What’s in your Wallet?

To keep spending under control:

• Think of your credit card as a 30-day loan that has to be repaid at month’s end.
• Don’t overspend. Act as if you are paying with cash.
• Track how much you spend on your credit card. Small impulse purchases of $20 here and there add up.
• Always pay your bills on time.
• Keep your balance less than 50% of the credit limit.
• Save credit card receipts and compare them with your monthly bill.
• lways send more than the minimum payment that is required.
• Whenever possible, pay the bill in full every month.

Credit Counseling

The best credit counseling agencies can help people who are behind with their bills get back on their feet. Some do a good job negotiating repayment plans with creditors. Some may charge big fees upfront, and keep much of the money that could be going to pay off credit cards. An increasing number of companies target consumers who aren’t late paying their bills, but who are just disgruntled about their interest rates.

Who needs counseling?

If you’re current on all of your accounts, you don’t need credit counseling. If you’re concerned that your interest rates are too high, call your creditors to negotiate a lower rate, or threaten to move the balance elsewhere. You should consider credit counseling if:

• You can’t keep up with the minimum payments on your credit cards.
• You’re consistently late paying one or more of your regular bills.
• You’re being hounded by creditors and collection agencies.
• Your efforts to work out reasonable repayment plans with your creditors have failed.
  

What to watch out for

• Big upfront fees. Non-profit credit counseling agencies such as Consumer Credit Counseling Services (CCCS) typically charge a nominal set-up fee.
• No accreditation. Legitimate credit counseling services will be affiliated with the National Foundation for Credit Counseling, or the Association of Independent Consumer Credit Counseling Agencies.
• Delayed or missing payments. Find out how much of each payment will be going to your creditors, and when it will be sent.
• Unrealistic claims. Some companies falsely promise to settle your debts for pennies on the dollar. Legitimate credit counseling services help you pay back what you owe, at reduced interest rates, and acknowledge there may be some affect on your credit rating, and your ability to obtain new credit.

Counseling can affect your credit

Credit counseling may or may not have a negative effect on your credit, depending on how your lenders report your account to the credit bureaus. While being reported as late or delinquent will always hurt your credit, a simple notation about credit counseling probably won’t. Some lenders refuse to deal with anyone enrolled in credit counseling, but others see it as an encouraging sign that the customer is getting his or her debts under control.

The Big Print Giveth, The Small Print Taketh Away

Read the Fine Print in your Contract The lender can apply a penalty rate, or default rate, if:

• You miss one payment, or make one late payment
• You make one late payment with another creditor
• You bounce a check
• You pay less than the minimum payment required
• You exceed the credit limit
• You apply for too many new accounts (credit cards, auto or mortgage loans)
• Your credit score changes
• You file for bankruptcy

Other Fine-Print Finds

Payment Allocation:
The lender decides how to apply all payments. Normally payments are applied to lower interest rates first. Balances billed at a higher interest rate will continue to accrue interest until the lower rate balance has been paid off completely.

Annual Percentage Rate (APR):
The APR may be fixed or variable (subject to change with the US Prime Rate). A “fixed” interest rate is not permanently guaranteed. The bank can change any of the terms, including the “fixed” interest rate, at any time.

Interest-ing Calculations:
Two common methods a bank uses to calculate interest charges:

1. Average Daily Balance:
Based on the average balance carried during the billing period.


2. Double Cycle Billing:
Based on the average balance carried on the account during the past two billing cycles. Consumers who pay down their balance during one month, are still being charged interest based on the previous month’s (higher) debt.