Have You Checked Your Credit Cards Lately?

Have you checked the credit limits on your credit cards lately?  If not, you might want to take time to do just that, especially since roughly 50 million Americans’ credit card accounts were either closed or had their credit limit cut in the past 30 days.  That’s about 1 in 4 credit card holders, and of those, men between the ages of 18-38 years old were particularly affected.

Credit CardWhat’s even worse is that lenders are not even required to tell you when your credit limit is lowered, so you may not find out until you’re ready to actually use that credit card.  Why now, you wonder?  Truthfully, this is another financial side effect of the COVID-19 pandemic.  Early on, lenders reviewed accounts, then lowered some credit limits to reduce their risk of loss if it appeared that consumers would struggle to make payments, or even use the cards to live on, as unemployment skyrocketed across the country.

Sadly, these credit cutbacks occurred just when household budgets were hit the hardest.  Not only are families using their cards frequently right now, but some are having to use them to make ends meet until unemployment funds start coming in, or to buy essential goods.

Unfortunately,  even though this makes sense for the credit card companies, it didn’t make things any easier for consumers.  But, in their defense, total credit card debt has been growing steadily since 2015, and is hovering right around $1.1 trillion nationwide.  And, even before the pandemic, delinquencies had already hit a seven year high as many families struggled to meet payments.

While we don’t have exact details, some cardholders have reported credit limit reductions in the thousands of dollars, so you’ll want to log in to every account to check your limits. Then, if you find your credit limit has been reduced, contact the issuer and request that they reconsider the reduction, or even in some cases, closures of accounts that have been dormant for some time.

In fact, you may want to consider moving a couple of small recurring payments to a dormant card, like Netflix or Hulu subscriptions, and set it up on autopay to handle payments, just so that the card is not considered dormant (and subsequently closed).  Just that one regular monthly charge will keep your credit card account active without adding any unnecessary expense to your budget, thereby  preserving the now-active card’s larger spending limit for true spending emergencies.

Surviving the Crisis

By now, many who’ve been laid off, furloughed, had our hours cut, or worse, are really running tight on cash, even as the pandemic rages on.  While both federal and state governments have promised quick access to unemployment funds, stimulus checks, and other forms of help, these things take time.  Time that you may no longer have.  So, what are your options?

If you’re fortunate enough to have credit available, you may want to consider using your credit cards to get you through the immediate cash crunch.  However, you’ll definitely want to sit down and consider all of your options first.  If you’re already in too deep with credit cards, racking up more debt might not be the best thing to do, especially if you don’t have a plan to repay the debt once you get back on your feet financially.

But, if you do expect your cash flow shortage to be temporary, and you do have a plan to pay off the debt you incur, then you may be able to utilize your credit cards to get through it.  By using your credit cards to pay when you can, you can save cash to pay for things like your mortgage, car payment, certain utilities, etc.  This one move can give you the time you need to get through a cash crunch, whether that means going back to work, getting your stimulus check, or starting up unemployment.

 

 

It’s a Great Time to Review Your Finances!

By now, many of us are getting bored with Netflix, our little home improvement projects, our hobbies, working from home, homeschooling, being laid off… the list could go on and on.  The point is, we’re all looking for different things to focus on, and as much as you might not want to, now is the perfect time to focus on your money.  I know that right now it’s much easier to just stick your head in the sand and pray that it’s all going to work out, but can any of us really afford to do that?  Seriously, if you’ve lost your job, you’re already stressing out over money, and if you’re still working?  Maybe you’re not sure how long that will last?  Either way, when you really sit down and think about it, it’s a great time to review your finances and your credit.  Yes, I know what you’re thinking… why depress yourself even further?

Actually, reviewing your finances right now might do more than depress you.  It can also give you the time to figure things out.  If you’re laid off, you can plan how you will catch up once this forced period of economic misery is finally behind us.  We’ve all heard about the economic stimulus, and the four full salaried months of unemployment that we’re being promised, but how will that fit into your life?  Can you make it work?  Can you catch up?  Or, if you’re still working, how can you use that stimulus money to your best advantage?  What can you do to get back to where you were financially before this forced shutdown.

See what’s happening?  That’s right, you’re making a plan to survive, to dig yourself out of this crazy mess that we’re all in!  If you’ve been reviewing things, you now know what you have in the bank, how much your monthly bills are, how much and where you can trim your expenses, how much credit you have available… things you probably didn’t know two weeks ago.  Things that will help you to survive once the pandemic is over and we all get back to living.  And even you have to admit that you feel just a little bit better, don’t you?

 

Tax Refund Burning a Hole in Your Pocket?

Money In PocketTax refund starting to burn a hole in your pocket?

It’s tempting, isn’t it.  You know, every year millions and millions of people file their taxes, cash their refund checks (or withdraw the cash from the bank when it arrives in the account), and spend it within a matter of days.

It seems as if there’s always a project that they want to do at home, or something that they just can’t live without, or even somewhere they can’t just NOT go.  Whether you’re tempted by new laminate flooring, a new car, or even that trip to the beach for spring break, don’t spend ALL of your tax refund so quickly this year.  Instead, why not set aside a portion of it for that emergency fund you’ve been meaning to start?

That’s right, SAVE part of your tax refund this year.

It took you ALL year to pay the taxes that resulted in the refund, so why not keep it a little bit longer than it’ll take you to get to the nearest home improvement, electronics, or automobile store?  Maybe you can rent a cheaper condo or hotel room on spring break?  Surely, there is some way that you can hang on to a portion of that tax refund?

Let’s face it, for some of us, that’s the single largest lump sum amount that we see all year, and it’s likely impossible that we’d be able to save that amount as easily as we get it once we file those taxes.  So, for once, why not think ahead.  Sit down with your checkbook, savings account, and budget, and really think before you spend.  Even if it’s only 10% or 25% of your tax refund, SAVE IT.

Put it in your savings account.  Draw it out of the bank in cash.  Do whatever you need to do so that you don’t spend it frivolously this one time.  I promise you, once you manage to save just a portion of it, just one time, every year you will strive to save a little more.  Don’t believe me?  Why not try it this year.

New FICO Scoring Could Change Your Credit Score!

FICO’s new scoring model, which was announced this past week, will likely lower credit scores for those with a current credit score below 600, as it is based more on the past two years of payments, and it takes personal loans into account.  However, those who already have good credit scores, and who continue to whittle away at existing loans, make payments on time, and don’t acquire new balances, will likely see higher scores under the new model.

“We’ve unfortunately found ourselves in an era where it’s becoming commonplace to water down the breadth of information on credit reports,” Ulzheimer says, adding that tax liens, judgments, medical collections and medical debt have all been removed or delayed from some credit scoring models.

“All of this is great for consumers who have tax liens, judgments, and medical collections…but it’s not great for scoring models and their users,” Ulzheimer adds. But he notes the new scoring model is not “consumer unfriendly” either. “People with good credit are going to score higher with newer models. People who have elevated risk are going to score lower.”

Despite the changed scoring model, it may take a while for it to hit your credit report.  “Change comes slowly in credit monitoring,” says CreditCards.com’s industry analyst Ted Rossman. “Rather than getting too hung up on which model a particular lender is using, consumers should practice fundamental good habits such as paying their bills on time and keeping their debts low,” Rossman continues.

Of course, ultimately, which model is used will be decided by banks and other lenders.  FICO 9, released in August 2014, is still not used across the board.  Many lenders still use FICO 8, whick was released in 2009.  And still other lenders use VantageScore, which is produced by the credit bureaus Experian, Equifax and TransUnion.


10 Ugly Truths About Credit Cards

Credit card debt is one of the most difficult financial obstacles to overcome – interest rates are high, minimum payments barely scratch the surface of the actual debt, and it’s just so, so easy to fall into the trap you set for yourself whenever you use your credit cards without having a real plan for paying them off.  Unfortunately, the ugly truth about credit card usage has only gotten uglier in the past few years.  Not only have interest rates risen, but credit card use itself has tripled, and there doesn’t appear to be an end in sight.

Here are just a few of the down and dirty truths about credit cards and the debts we carry… and you might be surprised at just how much you don’t really know!

1. Nearly Half of the Population is in the Same Boat You Are

That’s right, you’re not alone.  Nearly half (46%) of all adults carry a balance on their credit cards from month to month, and since interest rates rarely drop, we’re all paying a premium for those purchases we made on that card.

2. It Takes Years to Pay Off Some Balances

If you’re like most people, and there are months when you can only pay the minimum payment, it can be very difficult to pay your credit card balances in full, ever.  For example, if you carry $3,000.00 in debt, at 17% interest, over time, your interest charge can easily amount to another $3,000.00.  That’s DOUBLE your initial balance – take a look at how much of your monthly payment actually goes toward the principal.  You might be sick.

3. Americans Aren’t Paying Off the Balances

Even though we’re really good at spending money, it turns out we aren’t nearly as good when it comes to paying the balance off.  In fact, for every dollar on average that we pay off, we’re adding another $2.65 in new debt.  It doesn’t take a genius to figure out that this cannot continue indefinitely.

4. The Average Household Credit Card Debt Is $5,700 

Even though the overall economy has improved significantly, the average household still carries around $5,700 in credit card debt, and are still unable to pay off much of that debt.

5. Interest Rates Are Not Coming Down

Even though the economy has improved, and mortgage rates, car loans, and other types of loans have low interest rates right now, most credit cards average at or above 16% interest.  Make just one late payment, and that can jump to 30% (or higher).

6. Just One Late Payment Will Damage Your FICO Score 

Even though it’s better to pay late than not at all, making just one payment that is more than 30 days past the due date can really harm your credit score for a very long time.  Payment histories stay on your credit report for up to seven years and can cause your score to drop significantly.

7. Baby Boomers Have the Least Amount of Credit Card Debt 

Perhaps it’s because baby boomers are aging, but the least amount of credit card debt belongs to the Baby Boomer Generation, while Gen X owes the most.  Born between 1967 and 1981, the average Gen Xer holds a credit card balance that is nearly $8,000. Even more telling, credit scores have historically dropped lower with each successive generation, meaning the successive generations will likely carry a larger balance than the Gen Xers.

8. 20% Of Americans Have More Credit Card Debt Than They Have In Savings

Even though it’s recommended that we all build an emergency fund that will cover three-to-six months of living expenses, most people have less than $1,000 in savings, and another 12% don’t have any emergency savings at all.  That means an emergency can quickly put most people into credit card debt.

9. Women Carry Less Debt Than Men 

Even though women are the “shoppers,” men actually carry more credit card debt, coming in at an average of $7,407 vs. women, who carry about 22% less, or $5,245.

10. Most of Us Will Die Carrying Credit Card Debt

Approximately 65% of Americans will owe credit card debt up to the day we die.  That’s more than those of who are not expected to leave this earth without a mortgage.  The average debt, which is more than $4,000, also leaves a legacy that family members have to deal with.

In closing, understand that credit card debt is an ugly problem that we Americans have yet to take control of in our own lives. But, it doesn’t have to be the norm – not if you take action now.  Control costs where you can, pay as much as you can on those balances, and stop the cycle before you find yourself struggling. 

Controlling Debt While You’re in College

1. Don’t wait until you finish school to start paying back those student loans. Even if you’re only paying the interest that’s accruing month to month, start paying what you can as soon as you can.

2. Get a job while you’re in college.  Wait tables, run a cash register.  Just do something to earn money.

3. Get your own place, off campus, as soon as possible.  Many colleges require you to live in a dorm the first year, but as soon as that’s over, get a place!  (If you’re in the same city as your parents, and if it’s feasible, live at home while you’re in school.

4. Skip the college meal plan.  You can make your own food for far less than it will cost you to eat in the cafeteria all the time and you can make food you really like!

5. Keep your day to day expenses to a minimum.  Skip that $6.00 cup of coffee!  Make your own at home.  Take a snack, pack a lunch, park the car and walk.  Whatever it takes, cut your daily expenses.

7. Skip the partying.  Let’s face it, alcohol is EXPENSIVE.  Parties are expensive.  You’re in school to earn a degree so that you can earn a living.  Keep your partying to a minimum and concentrate on your studies.

Getting Your First Apartment?

Are you a recent college graduate? Starting a new job in a new city? Maybe you’ve just now saved up enough money to get your own apartment? Maybe you’re just moving from one rental to another? Whatever your reason for moving, one thing that you don’t want to neglect is rental insurance! Even if you think you have nothing to insure, you really do when you think about it.. and there are other reasons for rental insurance, too.

Even though you’re just starting out, or even if you’ve been renting for a while, you will almost certainly be required to have insurance on your furniture, your personal items, and even, in some instances, your pets! And while it’s tempting to just call the place where you have your car insured, that may not be your best option. You still want to make sure you’re getting the best price and the best coverage for that price.

The Best Time to Improve Your Credit?

Ever wonder when is the best time to work on your credit score?

Should you work on it around the first of the year when you’re looking at your budget, taxes, and spending for the previous year?  When you’re wishing you had enough money to take a vacation this summer?  Should you work on your credit when you’re in desperate need of a credit card so you can afford Christmas gifts?  How about when your car goes kaput and it’s past time to invest in another one?  Or when you want to buy the home of your dreams?

The truth is that there is no perfect time to start improving your credit score!

Why wait until a major expense looms and you’re scurrying around trying to find somewhere, anywhere to get the funds you need to get past the latest financial crisis?  Instead, why not start working on your credit score now, before you need good credit, before you’re forced to accept that higher interest rate mortgage, car loan, or credit card!

Let’s be perfectly honest here, the time is going to pass anyway, so why not work on your credit now?

Summer Vacation is Looming!

Summer is almost here! 

Are you planning a vacation?  Or are you still trying to figure out how you’ll afford to take even a small vacation?

You know, one of the easiest ways to save money (and be able to afford that vacation) is to cut expenses, and the easiest way to cut expenses is to cut something that you won’t miss.  Like credit card interest charges!   Think about it… you’re already spending the money, but if you were able to cut out that monthly interest, what would you miss?  The answer is absolutely nothing!  Not only would you have to do without something, but you’d have more money each month.  Money that you could save for that summer vacation!  Or use to pay off your credit card early, or use to buy something that you really need, or any one of a hundred other things!  Who wouldn’t want to save money that way?

Of course, if you’ve already paid your credit cards down, and you’re actually planning to use them to take your summer vacation, then that opens up even more possibilities.  Have you figured out which credit card you’ll use?  Have you looked at the interest rate you’ll pay?  Does it have travel rewards or cash back rewards?

Would you benefit by getting a different credit card that better suited your needs?

And, don’t forget your credit score! If your credit score has improved over the past few months, or years, depending on how often you review your credit cards, then you definitely need to make sure you’re carrying the right card before you ever leave the driveway this summer!