Tips on Avoiding Huge Credit Card Bills

Credit card debt is one of the biggest problems that cash strapped Americans have are facing today. With salaries taking a beating and uncertainty about jobs preying on their minds, many Americans use their plastic to buy things because they do not have to pay for them right away.

Although users conveniently forget that credit card balances have to be paid off sooner or later, the issuers don’t forget to send the bills at month end. Instead of running up huge bills on your plastic that will wipe out your entire savings to repay, it is far better to keep a check on how you are using your card.

Monitor Your Card Spending

A great way to ensure you always have the cash to pay back credit card dues is to keep a list of purchases that you make using it. Update the list diligently whenever you use the card so that at month end you know exactly what you owe to your credit card company. This list will also help you detect any errors in your billing.

To further strengthen your monitoring system, you can have a separate account where you keep a certain fixed balance every month to pay off your credit card bill. Never, ever overshoot the amount in this account with your card purchases. This sets a clear budget for you to stick to and makes sure that your credit card spending is limited to a manageable level.

Compare Offers to Find Better Deals

Just like any other financial product, different card issuers offer different terms of use and rates on their cards. If you find your card unmanageable, see if you can transfer to an issuer offering a better rate. Factor in cancellation charges and fees that will apply on your current card. You can also try negotiating with your existing issuer if he will offer reduced rates to retain your account.

Avoid Using Credit Card as Cash

Wherever you can, use cash or your debit card instead of your credit card. Neither cash nor debit card will present you with a bill at month end and you are also limited to the actual amount of cash in your account when you use them.

A credit card should be used only when you need to make an emergency critical expense, say, buying gas for your car when you are miles way from home and don’t have your wallet. It can be used as a substitute for cash when you need to make large purchases and want to avoid carrying cash with you. In such case, set aside the money you expect to spend in your special credit card account before you go out shopping.

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You will find many tempting offers by companies claiming that they can settle your huge debt for a small amount. Many people may be lured by these promises, but in reality, these promises are hollow and there is no way of getting away by paying a small part of your debt.

You could still be attracted by these promises as you may feel that they cannot be completely baseless. The companies that make these tall claims are themselves unsure about the results and will charge you a lump sum fee instead of a commission based on the amount of settlement.

These companies are debt settlement companies. They exploit the desperate situation of a person who is facing the burden of too much debt and who will clutch at every last straw. They rely on the principal that creditors would rather get some money back than none.

What They Claim

Debt settlement programs take monthly deposits from customers. They keep depositing the money in a bank or a trust until the total amount is a substantial proportion of the total debt that is owed. After that, they negotiate with the lender and offer that amount for complete settlement of the debt. According to them, this will substantially reduce the total amount that you’ll have to pay.

Why it Doesn’t Usually Work

You may think that this does not seem like a really bad proposition. However, the lenders agree to settle the debt only at the stage when the borrower has been consistently defaulting. You will have to wait around six months for the debt settlement company to make an offer to the lender. Meanwhile, you will have to bear the pressure of the lender for debt collection. It will start with letters and calls. You will then be given legal notices and even summons. If the lender starts court proceedings, then you could be in a lot of trouble by the time you collect enough money to pay back your lender.

Moreover, there is a good chance of the lender refusing to settle. You will just end up bearing the menace of collection calls. You can lose all the fees that you gave to the debt settlement company, irrespective of the results.

Your credit score would fall because of default in payments. Further, even if you get a settlement, the part of debt that you don’t have to pay will be considered as income and taxed by the IRS.

There has already been a lot of criticism of dubious debt settlement companies and how they operate, and the Federal Trade Commission is in the process of investigating the industry.

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Yuan ‘Substantially Undervalued’- Latest U.S Treasury Report

The latest report from the U.S Treasury states that the Yuan is ‘substantially undervalued’. The artificially suppressed valuation of the Chinese currency has been a bone of contention for a while now for manufacturers in the U.S. Their grievance is more than justified as they continue to steadily lose potential customers to the Chinese manufacturers who make cheap substitutes for U.S. produced wares available in the market.

The line taken by the Treasury with this report is a markedly stronger one than the ‘undervalued’ prognosis it gave to the Yuan in the earlier July 2010 report. Back then, this ‘mild’ reprimand was considered as a political placebo offered by the government to keep U.S manufacturers happy without ruffling any Chinese feathers. Even this time, the report was kept ‘on ice’ so to speak until after the Washington visit by the Chinese President.

During his visit, President Hu Jintao made all the right noises about being keen on currency reform. The Yuan has, in fact, been appreciating ever since the Chinese verbally committed to kick start a currency revaluation program back in June. However, the stronger tack taken in the latest report still falls far short of expectations that the major power houses in manufacturing had from the U.S government.

Lawmakers and manufacturers alike would prefer that the White House stopped treading softly on the issue and labeled China a currency manipulator’. The problem has to be dealt with immediately and with effective steps, they believe. Senator Charles Schumer, who has been vociferous in his call for action against China, reiterated his stand that concrete action from the Congress is an immediate necessity.

The Treasury has chosen to soft pedal the issue with a statement justifying its stance. Treasury spokespersons have said that China will soon realize that opting for a nominal currency exchange rate is in its best interests, owing to economic pressures. The report lauds the relaxation on Yuan use that the Chinese government has adopted in recent times as a move in the right direction. In time, these factors will lead to a more market relevant and fair valuation of the Chinese currency, according to the U.S. treasury.

An interesting fact is that although the Republicans are now in charge of the House, there still has not been any bill proposing punitive action against China by lawmakers. This is in spite of the fact that several Republicans have openly criticized Obama’s ‘kid gloves treatment’ of China with respect to the currency undervaluation issue. All in all, it appears that the Republicans are as wary as their Democratic counterparts of antagonizing U.S’s largest trade partner.

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Managing finances when you are in college can go a long way in ensuring that you graduate with no debts. You can manage your college finances with relative ease if you are willing to spend money wisely and save money when you can. Here are a few tips that you can use for effective money management in college.

Create a Plan for Expenses

The first step to managing your finances is to create a plan for your expenses. By creating a plan, you will be able to stay within a range and not go over what you can afford to spend in a period of time. One of the main financial problems students face has to do with borrowing money to meet expenses that their funds can’t meet. By borrowing frequently from more than one lender, you can pile up a huge debt by the end of college.

Your expense plan will help you establish benchmarks for expenses. At the same time it will give you a sense of flexibility for spending, because with an expense range, you can spend more freely, without exceeding your limit. For instance, with a strict budget restricting you to spending $10 a day, you may feel uncomfortable when you have an urgent expense to meet. Instead, create a range of $70 to $90 a week and this way you can spend more on one day, and spend less on another, giving you the freedom to decide how to spend money.

Start a Contingency Fund

A contingency fund is important for students because it can serve as a back up fund when something goes wrong. While borrowing money in a crisis from friends and family may be an option when you have the time to ask for and receive the money, it may not be possible when you are in immediate need of money. With a contingency fund, you can access money for your immediate needs without having to worry about who to borrow it from.

Avoid Using Credit Cards

Careless use of credit cards is another reason why students accrue debts. As money loaned on credit cards has a high interest rate, paying it off on a student budget can become difficult. If payments are not made on time, your credit card debt will keep accruing. So always avoid using credit cards; instead, use cash from your student fund.

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Most people in a financial crunch fear shopping expeditions the most. These are often the times when money simply flows out of your pockets without your even realizing it. However, it is impossible to eliminate shopping completely. After all, you do need the groceries, staples, consumables and other essentials. These tips will help you shop wisely so that your spending is limited well within your budget.

Build Loyalty

Shopping with one specific store often pays off. All big stores generally have ‘loyal customer’ cards on which points accumulate every time you make purchases there. These points can be exchanged for other goods or in some cases, discounts. If you have a reasonably priced store nearby, then make a conscious decision to complete all your shopping when you visit it. Ask the store personnel for a Loyalty card or a frequent shopper card and make sure every purchase gets recorded against it.

Discount Coupons

Discount coupons are another marketing idea that many stores use to make their outlets more attractive to potential buyers. These coupons are good news for you too. Start collecting coupons of local shops from newspapers, magazines or even online sources. Put them aside carefully in one specific place so that they are within easy reach when you need to go shopping. Remember to look through your collection of coupons before every shopping visit so that you can avail discount on the to-be-purchased products without fail. These discounts will add up over the year to significant savings.

Stick to the List

Always make a list of things you need, before you go shopping. It is, in fact, a good idea to make list-making a habit. Just put up a small pad and pencil in a place where you catch sight of it frequently. Keep adding items to this list as and when you run out of them. This way you’ll have a comprehensive list and you can limit yourself to these items alone when you go shopping. Also, just take enough cash with you to cover these items and no more.

Stock in Bulk

There are some items you can stock in bulk when a sale rolls by. Keep an eye on your favorite store’s regular sale dates and buy items that are not perishable during the sale. Get as much as you will need to cover usage until the next sale. Items like tissue rolls, soap, nuts and bolts, even clothes, are good candidates for bulk purchasing.

These tips will help you restrict your shopping expenses to essentials and cut back total monthly expenditure to a manageable amount.

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Credit cards are synonymous with debt and your unaccounted spending can lead to debts that may not be good for your financial health. Here are 5 risks associated with credit cards that you should be aware of:

Using credit cards on unsecured sites

To prevent identity thefts, use your credit cards only on secured sites. Secured sites are encrypted and prevent hackers from stealing your credit card details. To see whether the site is encrypted, check if there is a lock icon on the address bar. An encrypted site will always show ‘https’ instead of the normal ‘http’ in unsecured sites.

Giving credit cards to employees

Credit cards given to employees should have a credit limit, as there is no guarantee if the employee will spend money with the right intent. There have been instances when employees have swindled large amounts of money. MasterCard’s inControl credit card is a good option as it lets you set a credit limit. Once the credit limit is reached, no transaction can be made. The best way of course is to keep track of your account balance.

Giving credit card to your kid

A kid with a credit card can be dangerous. The credit card act prohibits anyone to issue credit cards to people who are under the age of 21. If you still decide to give a credit card to your daughter or son, make sure that you authorize by signing on the expense receipt or your child has your permission before spending. However, the best thing you can do is not to give your child a credit card.

Spending till the limit

Try to curb your expenses. Spending more than you can afford to pay off can impact your financial health negatively. If you spend till the maximum credit, your credit score goes down. Also, a sudden usage of your credit limit can lead to an increment of your interest rates. So, it’s better to think before spending too much with a credit card.

Improper card disposal can be risky

If you want to close your credit card account, confirm with your issuer that your outstanding balance is zero. Pay off your entire debts before closing your account. Interest may pile up if you do not clear your dues. Another important thing to do is to destroy the magnetic strip on your card by applying a strong magnet before disposing it.

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Taxes constitute a significant portion of annual expenses a family has to incur. Plan your taxes carefully to avoid shelling out large amounts of your hard earned income on deductions, which could have been avoided. These tax planning and saving tips can help you manage your taxes better:

A new graduate

A new graduate can save taxes in a number of ways. If you are relocating to a place more than 50 miles from your current location and your relocation amount hasn’t been reimbursed by your employer, you can deduct the cost incurred by you for the trip. You can also deduct travelling expenses taking into consideration 16.5 cents a mile. If you have taken an education loan, the interest paid on the loan can be deducted.

Your first job

The cost you incur while looking for your first job cannot be deducted but cost incurred while changing to a new job including travel expenses, cost for printing resumes etc can be deducted from income for tax calculations. Unfortunately, if you decide to change your line of work or the total costs incurred do not exceed 2% of your total earnings, the amount cannot be claimed as deduction.

Your marriage

Getting married doesn’t necessarily mean that you have to pay more taxes. Couples filing joint returns are eligible for more deductions, credits and a smaller tax rate in comparison to a separate filing.

Birth of your child

As soon as your child is born make sure that you obtain a social security number for the newborn (at the hospital). Claiming your newborn as a dependent will help you save a considerable amount on taxes. You will also get a $1000 child tax credit every year till your kid turns 17.

Buying a new home

You can deduct mortgage interest of up to $1 million when you buy a new home. Local property taxes that you pay each year can also be deducted on a new home. In addition to these, energy credits are also available that can help you save a lot of money on taxes.

Serious Ailments

Medical bills are deductible but only if the expenses you incur is more than 7.5% of your AGI or adjusted gross income.

Buying a second home

Mortgage interest is deductible on the second loan just as the first. If you rent your home for less than 14 days, you get a 100% tax break.

With some smart planning, you can save a lot of money on taxes. Update yourself regularly with the latest changes in tax rules to make informed decisions.

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Travelling can be fun especially if you are traveling to exotic destinations worldwide. You get to experience the culture, food, attractions and nightlife of the destination you visit. But traveling costs can be very high for several destinations and if you are a budget traveler, planning the trip carefully becomes very important. Here are some ways you can save money while traveling:

Cheap flights

Off season flight fares are much cheaper than those during the peak season. So it is important to have flexibility with your travel dates. Flight fares change almost everyday. So, check and compare between different flights before you decide on the itinerary. A low fare can help save a lot of money.

Save on baggage expenses

Excess baggage can cost you more money. Most flight companies charge for the excess luggage that you carry. So, traveling light can save you hundreds of dollars.

Research

A little research on the different options to stay, shop and commute can be very helpful for a budget traveler. More the information you have about the place you want to visit, easier it will be for you to travel. Take help of sites such as WikiTravel to gain knowledge about different places. You can also take help of various travel agencies that can provide you with comprehensive information on your destination.

Lodging

Instead of opting for hotels that can prove to be costly for budget travelers, opt for off beat options such as hostels, sublets, vacation homes rented out by home owners and couch surfing. Couch surfing doesn’t cost you much money and is a great option. You also get to make new friends. Camping is another great alternative but you have to carry with you a tent and a sleeping bag.

Transportation

Public transport is the cheapest way to travel around places. Buses and metro trains are usually affordable and inexpensive. You can also share taxis with fellow travelers. Renting cars, although a little expensive, can turn out to be economical if hired from non-airport locations.

Food

Local cuisines always cost less than continental cuisines. Families can shop for food items like bread, butter or cheese and have a picnic in parks or gardens. Check out for complimentary breakfast deals offered by hotels if you’re staying in one.

Save on sightseeing expenses

Sightseeing can be expensive if you do not know the places to visit. Avoid visiting all the monuments or attractions. Visit only the must-see places. This can save you considerable amount of money, while you have the same amount of fun.

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