Posts Tagged ‘Debt’

The recent global economic downturn can be blamed to the credit crunch. According to research, there is almost one trillion dollars worth of revolving debt in the US alone. Individuals, groups, businesses and almost every sector of society have debt. But who’s really to blame? Is it the government, lenders and banks, or people themselves?

Credit Providers

The first ones that usually get blamed for the staggering debt are financial institutions. These include banks, credit card providers and lending companies. It all starts with the bait. These groups offer interesting introductory offers which are seemingly too great of a deal to refuse. And what do people do? Snag them like sugary sweet cupcakes only to regret the calories later.

Sad but true. These financial groups know where to push the buttons. They know what people’s weaknesses are and they use these to their advantage. The unsuspecting people on the other hand get lured in to financial trap. Initially, promotional offers and introductory rates work like magic for consumers. They can purchase wonderful items in a swipe without cash. What’s greater is that they get to pay back these items with zero percent interest for an entire year.

But what people realise too late are the interest rates once the promotional period expires. Penalty charges for late payments also pull them back from temporary bliss. As for the credit providers, imposing hefty charges is their privilege. They don’t seem to care about people’s debt.

Government

When the credit crunch hit the economy, many turned an angry face towards the government. People blamed them for not preventing the downturn. They clearly turned a blind eye against consumers’ interest. They failed to protect the masses from debt and from credit institutions.

In 2007, a bill was introduced to the senate imposing rules to credit card providers. The bill ought to have providers state on each billing statement various information such as the period of time a card holder can pay off his balance. This bill got nowhere. Currently, however, a similar bill is being conjured in the senate. This is supposed to clip off credit providers’ horrendous practices such as raising interest rates on late payments.

Consumers

People shouldn’t act as the sole victim of the credit crunch. Because first and foremost, it is their choice why they have multiple credit cards, have more than $5000 in debt and so forth. They were completely capable of analysing. They are able to compare credit cards if they choose to.

Living beyond one’s means has no justifiable reason. In the end, everything is intertwined. One act can lead to another. And because everyone in the society didn’t do their part, the credit crunch materialised and affected them all.

It’s so easy to have those credit card balances sneak up on you, leaving you with a number of credit card and charge card balances high enough that you’re only able to meet the monthly payments. On top of that, the interest rate is eating up the majority of your payment, so that it will take you years to pay off the balance owing. This is where you should consider credit card debt consolidation.

There are many people who do not own a home and don’t have the luxury of being able to draw on an equity line of credit. This is where one should consider a balance transfer credit card. Many of these offers include a 0% twelve month introductory agreement.

When considering this method of reducing your monthly payments and paying down your debt, you do need to read the fine print. Some offers have no transfer fee, while others charge a flat fee of up to $50 for each transaction and then again there are those that charge 3% of the balance transferred.

The other thing needed to take into consideration, is what is the interest rate after the 12 month introductory time is up? This can also vary greatly, from 10% to 17.99%; however, there are many low interest credit cards that offer the balance transfer option.

If you do take this road to reduce your debt, you need the determination and discipline in paying a set amount each month and enough to make it worth your while. After all, this is your big chance in paying principle only without interest, thus accelerating your pay-off. But be warned, should you pay even one monthly payment late, there are penalties.

Credit card debt consolidation really isn’t difficult. You can do all of your homework right here on the internet by comparing credit card offers from any number of financial institutions, available here online. If you take your time and do your due diligence, you could save yourself hundreds of dollars and pay down your debt considerably during the next twelve months.

Regardless of your reason, getting a credit card opens your world up to a large number of temptations – many of which should be avoided to stop you falling in a black hole of credit card debt. 

What steps can you take to ensure you avoid credit card debt, and what should you be aware of when signing up for a credit card?

First and foremost it’s important to make sure the the card you apply for is within a limit that, if you max the card out, you’ll be able to afford repayments on it. Having a credit card with an enormous limit may look appealing, but it’s no fun when that limit has been reached and you have to repay it. 

Regardless of the initial limit of your card, once it’s reached banks will often offer you a credit card increase. This can be tempting, particularly if there’s something you want to buy but haven’t been able to afford. If you decide to increase the limit, again make sure that you’ll be able to afford the maximum repayments. This is one of the biggest traps people fall into with credit cards, and can cause years of hardship as you repay hefty debts. 

A closely watched credit card limit is just the first of many ways to keep your credit card under control. The hardest aspect of having a credit card is the belief that you have money which you actually don’t have. It can be very tempting to pull out the credit card for those purchases which you would otherwise save for or put on lay by. 

This belief that credit is cash is one of the many factors which has attributed to the current global financial crisis, and the big learning that should be taken away is not to spend money you don’t have. Most purchases can be lay-byed, and if something can’t be put on lay by then it’s important to ask that question – do you really need it? 

Reading through this list of precautions it’s pretty obvious that the most important factor to keep in mind with your credit card is not to spend money you don’t have. This seems like a pretty obvious rule to live by but temptations, particularly temptations that come in the form of shiny new objects, can be hard to resist when you have a brand new credit card in your hand. 

So each time you go to make that purchase, pause for a minute and ask yourself first of all “do I have the money?” and secondly “do I actually need the item”. If the answer to even one of these questions is no, then you should be putting the credit card away for now. 

Finally, and perhaps most importantly, is to make sure you compare credit cards properly before you actually apply for one. Many different cards have different interest free periods, and interest rates. Low interest rates can go a long way towards paying off credit cards should you accidentally rack up a high credit card bill. 

Schiff Report Video Blog July 12th 2010

Hannah Montana Season 1 Episode 20 Debt It Be Part 1 Episode Description: Miley and Jackson both receive new credit cards and promise to use them in “emergencies only”, but Lilly convinces her to go to a flea market with her credit card, and buys almost everything there, In order to pay off the bill, she sells Hannah’s used clothes and accessories that she thinks that she’ll “probably never have to wear again”. When she finds out a pair of earrings from a video shoot are worth more money than she sold them for, she and Jackson go to extremes to retrieve them from the little old lady who bought them. Copyright to Disney I do not own this.