mortgage company and ask it to approve the remaining spouse to refinance the home in their name only.</p> <p>If there is equity in the home, there are several ways to split it. If one party keeps the house, they could &quot;buy out&quot; the other person with cash. &quot;You could also refinance the home for what it's worth and get cash out,&quot; says Boyle.</p> <p>Another option is for the remaining spouse to get a home-equity loan and use some of the cash to give the other spouse their share of the equity. A final option is to just sell the house and split the proceeds, notes Boyle.</p> <h3>Auto loans</h3> <p>What about cars? Auto loans can work a number of different ways. Many times, each spouse will keep the car they drive and take over the payments even if both spouses are on the loan. However, it often makes sense for each spouse to refinance the car loan into their own names when they don't want to continue sharing a joint debt after divorce.</p> <h3>Student loans</h3> <p>Then there are <a href="http://www.wisebread.com/does-divorce-affect-your-student-loans?ref=internal" target="_blank">student loans</a> to contend with. Boyle says that since student loans are taken out by only one spouse most of the time, the debt is often retained by the borrower. However, there are some exceptions.</p> <p>&quot;I've had situations where a spouse might pay off the other spouse's student loans as part of a broader divorce settlement,&quot; she says. &quot;Maybe they were the breadwinner or they had more assets.&quot;</p> <h2>Why couples typically split up debts during divorce</h2> <p>Attorney Nicholas Dowgul of <a href="http://www.feltonbanks.com/" target="_blank">Felton Banks</a> in Raleigh, North Carolina says couples there occasionally continue holding debt together after divorce.</p> <p>Basically, if the parties get a divorce and no equitable distribution action is filed, then equitable distribution (property settlement) is waived by both parties and the debt remains in whomever's name it was, says Dowgul. But if it's joint debt, then it remains the obligation of both spouses.</p> <p>However, the problem with joint debt after divorce is that one spouse may not stick to the agreement. In that case, the creditor would likely go after both spouses for repayment, regardless of their agreement to remain jointly liable. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-about-divorce-and-credit?ref=seealso" target="_blank">What You Need to Know About Divorce and Credit</a>)</p> <p>For example, imagine there's a court order from a North Carolina court that says the husband is required to pay the credit card held jointly by the parties, but he stops paying his part of the bill. The card issuer will hold both spouses liable for the debt and repayment, meaning the bank will come after the wife as well, even though, according to the divorce decree, she's not responsible for paying that credit card bill.</p> <p>This doesn't mean that the husband would be off the hook, however. If he agreed to hold the debt jointly during the divorce settlement, then he could be held in contempt of court unless he pays what was ordered, notes Dowgul. (See also: <a href="http://www.wisebread.com/4-myths-about-divorce-and-money-debunked?ref=seealso" target="_blank">4 Myths About Divorce and Money Debunked</a>)</p> <p>To avoid situations like this one where one spouse stops paying their share, many couples opt to pay off joint debts and close all joint accounts, then refinance remaining debts in one or the other's name only. It's just too risky to remain in an account with an ex-spouse, especially if you can avoid the situation altogether by moving debts into separate accounts.</p> <h2>What can you do to ensure debt is distributed fairly when you divorce?</h2> <p>While Dowgul only practices law in North Carolina and believes people in other states should consult a local divorce lawyer for specific advice, he says he recommends his clients write up a separation agreement once they decide they are going to divorce. A separation agreement should include a basic understanding of who gets what after the divorce, including which person is responsible for each debt accrued up to that point.</p> <p>In the state of North Carolina, couples have to be separated a year and a day before a divorce is granted, he says. While there's no requirement in his state that couples get their separation in writing, it makes things easier if the parties can at least agree on matters involving debt and assets upfront.</p> <p>Finally, hire a divorce lawyer who can represent you and ensure you're left with a fair number of assets and no more than your share of the debts once your divorce is final. &quot;The goal of divorce is for each spouse to end with assets of similar value,&quot; says Boyle. &quot;It's not always a 50/50 split, but it needs to be a fair split.&quot;</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-happens-to-debt-after-divorce&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhat%2520Happens%2520to%2520Debt%2520After%2520Divorce_.jpg&amp;description=What%20Happens%20to%20Debt%20After%20Divorce%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/What%20Happens%20to%20Debt%20After%20Divorce_.jpg" alt="What Happens to Debt After Divorce?" 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/what-happens-to-debt-after-divorce">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-7"> <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-5-best-debt-tracking-systems">The 5 Best Debt Tracking Systems</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/8-questions-to-ask-before-hiring-a-credit-counselor">8 Questions to Ask Before Hiring a Credit Counselor</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-ways-to-stop-your-spouse-from-overspending">4 Ways to Stop Your Spouse From Overspending</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/8-common-causes-of-debt-and-how-to-avoid-them">8 Common Causes of Debt — And How to Avoid them</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-tough-questions-about-debt-answered">7 Tough Questions About Debt, Answered</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Family debt management tips divorce getting divorced lawyer fees Paying Off Debt Fri, 30 Mar 2018 09:30:19 +0000 Holly Johnson 2124619 at http://www.wisebread.com Re-Age Your Credit Card Debt to Protect Your Credit Score http://www.wisebread.com/re-age-your-credit-card-debt-to-protect-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/re-age-your-credit-card-debt-to-protect-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/smiling_man_with_credit_card_and_laptop_0.jpg" alt="Smiling man with credit card and laptop" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Re-aging a delinquent credit card account can be a great way to wipe out payment errors in your past, or it can be a way to reanimate debts that you are no longer legally required to pay. The difference lies partly in who's requesting the re-aging. Here, we'll explain more about that difference and how you can make re-aging work in your favor.</p> <h2>What is positive re-aging?</h2> <p>Positive re-aging is a step your creditors can take to change the delinquency status of your debt on your credit record. It's designed for people who have hit a rough patch in the past but are now on the mend financially and able to make timely debt payments.</p> <p>You may want to ask for a re-age because until you've paid back everything you owe, you could still be reported as &quot;late&quot; every month on your credit report, even though you are making payments every month. Mike Sullivan, a personal finance consultant with Take Charge America, a national nonprofit credit counseling agency, says this scenario is often referred to as &quot;rolling lates.&quot;</p> <p>&quot;If you miss a loan payment in April, you are 30 days late,&quot; Sullivan explains. &quot;The payment you make on time in May is considered your April payment and you are again 30 days late.&quot;</p> <p>According to Sullivan, you never catch up until you send an extra payment that includes the missed payment plus all interest and penalties. &quot;Every reported late payment is another deduction from your credit score and diminishes your credit rating,&quot; he says.</p> <p>When your credit is re-aged, two things can happen: either your creditors will go back and mark all your payments as on time, or they'll mark every payment going forward as on time and leave the late payment marks in place. Either way, you'll <em>at least</em> be reported as being current on your bills. The damage to your credit report will stop mounting.</p> <p>Not only that, but re-aging can bring late fees to a halt. This makes it easier for you to stay on top of your bills and actually pay back what you owe.</p> <h2>Get a credit reboot with re-aging</h2> <p>If re-aging is a strategy you'd like to pursue to repair your damaged credit, there are a couple of avenues to pursue. Most of the time, re-aging takes place as part of a debt management plan you sign up for, meaning the organization you're working with will initiate re-aging with your creditors on your behalf.</p> <p>In case you're not familiar with debt management plans, they're arrangements drawn up by nonprofit <a href="http://www.wisebread.com/credit-counseling-when-you-need-it-and-when-you-dont?ref=internal" target="_blank">credit counselors</a>. Not only do these counselors often ask creditors to re-age their clients' credit, but they set up payment plans and try to talk your creditors into lowering your interest rate.</p> <p>With a debt management plan, you'll deposit a predetermined amount of money every month into an account specified for debt payment. Once you get started, your credit counselor will pay your bills and manage your debts for you. (See related: <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> <p>You'll usually pay $25 to $50 a month to the credit counseling agency when you're in a debt management plan. But you can also ask creditors to re-age debt yourself.</p> <p>According to Sullivan, some lenders may be willing to re-age your debt as an act of goodwill. &quot;Lenders agree to re-age accounts to help borrowers and to encourage them to keep making payments,&quot; he says. &quot;Re-aging an account is a way to offer a fresh start by declaring the account is current.&quot;</p> <p>To be eligible for debt re-aging, your account must be at least nine months old, and you have to make your minimum payment for at least three months in a row. You'll also have to demonstrate a &quot;willingness and ability&quot; to repay your loan in full. It's best to do this in a letter to the creditor describing why your payments were late and how your financial situation has changed since then. Ask for written confirmation from the creditor that your debt is being re-aged, too.</p> <p>But don't request a re-age unless you're sure you can continue to pay on time. By law, creditors can't re-age an account more than once in a 12-month period and not more than twice in five years. So if you fail to make good on your agreement, you'll lose the chance to re-age again for at least a year.</p> <h2>Negative credit re-aging</h2> <p>While getting your creditors to re-age your credit can be advantageous if you have a plan to catch up on your delinquent payments, there are times when re-aging can actually hurt you. This applies to people whose debt has been <a href="http://www.wisebread.com/what-happens-when-your-credit-card-debt-is-charged-off?ref=internal" target="_blank">charged off</a> and is past the statute of limitations for collections, or is nearing that deadline. Collections agencies may try to re-age the debt to restart the clock on the statute of limitations and give them more time to sue for collection.</p> <p>They may do this by getting you to acknowledge the debt is yours or getting you to make a payment, even when it's not in your best interest. When this kind of debt is re-aged, the collector gets another three to seven years (depending on the state you live in) to use the courts to help collect your debt. In addition, the delinquency will be put back on your credit report, where it can stay for another seven to 10 years if it's not paid off in full. Ethically, it's great to pay off your debt, but unless you can afford to pay it all off, consumer advocates advise against re-aging your debt.</p> <p>Unfortunately, some unscrupulous collectors may even lie and report your bill in collections as a <em>new </em>late bill, without any action from you. Re-aging in this way is illegal and a violation of the <a href="http://www.wisebread.com/how-the-fair-credit-reporting-act-protects-you?ref=internal" target="_blank">Fair Credit Reporting Act</a>. If it happens to you, contact the Consumer Financial Protection Bureau or a lawyer.</p> <h2>Improving your credit for the long haul</h2> <p>Whether you decide to work with a credit counselor on a debt management plan or handle debt re-aging yourself, getting all your bills up to date is crucial. Not only will it help you stop paying expensive late fees, but it will also help you start fixing the damage you've done to your credit score.</p> <p>Since your payment history makes up <a href="http://www.wisebread.com/the-5-things-with-the-biggest-impact-on-your-credit-score?ref=internal" target="_blank">35 percent of your FICO score</a>, making all your payments on time is the best way to boost your score in a hurry. Asking your creditors to re-age accounts in default is one way to do it, but you should also strive to pay all your bills on time going forward.</p> <p>Another big move that can improve your credit is simply paying down the debts you owe. Your credit utilization makes up another 30 percent of your FICO score, which means how much you owe in relation to your credit limits plays a huge role in your credit health. When you pay down debt, your utilization falls and you look better in the eyes of creditors. (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> <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%2Fre-age-your-credit-card-debt-to-protect-your-credit-score&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FRe-Age%2520Your%2520Credit%2520Card%2520Debt%2520to%2520Protect%2520Your%2520Credit%2520Score.jpg&amp;description=Re-Age%20Your%20Credit%20Card%20Debt%20to%20Protect%20Your%20Credit%20Score"></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/Re-Age%20Your%20Credit%20Card%20Debt%20to%20Protect%20Your%20Credit%20Score.jpg" alt="Re-Age Your Credit Card Debt to Protect Your Credit Score" 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/re-age-your-credit-card-debt-to-protect-your-credit-score">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-8"> <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-rebuild-your-credit-in-8-simple-steps">How to Rebuild Your Credit in 8 Simple Steps</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/does-your-teenager-really-need-a-credit-card">Does Your Teenager Really Need a Credit Card?</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/12-habits-of-highly-responsible-credit-card-users">12 Habits of Highly Responsible Credit Card Users</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/8-questions-to-ask-before-hiring-a-credit-counselor">8 Questions to Ask Before Hiring a Credit Counselor</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/building-a-credit-history">Building a Credit History</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management credit card tips credit score debt management tips improve your credit score raise your credit score Tue, 27 Mar 2018 09:30:19 +0000 Holly Johnson 2123635 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-9"> <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/financial-experts-share-their-biggest-credit-mistakes">Financial Experts Share Their Biggest Credit Mistakes</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-happens-to-a-student-credit-card-after-you-graduate">What Happens to a Student Credit Card After You Graduate?</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 How to Ease into Credit Card Rewards After Debt Repayment http://www.wisebread.com/how-to-ease-into-credit-card-rewards-after-debt-repayment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-ease-into-credit-card-rewards-after-debt-repayment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/shop_while_at_home_on_the_sofa.jpg" alt="Shop while at home on the sofa" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Imagine you've just paid off a boatload of debt after months, or years, of struggle. Now that you're finally debt-free, you have extra cash to spend each month and your credit score is higher than ever.</p> <p>With that in mind, you may think you're ready to use credit cards again. Thanks to the array of <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">travel rewards</a> and <a href="http://www.wisebread.com/5-best-cash-back-credit-cards?ref=internal" target="_blank">cash-back offers</a> available, you may even be itching to start earning rewards for each dollar you spend. And why not? You're debt-free and have a much better grasp on your spending now. Plus, paying off debt has helped you develop the discipline to avoid letting your spending get out of hand.</p> <p>While it's great to feel confident, many financial advisers say you should probably still err on the side of caution to avoid any more credit mishaps. It's true you may be ready for credit cards, but there are still precautions you'll want to take right away, they say.</p> <p>As you ease back into credit card use, here are some steps you should take.</p> <h2>Review your spending frequently &mdash; especially at first</h2> <p>Wealth adviser and certified financial planner Brian Behl of Bronfman Rothschild says one of the best steps you can take as you get started is reviewing your spending often. &quot;Every few days or at least weekly&quot; at a minimum is what Behl suggests, although you can tailor this advice to your lifestyle and needs.</p> <p>By reviewing your spending at least once a week, you can check to see if using a credit card has brought on any of your old habits. For example, you can make sure you're not using credit as an excuse to splurge, and that everything you've purchased can be paid off immediately when your credit card bill becomes due.</p> <h2>Make frequent payments</h2> <p>Behl also suggests making more than one payment each month. If you have access to your account online, you can usually make payments from your checking account instantly without sending a check. This allows you to keep your balance from accumulating and lets you maintain a low <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>.</p> <p>By making frequent payments, Behl says you can stay on top of your spending, take advantage of credit card rewards, and avoid credit card debt. (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>Use credit cards as part of a monthly spending plan</h2> <p>Financial adviser Matt Adams of MoneyMethods.com suggests you use credit cards as part of a monthly spending plan if you want to make the most of rewards without falling back into debt. Yes, this means dealing with the dreaded &quot;b-word&quot; (budget), but it doesn't have to be bad news.</p> <p>Try writing out a budget for the month, then make sure you never charge more on that card than you would if you were paying in cash, says Adams. Also, &quot;make certain it is never an amount that can't be paid off each month. If you don't keep close track of it, that credit card balance can get overwhelming very quickly.&quot; (See also: <a href="http://www.wisebread.com/how-to-budget-when-youre-no-longer-broke?ref=seealso" target="_blank">How to Budget When You're No Longer Broke</a>)</p> <p>Adams says that, even though he is a financial adviser, he still tracks his spending and compares it to his budget at least once a week. This way, he can earn travel rewards points good for airfare or hotels while making sure his spending isn't getting out of hand.</p> <p>&quot;If you are diligent and pay close attention to it, the rewards may very well be worth the trouble,&quot; he says. After all, who doesn't love a free vacation?</p> <h2>Use credit for fixed bills only</h2> <p>Shane Sullivan, a certified financial planner and founder of the blog Wealth Over 50, offers this strategy for people who want to ease into credit use slowly: Try paying only recurring bills with credit and use cash or debit for everything else.</p> <p>Recurring bills include any bills you pay monthly &mdash; for example, utility bills, cable subscriptions, day care, and your gym membership. Very often, you can even set these bills up to be charged to your card automatically. From there, you can set up automatic payments so your credit card bills are paid once a month from your checking account.</p> <p>Sullivan says he uses this strategy to maximize rewards while avoiding debt problems in his home. &quot;For example, our day care is $1,000 per month and it is automatically charged to our credit card where we earn points used to take a family vacation,&quot; he says. &quot;However, I also set up a monthly bill pay to automatically send $1,000 per month to pay off the card.&quot;</p> <p>For this strategy to work, Sullivan says you need to make sure you don't carry your credit card around in your wallet. If you want to benefit from your recurring expenses without worrying about getting into trouble, then you have to make sure you're not using your card for regular spending.</p> <p>&quot;Stick it in a drawer, give it to your spouse, or cut it up,&quot; he says. &quot;If you carry the card, you'll use the card &mdash; so don't carry it.&quot;</p> <h2>Hold off on rewards if you're not certain</h2> <p>Finally, if all of this sounds overwhelming or the mere thought of using credit has you nervous, don't forget that you don't have to jump in.</p> <p>Jon Luskin, a certified financial planner based in San Diego, says that, for many people, the risk of getting back into debt is simply too great. Sure, you may be able to earn 2% back on your purchases, but what happens if you wind up paying 24% APR on those purchases for years?</p> <p>Sign-up bonuses can make the initial rewards sweeter, but Luskin says it's still a terrible deal when you're stuck paying credit card interest for an unknown period of time.</p> <p>So pursue credit card rewards if you're determined to do it responsibly, but don't forget there's nothing wrong with <a href="http://www.wisebread.com/is-an-all-cash-diet-right-for-you?ref=internal" target="_blank">skipping credit altogether</a>. The rewards may be tempting, but the risks are downright scary.</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%2Fhow-to-ease-into-credit-card-rewards-after-debt-repayment&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Ease%2520into%2520Credit%2520Card%2520Rewards%2520After%2520Debt%2520Repayment.jpg&amp;description=How%20to%20Ease%20into%20Credit%20Card%20Rewards%20After%20Debt%20Repayment"></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/How%20to%20Ease%20into%20Credit%20Card%20Rewards%20After%20Debt%20Repayment.jpg" alt="How to Ease into Credit Card Rewards After Debt Repayment" 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/how-to-ease-into-credit-card-rewards-after-debt-repayment">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-10"> <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/8-credit-card-perks-thatll-make-your-summer-travels-easier">Use These 8 Credit Card Perks to Save Big and Have More Fun on Your Summer Vacation</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-day-debt-reduction-plan-pay-it-off">5-Day Debt Reduction Plan: Pay It Off</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/6-pitfalls-when-chasing-travel-rewards">6 Pitfalls When Chasing Travel Rewards</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-myths-about-credit-card-rewards">5 Myths About 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/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> </ul> </div> </div> </div> </div><br/></br> Credit Cards Debt Management credit card rewards credit card tips debt tips managing debt saving money Fri, 23 Mar 2018 09:30:18 +0000 Holly Johnson 2122414 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-11"> <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/4-ways-to-negotiate-credit-card-debt">4 Ways to Negotiate 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/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-5 views-row-odd views-row-last"> <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> </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