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By the end of 2018, United States Americans owed over $800 billion in credit card debt.
And the same source tells us that 48% of those credit card users make only minimum payments on their credit cards. Those customers typically have rollover amounts each month.
To keep up with friends, almost 40% of millennials spend money they don’t have. And 3 in 10 cardholders don’t even use their rewards.
If you aren’t financially aware, credit cards can be a detriment to your future earnings. But if you use them correctly, they can improve your credit significantly and help set you up for success.
Before you get your first credit card, make sure that you’re ready. Keep reading to determine when you’re ready and to learn some essential tips for being a responsible user.
Getting a credit card is an essential step in almost every person’s life. But before you get one, you should understand the way they work.
Plus, it helps if you already have a bank account. Understanding how to deposit, save, spend, and budget money is an integral step in learning about finances.
When you use your debit card that’s attached to your checking account, you’ll get practice for when you use a credit card.
Do you already have self-discipline? Do you prioritize? If the answer is yes to either, you’re one step closer to being ready for your first credit card.
You should know about how much money you have in your checking account at any given time.
Make sure that you don’t overdraw your account and can manage any regular payments before spending money on anything else.
Have you ever saved up for anything, big or small?
It’s good to be in the habit of saving up for things, especially when it comes to bigger purchases.
Don’t think of your credit card as a blank check. It’s a great idea to only buy things on your credit card that you could already pay for with funds from your checking account.
Using a credit card is an excellent way to build credit, especially if you pay it down regularly, and don’t max out your available credit.
There are a few different types of financial institutions that offer credit cards.
Your bank is a great place to get your first credit card. While it used to be harder for someone with no credit to qualify, there are now quite a few options for those with no credit.
And applying through a bank where you already have an account may significantly increase your odds of being approved.
Sometimes these cards are easier to get, as you can typically only spend money in the store for which you hold the card. However, many of those stores have different card options, some of which DO work in other venues.
If there’s a particular retail store you frequent often, try there, especially if you have no credit. These are easy to get approved for, but they generally have higher interest rates.
Lenders other than banks also offer credit cards. Some only offer to low to high credit, but some lenders who offer cards to those without any credit yet.
Getting your first credit card isn’t always easy. If you don’t get an offer on your own, you could always try enlisting a co-signer in your application.
Your co-signer’s credit history and income will be used to determine whether or not you are eligible.
A secured credit card is another viable option, and banks offer them a lot of the time.
The way it works is that you’ll put a deposit on the card first, and the lender may match those funds, or approve you for a certain amount.
It makes things less risky for the lender in choosing to trust someone with no credit.
There are a few tips and tricks that will make your first credit card adventure a success.
First and foremost, make all of your payments on time. Late payments will only lower your credit rating and put you further into the hole. Plus, there’s no sense in starting with bad habits.
If you can help it, don’t ever spend more than what you could pay in full. If you pay your balance in full every month, you’ll avoid significant interest charges and a lower credit rating.
Plus, when you purchase things you technically can’t afford, you’re borrowing from and making decisions for your future self.
Try to keep your credit utilization ratio under 30%. If the amount of credit you’ve used is not significantly lower than the credit you currently have available, you won’t be building good credit.
Before you get your first credit card, it’s in your best interest to open up and use a checking account with a debit card.
You must know how to manage your money and to put bills and essentials ahead of other purchases.
Plus, you must make your payments on time and make more than the minimum payments. And the lower you keep your credit utilization ratio, the better it is for your credit.
If you’re determined to better your credit, here are some life-saving tips that’ll boost your score quickly.
And if you’re ready for your first credit card or have any questions, give us a call.
The average American carries approximately $6,375 in credit card debt. For many, the stress associated with trying to pay off this high level of debt is significant.
If you find yourself in the group of people stressed about how to go about paying off credit card debt, you will be happy to learn there are some tips and tricks you can use. While your debt may seem insurmountable now, with time, effort, and dedication, you can get out of debt for good.
If you’re ready to learn what steps to begin taking, keep reading.
Are you carrying a balance on more than one credit card? If so, you need to make sure you are always paying the minimum required on each.
However, don’t stop there. Once the minimums are paid, you need to concentrate on paying down the balance on each card. Be sure you choose one card to focus on at a time.
You can choose the card with the highest interest rate to pay off first, or the one with the smallest balance. Both of these strategies are effective but choose the one that works for you, and then stick with it.
If you want to get out of credit card debt and stay out of it – for good – you have to take some drastic steps. One of these is to destroy the cards.
Regardless of what you think, there is no such thing as responsible credit card use. There is no good reason to keep these cards around, especially the department store cards that would not even be helpful in an emergency situation.
While this step may sound somewhat drastic, it’s the only surefire way you won’t get right back into credit card debt once you have paid everything off.
Another option is to consolidate your debt. You can combine several of the higher-interest balances into a single payment. In most cases, the transfer fee is going to be three to five percent, but you can compensate for this with the savings you are going to see from the transfer.
If you have any equity in your home, you may be able to use that to pay down your credit card debt, as well. Home equity lines of credit often provide a lower interest rate than what the typical credit card charges.
It’s important to understand that closing costs will apply. However, the benefit is that the equity interest payments are usually tax-deductible.
If you choose the consolidation path, remember, you need to control your spending. This can help you avoid accumulating new debt, along with the debt that’s just been consolidated.
If you are planning to pay off and destroy your credit cards, then you still need to ensure you have some type of safety net for emergency situations. This is where an emergency fund comes in.
Building an emergency fund can take some time, but it will also be valuable if you encounter an unexpected expense or some type of income disruption. All you have to do to create an emergency fund is put a little back from each of your paychecks. By doing this, you can avoid missed payments and the need to use a credit card in the future.
You need to get a handle on your budget and make sure you fully understand what it is and how you can make the most of it. For example, top priorities should be transportation, groceries, housing costs, and entertainment.
A great way to begin this reorganization process is by looking at your credit card statements, as most issuers categorize your spending.
Be sure you scrutinize this information closely. Find areas where you can cut back how much you are spending. Then take the money that you have “found” and put it toward paying down the debt you have.
If you are like most people, you didn’t get into credit card debt overnight. As a result, you are aren’t going to be able to get out of it that quickly either (unless you find a windfall of some sort).
Be patient and continue on the path to living a debt free life. While this is bound to take some time, in the end, it will be well worth it, and you will be in a position to take charge of your finances and finally achieve the financial freedom that you want and need.
There’s no question that paying off credit card debt is something that takes time. However, it’s possible when you use the right tactics and rely on the right information.
Be sure to use the tips and information found here, as they’re going to help you on your journey to financial freedom. You may also want to reach out to a financial advisor, who can provide you even more information on how to best manage your finances to remain debt free.
If you are ready to take control of your finances, rather than letting them control you, we can help. Our team can provide the information you need on any finance related topic. For example, we have a recent blog on how to take the pain out of monitoring your finances.
Stay tuned to our blog for more insights.
Did you know that Americans now have more debt than ever?
In fact, this debt amounts to a hefty $13 trillion–and this number is likely on the rise.
Debt can sneak up on all of us, especially given life’s range of expenses. Student loans, vehicle financing, and mortgages may grant education, mobility, and home ownership, but they still all equate to debt.
Luckily, if you are struggling with debt management, there are options. One of these is debt consolidation.
How does debt consolidation work, and is it right for you? In this post, we answer these questions and more.
Keep reading for insight!
Most people accrue debt from a variety of sources. You may, for example, have credit card debt in addition to an auto loan or home mortgage.
This is very common, and it’s not necessarily a problem. It is possible to have “healthy debt” if you are a responsible borrower and if you can comfortably make your monthly payments.
Yet healthy debt can be hard to come by. Plenty of loans have high-interest rates, which can quickly get burdensome and keep you from saving what you need to be saving!
A lot of people also juggle multiple monthly payments. It can be tough to meet these, especially if you’re living paycheck to paycheck. (In fact, most Americans do!)
Unexpected situations such as family emergencies or medical expenses can be an additional challenge. These can add more to your debt and stress levels.
If you find yourself missing payments on any of your loans, you may face late payment fees. Credit card balances are also subject to potentially high-interest rates.
Debt consolidation strives to alleviate the stress of these potential situations. When you consolidate your debt, you lump your debt into one, single loan. This results in just one monthly payment and–in most cases–less interest due.
Debt consolidation sometimes sounds too good to be true. How does it work?
First, it’s important to note that there are, in general, two ways to consolidate debt: with a credit card balance transfer or a debt consolidation loan.
Both of these have the same goal, which is to get all of your debt into one monthly payment. Plus, they also strive to reduce interest and fees.
For people with a lot of credit card debt, this is a great means of consolidating. Users simply transfer all of their debt to one credit card. They must then pay off this balance within a given time frame.
Most people will seek out new cards that offer a 0% balance transfer APR and/or a $0 balance transfer fee. Plenty of credit cards offer these terms!
These terms mean that balance transfers won’t be subject to any fees. Once you transfer a balance, you won’t have to pay interest on that balance for a given period of time (sometimes up to a year).
If you aren’t eligible for such offers for any reason, have no fear. You can always transfer your credit card balances. These, however, will be subject to APR and/or transfer fees according to your card’s terms.
For this reason, identify your card’s balance transfer terms before you make a decision.
Another way to consolidate your debt is to take out a debt consolidation loan.
With this, borrowers take out a loan valued at their total debt. Generally, this loan is fixed-rate, meaning that its balance will have the same interest rate for the entire repayment period.
With this debt consolidation loan, borrowers pay off all of their existing debt. They will then work on repaying that loan in a given amount of time, generally at a lower interest rate.
Debt consolidation loans are ideal only if they do offer lower interest rates and fees than a borrower is paying on other loans.
You can get debt consolidation loans from a variety of sources. What’s more, they don’t have to be called a “debt consolidation loan” to count. Low-interest personal loans can also suffice.
Debt consolidation can be a relief for most borrowers, especially when it comes to reducing payments, interest, and fees. But is it right for you?
In general, debt consolidation is ideal for people who could benefit from a single monthly payment (rather than several).
It’s also the right choice for individuals who aren’t 100% drowning in debt. In general, your debt shouldn’t be more than half of your current income. If it is, it will be really tough to pay off that debt, even after it is consolidated!
Credit score can also play a role. In general, people with good to excellent credit are more eligible for 0% balance transfer terms on credit cards and low-interest consolidation loans.
If you have a lower credit score, you may struggle to find a consolidation method that actually saves you money.
It’s also important to have a plan in place once you do consolidate your debt. This plan should incorporate income sources and repayment terms.
Remember: debt consolidation doesn’t get rid of your debt. It only reorganizes it, in an attempt to reduce interest paid.
If you’ve decided that debt consolidation is right for you, begin by choosing how you wish to consolidate your debt. Is credit card consolidation right for you, or is a debt consolidation loan the way to go?
Next, start researching. Take your time to identify the best balance transfer terms and/or low-interest consolidation loan.
If you do intend to take out a loan for debt consolidation, browse lenders wisely. There are a lot of scams out there when it comes to debt consolidation, so look only for reputable lenders.
We also recommend inspecting your credit score before you hunt for offers. Remember: the higher your score, the better for securing terms likely to make debt consolidation worth it.
How does debt consolidation work? Debt consolidation involves lumping all of your debt into one loan to reduce payments and interest.
In general, debt consolidation can be a useful tool for individuals with debt that doesn’t surpass half of their income.
Are you ready to consolidate your debt? Apply for a loan now!
16% of Americans have a credit score of below 579. This is the lowest level of the FICO score and is categorized as “very poor”.
A poor credit score can have a serious impact on your personal life and can affect your business negatively as well.
While no one can guarantee that you will hit an exceptional score, there are steps you can take to improve your credit score.
Here are seven tips to raise your credit score quickly.
The very first step to take is to get a copy of your credit card report. This is the only way to know where you stand before you figure out the specific actions to take to make things better.
This is, however, not all you will be doing with your report. Go through it carefully, checking for any error and omissions.
Look for things like a repaid debt that’s been listed as a default or a loan you repaid on time that is not listed.
If you identify any of these issues, move to have them corrected. This action in itself can add a few points to your rating.
You will be surprised at how helpful your creditors can be. Unfortunately, if you never ask, you will never find out.
If you are having trouble making payments, make contact with your credit card issuer and communicate this with them.
Most providers have temporary hardship programs you can take advantage of. The benefit of this is that you can have your repayment amounts reduced until you get back on your feet.
Smaller, more manageable installments mean you can pay a lot more comfortably. This is better than skipping payments and having a creditor send a negative report that sheds a few points off your score.
This is a great way of giving your credit score an immediate boost. This works particularly well if you are just starting out and have little information on your credit rating.
You do this by getting someone with a high credit card limit and an even greater repayment history. Their card issuer sends them a card with your name on it.
Legally, you are not obligated to make payments on any debt accrued on the card. But its usage reflects positively on your credit score.
The key is finding someone with above board transactions. In a sense, you inherit the person’s positive credit history.
However, not all credit card companies report authorized users. Before you get on it, do your research and find out if it will be reported.
It’s not uncommon to fall behind on payments from time to time. However, these small mistakes lower your credit score.
If you are in good standing with your creditors, it does not hurt to request them to delete some of the reported late payments. Financial institutions regularly communicate with Credit Referencing Bureaus, and all it would take is a quick phone call on your behalf.
If the request goes through, then you will have fewer negative reports, which will add some points to your credit rating. Nevertheless, try and restrict your late payments to 30 days. Creditors will not report late dues failing in this time frame.
If your issue is forgetfulness, rather than availability of funds, you can have your banker or employer make direct payments if this facility is available. If not, there are numerous software tools you can use to remind you when your payments are due.
You might be eager to forget about your car loan or student loan debts once you make the final payment.
However, as long as you completed your payments promptly, those records may help your scoring. The same is true for credit card debt.
All you need to do is keep these debts on your record. If they were entirely left out, then provide all the information to the credit Reference Bureau so they can use it to calculate your credit score.
Bad payment histories are deleted with time. However, bankruptcies stay on your report for 10 years and late payments for seven years. You don’t have much leeway with these.
Credit utilization is the amount of credit card balance you have compared to your credit limit.
This is the second largest factor affecting your credit score. The first is your credit repayment history.
The more credit you use on your credit card, the further down your credit rating drops. This trend indicates you are spending a significant portion of your income to repay debt, which makes you likelier to default on payments.
The best credit utilization is 0, which means your credit card limit is untouched. This defeats the purpose of applying for a credit card in the first place.
As a rule of thumb, keep your credit utilization ratio at 30%. This means using less than 30% of the credit limit availed to you. Anything above this can cause your rating to drop.
Under the FICO system, people with the highest scores have a utilization rate of 7%. The lower your utilization, the better.
The average age and number of accounts you have held are an important consideration in evaluating how you handle debt.
This tends to disadvantage people with a limited credit history.
UltraFico and Experian Boost allow people with limited credit histories to puff it up using other information.
Experian requires access to your online banking data and allows Credit Referencing Bureaus to add utility payments to your history.
In the same way, UltraFico allows you to give permissions for savings and checking accounts to be used alongside your report when calculating your credit score.
All in all, while it is possible to raise your credit score quickly, expect a few bumps along the way and allow yourself some time.
At First Financial, we understand that while you work on your credit rating you might still need help from time to time. No matter your credit score, we have a financing solution for you. Contact us today for more information.
Most people have some debt, but if your situation has gotten out of hand, now is the time to figure out how you can pay it off before it gets even worse. By figuring out how much you owe, picking a strategy to pay it off, and making a couple sacrifices along the way, you could be debt free by Christmas.
Here’s how to get started:
The first step to paying off the debt you owe is to figure out exactly how much debt you’re in. You may have avoided doing this because you’re scared of the number, but it essential as it will help you keep perspective and figure out a plan to pay it off. Gather all debts you owe, from credit cards to student loans to medical expenses, and calculate how much it all adds up to.
The next step is to develop a strategy to pay off the debt. This is important. Picking and being able to stick to a strategy will help you pay down the debt faster, while also knowing that the sacrifices you’re making to do so have a set end date, giving you some peace of mind. There are two main strategies to pay off debt: Debt avalanche and debt snowball. The first one is the fastest, and has you pay off the debts with the highest interest rates first. This can save you a lot of money over the long term, but you won’t feel much progress is being made at first.
If you feel as if you need to see yourself making progress to stick to a strategy, debt snowball is likely for you. This strategy takes the opposite approach. Arrange your debts from smallest to biggest (ignore the interest rate) and begin paying off the smallest ones first. This will help you see that you are making progress, but will likely cost you money over the long term due to interest.
Another excellent way to help you pay down your debt steadily is to set aside a set amount of money every month and put it towards the debt. Start out by calculating how much you need to spend per month on necessities (include building up an emergency fund) and then subtract that from your total monthly income to get an idea about how much you can put towards the debt every month. The higher the debt, the more of that money you will want to dedicate towards it.
Even with these strategies, paying off these debts is no easy task. It takes persistence and sacrifice for possibly years. One way to help you but a bigger dent in the amount you owe is to get a side job. Even if it’s just on the weekends doing something simple, you could easily find yourself with a couple extra hundred dollars at the end of every month to put towards the debt. It may not sound like a lot, but it could save you hundreds if not thousands over the long run, and you’ll have that debt paid down much quicker.
When calculating your total monthly expenses, chances are the rent towards your apartment is what is eating up most of your budget. You could downsize to a smaller apartment, but this would involve lots of paperwork and being stuck there for a few years. An alternative solution is to rent out a room in someone’s house or apartment. There is little to no hassle, and with the money saved, you could put even more towards the debt or perhaps avoid getting that side job. Either way, if you owe a lot of money, this is certainly an option to look into.
Like any financial option, the cash advance serves consumers well when used properly. We reveal the best ways to manage the cash advance in our previous posts about when to use it and strategies to pay it off.
While a cash advance can help you keep your computer, car or apartment, some use a second cash advance to pay for the first and then get caught up in an ever increasing interest rate and fee cycle. This habit erodes your long-term financial health.
When you get your very first cash advance, to ensure you can pay it off, try to make these lifestyle changes:
While the cash advance does come in handy in many situations, before applying for a cash advance, make sure you can answer the following questions positively.
When considering personal loans, don’t forget that online lenders have the automation and reduced overhead to offer the best loans and terms. First Financial is the national leader in providing cash advances for borrowers of all types, even bad credit borrowers. Just fill out some forms, upload documents and get the money in your account in a matter of days. The Better Business Bureau rates First Financial A+ because we make customer service our highest priority.
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