Let’s look at Question #2 – Have I found the best credit use or “buy” that I could?

In case you missed Part 1 we looked at the question of – Using credit for this purchase?

Now let’s look at question 2:

The main sources of consumer credit are:

(a) Lending Institutions

• Credit Card Companies – VISA, MasterCard, American Express, Discover
• Credit unions
• Personal loan departments of banks
• Small loan companies
• Sales finance companies that take over credit “paper” from dealers.
• Pawnshops

(b) Retail sales establishments

Department stores, specialty shops, appliance stores, auto sales, for example. Such companies as Sears, JC Penney’s, The Gap, Victoria Secret and many more offer credit as a service.

The charges from these different sources vary a great deal. Take time to investigate. Find out what kind of service you can expect, what the cost and repayment terms will be. Do this before you make a bargain, for once you sign a contract, you’re committed to carry out your part.

Find Out the Dollar Cost. You probably compare prices on shoes, dresses, coats, housewares. Why not on the cost of credit?

Credit costs vary widely among different lenders and among stores that sell on the installment plan. In fact, costs may differ considerably among the various “plans” available from a single store.

It will pay you to take time to get the facts. You need to know more than the down payment and monthly (or weekly) payments — so take time to check your contract. The contract should give you

• (a) how much is to be financed ;
• (b) the amount of each installment payment ; and
• (c) the number of installments.

This is the way you figure cost: Multiply the amount of the monthly payment by the number of payments to be made. From this figure subtract the amount that is to be financed. The difference will be the dollar cost of credit.

EXAMPLE :1

A refrigerator costs $300 and can be paid for by making a $12 down payment and 12 monthly payments of $25.92 each.

Multiply payment amount X number of months to be made ($25.92 x 12) = $311.04

Subtract the amount financed (Cash price minus down payment) $300 – $12 = $288.00

Dollar Cost of Credit $ 23.04*

Total cost when bought on credit ($300 cash price plus $23.04
credit cost) $323.04

Note: The cost of credit equals $8 per $100 per year on unpaid balance of $288. This is equivalent to a simple annual rate of 14.8%.

Now on to Question #3 – How Is My “Credit Score or Rating”?

Question: I wanted to know about annual interest rates. Who’s job is it to know the rates. The numbers seem different than what is advertised. My boyfriend recently bought a TV and he just signed the papers and did not really understand the cost or rates. Renee Falls Church, Virgina

Answer: The “True Annual Interest Rate” sometimes called APR is something as a consumer you need to find out before making any purchase on credit. As the use of installment credit (using credit cards and paying minimums) has increased, a great deal of confusion has developed over interest rates. As a result, it has become extremely difficult and sometimes impossible for consumers to compare the cost to him on credit cards, credit from the bank, the credit union, the department store and other sources.

“Truth-in-lending” legislation has been updated many times since it was proposed in 1961 and there have been extensive hearings on the bill. Proponents say that the consumer “has the right to know.” Opponents (some lenders and retail establishments) argue, among other things, that it is impossible to figure accurately what the true annual interest rate would be on installment payments as they are commonly set up. There is some truth in this claim, but the consumer could be given much more exact information about interest rates than he usually is given.

As a consumer it is very important that you get yourself educated on the “True Cost” of borrowing before buying an item.

When applying for a credit card, you must understand the importance of the APR. The Annual Percentage Rate affects how much you pay in interest on your credit card. With millions of Americans are currently in debt, you should understand how credit cards work to avoid falling into the same trap.

Using credit cards can become very expensive, especially if you have a high APR. Be sure you understand the interest rate and all of the fees associated with using your credit card. If you don’t, these fees can really add up, making it hard for you to pay the bill each month.

If you have bad credit, you will probably only qualify for a card with a high APR, as well as additional annual fees. If you do sign up for such an offer, pay the bill on time every month, and then in six months contact the lender and ask for a lower interest rate.

One way to do this successfully is to research other credit card companies willing to offer you lower interest rates, and threaten to leave if your current credit card company does not lower their rate. However, if do not often pay on time or have only recently gotten the card, this strategy will not work.

Before applying for a credit card, make sure you do your research so that you know how interest rates work and what would be a reasonable APR for you to accept. Also look at the Terms & Conditions to learn about fees for balance transfers, overdrafts, cash advances, and other activity on your account. Consider how often you would be charged these fees to find a card that works well for your situation.

Again, if you already have a credit card, then make all of your payments on time to increase the likelihood of getting a better interest rate in the future. If your credit card company will not lower your interest rate, consider switching to a different credit card company willing to offer you a better rate. Make sure to take care of the remaining balance on your current card before leaving, or you could be charged a penalty fee.

Keep in mind that credit card interest can add up quickly from month to month. If you don’t pay your balance in full each month, having a credit card can get expensive. Ask yourself if it is worth it, and try your hardest to lower the interest rates. Make sure you understand exactly how much your credit card is costing you each month, and weigh the benefits against the risks.

If you feel that you can do without a credit card, that is a viable option to consider. In fact, many people do not use a credit card. Make sure you read all of the details if you do decide to sign up for a card. If you don’t understand the card’s fees, you could find yourself in debt because of the credit card.

Many people wake up one day and themselves swamped with a bunch of credit card bills, do not worry. Anxiety, depression, and feeling overwhelmed over your financial situation will not help. Overpowering debt from credit card use can surely create chaos in your life; especially if the debts are hard to settle.

But remember… if credit cards are made to go with credit card bills, then credit card bills surely go with something to settle it. Read further and discover that there is still life beyond a pile of credit card bills.

Self-control: It is a Must

Credit cards were not made to create havoc in your financial situation. It is never made for people to find themselves buried in debts in the future. Credit cards were actually made to help solve immediate financial problems, emergency situations, and the likes. Thus if you are only using your credit card when you are short in cash in during necessary situations such as paying for your child’s school fees, spending for groceries, paying for hospital bills and medicines, and the likes, then you are more like a wise card-user. On the other hand, people who use their credit cards during reckless and impulse shopping are surely bound towards the pitfalls of credit card debts.

These plastic cards are more often treated as people’s immediate escape from lack of something. Some would even take the cards as their only safe passage. But too much use of card even for cases that are no longer considered as emergency situations will surely lead the user towards the card’s trap. Simply put, every credit card user must use their card wisely.

Practices of credit companies were studied by the U.S. Senate last March 2007. Some of these companies were questioned because of their unjust practices which were merely towards gaining profit. Practices such as penalties for delinquent and even on-time payers, soaring high charges, and lack of proper information dissemination that lead to hidden charges, were condemned. But despite of this effort from the government, credit card users are advised to take care of themselves. Not all the time that the government can watch over them and protect their rights from capitalizing credit card issuers.

Take Control

If credit card balances and their corresponding payments have made your financial life unsustainable, you might consider taking some of these steps:

Finding yourself buried in a credit card bills is not the end of the world. Learn to take control over the matter and try to think of wise strategies to alleviate the whole situation. Or you might as well consider the following suggestions.

Preparatory Procedures

Quick fixes or a debt relief within 24 hours are nothing but products of one’s imagination. Settling your debts will never happen overnight. It is better to start making solutions, one step at a time. Sit back and relax. Review what has happened to your overall lifestyle. And once you were able to determine the portion when you made the wrong turn, educate yourself about personal finance. Learn how to make sacrifices in order to get rid of credit card debt from your whole system. Most importantly, be strong and firm in making decisions to bring everything back to normal.

If you think that your personal knowledge on finances is not enough, then it is best to seek professional help. Hiring a financial advisor or credit card debt management specialist can do wonders on your financial status. Gather all information that you can get regarding your financial situation. Use this set of information as considerations when finding a financial advisor. Remember that you are in search for someone who can help you solve a financial problem. It is therefore a must that you choose the person who has all that you need to solve your problem.

It is also best to share your financial problem to people whom you trust. There is nothing better than sharing a problem to someone who cares for you more than anyone else in this world. These people may not be able to lend you some amount to help you pay off your debt but the time and concern plus the pieces of advice they can share with you are priceless.

Applying for a low interest loan might also help. Although this is an additional debt but you can get out of higher debt more quickly while the loan is just there not adding more burden to your life.

When worst comes to worst, why not give the following strategies a try?

Solution 1: Debt Consolidation

This solution will allow you to combine all credit card debts into one single loan. Basically, this solution can simplify your debt situation by making you settle all of your debts in one payment at a lower interest rate. There are lots of debt consolidation companies out there who can help you. But make sure that you investigate on all details of the debt consolidation offer of each and every company that you go to. Remember that they are in service to earn income and to profit from the services they offer to you. So hire only the services of a debt consolidation company who will put you into less financial risk.

Solution 2: Settle the Debts

Settling your debts should not be done by you; otherwise you will just worsen your situation. It is best to seek the help of a competent and trusted debt settlement company. This company will do the debt settlement negotiations on your behalf and more often that not they can reduce debts by 25-50%. Once a debt settlement is processed between a credit card company and your hired debt settlement company, watch out for the settlement on your credit report. This usually creates a great impact on your credit rating for the period of the time you are accumulating the agreed upon settlement amount to the credit card company, plus six months. Simply put, this will show up as a black mark on your credit report for 3 to 5 years. In the whole settlement process, the debt settlement company takes a percentage of the total outstanding debt as fee for their services. Even if the whole situation relieves you of the credit card debt burden, it is highly recommended that you seek first a financial planner or advisor. They can advise you in choosing the best debt settlement company. They can also help you weigh things up so you can wisely determine if this solution will work out for you.

Bankruptcy: No one likes to think about declaring bankruptcy but the truth is, bankruptcy is a legal financial tool that adults can use to gain a fresh start. In some cases, bankruptcy is the only way to get financial resources productive again. Bankruptcy can legally appear on your credit report for up to 10 years but its effects on your overall credit score depends on many factors, including how you go about rebuilding your credit history as soon as your bankruptcy case is closed. Changes made to bankruptcy laws in 2005 made it more difficult for individuals to declare bankruptcy, although rules vary by state. If you are seriously considering this option, see an independent financial planner before you consult a bankruptcy attorney for advice.

Solution 3: Declare Bankruptcy

Bankruptcy – the word does seem ugly but it is actually a legal financial tool. If debt settlement leaves a black mark on your credit report for 3 to 5 years, bankruptcy can legally appear for up to 10 years. But do not be overwhelmed by the figure or number of years. A closer look at the effect of bankruptcy will tell you that it can even out negative and positive marks on your total credit score. Your ways of rebuilding your credit history as soon as your bankruptcy case is closed can be considered. The government has issued updated bankruptcy laws in 2005 that vary by state. Review these laws and discover the benefits of declaring bankruptcy. To be on the safe side, always seek professional advice.

Conclusion

Credit card debt relief requires difficult procedures. Educating yourself regarding personal finances, seeking professional advice, and employing debt relief procedures can help you find get back to normal. Couple these with little sacrifices and taking responsibility over the whole matter, you will surely find yourself out of the whole trap.

Have you met someone whose wallet is packed with cards used for shopping, cash advance, paying bills, and the likes? You must have thought that all of those were credit cards. The truth of the matter is not all of those shiny pieces of plastic cards are credit cards. Only some of those cards are true credit cards while the rest are either charge cards or debit cards.

True credit cards have a fixed spending or credit limit. This limit is based on the cardholders income and credit rating. Upon application, the higher the income and the richer the bank account, the higher the possibility that an applicant is granted a credit card w/ a high credit limits. The credit limit also increases as the cardholder spends more. But it decreases if one chronically makes late payments. Prolonged missed payments also results to credit being cut off and increased interest rate charges on the outstanding debt.

Shop carefully when selecting for a new credit card. Check the annual fees, interest rates, as well as the uses of such card. Some have no annual fee while others have high interest rates, and still others are accepted anywhere or limited to shopping and for dining only. Banks are known for offering easy-to-apply-for credit cards. However if you do not have a rich bank account there are companies that offer secured cards. With such card, you deposit money and you can obtain a card which has a limit that is equal to the money deposited. The deposit eventually earns interest and is usually refundable once you establish a good credit rating.

Charge cards such as American express do not have a monthly spending limit. You can purchase and shop – til you drop but upon payment there is no such thing about minimum payment; rather you need to pay the balance in full each month. Charge cards impose a yearly fee. Many consumers, however, believe that despite of any fees or charges, the cost of having charge cards is still lower than having a credit card.

Debit cards technically work like plastic checks. Cards like these are usually released by Visa and MasterCard affiliates. When paying purchases using debit cards, the payment is taken directly from the cardholders bank account. Debit cards come in two forms- Online and Offline.

Online debit cards are like ATM cards. They require you to enter a pin for you to be able to pay for your purchases. Most banks now always release ATM cards that employ the so-called (Electronic Payment Services) EPS system. These allow the cardholder to pay purchases through their ATM.

An Offline debit card, on the other hand, does not require a PIN. In lieu of the PIN, it only requires the signature of the cardholder to initiate the transfer of the funds from the cardholders account to the merchants account.

Debit cards are highly recommended for shopaholics and impulsive buyers. They have no monthly bills, no interest charges, and no fees.

The power and perils of putting plastic into your wallet is a convenient way of making purchases without the hassle of carrying cash. Additional perks offered by credit cards and charge cards, can earn you airline miles or a variety of other rewards for purchasing items that you would have brought anyway.

From a financial perspective, debit and charge cards pose little danger to your financial well being because of their internal controls that minimizes the temptation to make purchases that you can’t afford.

Credit cards have served as the source of financial ruin for careless shoppers. They encourage consumers to live beyond there means. To avoid the potential pitfalls that go with credit card use, be mindful of your spending habits. Remember that being able to make the minimum monthly payment simply means that buying an item not only will put you in debt, but the interest will increase the total cost of the item to well beyond the sticker price.

Many people like to choose the credit cards that offer a certain percentage of cash back after making purchases. There are many companies and just about all of them offer a cash back credit card among all the other credit cards they offer. Some people who already have cash back cards end up with hundreds of dollars cash back from their card at the end of the year. How much you get back depends on how many purchases you make with your card.

Why are cash back credit cards more popular?

It seems that many people find that cash back cards are better than those that just give you rewards like free air miles. This is mostly for the obvious reason that you can get whatever you want with free cash but you cannot get whatever you want with air miles. You have to, of course, use your air miles when you are traveling by plane. Let’s face it, which would not rather have free cash than reward points or air miles that you may only be able to use at certain places?

How do you get your cash back?

The way you get your cash back depends on the specific card you get, different companies have different methods of giving their customers cash back. Also, with some companies you may get cash back for a certain type of purchase but not for a different purchase. Some companies also give more percentage back on everyday purchases like groceries and gas than they do on other purchases. You have to read the fine print to really understand how the program works.

What are some things you need to watch out for?

There are a few things you need to watch out for when choosing your cash back credit card. First of all you need to look over the terms of service and all the fees before you decide on a specific card. Certain cards that offer cash back will not actually be worth your time because they have certain fees that will cancel out the cash back. This means that you will be getting a percentage of your cash back but you will then be spending it on the extra fees. Annual fees and monthly rates could be the fees that really get you in the end.

These are three things you need to consider when you are getting a cash back credit card. You may find that a cash back credit card is not right for you and your situation at all. Once you read all the fine print and make sure everything is in order and you are sure that the card you choose is the one for you, you will be on your way to earning cash back in no time.

Chase the Credit Card Company offers a wide variety of credit cards to fit almost any lifestyle and credit rating. Everything from low credit line cards for bad credit up to rewards cards for those with excellent credit ratings. The Chase Flexible Rewards Card is one of the best cards offered by Chase Bank, since it gives those with excellent credit the chance to earn rewards and redeem them for a number of their travel needs.

How To Earn Points

The Flexible Rewards Card offers points for all types of purchases, from gas, dining, and even grocery shopping. One point is earned for every dollar spent on the credit card, and a cardholder can earn up to a total of 5,000 points every month. An initial 1,000 points is awarded for the first purchase made on the card when the account is first opened, and a total of 60,000 points can be earned every year.

Unlike other reward cards offering points only for certain purchases, the Chase’s Flexible Rewards Card offers points for every single purchase made on the card, making it easy to earn points no matter what the card is used for.

What Can Points Be Redeemed For?

Like most other reward credit cards, the Flexible Rewards Card allows cardholders to redeem their points for airline tickets. They can also be redeemed for several other travel needs, including rental cars and even hotel stays. Cardholders who don’t travel much can choose to redeem their points for merchandise offered by Chase Bank, or even exchange their points for cash rewards that can either be used toward the balance of their card or in the form of a check. Points can even be redeemed for gift cards for a number of major retailers, which can be used by the cardholder or given as a gift for an upcoming holiday.

Restrictions On Airline Tickets

Even though the Chase Flexible Rewards Card is much more flexible than most other rewards cards, there are some restrictions when it comes to redeeming points on airline tickets. A cardholder does have the flexibility of choosing the airline they wish to fly on as well as the dates, but some of the restrictions including booking 21 days in advance, and the flight must include a Saturday night stay over. Also, Chase points can only be redeemed for coach class plane tickets, so flying business class is not available on this program.

Cardholders can choose to use less points by redeeming them through Continental Airlines, since they have an agreement with Chase Bank. Also, frequent Continental customers can transfer their Chase points into frequent flyer miles, which can make it easier to purchase more expensive flights during peak periods. Chase customers can choose how they would like to spend their points based on which airline they would like to fly, since the Chase Flexible Rewards Card gives cardholders great flexibility.

The Chase Flexible Rewards Card is an excellent card for earning points, since it awards one point for every dollar spent on the card. The cardholder can choose a number of different ways of spending their points, with everything from gift cards to plane tickets to even cash. It is a great card to carry in your wallet or purse for anyone who travels, yet it is even beneficial for those who like to be rewarded for every dollar they spend.

Basically you find two types of credit cardholders.

Person #1

The person who can afford to pay their debt each billing cycle and uses credit for its convenience and the card’s benefits, like airline miles, credits at restaurants, hotels or theme parks, cash back or a certain percentage of spending donated to a designated cause or organization.

The other type of person is one who needs a credit card to purchase items and pay them off over an extended period.

Person #2

Is the most popular cardholder, so credit card companies advertise low interest cards to suit their demands.

All cards give you an annual percentage rate (APR) which gives a standard rate for the interest incurred on the balance you carry. Giving you the APR is mandatory for all credit card companies by the federal “Truth in Lending Act”? to inform consumers. It gives you the ability to compare apples to apples and oranges to oranges when choosing your credit card.

APR is not the only thing you should look for in a low interest rate credit card. As with all types of credit cards, they may have an annual membership fee, stiff penalties for late payments, and the APR being offered may be an introductory rate that lasts for a certain period then, changes to a much higher rate.

After comparing card benefits, your particular need, and the APR you are willing to pay, choosing is a breeze. Making the right choice comes with well-worth investigation. Before making any card selection make sure you read and understand the “Terms and Conditions” of the card.

If you take the time to look around you, there are credit card offers in newspapers, magazine, internet, television and some that come straight to you in the mail. So, how do you choose? This highly profitable market offers a plethora of benefits which will help you in choosing like low APR cards.

Start off by evaluating your needs in comparison with your lifestyle and how you spend your money.

• Do you shop regularly anywhere?
• Do you have a favorite gas station?
• How about groceries, are you faithful to a particular supermarket?

After answering these question, look into if these businesses offer store credit cards or a Mastercard or Visa co-branded card that you can used elsewhere. All of these types of cards offer some sort of benefit like a certain percentage discount when you use your card and an even better discount for its used at the store itself.

If you have a certain theme park you like to visit, they may offer credit cards as well. They typically accumulate points or rewards that have a monetary value at the park. I’ve known of people who actually pay for their entire theme park vacation using the points off of their card.

For those you like to travel there are airline credit cards where you rack up airline miles when traveling to be used on their airline. They may also offer special discounts, cash back and rebates, balance transfers or rewards when you use the card for general purposes.

Now don’t go crazy getting every credit card you see, just choose those that will offer incentives that you will benefit from on a regular basis. Maybe, you can travel to your dream destination or get a substantial discount coupon for a store you frequent. Who Knows? The rewards offered by today’s credit card companies are countless.

A credit card can be a very handy tool, since it makes it possible to make purchasing easier when we don’t have the cash on hand. It can be used for emergencies, making large purchasing that one cannot normally afford, or even great for helping to build a positive credit history. No matter what the purpose may be for the credit card, there are a few things to consider when choosing a low APR credit card.

APR – Annual Percentage Rate

The term APR stands for annual percentage rate, which is the fee charged to the card every month there is an outstanding balance. Even though it is an annual rate, the fee is usually charged on a monthly basis and added to the total balance on the card. The APR is usually determined by the credit card company based on the applicants past credit history and current credit score.

An annual percentage rate can vary from about 5% all the way up to 30%, and it can even change month to month depending on the terms of the credit card.

The APR is the method credit card companies use to make money off of their clients, and it is the price cardholders pay to be able to pay for purchasing over time instead of upfront. Even though there are additional fees associated with credit cards, the APR is usually the highest fee since it is based on the remaining balance on the card.

Because the APR is the main way credit card companies make their money, credit card companies can charge as much as they wish every month to make money. It is up to the cardholder or potential cardholder to choose a credit card that does not have a sky high APR, since it will only cost them a great deal of money in the long run.

Introductory Period – The Hook!

One of the ways that credit card companies get cardholders to pay such a high APR is by first extending an introductory period, which usually offers a 0% APR for a set amount of time. While it does seem like a dream come true to not have to pay any interest, the time period ends and a very high APR is tacked onto the card.

This is also the case for cards with a variable APR, since it has the ability to increase over time. The card will start off with a very appealing and low APR, but will dramatically increase as months pass by. This can make a cardholder owe a lot of money in the long run if they have a balance on the card, making it almost not worth it to use a credit card for purchases.

Choose Low APR with NO Introductory Period

The best bet for potential credit cardholders is to look for cards with low APR, and try and avoid those with introductory periods. A low APR is not always possible since it is based on current credit score, but the only way to fix that is by being a cardholder and building up a good credit history.

Choosing a credit card with a low APR is the best way to get all of the benefits a credit card has to offer, but you won’t have to worry about paying a great deal of money in the long run.