Credit Card Blog

Between ballooning interest rates and hidden charges, you’ve finally reached that pinnacle point with your finances when you’re ready to pull your hair out and take the hedge trimmers to your credit cards. If the largest portion of your debt is on high interest rate credit cards, take heart in knowing there is a solution.

Transferring all your debt over to one card with a zero percent interest rate can be one debt-reducing solution; not to mention also a stress-reducer. There are currently two available through Discover: Discover More American Flag card offers 0% interest for twelve months with a 5% balance transfer fee; the Escape card offers 0% interest for six months with a 3% balance transfer fee.

Discover More Card-0% interest for twelve months with 5% balance transfer fee.

After the first year of 0% Annual Percentage Rate, the standard rate of 10.99% - 18.99% will apply. Standard rates depend on your credit history. There are multiple designs to choose from and there are over 50 million Discover Card users. Also, there is no annual fee with the Discover More Card.

Escape Card-0% interest for six months with 3% balance transfer fee.

After the initial six months, the standard APR rate of 11.99-18.99% will apply, according to your credit rating. Although there is only a 3% balance transfer fee during the first six months, there is a $60 annual fee in addition to other fees and charges.

Neither of these options will make your debt disappear but can certainly reduce your stress level. Knowing your monthly payment is paying completely for principal and not interest, is a priceless peace of mind. Which card you choose depends on how soon you can realistically pay off your debt; six months or twelve. For your convenience, you can apply for either the Discover More or Escape Card online or by phone.

Credit card defaults are tied to the unemployment rate. It’s a simple fact that when people don’t have jobs, they cannot pay their credit card bills. But just how high will America’s credit card default rise?

As of June 2009, Moody’s Credit Card Index was reporting a credit card default rate of 10.76%. In that same month, the national unemployment rate was reported to be 9.5%.

Things are expected to get worse in 2010, with the jobless rate projected to climb to 10.5% and credit card defaults reaching a record 12-13%.

While credit card defaults are at record highs, delinquencies hit their lowest point in June of 2009: 5.81%. Experts believe that was a reflection of consumers using their income tax returns to catch up on their credit card payments, as well as a generally cautious attitude toward spending. Some analysts believe the federal stimulus funds also helped.

Consolidating your debts into one can be done in a number of ways. A few common options are a debt-consolidation loan, a personal loan, or a 0% credit card. With just one payment versus multiple ones, you no longer have the need to track countless payment dates or experience numerous late fees and finance charges that only increase your debt.

A debt-consolidation loan is strictly for compiling all your debts into one and establishing one affordable payment. The payment amount you establish will also depend on how quickly you wish to achieve financial freedom. One payment is much easier to manage than multiples with varying fees and charges, not to mention several different payment due dates.

Personal loans have multiple uses. There are some lenders, like E-Loan.com, who don’t charge an application fee. Although your credit history is a determining factor, loan limits and interest rates vary between different lenders. For example, you may secure a $30,000 loan but with a 9% interest rate or maybe a $15,000 loan with only a 4% interest rate. Be sure to compare lenders in order to find the best provider.

O% credit cards may sound too good to be true but they are not a mirage. They are a current source of good opportunity offering the chance to consolidate all your debts into one with no interest rate for six to twelve months. The two currently available are Discover More and Escape both by Discover. For twelve months, you get 0% interest rate with the Discover More and there’s no annual fee. With the Escape card, you get six months of 0% interest with only a 3% balance transfer fee and an annual fee $60.

Once you’ve consolidated your debts into one and are making one payment, it’s time to establish a budget that’s customized according to payday and payment due dates. Implementing this crucial money management tool will keep you from accumulating future debt because all your funds will be preallocated. With a budget, you stay in control of your money rather than wondering where it all went.

It’s a scenario we’re all too familiar with: consumers take on too much debt and, because of a combination of shady lending practices, a soft job market, and the increasing cost of living, find that they have no hope of paying off that debt. It happened with mortgages, and now the scenario is poised to repeat itself with credit cards as more and more cardholders give up hope of ever paying off their balances.

In the past, credit card write-offs stayed pretty much on par with layoffs. Now lenders are seeing their number of uncollectible debts increase more rapidly than job losses.

The bank stress-test predicts that America’s 19 major banks could lose at much as $82.4 billion in bad debts by the end of 2010. Experts believe that the figure could go much higher if the national unemployment rate reaches 10% (it’s currently at 8.9%). In such a scenario, the credit card industry could lose as much as $186 billion.

In recessions past, homeowners were able to tap their home equity to stay afloat. That’s no longer an option for millions of homeowners. And, in a survival situation, “optional” bills, like credit card payments, are often the first to go. This doesn’t paint a very optimistic future for the banks. Only time will tell which ones survive and which ones fold.

With all the headlines lately, you’d think that the upcoming credit card reforms are the cure-all for the debt that plagues modern Americans. And you’d be half right; credit card companies should play fair, and if it takes a rolled-up newspaper (in the form of tough legislation) to make them behave, so be it! But reform is only one half of the equation. All the legislation in the world isn’t going to do much if consumers don’t control their spending.

If there’s one good thing to come out of the recession, it’s the fact that millions of us have had to take a good, hard look at our financial situations. It’s scary at first, especially if you’ve been buying things here and there and making minimum monthly payments. You might be shocked to see how much of your income is being eaten by interest, bank fees, and finance charges. The sour economy has given us an opportunity to rethink our spending habits, and the upcoming credit card reforms will make it even easier for us to reduce our credit card debt.

With that in mind, it’s important for us to remember what we’ve learned once the economy struggles back to its feet and credit becomes readily available once more: don’t carry more cards than you need; don’t carry a monthly balance on your cards; and don’t spend beyond your means. Cardholders will soon have new, more enforceable rights. Let’s live up to those rights with a new level of responsibility.

Ann Minch started a debtor’s revolution on YouTube when she told Bank of America to stick her credit card debt in their bailout pipe and smoke it. Angered that her interest rate had jumped from 12.99% to 30% for no good reason, Minch went on an angry video rant targeting the bank.

The result? Bank of America renegotiated her interest rate within 5 days, and lots of other angry cardholders jumped on the bandwagon with horror stories of their own.

Some debtors are determined not to repay a cent of their credit card debt until the bank lowers their interest rates. Others want their accounts settled immediately, without the 180-day delinquency that Bank of America requires before settling an account. Many are angered that Bank of America continues to charge such high interest rates after receiving billions of bailout dollars - especially at a time when so many customers are struggling to find work and pay their bills.

YouTube user ‘efrasier21mbf’, a former assistant branch manager for Bank of America, posted a video of his own in which he supports the debtor’s revolt. He has harsh words for Bank of America due to the practices he witnessed during his time as an employee, and his own experience with an interest rate that jumped from 5.1% to 32% — even though he was never late on a payment. At the end, he offers the bank a deal: settle his account now for a large cash sum, or never see another penny on the loan.

Want to witness the debtor’s revolt? You can watch Minch’s original video here. Huffington Post also featured several follow-up videos here. (Warning: Some videos contain strong language.)

There are signs that consumers are bringing credit card debt under control and are beginning to make strides to pay it off along with other debts like automobile loans.

Moody’s Investor’s Service reports that the charge-off rate by banks for bad consumer debts decreased from 10.76 percent in June 2009 to 10.52 percent in July.

Also, delinquencies that had been on a steady increase have also begun to decline. The Federal Reserve has issued statements that show that there is a positive move by consumers to paying down their debts as well.

Retailers are hoping that this bodes well for the holiday shopping season. It appears that more families have discovered ways to manage their debt and make strides to pay it down. Other studies are validating this trend. Consumers are also increasing their savings rates at levels not seen in years.

With unemployment and underemployment still major issues, the positive effects will probably not be wide-reaching, but it is better than the opposite.

The best way to view this information is to realize that families are in a better position to make a comeback when things do improve.

This is not good news, however, for credit card companies who are beginning to feel the pinch of fewer and fewer people using their credit cards for purchases and instead paying with cash via debit cards or using tactics like layaways at retailers to fund their purchases.

The door to economic recovery is opened but just slightly for the moment. The recovery is fragile and might still be a ways away before it grows stronger.

It is obvious to state that if you are laid off from your job, you immediately go into conservation mode. Most workers are not afforded the advantage of having advance notice of a job layoff, but economic indicators tell us that we all are vulnerable.

Consider that Whirlpool Corporation just announced that they will close their plant in Evansville, Indiana, Idling more than 1100 workers. The closing will come in the summer of 2010. Far more serious than a layoff, these people will have no jobs in less than 12 months. So the best thing to do is to plan now for the worst that is to come.

Pay off Credit Cards- If you have money with which you can pay off cards then by all means, do so. Use the method that makes sense for you by paying off the balances that are costing you the most in interest and other fees, or by paying off the small ones first and rolling your payments towards the larger balance cards.

Save Money- Begin to save money into a liquid account as soon as you can (if you are not already). A savings account will work ok, but if you know you have a long period of time in which to do this, you might consider a higher interest yielding account for this purpose.

Stay Away from 401k- Avoid raiding your 401k or other retirement money to use for paying bills. The only possible exception to this is if you are under 30 years of age, and you can use what you have built up to completely pay off your unsecured and possibly auto loans. Even at that it is not recommended.

Begin looking for another position with another company right away. Do not wait until the layoff or job loss hits. Polish your resume and hit the streets.

Looking for new and innovative ways to stay out of credit card trouble? Most of the good ideas have been presented, but here is one that might help. This one involves your behavior and attitudes towards credit cards.

Continue in Crisis Mode

Even though things might be improving and you can see the credit market beginning to open back up, continue to operate as thought there is a crisis. That means, continue to pay down your balances and aggressively clean up your credit. Be vigilant about credit card accounts that you have - do not open any more.

Keep extra income flowing as long as you can. If you have taken on a part-time job or jobs that are bringing in some much needed additional money, keep working them. Use that extra money to reduce debt and build up savings.

Retain the expense savings efforts that you began months ago. In reality, these might be things that you will want to embrace as positive lifestyle changes. These include shopping with coupons as well as more price consciously, shopping at thrift stores and yard sales.

Doing this along with other energy savings ideas can help you keep more of your money and when it comes time to pay bills, you will actually have some cash that is left over.

Using a mindset of intensity towards reducing your credit card and other debt will go a long way to helping you become more financially stable, even when times get better. Think of how much better off you will be then.

The practice of lowering credit limits on card holders across the board has affected many customers with good credit. Since then, they have learned to be more aware of their credit limit. Making these tasks a common activity every week before you shop and use your card will help.

Check Your Limit – Make it a point to check your credit limit regularly. Once per week is not too much. If you have Internet access, you can view it when it is convenient. Tie it into another online activity that you already perform on a regular basis, such as checking your email. Or, most card issuers allow you to check your balance and other items via a phone call to their toll free customer service number. Put the number on speed dial and use it often.

Pay Down Your Balance – Work hard to pay down your balance and keep it as low as possible. While this will not keep the creditor from lowering your limit, it will help if they do by making sure that you have enough of a ceiling to absorb such a decrease.

Protect What You Have – Learn to use your credit card wisely and pay more than the monthly minimum which will help protect what you do have and make it easier to manage your balances.

Smart card holders adjust their activities to make sure they are not caught in the tow of card issuers across the board adjustments to accounts. The days of running your credit card accounts on auto-pilot are over.