Credit Card Blog

If you’re finding it difficult to keep up with your credit card payments, you should know most of the credit card companies are willing to work with cardholders. Each company has it’s own method of modifying your credit card payment plan, but here are some examples of what you might be able to do if you talk with your credit card companies:

Lower Interest Rates and No Late Fees

Many credit cards will temporarily offer you a lower interest rate with no late fees to help you get back on your feet. This will allow more of your monthly payment to go toward principal balance and less toward interest. To avoid late fees, the credit card company will likely require that the payments are made automatically through your checking or savings account.

Lower Minimum Payment and No Late Fees

Some cards will temporarily offer a lower minimum payment. Usually, if you send less than the minimum payment you’ll get hit with finance charges and late fees because it’s considered unpaid. On an alternate repayment plan, you can send a lower minimum payment without fear of getting socked with fees. The temporary lower payment is good for six months or twelve months, depending on the company who sets it up for you. If you get this option, they may also require that your payments are made automatically through your checking or savings account.

Credit Card Settlement

In some cases, people with high credit card debt might want to consider settling the debt. Credit card companies will often accept an amount of money that is smaller than the total balance owed to close the account and considered it paid off, if they feel you are in danger of bankruptcy. If you file bankruptcy, often the credit card companies won’t get anything from you at all, so it’s in their best interest to agree to settle the account. In order to settle though, you usually need to have the money available up front to pay it off as soon as they agree to your settlement amount. You can no longer make payments – you just have to pay the amount in full to close the credit card account. This option has a negative affect on your credit score usually, although some people find that simply removing large amounts of debts from their credit report through settlements ends up helping their credit scores.

If you have a credit card, there’s a good chance you’ve been asked if you would like to add credit card insurance. Sometimes it’s offered when you first sign up for the credit card, sometimes it’s when you call the number on the card or visit the website to activate the card, or sometimes it’s by a telemarketer. Most of the time, the insurance coverage is offered for a free trial, for 30 or 60 days, which will continue unless you cancel it.

Credit card insurance is meant to cover your monthly minimum payment in case you lose income from illness or job loss, or to pay your balance in full if you should die. Credit card insurance coverage sounds good in theory, but there have been many people who have reported trying to put a claim in for insurance coverage when they’ve lost their job who discovered their job loss wasn’t eligible for coverage. Others tried obtaining insurance coverage when they became too ill to work, and discovered their illness wasn’t covered. If you are considering card protection insurance coverage – first make sure it covers what you think it covers! Additionally, most insurance plans will not cover job loss for self-employed individuals, so if you are self-employed – better check on this before purchasing.

Most people have disability insurance and/or life insurance which will cover your credit card payments, which makes having a separate credit card protection insurance policy unnecessary. If you don’t have a disability insurance or life insurance policy – you may want to look at these options prior to signing up for credit card insurance, as you may find you get more coverage for your money through those options.

Credit card protection insurance only covers you for one credit card – so if you have multiple cards you would need to sign up and pay for it on each card. The typical price is around $0.89 per $100 you spent each month. It may not sound like a lot, but can add up to thousands of dollars over the years.

If you already have protection insurance and you want to cancel, be prepared to speak with a pushy sales person. They will try to convince you that the product offers so many benefits that you are crazy to cancel, but if you’ve made your decision to cancel simply be firm and demand that they stop billing your account immediately and cancel the coverage. Most people aren’t even aware they have insurance protection, but you can see it listed on your statement if you’re being charged for it.

As more individuals make an effort to pay back their debt, consumer borrowing has been declining. Revolving credit – mostly credit-card borrowing, has declined at 13.1% the annual pace in February, while non-revolving credit, like car loans and school loans, dropped at 1.6% the annual rate in the same month.

The American Bankers Association released survey results that showed defaults on consumer loans dropped greatly during the fourth quarter. It’s too soon to say the worst is over though, as the credit card defaults are still at historical highs. J.P Morgan Chase (as well as other credit card lenders and loan lenders) predict they will continue operating at a loss for the rest of 2010.

Credit card issuers are continuing to reduce credit lines when issuing credit, canceling cards for their riskiest customers and closing unprofitable credit cards. Banks are writing off more credit card debt as noncollectable. Bank of America Corp reduced the affinity card programs typically targeted to college alumni associations, charities and social groups by 12%.

As consumers reduce their spending to focus on paying back debt, the recovery of the economy will also be slowed. While individual households may benefit from less debt, less consumer spending hurts the economy as it accounts for about 70% of the economy’s financial picture.

Pat yourselves on the back America. According to a report from the AP, more Americans are paying their credit card payments on time, a sign that the economic recovery is beginning to take hold on main street.

Reports from major credit card issuers like Bank of America, Capital One, Discover and American Express all showed small declines in delinquency rates in March from February.  Delinquency refers to when payments are received over 30 days late.

Despite the good news the data on charge-offsthe amount banks write off because they assume they will never receive payment, is more mixed, with some banks having to write off and some less.  In 2009, banks wrote off a record $83 billion dollars of debt.  But the consistent rising of on-time payments mean that write-offs will likely trend downward as the year progresses.

via the NYTimes.

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.)