Sunday, 25 August 2019

All About Credit Cards

All About Credit Cards
31 Jul
7:08

Hi, thanks for joining us today Today we're going to be talking to all about credit cards

Everything you need to know We are Consolidated Credit our mission is to assist families in need When debt is the problem, we are the solution Let's start off with some statistics nerd wallet conducted a study in 2017 regarding credit card debt What they found was that Americans total credit card debt continued to climb reaching an estimated $931 billion now that's a nearly 7% increase from the previous year, and the average household their carrying a balance of at least $15,000

Let's first take a step back and discuss what is a credit card? Well a credit card is issued by a financial company gives you the holder the option to borrow funds at some point of sale in exchange for doing for paying cash Now credit cards they charge an interest and are primarily used for short-term financing, it's important to understand a credit card is different from a charge card A charge card requires the balance be paid in full every month for example American Express offers a charge card every month you get your bill you must pay it off in its entirety Credit cards you're carrying the balance and paying on the debt So what are the advantages? Well first of all one advantage that you can buy things that you need now it reduces your need to carry cash, it creates a record of your purchases, it's more convenient than writing checks, and it does consolidate your bills into one payment, but the disadvantages are you pay interest which is a higher cost for the good you buy, it may require additional fees, and you could have financial difficulties if you lose track of how much you've spent and you can't afford to pay the bill down the road

It also allows you to do impulse buying which is something you should always seek to control So before you sign up for a card there's some things you should know, first of all just like any loan shop for the best rates, bankratecom is a great resource for finding good available deals, second read and understand the contract yeah it's a lot of fine print but you may save yourself some trouble later don't rush into signing anything and once you do sign make a copy of it, even if it's online print it out, keep a copy Also figure out the total price when paying with credit how much will it cost you overtime make the largest monthly payments possible every time Of course when you get credit cards you should compare them, compare them to the ones you have compare the ones you don't have, know the penalties for missed payments, how much is the annual percentage rate? Interest rates can vary greatly between cards

One issuer could give you a rate of 599% percent while another one could offer you a 21% percent rate, some will have a teaser rate to start with and it will go up higher later Know the rates ahead of time before you apply Second annual fees some cards have no annual fee while some have fees of $75 or more Transaction fees, if you do a balance transfer will cost you any money? Finally grace periods, how many days after the due date do you have to pay your debt before your accessed a late fee? Most cards no longer have a grace period it's important to check into this though

The features that your credit card offers are also very important For instance, what is the credit limit that the card offers you? How widely is the card accepted will it be taken at all the stores that you shot that generally? Think about the advantages of a major credit card versus a stor credit card Sometimes it is in your best interest to have a store credit card while limited you offer great advantages for the things that you like to buy and need most often, and finally what services are available? A lot of credit cards offer ancillary services don't fail to check those out and see what benefits you're getting So the question naturally arises how do lenders choose whom to give credit to how do they decide one person from the next? Well primarily they use what's called the three C's character, capacity, and capital Character, will you repay the debt, have you used credit before, do you pay your bills on time do you have the good credit report, can you provide character references from your credit history, does it look like you possessed honesty and reliability, how long have you lived at your present address, those are among some of the questions that I want to answer

Second is capacity, can you repay the debt, how long have you been at your present job, how much money do you make, what is your salary what other loan payments do you have, what are your living expenses, what other debts do you have, how many dependents you have in other words what is your ability to pay after we remove all your other expenses and after we add up all your income Then finally capital what if you can't repay the debt, what do you own, what do you have in your possession that you can sell that would help you repay the debt, even if it's not a secured debt do you have a savings account, do you have investments use as collateral Having capital is an important thing it's an asset that underlies your ability to pay back debts You want to build your credit history, how do you do that? First of all establish a steady work record pay your bills promptly, opening a checking account and not bouncing checks is quite important, opening a savings account make regular deposits, apply for local store credit cards you make regular monthly payments, maybe apply for a small loan use your savings account as collateral If you don't have good credit and you need help you can also get a cosigner on a loan and pay back the loan as agreed

At least it will show that you have a positive history The trouble is sometimes you do need to get a credit card to start building good history but you can't get one and then you should look into a secured card Secured cards a little bit different from a regular credit card in that you're going to be required to put a deposit at a bank or financial institution and they will hold that money in an account in case you can't pay your bill that's the security the collateral against your amount that you owe Now one of the good things about a credit card that's secured is that it'll help you get a card that's not secured, it'll also give you the ability when you do have to travel you need a credit card to use that in emergencies when you can't access your bank accounts the drawbacks well there are some drawbacks first of all you do have to pay back the money that you borrow second the money you're putting into the deposit into security that money is going to be held for a while so you won't have that money available, and if you do need to take that money out for something you're gonna have to put that back otherwise you won't have the capital to secure the credit card Is it worth the drawback? Sure it is especially if you need to rebuild your credit but again as an all decisions using credit you have to do it wisely

So how much credit can you afford? Well it's an interesting question because it depends on how much you spend on everything else generally speaking though 15% of your net income is all that should go to be paying your personal debt because you have to leave room for food generally expected to be roughly 20% housing 25% personal debt as I said 15 and then mixed on all the other expenses you generally find it's gonna have to be squeezed in there because personal debt can't outweigh your other more important requirements for life food, housing, clothes, and so forth It's important to stress that you never borrow more than 15% of your net yearly income Let's take an example of that so if you earn 2,000 a month after taxes then your yearly net income is $24,000 a year that's 12 times 2,000, calculate 15% of your annual net income to find that you're safe debt load 15% of 24,000 comes to 3,600 so you should never have more than 3,600 and debt outstanding again housing debt is not part of that 15 and monthly payments on your credit card debt should never exceed more than 10 percent of your monthly net income So if your net take-home pay is $2,000 a month it's easy to understand that you should never have debt payments in a month for your personal debt of more than $200 per month again that would be 10% of your monthly net income So what are the important credit card do's and don'ts first of all and know your payment due dates know when your billows do check your statements every month if you're receiving them paperless online make sure you're reading those emails and then going to the website and looking at them always try to pay more than the minimum amount if you're only paying the minimum amount it could take a really long time to pay those cards back no one you need to pay no one you need to use the credit interest free know when to call your creditors to negotiate a lower APR sometimes that's possible to do all you have to do is ask also only get credit cards when you have a strategic need for them just don't get cards just so you can have them in your wallet keep your accounts open and a good standing always use the one with the lowest interest rate first, keep your payments as I said around 10 percent of your income and use your credit card reward program to your advantage don't use it just to generate points but use it only when it pays you off better

Take advantage of extras and understand if you're gonna cosign for anybody else or someone's gonna cosign for you remember that you know the business partner you want to make sure that you respect out of the person that they respect you don't run your balances up to the limit that's the worst thing you can do it hurts your credit score at the same time it leaves you unavailable to use the credit when you really really need it Don't use reward credit cards when you can't pay the balance off quickly just because you're getting a reward doesn't mean that you should spend money you don't have, never use a credit as a substitute for your income if you don't have income coming in get income don't use your credit cards if you miss a payment by more than 30 days call your creditor if you're going to miss the payment call your creditor and avoid cash advances cash advantage usually carry a much higher interest rate than your regular purchases and don't apply for too many cards in a 6-month period because that will go against your credit also if you have any old accounts out there don't just close them you may want to use them or just leave them out there but closing them you don't want to do that and don't let them close to inactivity try and use them occasionally just to keep them out there they will help your credit but don't run up credit when you don't need and finally if you can help it never carry a balance for a month to pump the best borrowers are the ones who pay their loans off every month and start anew never take on more credit that you can afford and again if you run into trouble don't hide from your creditors they're the first one you should call when you have trouble Every month now you're going to be also getting a credit card statement just like you get from other accounts that you have and in there you're gonna find a lot of important information aside from your name and address and the name of the credit card company are things like the annual percentage rate your pain check to make sure that hasn't changed make sure you're following your due dates make sure those don't change they'll tell you what your new balance is what your old balance was how much you're paying in finance charges and again the due date that's a really important date on the back of your statement you'll generally find what the fees are for lost stolen cards cash advances other fees make sure you're aware of what they are it's important to know your statement really well again I advise getting your statement online and getting a printed copy doesn't hurt to have an extra copy for now The Fair Credit Reporting Act that protects your privacy any accuracy of information about you that's held by credit bureaus under this act credit reporting agencies they're not allowed to report any information that's too old incomplete or wrong and positive and neutral information can be reported indefinitely negative information can only report it for a specific period of time bankruptcies are from ten years, civil suits can be on there for no longer than seven years and again seven years for unpaid liens and other things it's important to know the law and to look into it if you have any questions but understand that negative information cannot be reported about you indefinitely there's a time limit on them Equal Opportunity Act of 1974 that's an important one it protects you from being discriminated on on the basis of your sex your race your color your religion national origin marital status age or receipt a public assessments it applies to any business that grants credit it's important to make sure that no one is depriving you of opportunities that you have coming to you

Fair Credit Billing Act this one made sure that there's a procedure for the quick correction of mistakes okay so we all make mistakes credit card companies too, this gives you the ability to refute charges you didn't make and to make sure that everything is on your bill is there in property The Fair Debt Collection Practices Act well, this prevents abuse by professional debt collectors and applies to anyone employed to collect debts owed to others they can't call you it inconvenient times such as before 8 o'clock or after 8:00 9:00 pm they can't call you at work if they know that your employer does not want you to be called there and they can't contact you by a postcard or use an envelope that makes it clear that a debt collector sent it have some other ones in there too it's important to understand these and to make sure that no one is depriving you of your rights So just to recap, it's important to remember your credit responsibilities, always avoid buying on impulse, borrow only what you can repay, read and understand the credit contract that you signed, pay up debts promptly don't wait until the end of the month don't wait to pay next month pay what you can now, notify your creditor if you cannot meet payments

It's important to stay in contact with your creditors they'll work with you only so long as you're willing to work with them Also report lost or stolen cards promptly, if you see any activity on your account statement that doesn't look like it's something you did contact your credit card company promptly, they may be fraud going on it's important to keep track of this especially nowadays, and finally never give your credit card number over the phone unless you initiated the call or you are absolutely certain of the cause identity It's important to protect yourself at all times, it's your money make sure that you're spending it wisely and protecting it wisely Finally thank you very much for joining us today! If you have any further questions you can always reach us at 800 435 2261 or by email at [email protected] Remember Consolidated Credit when debt is the problem, we are the solution

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