credit card

Frequency Of Credit Card Use

January 2, 2016 by editor

How often should you be using your credit cards, and if you hold on to them to long without use, will they get closed by the credit card company? Both really good questions. On the opposite end of the credit spectrum, from heavy overuse, is extreme non use of your credit cards. Although not as harmful as the former, the latter can have an effect on your credit score, and how the history shows on your credit report.

Factors to Consider

How many cards you have
How often to use them
When will they become inactive
Warnings

[Read: Credit Card Tricks That Can Make You Money!]

Lets face it, there is no one sure fire way to make your credit better, or worse, there are degrees of everything. When you consider all aspects of your credit score, credit history, and credit worthiness, you should look at the things that you can control, and one of those is the use and history of credit cards, you do not have to have them, or overuse them, they are not a right, but a privilege and honor. A useful tool to help you achieve financial success. But keep the four points in mind.

1. How many cards do you have

Having to many credit cards in your “rotation” can have a negative effect, in more ways than one, because if you are trying to keep them all active you may be getting into a financial hole, with overspending each month in attempt to create a payment history and credit personality. You may want to pare down your amount of cards, or put them on a “rotation” of such, so that you do not dig yourself into a deeper hole than necessary.

2. How often to use them

Well unfortunately, there is no set defined time in which a card can sit dormant before the issuer closes it out, and it may be a good idea to call and just ask them what their policy is. It may be three month, or three years of inactivity. But if you ask then at least you will know. Try and use your card at least every couple of months, or more frequently on smaller purchases, so that you can show a history.

3. When will they become inactive

If a card has become inactive for a certain period of time, then the issuer may not be reporting your history to the credit reporting agencies and that will have at the very least a neutral effect on your accounts or in the worst case a negative effect, showing an open account without any recent history. This may raise red flags to potential lenders, showing an inattentive state, or unawareness. It could indicate that you have little extra money to play with and you are just letting your cards sit because you cannot afford to use them.

4. Warnings

Don’t expect any fair warning that your card has gone inactive from your issuing company, because that is not their standard procedure, you may end up finding out that your card is inactive and a most inappropriate time, when you are out and about and attempt to purchase something with it and it gets declined. If you have not used a card in some time try a small purchase of a few dollars to see if the card is still active, and once that is done you can rest easy that they have not moved the card to an inactive status. In addition, it may not be as simple as a call to get it reinstated either, so be aware that if you need it you may have to re apply, which will impact your credit score.

[Read: Avoid Losing Your Credit Card Rewards]

In Conclusion

Your frequent use of credit cards is an important strategy in the overall health of your credit picture, in some instances credit cards can sit dormant in your wallet or safe without a thought. This can lead to them becoming inactive, and thereby not helping your credit score. Keep in mind that conscientious use of your open credit lines is a wise and useful tool to overall financial health. Keep the four points mentioned above; how many cards you have; how often to uses them; when they may become inactive; and, the warnings that you will not get before they become inactive. In a well thought out way you can use your credit cards in a proactive way to insure that your credit card issuers are reporting your activity, and that you are not spending to much to keep them active, thereby going to deep into debt.

It is in your control to, and your responsibility to take charge of your credit report, and how those open accounts look on there, to many inactive accounts can have a negative effect on your overall credit picture.

Things You Need to Know Upon Getting a Credit Card

December 28, 2015 by editor

So, you have finally decided to join the rest of civilization and get your first credit card. Maybe you got one of those pre-approved credit cards in the mail, or you really want to buy something online but need a credit card in order to pay for it, maybe even you just want to bring up your credit score and this seemed like a good way to do it. Whatever we the reasoning is behind you wanting to get your first credit card there are, in fact, some things you might want to look into upon getting one.

[Read: Eight Credit Card Mistakes to Avoid]

There are many benefits to getting a credit card. Most of us have them, but there still are some ithat don’t. Can’t be that hard to own and manage one, right? Well not really if you know what your doing. Let’s take a look at just a few benefits of having a credit card.

You can buy things from the comfort of your own home, in your pajamas if you wish.
You can buy things that you really need, in an emergency, if you don’t have the cash.
You can buy things for your home in bulk.

What Do I Need To Know About Credit Cards?

As stated above there are some fundamental things you need to be aware of when getting a credit card. Believe it or not most people just wing it when they get one, this is why it never ends well for these people, they don’t make themselves aware of even the most basic things you need to learn. They get a credit card and just start spending it right away and they either end up in a truck load of debt, have numerous problems with them and end up closing them. Owning a credit card can be fun, and it can be easy, just follow these steps and you will be good as gold.

1. Interest Rates.

One of the most common things you need to be aware of when getting a credit card is how the interest rates work. The interest rate on a credit card varies from card to card and it is generally charged by the day. It is always best to find out how much interest you’re paying on your card when you get one. This way you can calculate how much you should spend on your card in a day. Think smart.

2. Your Card Can Get Put On Hold.

This is just something to keep in the back of your mind when using your card. Your Card can get out on hold at any time for a number of reasons. One of them being fraud. If you are going to own a credit card this is something that could potentially happen and you need to be aware of this and take the steps so this doesn’t happen. Use common sense in this case.

Now if you go to use your card and find that’s it’s been froze call your company and find out why.

3. Use The Same Address

As tedious as it is, when you have a credit card say with PayPal, you need to make sure you use the same address that’s on the account for your card. It’s the same with any other card. All addresses must match exactly. If they don’t there will be problems when you go to use it. You don’t really want to be searching and searching for the problem only to find you used your street address on one and have our PO box on the other. Just save yourself the time and keep the addresses all the same.

4. Credit Limit.

Often times when you get a credit card it comes with a limit of how much you can spend in a day. Some have a limit of five hundred dollars, some eight hundred, some even have a higher spending limit. So when you apply for yours or get yours make sure you find out how much a day you can spend on said card.

5. Grace Period.

When you get your credit card you also need to be aware of the grace period. The grace period is the time between your billing cycle and when your first payment is due. If you pay all of your balance you can avoid paying interest on your purchases. But the longer you let it go unpaid after that the more interest you will have to pay. Again think smart.

[Read: Credit Card Tricks That Can Make You Money!]

In closing I hope that these tips helped you in becoming a smarter wiser credit card holder. Having a credit card is a convenient, fun thing that’s ment to be enjoyed. But can only be done when being smart about it. Be a smart credit card holder.

Avoid Losing Your Credit Card Rewards

December 14, 2015 by editor

Many of us choose which credit card company to open an account with based on the credit card rewards that are offered. You work hard for your money, and you want to get the most out of that hard-earned dollar. Additionally, if you are going to spend the money regardless, you might as well try to get some kick back for it, right? What some people don’t realize is that even if you’ve chosen the perfect credit card for your needs and you are pleased with their reward system, you are not always guaranteed to receive credit card rewards. Follow this easy guide to learn how you may lose your rewards and how you can avoid these pit falls.

[Read: Best Travel Credit Cards]

You Make a Late Payment

You read through countless options for different cards, you’ve chosen the perfect card with the perfect credit card rewards. You use your card at all the right places to ensure that you are maximizing those rewards. You’ve been tracking your points and can’t wait to cash them in at the end of the month. Then the due date comes and goes and you’ve let it slip your mind.

Guess what? This happens all the time! Life gets in the way and you forget to pay your bill and a week later you frantically send in that minimum payment.
Some credit card companies will void the credit card reward system you’ve subscribed to in lieu of payment.
This is their way of ‘punishing’ you for your forgetfulness.
It may not happen on your first late payment, it is all dependent on the details of your credit card company.

But this is certainly something you should be mindful of. Be careful to never miss a late payment if you want to ensure that you get to enjoy those credit card rewards you’ve worked so hard to rack up.

Your Card isn’t Seeing Enough Activity

You may have opened a card with great credit card rewards but made a promise to yourself that it is to be used for emergencies only. How very responsible of you! However, your inactivity can bar you from receiving rewards.

Even if you prefer to not use a credit card unless you must, try using it here and there to keep the rewards coming in.
It’s a good idea to know what rewards are available and exploit them.
This means if you get points for gas, swipe at the pump then transfer the money to your card right away. You’re spending it anyways, might as well get something back for it!
If you transfer the money in a timely fashion you can avoid paying interest on the amount put on the card and still get rewards.
It’s practically stealing! You’d be silly not to take advantage.

The Rewards Have Expired

Some cards have revolving rewards. The first 3 months you may get credit card rewards for going out to eat, pumping gas, and shopping at a certain store. The next 3 months it may be any health care product, airline purchases, and grocery stores.

If you don’t keep a close eye on your rewards, you may miss the memo they’ve expired
This isn’t the end of the world but you could be focusing on swiping for certain purchases thinking you’re acquiring points when in reality that ship has sailed.

To be sure you are gaining the most rewards possible, stay on top of your credit card reward system.

[Here’s an interesting article about credit card rewards.]

You Returned Your Purchase

Credit card companies keep a close eye on returned purchases. If they didn’t the credit card reward system would have been exploited long ago. You may think you’ve beat the system by purchasing something for the reward then returning it for the money.

The card companies are likely a step ahead of you.
If you return a purchase that made you eligible for a reward, you will lose the reward!
So keep that in mind when buying and returning products. Good try though.

You’ve Closed the Account

Be sure to use up your rewards before closing your card. It may have slipped your mind that you had rewards sitting in your account unused.

A common misconception with credit card rewards is that they are yours no matter what.
If you close a card without redeeming rewards, you can no longer benefit from them after the account has been closed.

You would hate to have that benefit go to waste! So be sure to take a look at your points before closing your card. It may be worth your while to keep the card open for another month and dormant if it means cashing in on accumulated rewards.

[Read: Credit Card Tricks That Can Make You Money!]

There are endless opportunities to find out more information about your credit card rewards. Many companies have great customer service that is happy to run through any questions you may have. The more you know the more you can benefit!

Saying Goodbye To Old Credit Lines

November 6, 2015 by editor

If you’re anything like me, your wallet is overflowing with cards. From gift cards, to business cards, the clutter can be confusing, especially when standing in a checkout line. Getting rid of the excess is easy, but what about all those credit cards? There’s the one from back in college that you’ve had for donkeys years, and the apple of your eye that has been swiped countless times! Your rewards card collecting dust – and it isn’t the only one either. You’ve plenty of lines of credit open, and suddenly your post is stuffed full of bills demanding payment for credit cards that barely see the light of day! So you’ve decided to cancel a few. Great! But which ones? Won’t it affect your FICO score?

[Read: Time To Get Some Credit: Finding The Best Low Interest Credit Cards]

The FICO Score Factor

A FICO score is based on a multitude of factors, but there are three factors you may be in jeopardy of affecting with the cancelling of credit cards: your ‘amounts owed’, your ‘length of credit history’, and your ‘types of credit in use’.

Amounts Owed: The amounts owed section of your scored is determined by how many accounts you have with balances, how much you currently owe in loans, and the percentage of available revolving credit you own. It accounts for thirty percent of your score. The lower these numbers are, the better! So stay on top of your credit card debt, and you shouldn’t have much to worry about on this end.
Types of Credit In Use: The more types of credit lines you have open, the higher this number may be. But it’s only ten percent of the score, so any change in this number will have a minute affect on your overall number.
Length of Credit History: This is a score found by calculating the average length of time you’ve had an open line of credit. It’s fifteen percent of your score, and will only really take a hit if you choose to cancel your oldest and/or newest credit cards.

Since we now have a better understanding of how a decision like cancelling credit cards can affect our crucial FICO scores, we can move forward with narrowing down the selection process of cards to cancel.

Annual Fee Credit Cards

This is the one card we all have that offers great rewards but never gets used. It was super handy when it got you that first class ticket that one time, but now it’s collecting dust in your wallet. Seeing as this credit card is turning into a waste of space at this point, you can definitely get away with scraping it. Save yourself the $100 dollar annual fee, and maybe consider converting to a no-fee credit card (but be warned, the swap could trigger a soft inquiry, but it shouldn’t affect your score.)

Old Secured Credit Cards That Can No Longer be Upgraded

This is the credit card we all sign up for when our scores need that little extra boost so we can get ourselves an unsecured card. But now, this credit card has fulfilled its purpose, and it’s time to kiss it goodbye. The only way closing this line of credit down is going to do any major damage to your score is if this is the card in your report you’ve held on to the longest. Even then, it’ll be minor, so this isn’t a card you shed tears over losing.

[Read: Credit Card Tricks That Can Make You Money!]

Your First Unsecured Credit Card

Yes, it’s limit a measly and small and probably couldn’t cover one-week worth of expenses, but this is one of the oldest credit cards in your bag. Believe it or not, you are better off keeping this card, because it shows those pesky FICO people that you can commit to a line of credit and stay up to date with it. It shows you’re dedicated and dependable, and responsible enough to pay your debts in a timely manner over an extended period of time. Us this card for gas once or twice a month to keep the good record going steady, and it’ll boost up your score enough to compensate for any marks lost as a result of cancelling the other cards.

The Rewards Card with the High Revolving Balance

This is your best friend. This credit card is your go to for every swipe, online purchase, Starbucks run – you name it. When you hit that register, your fingers automatically gravitate to this card. Unfortunately, your best pal is becoming increasingly expensive as time goes by. The more you charge, the more your interest rates are building, the more debt you rack up. You want to say goodbye, but you don’t want it to bite you in the butt. Well, the good news is, you can totally keep the awesome benefits that come with your favorite credit card companion, without the high interest rates. Move your high-interest debt to a 0 percent introductory APR card, and then keep this card open. Pay off the balance every month in full, and never worry about that high interest again.

Think Carefully Before Getting A Store Credit Card

May 2, 2015 by editor

Everyone loves a bargain and when there is one on offer, it is often hard to resist. Many retail outlets offer their customers up to a 20% discount on goods purchased that day if they sign up for a store credit card. Whilst this may seem like a harmless idea at the time, temptation may lead you into further debt. It is important not to act impulsively but instead do some research on the terms and conditions of the store credit card before signing up.

Your store credit card may offer you many perks such as continuous discount on certain goods but it is important to also realize that these cards often charge much higher interest rates when it comes to paying off you debt. If you are someone who needs to establish a credit history or improve your credit score, then by all means a store credit card can help you along the way as long as you exercise moderation. However if you already have many other store credit cards, or if you run up the balance on this one, it could severely hurt your credit score. Let’s look at some of the pros and cons a store credit card brings before we decide to get one.

Credit Cards Vs. Store Credit Cards

If you are looking to establish a credit history or improve your credit rating it may be more beneficial for you to get a bank or national credit card as opposed to a store-specific credit card. Your big retail outlets accept both and whilst they often offer you those very tempting discounts if you opt for a store credit card, it is important to note that the store will never lose out and that over time, should you default and with the high interest rates they charge, you will end up paying more even with the discounts you were given.

The other disadvantage of having a store credit card is that it is specific to that store alone. You cannot use it elsewhere and that often leads to you obtaining multiple store credit cards for all your favorite shops. In this case it would make more sense to get a national credit card which you can use anywhere and pay it off at a much lower interest rate.

Do Not Get A Store Credit Card If…

If you don’t have the discipline to pay off your store credit card as soon as possible or keep the statement balance minimal, and if you shop impulsively then signing up for a store credit card may not be a very good idea.

Store credit cards usually offer very low credit limits that can range anywhere from $100 to max, a $1000. This means that to use it responsibly would entail not exceeding the credit limit and to not use more than 50% of the available balance on any one card in order to avoid reducing your credit score. People need to realize that if they intend spending more, then maybe a national credit card may be a better option as they generally offer you a higher credit limit to begin with at a much lower interest rate. This way you can avoid hurting your credit score in a more manageable way.

When Store Credit Cards Work In Your Favor

You can make a store credit card work in your favor if you intend paying off the balances so as not to incur any interest. It can be really handy in building or improving your credit score. This is because retailers are generally more relaxed in terms of a consumers credit profile and they make up for it by charging much higher interest rates should a consumer then carry a balance.

So in order to get the most out of it, and you can, it is advisable to pay off the card as soon as possible or keep the balance to an absolute minimum. Then you may actually gain a lot form having a store credit card in terms of the discounts or rewards they retailer offers you. It is vitally important to keep your debt-to-credit ratio as low as possible in order to obtain a higher credit rating.

If you love shopping at one particular store for almost everything, be it your clothing or gadgets, and you shop their frequently, a store credit card will work for you, provided you keep the balance minimal because many stores offer reward systems in which you can earn points which may in fact help you save money.

To Summarize…

A store credit card can work in your favor if you:

You are responsible and smart about paying it off
If you intend purchasing a high ticket item, the 20% discount when you sign up is a good deal (provided you pay if off as soon as possible)
If you are looking to improve or build your credit score
If you shop often at one store in particular

It is advised to research thoroughly the terms and conditions of the store credit card you would like to apply for to see if you can handle the payments and control your purchasing. Responsible shopping is key to managing a store credit card!

4 Ways to Clean Up Credit Card Issues

February 17, 2015 by editor

All hail the great FICO! In order to get the finer things in life, a good credit rating is required. Looking for a house or car with a great interest rate? There’s a credit score for that. Need a personal loan? There’s a credit score for that too. Americans have billions of dollars in credit card debt, and the numbers continue to increase as people fight to “keep up with the Jones’”. In order to get the things that everyone else has, you have to work on cleaning up what you already have and focus on not getting yourself back in debt again.

If you are struggling with credit card issues, here are a few ways to negotiate those current debts and start getting them cleaned up. The tips in this article don’t require any extra fees. All you need is a little patience and a lot of elbow grease to get the job done.

Ask to Settle

When considering contacting a creditor to settle a debt, here are a few things to look at before you pick up the phone or send that email.

Is it a Zombie Debt? Zombies aren’t just on The Walking Dead. There is such a thing as a Zombie Debt. This is a debt that has surpassed the statute of limitation according to the state in which you live. Be sure to find out the statute of limitation for your state. Old credit card issues may be the least of your worries. This debt may be too old to pay.
If you have a debt that is within the statute of limitation and you wish to contact the creditor, never allow them access to your account. Some creditors will clean out your bank account even if you settled on a different amount. Try using a prepaid debit card to send the payment. This brings me to my next point.
Always get your settlement negotiations in writing. Sometimes you may get an option to settle in the mail. If you decide to settle, be sure to keep it for your records. If you decide to come to the creditor with your settlement, be sure to get something in writing before you send them a payment.

Set Up a Payment Arrangement

When it comes to credit card issues, anything can rise up that will put you in a tough situation. It’s always a good idea to get in contact with the credit card company to set up a payment arrangement when you feel like you are going to fall behind. Payment arrangements can vary based on the company. Some will request you pay the full amount at a later date, others work on your terms, and some break down the debt into monthly payments. Keep in mind:

Don’t let the debt fall too far behind. Don’t be afraid to keep in touch with the credit card company if you are having issues. Often times it’s our fear that keeps us in debt. When a problem arises and you know you are going to be late, make the phone call. If it’s too late, sometimes, it is out of their hands at that point.

I remember when I had fallen behind on my car note and they were going to repossess the car. My account rep said, “Why didn’t you tell me this sooner? We could have put you on a payment plan. So many people wait until it’s too late and then the situation is out of my hands.” I ended up losing my car and now I have repossession on my credit because of my fear.

Always remain truthful about your credit card issues. Believe it or not, some people feel sympathy and will pull strings if they can just to help you out.
Never bite off more than you can chew. If you know an arrangement is too much, don’t accept it.

Request a Forbearance

Ok, what does that mean? A forbearance is a postponement of making payments on a debt. These are usually granted to people that fall on hard times and find themselves in a situation where they can’t pay their debt. Depending on your situation or other credit card issues, forbearances can last six months or more. In some cases, they can even lower your interest rate or payments.

Change Your Payment Date

If you are having credit card issues due to payment dates, request to have the date changed. Don’t fall into debt because you get paid on the 19^th and your bill is due on the 1^st. There are several companies that will work with you on changing your payment date so your bill will be paid on time.

No matter what credit card issues are in the world today, there is always someone there that will work with you. Always know the laws and know your rights for your state.

In This Modern Day And Age, Should You Carry Cash?

July 14, 2014 by editor

To carry, or not to carry

We have come a long way in the world technology. With the vastly growing options of payment in the form of plastics (debit and credit cards), online banking and electronic fund transfers, it is no wonder that the question “Should you carry Cash?” Frequently arises. From making purchases online to buying cigarettes in the store, debit and credit cards are now the most common way of purchasing goods and services.

There are also the prepaid cards that also have become popular as well. The question should be rephrased to why should you carry cash when there is plastic?

It is estimated that 9% of Americans don’t carry any cash in their pockets as they go about their daily routines.

For the rest that do have cash in their pocket; they opt to have smaller notes ranging from 5-50 dollars. With the rising popularity, convenience and security of debit and credit cards, cash is being used less by American folk. The lure of earning points that turn into redeemable rewards also make the plastics appealing to the consumer.

Cash is a plus and a negative in your pocket

Like everything else, carrying around cash has its advantages and disadvantages.

Advantages

Emergencies– You may need it for something that requires paper money or for instance; if you want to wash your clothes at the laundry mart or clean your car at the car wash. While at work, you may desire to buy a soda or something from the vendor machine as a snack. There may be some sort of contribution going on at work for a certain co worker and you only have a card.
Card ‘unfriendly’– Believe it or not, there are those little shops that sell items for cash only and haven’t caught up with the times; or simply refuse to. There may be a garage sale you go to and I don’t think there is any I’ve been to that take debit or credit cards.
Card is not available-You may not always be near an ATM and emergency money in your wallet may get you out of a binding situation. Furthermore, your card may come up missing, or it is suspended by your financial institution for some reason. Should you carry cash? Answer is yes, it comes in handy sometimes.
Restaurant spending– You might want to tip a waiter or split bills while in a restaurant. Having some cash solves the confusion of having one person to pay the whole bill. To seek out someone just so that they pay their half for some food you ate at a restaurant can be deemed as petty and for you, cumbersome. You might as well consider it as a treat for your friend and call it a day. Should you carry cash, carry enough so that you don’t end up in an embarrassing situation.
Toll ways– It comes in handy for roadway tolls. However, there is now a tag that drivers hang on the front of the window so that every time they use the toll, that card is detected and charged to your bank account or debit card.
Emergency Lending– Just in case someone is in need of money; a friend or family member, then cash is the way to go. Your check book might not be nearby and it is always a good idea to have paper money. Should you carry cash, make sure it is in small bills.

Disadvantages

Losing Money– There is a likelihood that you may lose it. Having to dip in your wallet every so often to remove cash creates a high possibility of a note slipping out. Why should you carry cash when you have at least 3 plastics in your wallet?
Mugging– It can be stolen. It is the easiest to steal, especially if the thieves are not familiar with the identity theft schemes out there. A common thief prefers cash and if you have it; that is the first thing he or she will go after. There are people who always have a few 20 dollar bills in their wallet for the purposes of security. If a thief sees this in your wallet, chances are they shall forget about the plastic.
Overspending– You may be tempted to overuse or overspend what is in your wallet. When you have hard cash in your hand, it is easier to spend as opposed to having a debit card at hand. Asking why should you carry cash may be applied here, especially if you are a spendthrift.
When you have it in your pocket, it is possible to forget that you put it there and end up panic stricken because you don’t know exactly where your money is at home.

The 4 Debts You Should Avoid

December 24, 2013 by editor

There are many debts you should avoid whenever you are trying avoid financial ruin. Some of the debts that you can obtain may hinder your financial independence in the future. There are four different types of debts you should avoid whenever possible.

Auto Loans

Cars are needed for everyday life and are not something that many people can live without. However, auto loans are one of the debts you should avoid. Many times people will go overboard when it comes to purchasing a car.

Borrowing money to purchase a car is not wrong; you want to pay the loan off as quickly as possible. The longer you let the loan continue the more interest you will be paying. Save up some money before going and taking out the loan, so that you can make a large payment shortly after taking out the loan.

It is not smart to lease a car all the time. It is something that you want to think about clearly. When you lease a car you not only pay high interest but you also have nothing permanent to show when you have finished your contract.

Another reason that auto loans are a debt you should avoid is because most people cannot stop at just one. Many times after you complete one loan, you want a better car and end up taking out another.

Payday Loans

Commonly payday loans are used to cover unexpected expenses until the next day that you are paid. Payment for this type of loan is due at the time of your next paycheck. That means that this type of a loan is only good for about two weeks.

This is a debt you should avoid because it comes with consequences. With a payday loan, it has a high interest rate, anywhere from 15% to 30% for only a two-week period of time. That may not seem like a lot, however that is because you are looking at the short-term numbers. If you analyze the numbers for the APR (annual percentage rate) then you will see that it is from the interest rate is actually from 390% to 780%.

401k Loans

In most 401k plans, there are options for a loan provision. This loan is a debt you should avoid in getting into. 401k loans are something that most people believe comes with no penalty; however, there are several consequences.

If you leave your job, you will be required to pay the loan in full. Most commonly, you will have only 60 days to repay the money.

If the loan turns into a withdrawal it can be taxed at your normal income tax rates.

There will be a 10% penalty charged on top of any taxes if you are under the age of 59.5 years old.

You will miss any additional interest, capital gains, or dividends while the money is on loan. That means that your money is no longer in an investment account working for you.

Borrowing from your 401k can become a habit. It can become so easy to justify borrowing from your 401k that this is one debt you should avoid completely.

Credit Card

There are so many reasons that credit cards are a debt you should avoid. Most of the debt that an individual will abuse through purchases and the assumption of the ability to pay it back. Credit card debt can be debilitating to a person’s credit score as well as their financial stability.

It has been proven that there are around 46% of families have credit card balances. The average credit card balance is around $7,300. This can be a lot of debt for most families, and it can cause a lot of financial situations.

It can be tempting the credit rewards that can be offered, and this can make individuals want to gain more credit. When looking at rewards you want to watch out for penalties on late payments. Extra costs from the credit company can counter balance any good that is gained from the rewards.

It is important that no matter what debt you will choose, be sure that know what you are getting into. Make sure that the terms to any agreement are clear to you, as well as any consequences that might be incurred. These are the four types of debt you should avoid. However, that does not mean that in moderation or with careful planning that, you cannot successfully own a car, or credit cards, or even get a payday loans. However, it is important that no matter what you decide that you continue to watch and evaluate your situation to reduce the debt you are in.

Remember that it is important to continue to save for items that you need, this will help you stay out of the habit of search for the debt you should avoid.

Reasons Why Your Credit Card Is Declined

December 6, 2013 by editor

It can be embarrassing standing at the checkout and your credit card is declined, there are steps that you can take to prevent this from happening.

Check Your Credit Limit

It is possible that your credit card is declined because the amount of money that you are trying to put on is too high and goes over your credit limit. It is possible to avoid this situation if you are looking at keeping your balance below a certain threshold, it is better to pay off your credit card bill every month, this means that you are not going to be paying the company interest payments.

There is the option that if your card has been declined to phone the company as soon as possible to discuss the situation, but try and avoid putting your credit limit up because it will mean that you will find more problems in the future and you will not have solved anything.

Bills Not Been Paid

It is possible that your credit card is declined because your account has not been paid. It is important that you schedule your payments for your credit card, because they can freeze your account and this can cause you embarrassment whilst you are trying to use the card. It is possible that the card might be taken off you and cut up. If this happens it is important that you take the cut up card and dispose of it carefully.

Suspicious Activity

Your credit card is declined and you are not aware of any unusual use and you have paid the bill. The card could be declined if the credit card company thinks that the use is unusual. This is a way to safe guard you against fraud but unfortunately sometimes it gets it wrong and the purchase is genuine.

If this is the case a quick call to the credit card company and the issue should be quickly sorted.

A Holding Charge

If you have ever booked a hotel room or rented a car and they want your credit card, it could be that the company has put a hold on an amount of money. This ensures that they will get paid as per the contract. If you then use the card and there is not enough free credit left then the charge is going to be refused.

Traveling Overseas

It is possible that your credit card is declined when you are traveling in a different country. The credit card company can see this as unusual activity and decline the transaction. Many times, you are told to inform the company of the travel arrangements, but the practices that are put in place that can protect the card from freezing are limited and most of the time they seldom work.

Incorrect Information

One reason that your credit card is declined can be the miss-reading of one of the digits or transposing a number. This can cause the card to decline because the number that you have given is incorrect. This is simple to check if you are reading the number over the phone get the people on the other end of the line to tell you the number they have typed in and you clarify this with the number on the card. If you have typed in the number again you need to carefully go through the number that you have inputted. Any errors can easily be rectified and the transaction can be re-tried.

Dated Cards

It is possible that the reason that your credit card is declined is because the card is no longer valid. The date might have passed and this is the common reason for a card to be declined. A new card arrives and you continue to use the old card and you forget to change over cards.

The dated or expired card is just no longer valid, it will need to be destroyed and the new card will need to replace the expired card.

There are a number of reasons that can prevent the purchase that you are trying to make go through. It is possible that the reason might simply be a cautious one on the credit card company protecting you, on the other hand it could be the credit card company protecting themselves from allowing you to increase a debt that you are struggling to pay off.

To recap some of the top reasons why a card are is declined are:

Dated or expired card
Suspicious activity
Holding charge
Traveling
Unpaid bills
Above credit limit

These are just some of the reasons why a card might be declined in a store, the most important thing that you can do is to manage your credit card debt, pay the bills when they are due and to keep to a set percentage below your credit limit. It is not going to stop the credit card companies declining a purchase when they consider it to be fraudulent, it can be embarrassing and annoying but they are trying to protect you.

Eight Credit Card Mistakes to Avoid

November 19, 2013 by editor

People who use credit cards carefully never end up pilling a huge debt. Credit card debt is very similar to the disease ‘swine flu’. Both of them result in fever, headaches, chills and exhaustion and no one wants to go there. If you don’t use them responsibly, you will find yourself overburdened in debt. It is not very difficult to prevent this from happening. Here are eight credit card mistakes to avoid:

Don’t let marketers tempt you towards a wrong purchase

Marketers try to tempt you with their offers such as reward points or a good sign-up offer. However, you must choose your credit card according to your lifestyle. Check if it could be used at your favorite restaurants and shopping malls and if you have to pay annual fees. The one with lower APR would suit you more.

“Pre-approved” credit cards might tempt people with a history of credit problems. You should know that pre approval does not mean you will get the card for sure. Do proper research and choose the card that suits you the most.

Carefully understand terms and conditions

Don’t get mistaken for elimination of some credit card fees as stated in 2009 CARD Act because it applies only on few of them. Read the terms and conditions carefully so that you know everything before you sign up. Credit card companies sometimes tend to be less transparent so you have to be careful at your end.

Avoid making only the ‘minimum payment’

Among the credit card mistakes to avoid, this is an important one because you have to pay an amount to keep from missing your payment every time. Let’s look at an example. If you have a $1200 balance on your credit card and you just pay your minimum payment of, suppose $42. Your balance will remain same as before, in fact you will have a higher APR. You will end up with the same balance along with $713.79 interest with an APR of 18%. Also, you will be charged a higher rate of interest if you carry previous dues.

Avoid taking cash advances

Among credit card mistakes to avoid, you should avoid taking cash advances from your credit card because once you take it, interest is charged from that very moment. Such transactions charge extra fees and higher interest rates.

Never ignore statements and notices

Credit card companies send you some statements which include “gray” charges. These charges could be membership fees you had cancelled etc. Look for such charges and if you find some, resolve things immediately. Review your statements very carefully to avoid fraud.

Never max out a credit card

Using all your available credit will cost you money and ruin your credit score. It is based on the amount used vs. amount available. This is also called debt-to-credit ratio. Creditors prefer a lower ratio or at max 30% otherwise they increase your interest rate or reduce the credit amount. You should keep an eye the ratio and manage it if it is getting higher.

Make your payments within due date

Credit card companies give you a grace period to make your payments. This is the time between the billing cycle and your due date. Delaying payments will result in lowering your credit score by 60 points and can also raise your interest rate. Always remember and make timely payments to avoid consequences.

Don’t run after points

There are different types of credit cards. Some of them come with points and they look very tempting. Don’t buy items just to increase points. This is a common credit card mistake to avoid! Purchase items only if you need them. If you keep on buying things to complete your points for an attractive offer, you will realize that you are ahead of required points. Majority of people tend to spend more money when using a credit card rather than cash. Well, the credit card companies use this as a marketing strategy to get more money from you, so be careful not to get into their trap. For example they would offer you a plane ticket on 100 points and you would start making unnecessary purchases just to make points.

Using credit cards does not always put you in danger. You don’t have to stop using credit cards because of the danger of accumulating debts, we are just guiding you to make the “right” choices and avoid common unnecessary mistakes. There are plenty of benefits you can enjoy using credit cards such as they protect you from theft, useful for emergencies, make transactions easily etc. All you have to do is keep 1 or 2 cards according to your needs, keep a track of your payments and spend only on important purchases. It’s not even necessary to keep on purchasing all the time to get a good credit score; one or two good purchases a month can do your job. So be careful and enjoy using your credit cards.