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  • How Do I Get Out of Debt

    How Do I Get Out of Debt

    Now that the national economy is beginning to recover and people are having a better time dealing with their personal finances, many consumers who found themselves sunk deep in debt over the last few years may be asking themselves the question, “How do I get out of debt?” Fortunately, there are a number of avenues consumers can take to get out of debt, each with benefits and drawbacks depending on how quickly people need to fix their financial problems.

    For those asking themselves, “How Do I Get Out of Debt”, and desiring to do it the old- fashioned way, by paying their bills on time – the key is to reduce the amount they owe to lenders by increasing their monthly payments every month. One can go about this by using the “snowball method”. Consumers start by paying off their credit card with the highest interest rate first. Maximum funds are applied to this card’s monthly payment only, while just making the minimum payment to the others. Once the first card is paid off, its time to move onto the next. This method may take long, but it is more effective than making the minimum payment on all their cards, which could take a life time! In addition, they would also benefit from cutting their credit card spending. This can be accomplished by creating a monthly budget that identifies areas where money may be wasted every month.

    Some consumers can establish a healthy, sensible budget by working with a credit counselor. However, enrollment in such a service would likely be viewed negatively by a lender even though it doesn’t affect their credit score. A Consumer credit counseling (CCC) program is a method of debt relief for those who are unable to make minimum payments and undergoing financial difficulties. However, CCC programs could take participants up to 6 years or longer to complete and their debt is not reduced when compared to a debt resolution program. They may still have to pay back 100% of the debt they owe plus interest. In addition, if a monthly payment is missed, they could be dropped from the program altogether.

    Consumer Credit Counseling Services, on average, have very high rates of client cancellation, which does not bode well for their delivery of a successful debt management program. With that being said, a CCC program may be a viable option for those with under $10,000 in unsecured debt, or for those that are able to afford higher monthly payment obligations and are well disciplined to remain in the program.

    Consumers may also find a solution to the question, “How do I get out of Debt” by calling a credit card lender and simply asking for a lower interest rate. If they have a good enough credit score, their current lender may be inclined to drop the interest rate on the account to keep their business. If that does not work, it may be beneficial to transfer the balance to a new account with a low or 0 percent introductory interest rate, which would allow them to pay off their other debt more quickly. A consolidation loan transfers the debt they owe and bundles it into a package that seems affordable with an overall lower payment. But use caution as a lot of debt consolidation companies offer very low rates to start, but within a few months, those rates may go right back up to 10 – 24%, and one can end up back in the place they started.

    Another potential method for getting out of debt is enlisting the help of a debt settlement service. With this program, professional negotiators work with the consumer’s lenders to explain their financial situation and achieve debt relief. Client programs are custom-tailored to provide individuals with one low monthly program payment and target a fairly quick time frame for resolving the debt. This option could be one of the fastest ways for people to become debt-free from their unsecured debts as enrolled accounts may get settled in as little as 24-48 months. Keep in mind, this process will also cause damage to the participant’s credit score, though it may also allow him or her to repair a credit rating fairly efficiently after the program is completed.

    While its all too common these days for consumers to be asking the question, “How do I get out of debt,” the good news is that there are sensible alternatives for those that do their research and choose a path that fits with their financial goals.

  • Fewer will add credit card debt this holiday season

    Fewer will add credit card debt this holiday season A greater number of consumers say they will eschew credit card debt altogether this holiday season, as 40 percent of people said they will not use these accounts at all this year, up from 35 percent last year, according to a new poll from Morpace.

    Meanwhile, every other category of people who say they will take on credit card debt this holiday season grew smaller, save for one, the report said. Only those who will do 60 to 79 percent of their shopping using cards held steady at 7 percent, while other groups shrank by a percentage point or two. Still, the number of people who will make all their purchases with these accounts came in at 15 percent.

    Many consumers have altered their shopping habits in light of the recent recession, which saw them face greater financial difficulty and mounting credit card debt.

  • Warren says she will make credit card agreements clearer

    Warren says she will make credit card agreements clearer Elizabeth Warren said one of her primary focuses will be on cutting down the fine print in agreements so there are "no surprises" when consumers begin to deal with their credit card debt, according to a Marketwatch report.

    "We want to focus on the consumer credit products that families deal with nearly every day," Warren said in the conference call with reporters, Marketwatch relayed.

    Warren, who was appointed to be the face of the Consumer Financial Protection Bureau by President Barack Obama earlier this year, also said that she wants her organization to be at the forefront of technology to better communicate with consumers. The group is likely to begin operations in July of next year.

    Many consumers have been wary of the effects of credit cards in recent months, as the national recession seems to have altered spending habits and money management techniques.

  • American Express to promote Small Business Saturdays

    American Express to promote Small Business Saturdays American Express CEO Kenneth Chenault and New York City Mayor Michael Bloomberg recently announced the creation of Small Business Saturday, the credit card lender announced. The event will begin on November 27, and the financial institution is prepared to reward small companies and consumers alike for participating.

    The first 10,000 small business owners who sign up with American Express will receive $100 in free Facebook advertising, while the first 100,000 cardholders who pledge to make a purchase at these companies on November 27 will receive a credit for $25 that can be put toward their credit card debt.

    Small Business Saturday will run the day after Black Friday, when consumers tend to be more willing to take on credit card debt.

    However, many consumers have told various pollsters they are less likely to take on credit card debt this holiday season, and will instead rely on cash to make payments.

  • People who own an iPhone more likely to deal with credit card debt

    People who own an iPhone more likely to deal with credit card debt People with an iPhone deal with an average of $6,872 in credit card expenses every month, according to a new study from mobile payment management company Pageonce. This figure takes into account not only existing credit card debt, but also new transactions that may alter their balance, as well as fees and charges they may face every month.

    The other groups studied – users of BlackBerries, Android phones and Windows Mobile – saw their monthly credit card expenses range between $5,076 and $5,693, the report said. Altogether, the average iPhone user had an outstanding credit card debt balance that was 35 percent higher than users of different handsets.

    A Wall Street Journal report on the study noted previous findings conducted by other researchers have shown iPhone owners tend to be older and more affluent than people that use other smartphones.

  • Consumers turn to cash instead of more credit card debt

    Consumers turn to cash instead of more credit card debt Despite consumer spending climbing 2.2 percent so far this year, none of the four major credit card issuers in the U.S. have seen a marked increase in the number of transactions they process, according to a report from Smart Money. Visa, MasterCard, Discover and American Express have all reported lower or steady rates of purchases involving credit card debt.

    However, debit card use is expected to expand somewhere between 8 and 12 percent by the end of the year, and the dollar amount spent on these cards is up 15 percent, the report said. Meanwhile, the amount put on credit cards has risen just 1.9 percent. One credit expert told the site consumers have increased their cash spending largely because they are leery of dealing with additional credit card debt.

    People have made a greater effort to reduce their credit card debt recently by paying more into their accounts every month and spending less on their cards.

  • Fewer credit card accounts closed in third quarter

    Fewer credit card accounts closed in third quarter The number of open credit card accounts across the country declined once again in the third quarter, as it did in the previous three periods, according to the Federal Reserve Board's latest household credit report. But the rate at which Americans shut down old accounts as a way of avoiding credit card debt slowed, as 217 million accounts were closed during the four quarters ending September 30, and 158 million new ones were opened.

    Further, the number of credit account inquiries within the last six months, a measure of demand for consumer credit, rose for the second-straight quarter, the government report said. Even still, the number of open balance declined from 381 million to 378 million in the third quarter, proving consumers are less willing to take on credit card debt.

    Many may be shying away from credit card debt in light of the recent economic downturn, and demand for new accounts isn't likely to increase until the economy improves further.

  • Getting Out of Debt

    Getting Out of Debt

    Many consumers across the country are finding themselves drowning in an endless pile of bills these days and would like to be getting out of debt. While some are in the position to reduce the amount of debt they owe to creditors by placing themselves on a strict budget, others are finding that a loss of job or a decrease in pay is making it nearly impossible to make ends meet. As a result, many are turning to professional help to get themselves out of debt: Consumer Credit Counseling, Bankruptcy, and Debt Settlement.

    Consumer Credit Counseling

    One sensible way for consumer to be getting out of debt is to enroll in a consumer credit counseling program. Consumer credit counseling focuses on financial advising and the consolidation of debt. A company is hired to manage your consumer debt for a period of time. This method can take up to 4-5 years before the consumer completes the program and is done paying off all of your debt. The program works on placing consumers into a repayment plan while negotiating the reduction of interest rates, late fees and penalties. Similar to other debt programs, this solution may not be suitable for everyone. Since, the program works on only the reduction of interest rates, late fees and penalties and does not reduce work on reducing principal balances, some may find that the monthly payment to complete the program is still too high. Debt being paid through the program is noted on the credit report as “not being paid as agreed”. Although, this notation is not supposed to impact your actual credit score, it may prevent you from getting approved for a new credit card or mortgage. Most lenders and creditors frown upon such marks on your score.

    Bankruptcy

    When it comes to getting out of debt, bankruptcy, commonly described as “liquidations” or “reorganizations” is a legal process that helps consumers eliminate debt entirely or repay debt under the discretion of the courts. Although bankruptcy can permanently eliminate consumer debts and provide a means for the consumer to have a fresh start, there are serious financial hurdles one will face after filing for bankruptcy. One of the main obstacles is the inability to obtain a mortgage loan or credit. Typically speaking, a bankruptcy will be disclosed on your credit report for up to 10 years. Most lenders and creditors will not offer loans or credit to someone with this mark on their credit report. And if they do, the interest rates will be incredibly high. Due to the long term damage that bankruptcy can cause to your credit, bankruptcy should generally only be considered if all other debt management options have been considered or if you are in an urgent financial situation.

    Chapter 7 Bankruptcy

    Chapter 7 Bankruptcy, also known as a liquidation bankruptcy, is filed when the debtor has mostly consumer debt. In Chapter 7 bankruptcy, a trustee is assigned and is responsible for collecting and selling non-exempt property. The proceeds from the sale are then allocated to creditors and the debtor is then discharged for all dischargeable debts. As all debts are typically discharged, this may be the fastest way for people who want to be getting out of debt.

    Chapter 13 Bankruptcy

    Chapter 13 Bankruptcy, also known as the reorganization bankruptcy focuses on placing consumers into a repayment plan where their debts are paid off over a span of three to five years. This type of bankruptcy is a better option for individuals who have non-exempt property that they do not want to lose. And is an option for those who have a steady income with enough coming in to spend on reasonable expenses with some left over to pay off their debt.

    Debt Settlement

    Debt settlement provides a way for consumers to pay down and reduce their debt while avoiding bankruptcy. Since its focus is to reduce principle balance, it is more aggressive at lowering debt than consumer credit counseling. Debtmerica, a debt settlement company, offers debt reduction programs that aggressively attack credit card debt and may enable debtors to get our of their financial rut in about 24-48 months. Although this option has a short-term negative impact on one’s credit, this option is best for consumers who want a more aggressive approach than credit counseling and want a second chance without having to go through the grueling process of filing for bankruptcy.

    For those individuals looking to be getting out of debt, there are many alternatives. The key for those consumer is to thoroughly research all of the available alternatives and choose the plan that fits in with their overall financial goals.

  • Consumers avoid credit card debt with layaway

    Consumers avoid credit card debt with layaway Some consumers who are trying to avoid additional credit card debt have opted instead to make purchases on layaway, a practice that faded in popularity as credit cards became more common, according to a report in the Buffalo News. With this method, a consumer makes a purchase over the course of a short amount of time, rather than all at once, and only gets the item once the total owed is paid in full.

    As a result, more stores are starting to bring back the practice, with popular retailers like Burlington Coat Factory, Sears and Kmart either expanding or reintroducing their layaway options, the report said. Consumers without enough cash on hand to make a sizeable purchase all at once may find this method preferable to one resulting in more credit card debt.

    Many consumers have made a more concerted effort to reduce their reliance on credit card debt in recent months thanks to the national economic downturn.

  • Consumer credit card debt drops in September

    Consumer credit card debt drops in September The national total for revolving credit – the kind that can be added to and subtracted from month to month, and most often associated with credit card debt – consumers carried in September declined 12.1 percent between August and September, according to a report from the Federal Reserve Board. It marked the third consecutive month in which Americans reduced their reliance on credit cards.

    Commercial banks saw the amount of credit card debt, and other types of revolving credit, they handled decline most significantly, the government report said. While they dealt with $620.4 billion in August, that figure dropped to $611.9 billion in September. That total is also down from the $623.4 billion observed at the end of the second quarter.

    Many consumers have recently changed the way they deal with their credit card debt. They have cut down on their spending with these accounts, while simultaneously increasing their monthly payments to more quickly reduce their total balance.