Personal finance tips – Part 5

Personal Finance Tips

It’s easy to get into trouble with credit cards. Once you are over your head, it’s best to understand the confusing terms you’ll be dealing with. Here are some “tips & terms” to help you out.

Unsecured Credit Cards- Most credit cards are unsecured, meaning you don’t pledge any collateral. Be careful about interest rates, annual fees, rates that increase after a late payment, and monthly payments lower than 3% of the balance (they take forever to pay off). Best tip: pay your balance every month.

College Credit Cards- Most issuers will give a card to any student over 18 years old. A credit rating is good to have when you graduate, but watch out for high interest rates and annual fees. And avoid running up the balance! That can lead to payment problems and a bad mark on your credit.

Credit Card Counseling- So you’re having trouble paying your cards? It happens. Credit counselors will examine your income, debts, and assets, and recommend a plan to help you. Some are non-profit and will try to help at no cost. Others are for-profit and will steer you toward a loan, or sell you on a Debt Consolidation Program (see below) that will have fees.

Debt Counseling- This is essentially the same as Credit Card Counseling, but may address other forms of debt. Debt counselors may be more likely to steer you toward a home equity loan or mortgage refinance, which they will arrange. Watch the fees, points, and charges if you go that route!

Credit Card Debt Loans- If your monthly credit card payments are too high, you might try paying them off with a single loan that has a lower monthly payment and interest rate. This is usually a home equity loan, since an unsecured loan can be hard to get if you have a lot of credit card debt. Best tips: if you take this kind of loan, get rid of the credit cards pronto! And watch the interest rate.

Credit Card Debt Consolidation- These are usually the same as Credit Card Debt Loans. In other cases agencies will negotiate with your creditors and manage your payments while you make a single monthly payment to the agency. Best tip: understand what they will do for you!

Debt Consolidation Loans- These often pay off a wide range of debts, and may involve refinancing your mortgage or taking out a home equity loan. It will pay all the bills, but you’ll have a single large monthly payment. Best tip: avoid including auto financing in this consolidation, or you’ll be paying for your car for 20 or more years.

Debt Consolidation Programs- Usually this will involve making a single payment to a company that will negotiate better terms with your creditors. They will then manage the monthly payments for you. It’s convenient, but watch out for monthly fees and charges.

Think you have things under control now? You might want to check your credit to be sure.

Online Credit Reports- Nationwide consumer reporting companies like Equifax, Experian, and TransUnion are required to provide you with a free copy of your credit report when you request it, once every 12 months. Be sure you request it through annualcreditreport.com- they are the only agency the FTC has authorized to do this online.

Finally, if you’ve gone too far and have declared bankruptcy, consider a Bankruptcy Credit Card to help you rebuild your credit. The interest rates are higher, the credit limits lower, and you may have to make a cash deposit. But it’s a good step to rebuilding your credit.