Debt Consolidation Basics
Sometimes, managing your money can be a challenge. The idea of having things now instead of later is very attractive, but unfortunately excitement can sometimes take over from logic, and you are left with lots of little debts with repayments eating up your spare cash. There is a solution though!
Debt consolidation is a method of rolling all of your debts into one, making it easier to stay on top of them all with a single repayment. The basics of debt consolidation are fairly simple, as far as financial matters go. This is an overview of how you can straighten out most debt issues in three easy steps.
Step One: Budgeting
Figure out your total household income and subtract your total expenses. Don’t forget to keep all the receipts you are getting for miscellaneous things like ATM visits and small debit transactions. If you can’t find them all, then just request a detailed account summary from your bank. Most banks are happy to oblige for free or next to free.
Once you know how much you are spending, decide what categories and how much in each are essential and how much are elective. If you can cut your wasteful spending habits by even half, you are setting yourself up to be financially stable in the future. An important tip: if you are in debt, stop going to restaurants. Learn to cook at home from scratch: it’s fun, easier than you think and you can add up how much you save at the end of the month.
Step Two: Determine Your Total Debt and Decide
Tally up all your debt that exist beyond a single month and decide if you need a debt consolidation loan. Not everyone does. Signs that you need a consolidation loan are: debts, other than mortgages, that are higher than a total year of your disposable income; and mortgages that have unfair terms and interest rates higher than the present average. (This part might take some local research.) Most people intuitively know when they are in over their heads, so if you have the feeling that you are, then you most likely do need a consolidation loan from a bank or third party. Remember that when you are negotiating your consolidation loan, the overall goal is to prevent debt snowballing from high interest rates, so always check if the loan you are offered is actually a better rate.
Step Three: Setting a Repayment Schedule
This step depends a lot on how much you pull in with regards to income. A good guideline for people of modest means is to try to use 15% of your monthly income towards debt repayment. If you can afford to allocate more, then go for it, as the sooner you pay the less interest you pay.
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Choosing A Good Credit Card For You
Credit card business is very big and there is a lot of competition to choose from, so you should consider your choices carefully. It almost always best to look for a credit card with a trusted financial institution with a good reputation; in this manner you are assured of stability and a low risk to yourself. Looking for a credit card is always a daunting task. However when looking for a credit card it is vital to realize a few things.
It is good to browse the selection available before signing up with the first credit card company you come across, since good credit almost a basic need for survival in our contemporary economy. The first thing to look for in a good credit card is a low interest rate. While there are many low interest credit cards currently available, like Citi Platinum Select MasterCard, most credit card companies will not offer these low interest cards at first, instead they will only offer the more attractive credit cards to clients who have the knowledge to ask for them. You should check the fees that are charged, because these wary wildly between credit cards.
Another thing to look for is companies who have great starting offers such as no interest on transfer balances for six months (for example the Discover MoreSM Card) as an incentive to lure clients away from their competitors. You should not be paying user fees on a credit card that already charges interest – this is especially applies to you if you don’t want to carry a balance.
Some privileged credit cards sometimes have annual fees for extra benefits such as increased air miles or a larger insurance coverage, but in general credit cards shouldn’t have a reason to charge any annual fees. A good option that hasn’t got annual fees is the HSBC Credit Card (Visa). Always look for a credit card that is best suited towards your personal lifestyle and your own interests.
Also, many cards today offer their holders additional benefits, points towards merchandise, car rentals, air miles, hotels, gas, etc… the list is endless. If you want to add some personal touch to your card some credit cards even offer to personalize your card by embossing your card with a picture of your choice. With so much selection among credit cards there you should have no trouble picking up a good card with great value and benefits that suit you. Good luck hunting for that perfect card for you!
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Two Things To Look For In A Good Credit Card
There are two main things that one should look for when trying to select a good credit card.
The first, and certainly the most important, is the interest rate on the card. While many cards offer introductory rates, such as 0% APR for a year, charging customers interest is how these companies generate their profit. Take for example the Citi Platinum Select Mastercard. With this card, Citi offers customers 0% APR on balance transfers and purchases for the first 12 months they have their cards. However, it is important for the savvy customer to note that, in the fine print, the company states that after those first 12 months, the variable interest rate jumps to at least 12.99%.
A good credit card will have a low interest rate that is fixed. As for these advertised offers, not all customers should assume that they will be eligible for the 0% APR or later an interest rate of 12.99%. Customers should do their homework as to how good their credit must be to qualify for the best interest rates. For example, to qualify for the 0% introductory APR for the Citi Platinum Select card, a customer has to have good to excellent credit. Citi seems to give a little more flexibility with regard to ones credit than Capital One who states that only applicants showing excellent credit are eligible for their 0% introductory rate. Though a card may look good because of their advertised introductory offers, a good credit card will offer reasonable rates for the life of the card.
Another thing to look for in a credit card is what it has to offer you. A good credit will reward you through airline miles, cash back, etc. While interest rates are important to know, if you are someone who always pays off their credit card in full every month, a credit card company’s rewards program can help distinguish an average card from a good card. Take for example the Discover More card from Discover Card. With this card, customers receive cash back on all their purchases, that cash amount ranging from 1% to 5%. In addition, Discover has a program called Cashback Bonus where customers can get between 5% to 20% cash back through Discover’s online shopping site. In this way, when cardholders buy items they would have anyway, a good credit card will save them money while doing so.
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