Living Credit Card To Credit Card: How To Break The Cycle

By Maxime Rieman

Most of us have heard financial experts decry the dangers of “living paycheck to paycheck,” wherein a person’s income is so close to their expenses every month that they’re unable to put any money aside for emergencies or retirement. Of course, these gurus are right to be concerned: saving is an important habit to get into because it is an important safety net and it allows us to build wealth.

So yeah, living paycheck to paycheck isn’t ideal.

But really, I think the personal finance professionals are barking up the wrong tree. They’re right to be concerned that a lot of us are failing to save, but living paycheck to paycheck isn’t the worst monetary state you can be in. As most of us who have been in serious financial trouble know, there is a much direr financial situation you can fall into: living credit card to credit card.

Yep, credit-card-to-credit-card living is about as bad as it can get. If you’ve never experienced this type of financial lifestyle, it goes something like this: you charge up a credit card to the point that it’s just about maxed out. You probably keep your head just above water by paying the minimums on the card every month, just to be sure your credit score stays solid enough that you can get another card. Which you do. Then you charge that card up, without ever paying the balance on the first card. Again, you keep up with monthly minimums, but pretty soon you need another card. And not long after that, you can’t keep up with the minimums on the two other cards, so you use the third card to pay the other two. But now you have no more available credit, so you need another card. And so on. And so on.

Many college graduates fall into this trap. They graduate totally broke – student loan bills, rent, a car payment, and a bunch of other expenses eat up their nonexistent paychecks. But they also don’t adjust their spending accordingly, and quickly open more credit cards first to accommodate their splurges, and then to pay off the other cards. Keep in mind, in the past--even just as recently as 2007--banks were still doling out credit as generously as those free lollipops. So for many graduates, it is—well was--really easy to keep getting new cards to bail themselves out of payments that were too high on the other cards, and, of course, gain a little spending money, too.

This cycle lasts for about a year, and by then most realize that they are drowning. This is when the stress begins: stressed out about money all the time; constantly concerned about missing a payment or worse, not having enough to even pay the minimums; and sweat-inducing nightmares. For those, who are experiencing this during the Great Recession, I can only imagine your feelings of helplessness and the perpetual state of fright you must be in.

The good news is that, you can turn things around. You can go from a total money-wreck to financially savvy with some stubborn resolve, sacrifice and the knowledge that it can be done; knowing that there is an end in sight can really help on those hard days. If you’re looking to break the cycle of credit card to credit card living, try a few of the tips below:

• Stop using the cards – This is probably the most important step you can take towards stopping the credit card madness. It will be painful and unpleasant, but you have to stop using your credit cards entirely, at least for a while. Freeze them, cut them up, give them to a trusted friend, whatever – just keep those cards out of your wallet and out of your hands for the time being.
• Don’t open any new cards – No matter how bad the credit card withdrawal symptoms get, resist the urge to open a new card. Even if you promise yourself you’ll be responsible with this one, just say no. At some point you may be in a financial place where credit cards won’t pose a threat, but that’s not now.
• Put yourself on a budget – One of the reasons you probably got into debt is that you failed to create a plan for your money, which is what a budget does. Figure out how much money you make every month, then make a list of all your expenses, including non-fixed monthly costs like gas and groceries. Decide how much you want to spend in each category, making sure to allocate a hefty amount to debt repayment. Then, stick to your plan!
• Also, put yourself on a cash allowance – Since you’re not using credit cards, you’ll need a way to manage your spending money. I recommend cash. Go to the ATM every Friday; take out your spending money for the week ahead. Not only does this reacquaint you with the value of money (cash is concrete, credit cards are abstract), when it the money is gone, it’s gone. This will keep you out of trouble!
• Increase your income – Once you’ve quit credit cards and set a budget, it’s time to get serious about debt payoff by increasing your income. Get a second job, baby sit, walk your neighbor’s dog, or find some other income stream. But just be sure you use the extra cash to pay off your debts – no shopping sprees allowed!

Breaking the credit-card-to-credit-card lifestyle is tough, but it is doable. Even after a month you’ll start to feel better. Keep your chin up and know that you’re working towards a brighter financial future!

Maxime Rieman is a writer for NerdWallet, a financial literacy site where you can find brokerage reviews, such as this TD Ameritrade Review, when you’re ready to start investing.

Five Signs You’re Not Trying Hard Enough To Ruin Your Life With Credit Cards—College Edition

By Maxime Rieman

In these competitive times, many of us are pursuing lofty goals with a drive and determination that would make Aesop’s tortoise look woeful. After all, who doesn’t know someone who’s training for a marathon, writing a novel, or traveling the world? These days it seems like everyone is working on something big, and the bar for what constitutes “accomplished” keeps getting higher and higher.

While there are a lot of worthy aspirations out there, many Americans are working on a very specific endeavor, one that could potentially have long-lasting consequences—ruining their lives with credit cards.

Millions of people in the U.S. are destroying their credit and running up thousands of dollars in debt; they’re maxing out their cards, buying tons of junk they don’t want and can’t afford, while only paying minimums month after month. But the truth is, many of us who are trying to destroy our financial lives with credit cards simply aren’t doing enough to make sure that this goal is reached and we are not maximizing the example we’re setting for others who will soon be prey privy to the wonders of credit cards. Try as we might, we’re behaving far too responsibly with our cards and we need to put forth more of an effort to make sure that we’ll never get out from under the weight of consumer debt.

So how can you tell if you’re not trying hard enough to mess up your personal and financial life with credit cards? Here are five signs you could be doing more to reach your goal:

You’ve Never Gone Over Your Credit Limit
This is probably the most obvious symptom: if you’ve never had to pay a fee for going over the credit limit that your bank set for you, you really need to consider charging more. The interest and fees associated with going over your allotted credit could be all that’s standing between you and financial ruin, so if you’ve failed to purchase enough with your credit card to exceed that threshold, it’s time to hit the mall. A credit limit is really just a suggestion anyways.

You Don’t Obsessively Check Your Available Credit
If you feel comfortable enough to keep charging your day-to-day expenses to your card without worrying that you’ve run out of available credit, you’re definitely falling short of driving yourself into financial ruin. People who are really committed to letting their credit cards take them off a financial cliff are the ones you see in line at the grocery store obsessively checking the banking applications on their smart phones to be sure they can get out with their gluten-free pasta. Take a lesson from their desperation and make a bigger effort to eat up all of that available credit with mindless purchases. It might seem tough at first, but you’ll find that once you really make a commitment to buying useless crap, it gets easier over time.

You Can Sleep At Night
Every real credit card junkie knows that putting the goal of ruining their lives with their cards requires sacrifice, and one of those sacrifices is a good night’s sleep. If you never (or only rarely) lose sleep wondering how you’re going to pay your bills, you’re definitely not going to achieve the objective of total monetary devastation. Take it as a sign to start charging more if you’re getting a full eight hours every night, and remember that if you’re in a pinch you can always start putting your fraternity/sorority dues on your card. Do whatever it takes to get those balances up!

You’re Not Getting Random, Threatening Calls From Collections Agencies
One of the most persistent reminders that you’re really going the distance towards meeting your objective of ruining your life with credit cards is the unexpected and brash calls coming from collection agencies at all hours of the day. This is basically a commendation for not paying your bills, no matter how much the person on the other end might be encouraging you to cough up the cash. If you’ve never been awakened in the middle of the night—even though you were probably up anyways—by a bill collector threatening to tell all your future colleagues you’re a deadbeat, consider this a sign you’re being far too timely and responsible with your bill payments.

You’re Thinking About Buying A House
One of the hallmarks of financial responsibility is homeownership; so if you’re considering buying a house after college, kiss that goal of messing up your financial future goodbye. If you feel that in a few years you can take on a mortgage, you’re obviously been much too careful with your cash. Worse yet, if you actually qualify for a home loan, it’s really time to buckle down and start swiping that credit card.

Getting into a financial bind may seem hard at first, but with a dash of college-freshmen-ignorance, a pinch of giving-into-peer-pressure-and-keeping-up-with-the-Jones-Kardashians-everyone-else and a pound of prolonged-bill-opening-avoidance, you’ll achieve it in no time. Take these signs into consideration to gauge your progress periodically and remember: never let a trip to the Apple Store pass you by!

Maxime Rieman wishes being an adult weren’t so hard. Luckily, she works for NerdWallet, where she found cheap auto insurance, learned the ins and outs of credit cards and generally, how to be more financially savvy.

Small business and credit cards

Guest Post by Carolyn Knight

It might seem like small businesses have no need for credit cards. They’re supposed to be making money, and they can always go out and get a loan so there’s no reason they would benefit from a credit card, right? That’s definitely not the case. Small businesses can benefit in all kinds of ways when they use credit cards the right way. If you’re on the fence about implementing credit cards in your small business read on to find out some of the advantages that will benefit you:

Best way to track spending

If you’re a business owner you know how hard it can be to consolidate your books at the end of the year. You have to go through all the receipts from your expenses for the year and match them up to make sure you aren’t leaving anything out. If you use a credit card for purchases the tracking will be quite simple. All you have to do is go through your prior statements and you’ll know exactly how much was spent and where. A credit card will make it easy to track your expenses throughout the year.

Rewards

Like consumer credit cards, you can often get some kind of reward for your purchases made on business credit cards. You can get everything from cash back to points to airline miles, depending on the card and your business needs. If you’re going to be spending money it only makes sense that you should get some of that back in the form of rewards. Business credit cards are the perfect way to get a return on the expenditures you’re going to make either way.

Track employee spending

Depending on your business, you might have employees that need to make purchases on a regular basis. If you get a business credit card you can have duplicates made for your employees and track how much they’re using the card. This will help you keep their spending under control, and it will also help you identify areas where your profits are being lost unnecessarily.

Build credit

If you’re just starting out in business it’s unlikely that you’ll have enough business credit to take out a significant loan. It’s hard to build credit if you can’t borrow, but you can achieve the same effect by using a business credit card. The barriers to entry for getting a credit card are much lower than they are with getting a big loan. Once you have your credit built up you will be able to get money in loans much easier.

Businesses can benefit from credit cards just as much as consumers. You should consider getting a credit card for your business if it would help any of the areas above.



Author Bio:
Carolyn is a guest writer on the topics of business and credit cards. She is also an expert on order management software that works with Shopify, 3dcart, and BigCommerce.

4 Tips for Helping your Partner Get out of Debt

Guest Post by Maria Rainier

If there is one thing in common that almost all American adults have is that they carry with them at least some personal debt. In fact, it's very often the case that what brings us together are the hardships—financial and otherwise—that we've endured over the years. Many adults, after becoming very involved in their respective romantic relationships, decide to pool together finances. Whether this means simply living together and sharing related costs, or going as far as to take on a partner's debts, deciding to entangle yourselves in each other's finances is a huge step. Here are some things to consider before helping your partner tackle his or her debts, or vice-versa.

1. Be completely honest about your debts as soon you get serious about your relationship.

There's nothing worse than being with a person romantically for several years, perhaps even approaching marriage, when your partner suddenly discloses the enormous pile of debt they've accrued over the years. Of course, when you love someone deeply enough, you'll do anything for them. But to be fair to your partner, and for your partner to be fair to you, it's important to be as honest as possible as soon as possible so that you can begin managing each other's debts.

2. Help control each other's discretionary spending.

One of the main reasons that most adults cannot control their debts incurred before marriage is that they don't make it a priority. Once you both become privy to your respective debts, you can help each other out by making a joint budget that allows each of you to pay off more than the monthly minimum on different loans and debts. If you aren't committed enough yet to where you are actually paying off your partner's debts, you can, at the very least, help each other prioritize your debts by controlling your monthly expenses.

3. Don't jeopardize your future to help your partner get out of serious financial trouble.

Perhaps one of the main reasons that married or otherwise committed couples end up splitting is over serious financial troubles. If you go so far as to cover all or a significant portion of your partner's debts, and in the process you incur significant debt yourself, the end result will only be mountains of resentment. Of course, if you can afford to help your partner out, then by all means do so, if you feel that the commitment warrants that sort of generosity. However, if you hurt yourself financially in the process, be wary.

4. Establish a long-term repayment plan.

If you do end up paying for a reasonable portion of your partner's debts, or if your partner pays for yours, set up a repayment plan that you can stick to. For example, my brother paid for about $4,000 of his then-fiancée's student loans. This ended up being a great idea, just because now she owed him, instead of a debt company that would charge her significant amounts of interest. Now, four years into their marriage, she's paid him back completely and they are both well on their way to being debt-free.
It's terrible that finances can have a huge, mostly adverse, impact on personal relationships. But if you're careful, you and your partner can use your relationship and teamwork skills to both relieve your debt load. Good luck!

Author Bio:
Maria Rainier is a freelance writer and blog junkie. She is currently a resident blogger at First in Education where she writes about education, online colleges, online degrees etc. In her spare time, she enjoys square-foot gardening, swimming, and avoiding her laptop.

Paying Medical Bills with Credit Cards, is it a Smart Choice?

Guest Post by Eliza Morgan

Those who really fear credit card debt are usually cautious when it comes to making future purchases. For example, if a couple knows they want a new TV for the living room, they'll usually save for a few months and then pay for a new TV with cash. But not everything can be so calculated, especially when it comes to your health.

Sometimes you get sick out of nowhere, and even if you're insured, getting billed for medical expenses is one of the easiest ways for someone to get into debt (or deeper debt). Think about it: one single trip to the emergency room can set you back $200 for someone with insurance. If this was an unexpected expense and you don’t have enough money in your account, what will you do? Charge it on your credit card. Depending on how quickly you can pay it back will determine how much interest you will accumulate. In fact, according to the most recent statistics, nearly 21 million Americans accrued credit card debt in 2008 due to using their cards to pay for medical bills. While health is important and unpredictable, there are some things you should consider first before using your credit card to seek temporary relief.


1. Negotiate with your Doctor/Hospital. First things first, it's always important that you speak up front that you may not be able to afford whatever procedure or test that the physician says you need. If it's an emergency situation the physician will go ahead and do the procedure, but they will be more willing to give you a discounted rate or work out some sort of payment plan (some charge interest; others do not). Either case, you are not obligated to pay any sort of out-of-pocket expenses up front so don’t be too tempted to put it on your credit card immediately. But if you discuss your financial situation from the beginning, the physician may be able to reduce your bill in some area, whether it's with the anesthesiologist if you've had surgery or with your medications.

2. Know who is more likely to Report to Credit Bureaus. If you put your medical bills on your credit card and then can't find a way to pay off your credit card bill, you will undoubtedly be contacted by a bill collector. From there, the appropriate crediting bureaus will be notified as well and your discrepancy will negatively be placed on your credit report and affect your credit score. While you do in fact want to pay off your medical bills at sometime, it's important to know that rarely do physicians and hospitals actually report to collection agencies (as opposed to credit card companies that do it almost immediately). In fact, various sources say that only.07% of medical businesses actually report their patients to bureaus. Most just write off any losses.

3. Get a Health Savings Account. Lastly, a great way to be better prepared for these kinds of unexpected medical expenses to acquire a health savings account (HSA). Most health insurance companies require a high deductible (about $1,500 for a single) to establish one through your plan but they can really be a life saver and help you be debt free. How it works: a portion of your paycheck (prior to taxes) is put into your HSA each month. You can build the money in your account tax free as well. You are then issued a debit card and can use that card strictly for paying for medical expenses, such as when paying off co-pays, medications, and remaining balances you may have on a surgery. It takes out the temptation of using a small portion of your savings for something other than medical uses. Your balance moves from year to year and works as an IRA after 65, so it can be invested.

Author Bio:
Eliza Morgan is a full time blogger. She specializes in writing about business credit cards. You can reach her at: elizamorgan856 at gmail dot com.

3 Steps to Building a Superhuman Credit Score

Guest Post by Jacelyn Thomas

With the economy still weak from the recent recession (though at least recovering), it is harder to impress credit lenders than it was ten years ago.  What would have passed for an above-average credit score in 2001 (680) is now considered on the lower side of average.  The reason for this new, higher definition of credit-worthiness is primarily that banks are still hesitant to loan money for fear of not making that money back.  They want as few liabilities as possible, so they are more stringent in their credit score requirements.

In light of the shifted credit score curve, it might be time to examine your own credit score, as well as your spending and credit usage practices, to ensure that you aren’t unfairly denied a loan for your next car, house, or business venture.  There isn’t much you can do to improve the economy, or lender’s expectations, but there are steps you can take to improve your credit score, so that you will impress even the shrewdest of banks and always get the best rates.

Step 1: Know Thyself (Or At Least Thy Credit Report)

There are a number of factors that influence your final credit score: Payment history, bankruptcy, credit card debt, length of credit history, type and number of credit cards, and hard inquiries that are made when you apply for loans and lines of credit.
At any point, it is possible that one or more of the three bureaus that track your credit usage or any involved party (banks, collection agencies, etc.) could make a mistake that might negatively affect your score. 

To avoid this, check your credit report every 12 months for errors.  You can obtain a free copy of your credit report (though your score isn’t on free reports) from AnnualCreditReport.com; if you find any errors you can dispute them to have them resolved.  But be aware: it can take up to six months to fix an error on your report, so do it early, and be patient.

Step 2: Hold Steady

Especially if you’re planning to buy a new home or car in the near future (three to six months), don’t open any new lines of credit if you can help it.  Ultimately your credit score shows lenders your risk level, and will directly affect your interest rate — and applying for loans and credit cards temporarily lowers your score, so you might not get the best rate possible if you have any recent hard inquiries into your credit report. 

Instead of opening new accounts or transferring balances, make the best use of the credit you have.  The best way to prove to banks and other lenders that you will be a reliable borrower is to have a great revolving credit history.

Step 3: Be a Payment Superhero (Or At Least Pay Your Bills On Time)

Credit history accounts for 30% of your credit score, so it is imperative that you aren’t delinquent on any accounts you have.  The fastest way to delinquency is missing payments or due dates, so make your credit card payments with superhuman punctuality, and you’ll be on your way to a superhuman score.

But not missing payments isn’t really enough.  Ideally, you should be paying your entire balance in full (or at least more than the minimum amount due) every month, and should never exceed 30% of your total available credit. 

You won’t be bulletproof or be able to leap over tall buildings in a single bound, but if you follow these steps, your credit score will leap up, and will be as close enough to bulletproof that lenders will trust you with their lives (or at least their money, which is all that really matters). 

Author Bio:
Jacelyn writes about identity theft for IdentityTheft.net. She can be reached at: jacelyn.thomas @ gmail.com.

Did Enrolling in a Credit Card Debt Repayment Program Hurt Our Credit Rating?

Our first attempt to get a loan after enrolling in the program.

The month is April 98 we have been on the credit card debt management plan now since November. I am scheduled to retire from the Navy at the end of June 98 and we still don't know where we're going.

I have sent off many resumes to the Western North Carolina area hoping to get a job in the area. Neither of us are from the area but the area is beautiful and very similar in atmosphere to Maine.

In preparation for the move from Maine to North Carolina we had to tie up some loose ends that were going to cause us grief. First on the list was a mini motorhome built on a 1 ton Toyota pick-up truck chassis. In 94 when we moved from Florida to Maine parts of the motorhome had rotted and needed to be rebuilt. The motorhome has had its day we had a good five years before our first child and used this vehicle quite a bit. Now we had three kids and could use a vehicle that was more family friendly.

We looked around and found a Ford dealership that sold used program cars. These vehicles were used by a company for a year for their sales force and were ready for sale at a set no haggle price. They had 30,000 to 40,000 miles on each vehicle and were priced below Bluebook.

The dealership had many 98 Taurus wagons that all had Cruise control, power everything and car phones. But the best feature was a third seat in the back. This allowed the kids to spread out a little on long rides.

We went to the dealership when it was closed and looked over the lot. We then checked on the internet to see what kind of track record these models have had. It turned out the first model in the late eighties and early nineties had problems with engine mounts that ruined many transmissions. But that was corrected long ago and the current models benefited from the earlier mistakes.

We did our home work, we knew which car we wanted and we decided to trade in the motorhome. Our hope was that we were not upside down on the loan for the motorhome. We also were worried because we were on the credit card debt repayment plan. Would that prevent us from getting the loan needed to purchase this car?

They test drove the motorhome and came back with $1500.00 over the payoff amount of the loan. That was good news, now we had to wait.....

We got past our first worry.

Would we get past our second worry? Would we be able to get the loan or would we suffer from voluntarily consulting and enrolling in a credit card debt counseling and repayment program?

...the dealership came back with a decent interest rate through Ford's finance group and our loan was approved.

We got past our second worry, the loan was approved.

So what is the answer to the big question above?

No! We had a good credit rating prior to enrolling in the credit card debt counseling and repayment program and we still had a good credit rating after enrolling.