pros cons credit cards

Main Pros and Cons of Using Credit Cards

It’s hard to imagine in today’s credit-conscious society that there is anything bad about having a credit card. Of course, if you live in the other camp, it’s hard to imagine there is anything good about them.

The fact is, that with credit cards like anything else in the world, there are good and bad aspects.

As a consumer who has experienced the good, the bad, and the ugly when it comes to those little pieces of magic plastic, I’ve created a short list of pros and cons.

The Good

If you ever want to buy a home, having a credit rating is important. Having a great credit rating is even better.

By obtaining a credit card or two early on, you can begin to establish a track record. Be careful! Use credit cards with care and thought, buying only what you can afford.

A few missteps in the payment department and this practice can turn quickly to the ugly column.

The Bad

Interest is the cost consumers pay to the credit companies for the luxury of spending their money. Shop around to find the best interest rate you can get, and then be sure to pay more than the minimum amount due each month.

By paying more, you pay less in the end. Less interest, that is.

The Ugly

After my divorce, my budget took an unexpected nosedive (not uncommon for anyone in today’s age of unemployment).

When I couldn’t pay my credit card debts, I found the companies sold my debt to far more aggressive collection attorneys whose practices for collection can rival gangsters in old Cagney movies.

The best way to avoid harassing phone calls and maintain your sanity is to not apply for credit cards in the first place.

Are credit cards always a bad idea? I don’t believe so.

I know of a young man who used a credit card which offered points toward a new car from a large manufacturer all through college.

He only charged items he would have paid cash for and paid off the balance every month.

When he graduated, he paid thousands less for his first new car than he would have otherwise.

This practice takes immense discipline and planning. Ask yourself if you have what it takes to use a card in this manner, and you can add it to the “good” column.

If you can’t? Be sure you don’t end up feeling ugly.

improve credit score

Tips to Improve Your Credit Score

So, you want to buy something big. Something REALLY BIG like maybe. hmmmmm . . .a car or even bigger, a home!!

Well, the first thing you will have to do is tone down that buying enthusiasm and think clearly about your credit standing and credit score. Ask yourself, is your credit standing good? Then, what’s my credit score?

Now you say to yourself, “Now what? How am I going to get that personal loan at a good interest rate? I know I can use a service like this one, but what are my other options?”

Take a deep breath, that’s it, in and out slowly. Close your eyes and put yourself in the lender’s shoes and think about what they will be looking for when they check your credit. Could you be one of the following:

* Hey Big Spender!

You already have been having a good time and your current credit cards show you have high balances. Or you moved some high interest balances to a lower interest balance not really thinking that your big spending still shows the same total amount owed.

* I Have More Than You!

Having a credit card from every retail store you shop at cause they said, “Oh, you can get 10% off your purchase today, would you like to sign up?” is not good. Did they also tell you that their interest rate maybe 24% on that same purchase?

* Time? What’s that?!

This one is easy, are you paying your bills on time?

If you are any of the above, oh boy do you have a problem, but don’t worry, be concerned, very concerned. And believe it or not, you do have the ability to fix your credit so you can get that car or home at a good interest rate.

So NOW you ask yourself again, “Now what? What do I need to do?”

That’s easy. Just follow these easy steps:

* Don’t Close Me Out!

Don’t close any accounts. Your credit score will go down.

* Get Me In The Mail On Time!

Payment history is the one most important factor that affects your credit score. Getting in the habit of paying your bills on time can be a powerful tool for increasing your credit score.

* Hey, Keep It Down!

Lenders like to see a cushion between your credit card limit and the amount you owe. The more you pay off, the bigger the space, the better your credit score.

* Bad, That’s Very Bad!

Missing some payments may not seem bad to you but to your credit score and standing it is.

* Hey, Check Me Over!

At the least, check your credit report once a year. However, most experts recommend twice a year

Now that you know what to do. Go out and get that BIG, that REALLY BIG something like maybe that car or a home. And continue to follow the do’s and don’ts about your credit and you will always be in the $$$$$$$$.

The Reason You Should Consider Fixed Mortgages

The fixed mortgage loan is among the most famous kinds of mortgages available. Offering a fixed interest rate from generally one to thirty years this sort of mortgage offers financial security for several families.

Nevertheless, while there are lots of clear benefits of a fixed mortgage, there are also a few disadvantages that you must always remember.

By educating yourself about both positives and negatives it is possible to make the best decision as to regardless of whether a fixed mortgage is perfect for you.

This sort of loan is developed to give you the same interest fee that you simply signed up with for a set certain period of time. They are typically either 15-year mortgages or 30-year mortgages.

A 30 year fixed mortgage will supply you with much more money remaining monthly than a 15-year mortgage. Nonetheless, the longer the mortgages, obviously the longer you will have to pay it back.

Also, the longer that you shell out the home loan back, the additional interest you can payout overall.

There are some fixed interest rate mortgages that only provide a fixed fee for up to 12 months. Most are normally provides intended to attract new customers who would otherwise have difficulty qualifying for a mortgage loan.

The interest rate is typically quite low to start with but this “teaser rate” does not last long.

Once the fixed interest quote has expired the price will then commence differing in line with the housing market. Unfortunately, this is not always an excellent issue!

Of course, the problem with this type of mortgage loan usually when the housing marketplace lowers its prices, you may not profit at a lower price.

People that have an adjustable-rate mortgage loan will pay out either higher and lower rates depending upon the housing industry.

The leading advantage of fixed mortgages is that you simply know precisely how significantly you’re paying every single month.

This really is wonderful for anyone looking to stick to a low cost or anyone else where an increase in your monthly mortgage loan payments would cause difficulties. A lot of individuals fall under the trap of taking on an adjustable-fee home loan once they cannot afford any significant change in their payments.

At least having a fixed mortgage you realize exactly how much you need to spend each and every single month.

One more thing that you may not have considered usually using a fixed mortgage if your primary income increases you don’t have to spend anything extra. So you can still have a fixed-rate mortgage loan with additional money to spend on whatever you want.

Nevertheless, if you plan to repay the mortgage loan early then you’ll normally locate that there can often be high fees included.

Overall, fixed mortgages absolutely are a famous option with much more than 70% of homeowners. There is a specific level of security that’s included having a fixed mortgage as well as in this day and age which is certainly an advantage!

Even so, prior to you do go for this sort of mortgage loan, make certain that you simply have looked into another option obtainable first.

Like that you might find the most effective concept of whether this sort of mortgage loan would be your most effective option or otherwise.

Government Grants and Loans: Being Organized Is The Key

being organizedWith the U.S. economy still in the dumps and all of these financial institutions and other businesses receiving government bailout money, individuals are probably wondering how the government can personally bail them out of their financial troubles.

The answer to this has been the same for many years – government grants or loan programs.

As with everything, this money is not as easy to obtain as commercials and ads make it seem, but it is accessible.

You just have to be willing to roll up your sleeves and put in the effort if it is what you want.

As discussed in other articles, the single most discouraging part of the process is finding out who you are supposed to contact at an agency and knowing what to say when you speak to an agent.

Many times an agency will not have the program that you are looking for. In this case, one should continue to contact other agencies.

It’s almost a guarantee that other agencies will have the program or programs that you need. One should always start at the local level when searching for government money.

It is OK to go to the federal level but federal money is often only available through local agencies so you may as well start there.

No successful person in anything has succeeded without being organized, so before you go to any government agencies about grant money you definitely have to organize yourself.

You need to define your goals. You should know what you want to accomplish when you want to accomplish it, and how much you will need to accomplish it.

These are just some basics. Everyone’s goals are different and you should define them according to your own plan.

The other part of organizing is setting a plan. You already know what your goals are, and they should pose as an outline to your plan. Setting up your plan this way will make things much easier for you. It will be a lot less time-consuming.

Obviously you can use this for any goals you’re trying to accomplish that isn’t related to getting grants and loans from the government.

Most people who fail, do so because they quit. So make sure that once you set your plan that you stick to it and success will be inevitable.

When you come across information for a grant agency and the number is disconnected or web site URL is outdated chances are that that particular agency or program has changed their information.

It isn’t common for a program to just be canceled altogether so be consistent and stick to the plan.

Organizing can make the difference between a winner and a loser in various situations in life.

Government grant money is accessible to you but you have to know where to look in order to have access.

Before making contact with any agencies make sure that you have established your goals and devised a plan that you intend on sticking to regardless of the resistance you may face in the process.

What Do I Need to Know About Being a Guarantor?

guarantorI received a telephone call at work the other day from a very angry person.

This person had received a copy of their sister-in-law’s bankruptcy notice and wanted to know why she was receiving this mail.

I calmly explained (as I have hundreds of times before) that she was listed as a co-signor on one of the credit cards and, therefore, she received notice as prescribed by the bankruptcy code.

The questions then began to pour out, as they always do, when I have to give this speech to a caller.

Unfortunately, I cannot respond to her questions even though I may know the answer because our office represents the debtor.

All I can say is she should contact her own attorney to find out what she can do to try to protect herself.

The problem is that there is probably nothing she can do if she willingly agreed to guarantee her sister-in-law’s debt.

What is a guarantor?

Investopedia defines a guarantor as “one who becomes secondarily liable for another’s debt or performance.”

Basically put, if the sister-in-law does not pay, then you do. Unfortunately, there are many people who do not understand that being a cosigner obligates you to pay that person’s debt if they default.

Black’s defines cosigner in part as a person who signs a document with another “often assuming obligations and providing credit support to be shared with another obligor(s).”

By cosigning a credit card application or a loan application, you are agreeing to be liable for the debt with the primary applicant.

Signing as a guarantor adds another layer of protection for the lender because now you have guaranteed the debt and are agreeing to pay the debt if the borrower (in my example the sister-in-law) defaults on the loan – – including if she files bankruptcy.

Is it wise to cosign a loan for someone?

Husbands and wives cosign debt on a regular basis and parents often help their children by cosigning for their first car loan or being a guarantor on their first apartment lease.

However, you must remember that not everyone manages his or her money as wisely as you may manage your money.

Furthermore, you need to be prepared to absorb the loan payments into your own budget should the primary applicant default on the loan agreement and stop paying the monthly payments.

In my example, the sister-in-law filed a Chapter 7 bankruptcy and stopped making the payments, so now the angry relative will have either to make the payments or have her credit ruined as well.

Bottom line

As a child growing up, I watched my father managing money and budgeting our household expenses and, as I got older, what I noticed the most was that bills came before any “fun” spending.

My father drilled into my head that you never spend money you do not have and you always pay your bills on time even if you must give up something you want to do so.

I wish I could have followed his example better as it would have saved me from some of the financial mistakes I have made as an adult. There are three bits of advice about managing money that my father gave me that I have always followed:

1. Never loan money you do not have – If you cannot pay all your bills and living expenses without that money, then do not loan it to anyone.

2. When you do loan money treat it as a gift – If the person pays you back then that is wonderful but if you never receive a dime of the money back then you will not be hurting for it or you should have never loaned it in the first place.

3. Never cosign or be a guarantor for someone unless you can afford to pay the loan payments yourself – If you can afford to pay the loan payments yourself without stressing your budget and want to take the chance then it is your decision.

However, if you cannot afford to pay those loan payments yourself then do not cosign or guarantee the loan because if that person defaults you are stuck making the payments or ruining your credit.

NOTE: Nothing in this article is intended as legal advice. Questions about cosigners, guarantors or legal contracts should be answered by a qualified attorney.

Starting Your Financial Future After College

financial planning after graduatingIf you are in your early 20’s and are just starting your career after college, here are a few things you need to be sure to evaluate as you move forward into a long term financial plan.

Evaluate your debt:

If you, like most graduates today, needed to take loans out to help pay for your education, you may have a large amount of debt (Over $20k on average) which may have been bought and sold by your lenders while you were still its school.

It is important that during your 6 month deferment period after graduating you use that time to figure out exactly how much you owe and to whom.

Balances and current interest rates are particularly important.

Make a budget:

Compile all of your monthly expenses to see how much of your income you aren’t already spending on living.

As part of that, you can expect your day-to-day expenses to go up about 40% after college as you move away from eating nothing but Raman noodles and drinking cheap beer.

Make sure to include rent, utilities, fuel costs for your new commute, various insurance, cell phone bills, etc. From this, you can determine how much each month you can apply towards your debts.

In calculating your take-home pay that becomes your budget, be absolutely certain that you are maximizing any 401k match your company offers as well as picking a health benefits package that makes sense for you.

401k matches are essentially free money, and by using government health programs like an HSA or FSA can help save you money in tax benefits.

Your HR rep can explain both to you at length and I encourage you to listen and ask lots of questions.

Restructure and organize:

Let’s say that the results of your budget are that you can use $600 a month to pay down debt.

Using the information you got earlier evaluating your debt, set up repayment of your loans so that you can pay the least amount possible on all of your loans except the one with the highest interest rate.

This may be a good time to look into loan consolidation as well.

Federal and Private loans must be consolidated separately but doing so many help you decrease the minimum you must pay on them, that way you can dedicate more of your $600 dollar budget to your higher-interest loans.

By knowing your current debt situations and having a clear budget you can target your debt in the most efficient way possible to avoid paying more interest over the life of the loan.

Plus you will be a lot less stressed if you have a budget where you are already planning for a set amount of your income to be dedicated to your debt.