How to Reduce Your Credit Card Interest Rate

One of the most depressing things about having credit card debt is the fact that the high interest rate can mean that most of your monthly payment (if you carry a balance) goes to paying interest, rather than reducing your principal. This can mean a long, slow slog as you try to pay off debt.

However, you might not have to keep paying that interest rate. In some cases it’s possible for you to reduce your credit card interest rate… just by asking.

Steps to Reduce Your Credit Card Interest Rate

Is your credit card interest rate 18% or higher? Call the number on the back of your card, tell them you have seen lower rates and chances are that you can get them to lower it. It’s not always that simple, of course, but it’s a start.

Call and ask to speak to someone about your interest rate. In some cases, representatives are allowed to drop your interest rate by as much as 3% in order to retain you as a customer. If the first representative can’t help you, ask for someone who can help you lower your interest rate.

Your best leverage during the is if you have a recent offer in the mail with a low introductory rate of 0%-10%. Many credit card issuers are willing to drop your rate if there is the chance that you will take all of your money elsewhere. They’d rather have you pay some interest than ditch them and pay no interest at all.


If you don’t have a recent offer, check out the best current offers on low interest credit cards and balance transfer credit cards. Anytime you can offer a concrete possibility for switching to someone else, you have a bit of leverage during the phone call.

If you have been paying your minimum payment on time and they consider you a good customer, they will likely be willing to work with you to negotiate a lower rate. If, even after you have mentioned that you will switch your business, and they still refuse to lower your rate, remain polite and make ready to transfer your balance.

Tips for Speaking with Representatives on the Phone

If you want to reduce your credit card interest rate, you will need to make sure that you have it together on the phone. Here are some tips for speaking with credit card companies:

• Be polite: Don’t get rude. Remain polite and calm throughout.
• Ask for what you want: Be straightforward about how you want a rate reduction. Be clear that is what you want, and ask the representative to connect you with someone who has the authority to make it happen.
• Be prepared: You can create a script, or jot down some talking points. Also, be prepared to carry through on your threat to transfer your balance elsewhere.

If you phone your credit card company and get your rate lowered, please leave a comment and let us know what your rate was and what it’s at now!

source: canadianfinanceblog.com

My Kid's Drowning in Credit Card Debt! What Do I Do?

If you trusted your son or daughter to keep track of their finances, and they slipped up, what in the world are you supposed to do?

Let's say they've racked up a big, nasty credit card debt -- to the tune of thousands of dollars. Should you pay off their debts to help keep their credit score above water? Or is it better to let them learn from their mistakes and suffer the consequences? Though each individual situation is different, here are your options, what's at stake, and a few pointers to help you plot your course of action.  



A Personal Loan, With a Contract

If you have the means, think about whether or not you want to loan your daughter the money. Sometimes her debt is manageable enough that you can pay it off in the form of a personal loan to your daughter. You can charge her interest as well, so she learns just how much a high APR can cost her.

But you have to examine the situation from a lender's perspective, rather than simply write a check and expect she'll make payments. What is her employment situation? Will she be able to make payments to you without the security blanket of your relationship making her complacent? Has she typically been a responsible spender in the past, or does she impulsively purchase on a grand scale regularly? If you do decide to help protect her credit history, it's a smart idea to sign a contract with your daughter to make your agreement more official and binding.

If You Co-Signed, You're on the Hook

If you co-signed on your son's account, you're responsible for his credit card debt. Because of regulations passed in the CARD Act of 2009, it's more difficult for young adults to qualify for credit cards, so more and more parents are co-signing on accounts and acting as guarantors for their children. If you've already taken that step, you should hopefully have realized that your son's purchases will affect your credit, regardless of your involvement.



 In this case, it may be more prudent to pay off the debt if you can, cancel his account, and work together to come up with a payment plan to rectify the situation and make sure it never happens again. If you haven't co-signed yet, sit down for a serious conversation with your son on your values and financial responsibility.

Lessons to Be Learned?

Bad credit now will impact her financial future later, but so will bad habits. If your daughter doesn't learn from her mistakes now, there could be bigger and more damaging mistakes ahead. Will bailing your daughter out of her financial mess with creditors make her realize the gravity of her mistake? Or will you just end up fostering her sense of dependence on you? You won't always be there, wallet in hand to save her, so if she can manage to take the credit hit, perhaps it's best to let her learn her lesson this time, and give her some tough love.

Communication Is Key

Loaning money to someone you love is always, always messy. While your son should intellectually know that your love is unconditional (which is why your help comes so willingly), for him, it's emotionally very difficult to face your parents when you owe them money. Plenty of relationships have been ruined by debts of personal loans, both from neglected payments and feelings of shame. Be sure that if you choose to help your son, you commit to maintaining an open dialogue and doing your best to keep business and family separate.

Ultimately, each family and financial situation is different. But before you make a plan to tackle your son or daughter's debt, you need to examine the situation from all angles. There are many factors in play, but above all, your relationship and your child's sense of responsibility from this learning experience should be at the forefront of your mind.

source: dailyfinance.com

Top Reasons Why People Apply For A Loan

The biggest single reason people apply for a loan is to purchase a home. Mortgages, where the borrower provides the property as security against non payment, are a huge segment of lending. An estimated 60% of all domestic property has some form of mortgage loan outstanding. The total value of all property loans as disclosed by the Bank of England at the end of July 2010 was £1,239 billion pounds. This compares to lending to individuals for other purposes of just £217 billion. As customers are adapting to the harsher economic times, this amount is slowly being repaid and has fallen from £225 billion in January 2010.

Credit card debt accounts for £58 billion of this total. An amazing amount given that the rates of interest for borrowing on a credit card are extremely high compared with a personal loan. This short term borrowing is probably the most expensive form of debt individuals carry for any period of time.

Away from short term debt the principle reasons for borrowing fall into three broad areas:

Debt consolidation – This is where customers take out a new loan on better terms to pay off existing debt at high rates. For example, it may be that there is a combination of credit or store card debt at 18% interest bundled with a personal loan taken out a few years ago at 12% interest. Even in today’s tough markets it may be possible to obtain a new loan to cover this at 10% over a longer period. This can greatly ease the pressure on family finances. Many people have woken up to this option and lending for this purpose has grown considerably since debt management companies have highlighted the benefits of such an approach.

Acquiring a vehicle – This will probably be the second most expensive purchase after a home. Manufacturers and dealers are well aware that most customers cannot pay cash for a new or used vehicle. Hence, there is a huge market in personal loans and personal contract purchase plans to make obtaining a vehicle affordable for those on a budget. Be it a car, van, caravan or motorcycle there will be a point of sale option for financing the purchase. Many banks and other financial institutions also target this as a specific area of lending.

Home Improvements – Whilst the main home may be acquired on secured loan, home improvements such as double glazing, new kitchens or furniture are usually paid for by borrowing on unsecured loans. These tend to be relatively short term reflecting the smaller amounts involved when compared to property loans.

Lenders focus on the ability to repay and so there are regional variations in the amount of credit granted to individuals. The wealthier regions have more appeal than the poorer regions in the North and West of the country. Less well off areas are the domain of the subprime lenders and doorstep lenders who use different products and techniques to approach the market. Weekly payments and short term loans from places like http://www.cashwindow.co.uk at high rates will be more common in these areas as people’s credit ratings are generally lower and less appealing to mainstream lenders.

 source: everythingfinanceblog.com

Most Americans Have More Savings Than Credit Card Debt

Rumors of the spendthrift American consumer may be slightly exaggerated. Bankrate's 2013 February Financial Security Index found that a majority of consumers -- by a narrow margin -- say they have more savings than credit card debt.

For more than half the country, 55 percent, an emergency fund outweighs credit card debt. Nearly a quarter, 24 percent, admit to having more debt on plastic than money in the bank, while 16 percent say they have neither credit card debt nor savings. That puts 40 percent of the population close to the edge of ruin while everyone else seems to be sitting pretty.

If most people have more savings than credit card debt, "Why are so many people broke?" asks Howard Dvorkin, CPA and founder of ConsolidatedCredit.org.

It's a curious question. The answer may be that although credit card balances came down through the financial downturn that began in 2007, consumers' fundamental behavior of not saving enough did not change.

According to the Department of Commerce, for 2012, the overall savings of the average household were 3.9 percent, much better compared to the 0.9 percent Americans were saving in 2001. However, this is down from the average 5.4 percent savings rate in 2008.

Even with a low savings rate, why wouldn't a supposedly low credit card debt rate put Americans in better financial shape?

"The fact of the matter is that America is broke -- whether it's mortgages, student loans or credit cards, we are broke. The old rule of thumb is that people should have six months' of savings," Dvorkin says."If you talk to people, most don't have two pennies."

Who's In Trouble?

In Bankrate's survey, men were more likely than women to say their emergency fund outweighed credit card debt, at 60 percent, compared to 49 percent of women.

But credit card debt hits all kinds of consumers. Bankrate's survey has found that roughly a quarter of all income levels has more credit card debt than savings.

"Credit card debt will eat you alive no matter who you are," Dvorkin says.










Those people with incomes more than $75,000 were less likely to have no savings or credit card debt compared to those at the opposite end of the spectrum, with incomes less than $30,000. Only 7 percent of high earners have no credit card debt or savings, while 28 percent of the bottom rung of earners say they aren't in debt but have no savings.

While staying out of credit card debt is a good place to be,having no savings puts low-income earners in danger of falling into a payday-loan cycle or needing to borrow from family or friends.

"People who earn less than $30,000 may not have the credit score to get credit cards. That keeps them from getting into trouble with debt, but it also keeps them from saving," says Xavier Epps, CEO and founder of XNE Financial Advising in Woodbridge, Va.

For the rest of the population, there may be a fundamental divide between consumers who are fine with carrying credit card balances and dedicated savers who strictly avoid debt.

"It tends to be that debt and savings are very lumpy; you rarely find someone that has both. It's either someone has a lot of debt and little to no savings, or someone has savings and very little debt,"says Elliott Orsillo, CFA, co-founder of Season Investments in Colorado Springs, Colo.

"There isn't much of a fluid spectrum of people with a ton of savings and no debt and a nice mixture down to people with no savings and lots of debt. It's usually either one or the other," he says.

"One of my clients had $400,000 in credit card bills. He came to me because it was impeding his ability to fuel his jet. The credit card companies would not allow him to charge his fuel anymore," he says.

No matter how much money you have coming in, learning to save and live beneath your means is the key to getting ahead.

source: dailyfinance.com

How to Restructure Credit Card Debt

For consumers struggling to make ends meet and racking up credit card debt and barely making minimum payments, hardship programs might provide a welcome relief.

Many credit card companies offer these programs that target borrowers who have fallen behind on payments. They typically offer debtors lower interest rates as well as reduced payments, fees and penalties. In general, most hardship programs fall into two categories: short-term, which could be for a few months or up to a year, or permanent which is until the credit card balance is paid.

Credit card companies don’t publicize these programs because they hurt revenues due to the lowered interest rates. But for most banks, these programs are a better option than not getting any money back as a result of an individual’s default or bankruptcy.

Delinquency: Not a Good Strategy

There are a couple of things to keep in mind when approaching a credit card company about enrolling in a hardship program. Most creditors will want to look at your income and expenses so be prepared to explain your budget. The company will evaluate your ability to pay your debt to determine your eligibility.

They will also look at your account history, so it is a good idea to inquire about the program before falling behind on payments. Using delinquency as a strategy to get your creditor to work out a deal with you is a bad idea. You’ll get a more sympathetic ear if you approach them prior to missing a payment.

Hardship programs are not designed for reckless spenders who have maxed out their credit cards and are looking for an easy way out. They are aimed at debtors who have been hit by catastrophic, life-altering crises like a job loss, major illness, inability to work or loss of spouse or breadwinner. That is not to say that banks will not work with you if you don’t fit into one of these categories.

Stop the Plastic Habit

Be warned that these programs usually mean you will lose use of the credit card. In most cases, your charging privileges will be suspended or revoked. Some companies, however, have programs that restore your privileges upon completion of the program.

Entering a hardship program could also impact your credit score. Before entering the program it is a good idea to ask what repercussions this could have on your credit. Some companies negatively report this information to credit bureaus. Sometimes the negative references on your credit are removed after the program is completed. When negotiating with your creditor about being placed on the hardship track, it is important to understand the card issuer’s policies and the consequences.

The policy on credit reporting depends on the company. Most short-term plans are no more than a year. Long-term plans can go as long as five years. American Express, for example, doesn’t negatively report borrowers on short-term programs. But those who are on long-term programs should expect large dings on their credit regardless of what bank or issuer you owe.

source: foxbusiness.com

4 Ways Credit Cards Manipulate You Into More Debt

Credit cards are engineered to make sure you become a long-term, loyal, and indebted customer. Since many of the decisions that consumers make are not rational, card issuers work on those irrational impulses to make sure you spend money with their card without thinking logically about your actions.

Here are four methods that card issuers use to get you to sign up for their cards and keep you in debt. (See also: Which Type of Rewards Credit Card is Right for You?)

1. Appealing to Your Individuality and Creativity

Once upon a time, credit cards all came in the same boring colors. But sometime in the past 20 or so years, banks started allowing cardholders to express their individuality through their credit cards. Suddenly, you could show off anything from your adorable nephews to your commitment to the Humane Society with every purchase you made.

Part of what is going on here is something behavioral economists refer to as the IKEA effect. This effect causes individuals to value something more if they worked to create it. Not only does that mean you’re more likely to keep the inexpensive IKEA bookcase you put together with your own hands for years after you don’t need it anymore, it also means that you are going to overvalue the credit card whose cover image you chose.

In addition, your pleasure at seeing the chosen image will make you want to show it off — that is, use it more often.

2. Encouraging Instant Gratification

The very essence of credit — putting off payment — is something that appeals to a nearly universal cognitive bias called the present bias. (A cognitive bias is an error in logical thinking that is very difficult for an individual to recognize in himself.) Basically, this cognitive bias makes an individual value an immediate experience over future experiences.

The present bias is why it’s so easy to stay up late to watch the "Doctor Who" marathon even when you know you have to get up early the next day for an important meeting at work. Now is so much more important than later in our irrational minds, it can very difficult to make the responsible decision.

This, of course, is why it is so very easy to get into credit card debt and so difficult to dig out of it. Yes, your future self might need to work overtime every week to be able to make the payments on your credit card, but your now self really wants the big screen TV. Card issuers understand this quirk of human irrationality very well, and they do everything they can to appeal to our “I want it NOW!” tendencies.

3. Triggering Your Restraint Bias

Most people tend to overestimate their own impulse control; they believe that they will be able to show more restraint in the face of temptation than is realistic. This cognitive bias is why your grand plans to lose 20 pounds are often derailed by the first box of doughnuts you see. You have overestimated your ability to be virtuous in the face of temptation.

One way that credit cards use this cognitive bias is by offering to raise credit limits. While some consumers are capable of ignoring that temptation, there are others who will run up their balance to the new limit, even after they have convinced themselves that they can easily handle that much credit.

Another common strategy that triggers the restraint bias is the 0% balance transfer. In these cases, cardholders convince themselves that they can pay off the balance before the end of introductory period. However, many of those who take advantage of these offers are unable to show the restraint necessary to pay off their balance before the interest starts accruing.

4. Making You Fear a Loss of Perks

Many credit cards offer perks, from cash back to travel miles to money for college. The problem with these perks is that in many cases, cardholders are spending much more in interest than they are earning through the perks. Why would they do something so clearly irrational? Because of loss aversion.

Behavioral economists have discovered that human beings tend to irrationally overvalue something they already own or have. For example, plenty of investors have held onto tanking stocks for far too long because they are afraid of losing their original stake. They irrationally hope that the clearly dead investment will recover.

Loss aversion is also the reason why cable companies are happy to offer customers a free trial period of premium channels; viewers are much more likely to pay money to keep from losing something than they are to buy it in the first place.

And of course, loss aversion is a major reason banks offer credit card perks. While cardholders who pay off their balance each month are certainly making money on the perks, the majority of cardholders are not able to do that. If they were, banks would stop offering the perks because they would be the ones losing money.

For most consumers with perks credit cards, the fear of losing the airline miles will keep them charging on a card that they probably should have cut up long ago. They are afraid of losing that “free” flight, even though they are clearly paying for it.

Beware Your Irrational Brain

It can be difficult to responsibly use credit because our irrational brains and the manipulations of the credit industry are working against us. The best way to handle credit is to make sure you are conscious of your decisions and your irrational quirks before you whip out the plastic.

source: wisebread.com

Purging taint of eve of bankruptcy car purchase

LET’S say you have 2 old cars, a 1995 Camry, and a 1990 Taurus. You have $100,000 of credit card debt. You and your wife are both registered nurses and your combined household income with both of you working 2 jobs each is $250,000. You lost two investment properties in Las Vegas resulting in one 2nd trust deed of $80,000 on collection and threatening to garnish your wages. Both the Camry and the Taurus need constant repairs. The last repair was $3,000. You decide to trade in both cars for a brand new MB E 350, and a Lexus 400. The payment for the M-Benz is $950 monthly and $900 for the Lexus. Because of the two car payments, you cannot pay the $3,000 monthly for interest on the credit cards. So, after 4 months, you decide to seek bankruptcy relief. Will the fact that you traded in your old cars for new cars which require almost $2,000 of monthly payments 4 months before bankruptcy affect your ability to get a discharge?

The general rule is there is nothing wrong with pre-bankruptcy planning. Debtor can convert non exempt assets into exempt, trade in assets and assume new debt to buy a new car if that is justified, right before bankruptcy. However, the circumstances are relevant. In this example, debtor should keep evidence of the $3,000 car repair bills because that is evidence that the cars needed to be replaced. But note that debtor in this example bought two luxury cars requiring $2,000 of monthly payments. In some cases, the kind of car purchased pre-bankruptcy does not raise a red flag. But I have heard a judge opining that if debtor bought a civic, that’s a normal car, but M-Benz is a luxury car. It all depends on what type of bankruptcy is being sought. In a Chapter 13, the trustee may raise a good faith issue if debtor attempts to deduct the new car payments in calculating the plan payment.

In Re Williams, six days before they filed for Chapter 13 relief, the above-median income debtors owned three cars: 1996 Buick Skylark, 2007 Lexus RX-400H, and a 2007 Lexus ES-350. The Buick was fully paid. They bought a new 2011 Lexus RX-350 SUV on August 5, 2011, for $47,000. They traded in the 2007 Lexus RX-400H and the 2007 Lexus ES-350 as part of the same transaction for which they received a net credit of $14,111. They borrowed $35,000 to pay for the new car, payable over 75 months at $565 monthly whereas the monthly payment on the 2007 Lexus RX-400H was $484 and $866 for the 2007 Lexus. There were 12 payments left on the former and 24 payments left on the latter. They filed for bankruptcy on August 11, 2011. The trustee objected to confirmation of their plan partially on the ground that it was filed in bad faith.

The court sustained the trustee’s objection and told the debtors they could confirm a plan only if they treated their creditors as if they had sold the ES-350 and kept the other two cars. The plan they proposed, which treated their car payments as if they had not purchased the new card, did not “purge the taint of the improper car purchase on the eve of bankruptcy.” The debtors argued that by replacing their current vehicle ownership expense deduction with what they payment would have been if they re-amortized the two car loans that existed before they purchased their new car placed their creditors in the same position that they would have been in had they not improvidently purchased the new car. “While this approach has some appeal, the court cannot accept it…” Perhaps the fact that the judge drove a Ford Focus, and the trustee, a Yugo, had something to do with this decision?

Would there be a difference in Chapter 7, or if the cars were purchased 4 months pre-bankruptcy, probably?

source: asianjournal.com