Disadvantages of prepaid credit cards

If you are a prepaid credit card user and enjoying the befits out of that then you should also be aware of the disadvantages that are associated with it. Please go through some possible disadvantages that you might experience:

• If you are making any online purchase then be careful and take extra precaution. Because when you will be making online purchases then credit card companies might make you fool, becuase it might happen that you are making the payment for a service or a product that you will never receive in life. So if you are making online purchase then take extra initiative. always trust on a site that uses "https://" at the begining of their concerned url.

• When you are going out and planning to use your prepaid credit card in order to make some purchases then make sure that you have the adequate balance, otherwise you will wait in the long queue and at the time of making payment to cashier you will remember that you are not having adequate balance, then it will turn into a prestigious issue. It may lead you to serious frustration level.

• Another problem of using prepaid credit card is that it's not like the cash in your wallet. In case of the cash you can check the availability in your wallet very easily, but in case of prepaid credit card you need to check the balance online. Even you can not carry the card overseas as foreign countries will not accept that.

• One more disadvantage that you will notice is that if you are using prepaid credit card then you won't be able to withdraw cash from ATM when you will require the same most.

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Ways to avoid bankruptcy

There are many people who think that filing bankruptcy is the most easiest way to avoid debt and all credit related problems. They don't understand that getting out of debt is very easy and one can live with a healthy credit gain. Several ways are there that can help you to get out of debt, just you need to be little patient. Remember, if you will file for bankruptcy, then you will receive a huge blow financially. It will have affect your credit report hugely for next seven years or some times even more than that. Hardly you will find any lender who will lend some one who has declared himself or herself as bankrupt within last two years. Even if they will offer you any loan then the rate of interest will be horrible for you to pay.

If you want to avoid bankruptcy and restructure your credit report then it is very much possible. You will find many credit card companies that offer easy approvals. But at the same time it creates many unnecessary credit card debt which is not a good plan at all. The credit card companies that will be ready to offer you the loan or easy approval they will surely charge a very high interest as they are also taking a huge risk by providing you the loan.

Sometimes you creditor might come up with an offer called "interest only" payments. But in no way it's going to help you, it will be simply wasting money. Because the "interest only" payment that will never reduce your principal value, so it's better to pay for something that will help you to reduce your value.

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Consolidating your debt

Debt consolidation loan means converting several loans into one single loan. The debt consolidation loan comes with low interest rate and the rate remains also fixed. People go for it because of it's low interest rate. Every one is having different financial condition, so only a single debt consolidation process might not be appropriate for all. So for different persons have different solutions.

There are several debt consolidation processes available for different people. But a small calculation is required to be made before starting with the consolidation process. Just do the small math. if you are having total debt of $25,000 on four separate credit cards @ rate of 25% then you can easily transfer the total balance or debt in a new credit card @18% rate. But you should check throughly before transferring your total balance in a new card debt whether transferring debt will be benificial at all or not. Because after transferring your balance if you will not earn any benifit out of it then there is no use of following that process. You should also verify that whether the new lower interest rate is for short period of time or for a longer period of time.

If some one is taking a debt consolidation loan against the home equity then the rate of interest will be very low and the monthly payments will also be very small. Some loans will come with some points, some loans will have pre payment penalty. So you will face various conditions. There are companies that will offer you debt consolidation guidance at free of cost. depending upon your financial condition some plans will be right and some will be wrong for you. So you need to choose your option wisely.

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Credit card scams

If you are a first time credit card user or using credit card for years then you should know about some possible credit card scams that you might be exposed to. Though most of the credit card companies are honest, in spite of that you will find few companies who will try to cheat you in every possible way. So you should be careful from this type of companies or the possible scams that you may expect from them. Here are few examples of credit card scams:

• Debt suspension: This is a kind of offer that is offered some times by banks in order to keep you on track with payments. In this process you pay a certain amount every month so that if you can not pay your bills then no interest will be levied on you. But in this way the payments that actually you are paying not reducing your actual due, moreover you are not getting any interest, you can not use your card during this time. So it might seem interesting in the initial stage, but ultimately it is helping you in no way. So if you are getting any credit card then make sure that this type of any "debt suspension" offer is not attached with your card. If it is there then get it removed at any cost and try to look for an individual insurance company that will help you in making payments when you are unemployed.

• Advance fees: There is another scam that you should be aware of and that is advanced fees. In this case the lender will offer you a card with attractive rates. When you will hear the attractive interest rates then you will jump to catch that card at any cost. Then the lender will tell you to make an upfront payment as administration or approval fee. Once you will pay the amount you will never get any further response from the lender's part. So if you will receive this type of offer then simply reject that. Because to avail a card you need not to pay any fee upfront, either you application will be accepted or rejected by the lender, but requires no money.

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How will you identify a good debt counseling firm?

Debt counseling is an effective means to know where you stand financially. Often we fail to realize that a financial revamping is required at times. And if you occasionally review your finances, it can save you a lot of financial upheavals. A debt counselor can help you in this regard. Debt counseling also referred to as credit counseling has helped many debtors to get out of debt. There are times when a debt load and financial hardship blurs your sense of reasoning. Under such circumstances you need professional help.

The manner in which a debt counselor will analyze reason and suggest a solution helps you to evaluate your financial situation. There are many debt counseling clinics operating in the industry and you may hit upon a debt counseling firm that appears to be reliable but may not be able to live up to your expectations. So, when you are cash strapped and trying hard to get out of debt, you will definitely not want to waste money on a credit counseling firm that will not justify your money's worth.

Identifying the correct debt counseling agency is of utmost importance and how will you find out one. The different aspects that you need to look into while settling for a debt counseling agency is as follows –

• Find out the fees they are charging
Most of the consumers complain about upfront fees charged by debt counseling or credit counseling firms. You should make sure that you get your money's worth if you take debt counseling sessions.

• Have they sent unsolicited mails for offering their services?
If the debt counseling firm is sending mails to you and urging you to enroll for a credit counseling session, stay away from such firms. Instead you can talk to your friends regarding the debt counseling firms that can offer you the right kind of debt help.

• Are they maintaining documents?
Check whether the services they are offering have been documented. You should get everything in writing to avoid any disconnect in future. Avoid debt counseling firms that shy away from maintaining proper documents.

• Do they offer tailor made debt solutions?
No 2 debtor can have the same kind of debt problems. So, the debt relief options will also differ. If they offer debt relief option that is the same for everyone, it may not help you in the first place.

• Shop around
You can find out a good debt counseling agency if you shop around. You will also find information about debt counseling agencies from the following –

• National Foundation for Credit Counseling
• Yellow Pages
• Association of Independent Consumer Credit Counseling Agencies

So, instead of being ignorant, know thoroughly what debt counseling or credit counseling is all about so that you are not taken for a ride. This is because the "smooth operators" of the debt help industry target the ignorant.

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Smart Debt Management (Part-2)

People who are following smart debt management process can reduce both, their balances that they owe and the span of time that they will probably take in order to pay down their credit card debts if they will follow the normal payment procedure without proper debt management plan. If you will make a payment that is above the minimum payment, then it can make big difference and is a process to bring down what you owe. If a consumer will make the payment of same amount which is similar to minimum amount without noticing that the credit card company is imposing the minimum payment in attempt to keep your balance higher which can help your credit card balance and is an example of practicing smart debt management. If you are making your monthly payment on time then it is also a good way to improve your debt management.

Even if you will be late by one day in making payment then also it will be regarded as late payment and it will cost you the late payment fine and various times you will notice that the credit card companies have increased your interest rates on credit cards. It will make harder for you to make the payment of balances.

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Title: Debt solutions can help you to wrap up debts

There are many debt solutions you can choose from. And if one debt solution is a good option for you, it may not be a very good option for someone else. The Better Business Bureau has urged consumers to have a thorough understanding of the debt solutions that they are opting for. This is because reports suggest that the debt help companies have taken many consumers for a ride by taking advantage of their ignorance.

Some of the debt solutions that you can opt for include debt consolidation, debt management, debt negotiation, credit counseling and bankruptcy. Bankruptcy is undoubtedly a debt help option that can make you debt free. Although it is a last resort but if no other debt helps option works for you then you will have to file bankruptcy.

Credit counseling is a good option to get out of debt. A credit counselor will assess your financial state and guide you according to your need. A credit counselor will be able to help you to select the debt solution that will meet your current financial requirement. As per the new federal bankruptcy laws, credit counselor has been made mandatory. However, the pre bankruptcy briefings have to be from a credit counselor that should be approved by the government.

Whether you are opting for debt consolidation, where all your debts are consolidated and then addressed or debt negotiation where the outstanding balance of debt is reduced, all the debt solutions help you to get out of debt either by reducing the interest rate or by lowering the monthly payment. You will also get a new repayment plan according to which you will have to make payments each month.

The effect of the different debt solutions on your credit score will differ. Among the debt solutions mentioned here, bankruptcy is the debt relief option that will harm your credit score the most. If you file bankruptcy, you may not be lenders’ favorite and it will take a lot of time before you can win the confidence of your lenders again.

Whenever you are looking forward to wrap up your debts with professional help, make sure the debt help company you are choosing is authentic and reliable. You can find it out from the Better Business Bureau or by asking friends who have availed their services before. Even if you are taking sometime to look for a good debt help company, it will be worth the cash you are spending for getting debt relief. This is because many unreliable and fly-by night debt help clinics have mushroomed all over that take your cash and leave you at a point where you had started from.

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Title: Debt income ratio determines how healthy you are financially

Debt-to income ratio or debt income ratio is that percentage of an individual's income that is used to pay debts. It includes not just debts but also fees, taxes, insurance premiums etc. Your debt income ratio is also used by lenders to find out if you are eligible for a mortgage on favorable terms or not.

Debt-to income ratio is made up of 2 kinds of ratio. They are as follows –

One is the front ratio and the other is the back ratio. It is represented as front ratio/back ratio.

Front ratio
The front ratio is the percentage of the income that is used for housing costs, mortgage principal, interest, property taxes, mortgage insurance premium, hazard insurance premium etc.

Back ratio
The back ratio includes expenses that are included in the front ratio and also the amount that is spent for credit card bills, car loan payments, student loan payments, alimony payments, child support, legal judgment etc.

The acceptable debt income ratio is 28/36. The current limits of the debt-to income ratio in the United States is as follows –

• FHA or Federal Housing Administration limits are 31/43
• A debt-to income ratio of 28/36 is the conventional financing limits.
• VA limits use only one DTI and that is 41.

It is always better to take out a mortgage as per your eligibility. This is because; there were many borrowers that had taken out mortgages by manipulating their debt income ratio so that they could take out a bigger mortgage. However, it was found that these borrowers started defaulting and missed several monthly mortgage payments only to be a victim of foreclosure.

How will you calculate the DTI or debt-to income ratio?
In order to calculate your debts, the first thing you need to do is make a list of all your debts. You can make the list of debts in the following manner –

• Monthly mortgage payments
• Monthly credit card payments
• Home equity loans
• Student loan payment
• Alimony
• Child support
• Miscellaneous debts.

Once you have listed the debts, calculate your income. You can make the following list to calculate your income –

• Make note of your income
• List down the income of your partner
• Miscellaneous income

Now, divide the total monthly debts by total monthly income, you get the debt-to income ratio. If the DTI is 30, it is regarded as excellent, DTI between 30% and 36% is good and debt income ratio of 40% indicates that you will not be able to enjoy financial benefits unless you work upon your debt-to income ratio.

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Title: How To Lower Credit Card Debt By Age 40

If you would soon become 40, you might think that this is a milestone in your life. This is the time when majority of people believe their "middle age" starts. You begin to consider retirement and shortly your kids would go out of the home and you have to live all alone. However, it is most likely that you don't wish to turn 40 and you want to move ahead in life by eliminating your credit card debt. Know the most useful tips to help you lower your credit card debt when you become 40.

• Assess your credit condition very well. If you wish to lower your credit card debt by the time you become 40, then you have to understand what actually your present status is. It might be difficult to work out the amount that you owe, however, this is essential. Take your time to assess your financial condition and work out the number of credit cards you have and the amount you owe on every card. This would provide you the capacity to get rid of your problems as soon as you understand what your problems are.
• You should preferably stop utilizing your credit cards. If you are able to stop using your cards, you would come much nearer to coming out of the credit card debt trap. The less you use your cards, the less you need to pay off. This is one of the proven techniques to lower credit card debt.
• You should only charge what you can pay within 30 days. There are instances where you might have to use a credit card. If this is absolutely necessary, just ensure that you are not charging anything more than what you're able to pay back within a grace period of 30 days that has been allowed to you. As soon as you receive the bill, make the full payment. In this manner, you would not sum up further credit card debt to the amount of debt you're attempting to lower.
• Begin to pay off your credit card debt. Once you understand your credit condition, you have to begin paying off those cards if you wish to lower credit card debt by the time you become 40. The most effective means to perform this is to find out which card carries the highest interest rate. After you determine this, begin to pay as much as you can on the card with the highest interest rate till it is completely paid off. Subsequently, begin paying off the card with the next highest interest rate. Just continue performing this till you pay down all of your debts. Paying off in this fashion would help you prevent excessive payment on interest in the end.
• Think about a debt consolidation loan. Debt consolidation involves taking out one large loan to repay multiple debts with smaller amounts. On certain occasions, the most effective and quickest technique to lower credit card debt is to obtain a debt consolidation loan. These loans would assist you to pay down all your credit card debts promptly. Then you just need to make one payment every month to the lender and normally it carries a low interest rate. The rate is typically decided on the basis of your credit, so the higher your credit, the less would your interest rate be. Normally, you would see that you're saving money and repaying debt much sooner by utilizing this technique.

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Title: How do you identify a reliable debt and credit counseling firm?

Debt counseling also referred to as credit counseling is an important option that can make you debt free. It has proved to be very helpful for consumers and if you fear that you may face a financial crisis in near future, this is one of the options that can ease your financial burden. So, a debt counseling session will be able to help you if you foresee a financial showdown in near future or you are already in debt and trying to wrestle out of it.

When you approach a debt counselor or a credit counselor, your current financial status is first taken into account. It includes details of your income, expenses, taxes etc. Your expenses will include all your monthly financial obligations.

Once you have decided that you will be opting for debt counseling, you have to look for a debt counseling firm that will be able to meet your requirements. There are many credit counseling agencies operating in the debt help industry. Are all of them reliable? No they are not. So, how will you identify a credit counseling agency that you can bank upon?

Go through the following points to find out how you can identify a reliable debt counseling agency.

• Good debt counseling firms use referrals for getting clients

If the credit counseling or the debt counseling agency you are hiring put up flashy advertisements and send mails and notification urging consumers to avail services from them, stay away from these firms. It must be remembered that a good debt counseling firms will get clients from past referrals mostly.

• Track past records

You can also find out from your friends and relatives if they have availed such services before. You may get vital information that can help you to take a decision.

• Are the counselors qualified enough?

The debt counselors you approach should be qualified enough to help you and give you proper guidance.

• Understand the services that are being offered

Once you contact the right debt counseling firm and get to know the services they offer, make sure you understand the services that they will be offering.

• Get all their promises and commitments in writing

The services that will be offered by them need to be documented. This will be helpful because in case they refuse to fulfill their commitment, you can show the documents where they had promised to deliver their services.

• Fees charged by them

As far as the fees charged by them are concerned, make sure they will do justice to the cash you are spending on them.

• The services offered by them should be customized

Every debtor cannot have the same problem so the same remedy will definitely not work for all. Make sure that the services offered by them can be customized.

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Smart Debt Management (Part-1)

People who are using credit cards or carrying credit card balances, they need to have proper debt management skills. Because it's really necessary to have a proper plan in order to make the payment of the due balances. Credit card companies have number of schemes that will enable you to make the payment of those balances. The minimum payment procedure is one among those.

If someone is going for the minimum payment option then that person would probably be paying his dues for many years. Even the interest rate will be very high as you would be paying for long period. Another tactics that the credit card companies often follow is playing with the interest rates that customers pay. They actually offer very attractive rates for first 6 months or 1 year, after completion of the specific period they pay increase the interest rate much higher compared to the interest rate of the introductory period. This tactic draws more attention of the customers and they happily accept that and at the same time they also help credit card companies to make more profit at the expenses of consumers and their family budgets.

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