Bad Credit Blog

When it comes to getting into debt, there are always a few expenses that can’t be avoided. Whether it’s the mortgage on your home or student loans from graduate school, a certain amount of debt is a part of most people’s lives. However, there are some forms of debt that are totally avoidable.

Here are the top 10 dumbest ways to get in over your head with debt, and the best ways to avoid them.

1.) Cash advances on credit cards

Most credit card cash advances carry an upfront fee and a higher interest rate than other charges on your credit card, according to Dan Wegner, a certified credit counselor in Phoenix, Ariz.

Interest starts accumulating from the second you borrow the money, Wegner said, and most credit card companies require that customers pay down the balance on their credit card purchases before they’re even allowed to pay off the cash advances.

The solution: Use a credit card or an ATM. Credit card interest won’t accumulate for a month, and an ATM is free.  If you’re not near your bank’s ATM, it’s better to use a renegade ATM and pay a usage fee than to use your credit card to get cash.

 2.) Giving family and friends a loan or co-signing for a loan

Offering loans to friends and family can get messy unless expectations are established in the beginning, according to Sanyika Calloway Boyce, founder of FinancialFitnessCoach.com.

Too often, the party loaning the money does not specify when the loan should be returned and whether or not they want interest. This can lead to ruined, or at least strained, relationships.

The solution: If you are in a position to give, consider it a gift, Boyce said. It’s also easy to go online and make up a promissory note that both parties can fill out to establish details.

3.) Playing the lottery or gambling

“You have higher odds of contracting a flesh-eating bacterial virus than winning the lottery,” said Dara Duguay, Director of Citi’s Office of Financial Education and author of  Don’t Spend Your Raise and The Citi Commonsense Money Guide for Real People.

Gambling has allure, but the odds of winning are very low.

The solution: Your betting instincts are best spent in the world’s largest casino: the stock market. Better yet, take your chances on enjoying an exotic vacation spot you’ve never been.

4.) Payday loans and refund anticipation loans

Frequently pitched as a quick way to get access to your tax refund, refund anticipation loans have become a major profit driver for tax preparation firms. But they are roughly equivalent to a payday loan in terms of interest rates, according to Paul Herman, CEO and founder of HIPinvestor.com, a consultancy for eco-conscious and humanitarian investors.

Payday loans often carry up-front fees, hidden fees and administration fees, and can carry an APR of up to 200%, according to Wegner.

The solution: Patience! Waiting a few days to get your money will save you a ton over the long haul. If you absolutely have to have money, it’s better to use a credit card.

5.) Rent-to-own, Furniture and Appliances

“Rent-to-own is simply one of the worst decisions you can make,” according to Scott Crawford, CEO of DebtGoal.com, an online educational service that teaches people how to break down and pay off debt.

Rent-to-own customers will end up paying two to five times the department store cost of the item with an annual APR for 100% to 300%, according to Crawford.

“People will see that a couch is only $49 a month,” Crawford said, “But they are not doing the math!”

The solution: Save up money and purchase the item outright from a store. To get better deals, buy used furniture that can be found easily via the Internet on Web sites like Craigslist.

6.) Financing for cosmetic procedures

Financing for cosmetic medical procedures like Botox, liposuction and face lifts is more common than you’d think, according to Crawford.  Most strip-mall cosmetic shops offer in-house credit to customers who can’t pay cash, he said.

“You have to question whether going into debt for elective surgery is a smart purchase, but financing through the on-site financing will reflect negatively on your credit report, pushing up future borrowing costs,” Crawford said.

The solution:  If you must go under the knife, at least do it debt-free. Try selling some of your “fat clothes” to make the money.

7.) Buying a new car

By buying a new car instead of used, customers are essentially paying twice for the asset: they’ll pay interest and they’ll pay depreciation when they sell, Crawford said.

Further, new car owners will pay more in insurance and licensing fees. Most consumers will find it 50% to 60% less expensive to buy a car that’s three to four years old, according to Crawford.

The solution: Buy a used car. The market for used cars is improving, and with vehicle history reports, you’ll know exactly what the car has been through before you buy it.

8.) Student Loans

Students should not take out loans to attend non-accredited schools with poor job placement records, and should look for federally subsidized debt rather than private lender loans at higher rates, according to Crawford.

Some students make the mistake of taking out a loan that is more than they actually need, according to Duguay, and then spend the extra money on things like midnight pizza.

The Solution: Students should find out what financial aid and grants they qualify for first. Students should use loans to fill in the income gaps for what they cannot afford, not to finance the entirety of their education and college fun.

9.) Using your credit card for insignificant purchases like fast food or soda

Don’t use your card for tiny purchases when you could easily pay cash instead, said Herman.

“Cash is the best option unless you’re interested in paying 25% interest on your Big Mac,” he said.

Individuals using a credit card for food will spend an average of 33% more than those using cash, according to Wegner. Using a credit card to buy small food items is bad for your wallet and your waistline, he said.

The solution: Cash! At the end of the month, you’ll thank yourself for going a little out of the way to avoid using plastic.

10.) Taking out 401(k) loans or making early withdrawals

Loans taken against your 401(k) often carry high fees. Also, when a loan is taken against a retirement account, the person taking the loan must have a definite plan to repay it, according to Crawford.

The solution: Keep enough cash liquid and in savings accounts so that you don’t have to dip into a 401(k) before you’re ready. If you must take out a loan, make sure it’s for a home or property that will appreciate over time.

http://www.foxbusiness.com/story/personal-finance/on-topic/dumbest-ways-debt/

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Sounds cliché I know. Save money for the holidays. But did you know that the average American will spend about $791.10 this year on holiday gifts (including food and decorations), according to a recent survey by the National Retail Federation?

What’s more, consumers will also plan to spend on average $99.22 on gifts for themselves!

If spending $890 isn’t in your plans (and don’t forget to add credit card interest to the total), it’s time to get smart before you get trapped. Here are some ways to save money during the upcoming holidays.

1. Try A Non-Traditional Tree To Save Money For Presents
   • Cut your own tree! If you live near a National Forest, contact your local Forestry Office to see if they sell Christmas Tree permits. My son lives in Northern California and his family does this every year. It’s cheaper than buying from a lot and you can make a family day of going out and picking your own Christmas tree!

This is not an endorsement of Christmas Tree farmers who let you cut a tree for yourself. Those places are usually more expensive in which case you’ll actually save money by going to the local WalMart shopping center and picking a pre-cut tree.

1. • Get a well-made artificial tree. All the major retail stores sell them and if you spend some time checking them out you can find some very realistic looking trees.

I bought one last year - an 8-foot tree for about $100.00. That sounds like a lot but if you figure the average real tree costs $40 to $50, this one is paid for in two years and could last a lot longer than that. If you take your time and look around (not just Target and WalMart) you can actually find trees that look so real it’s a little unnerving.

Here’s a tip: DO NOT buy the artificial trees with the built-in lights. The lights only last a season or two and they are too hard to replace so you end up throwing the whole tree out every couple years.

2. Brave The Post-Thanksgiving Crowds!
   • If you’re not faint of heart, you can actually save money by shopping the Friday after Thanksgiving according to Ellie Kay, author of several money-saving books, including The Debt Diet. Kay is a firm believer in bargain hunting and has done so for years. She says, “I often start at 5 a.m. and finish about 9 a.m. just in time for breakfast and a nice cup of coffee.”

Kay suggests that you shop strategically. “Plan your day in advance, and then read through the sales circulars on Thanksgiving so you’re well prepared. Be sure you know the store opening times, which often are as early as 5 a.m., and watch for the fine print regarding popular items such as ‘until stock runs out’ or ‘available to first 100 customers.’” If you have a bargain-minded buddy she also suggests you take them along. My wife had two of those that she loved to shop with. She said these friends could sniff out a bargain a mile away!

Thanksgiving sales are a great way to save money on holiday gifts, plus you get the first choice on some really nice gifts, not the “sloppy seconds” most stores have about a week before Christmas.

3. Use Up Store Credits And Gift Cards
   • I’ll bet you’ve wondered why gift cards are so popular with merchants. It’s not for your convenience but theirs - up to 70% of those are never used! Some of them expire after a certain date, which means the money is theirs to keep and you never actually purchased something. If you still have a gift card the holiday’s are a great time to use it before you forget about it again.

This is a great way to save money AND keep you on a budget! If your card is only good for $50 try to keep at or under this amount so you don’t dip into your own pocket.

4. Don’t Shop For Yourself
   • I know it’s tempting - the old Madison Avenue mentality, “You deserve it, you’ve been working hard.” Remember that National Retail Federation report that the average shopper will spend $99 on themselves. Take yourself off the list and save money. Wait until AFTER the holidays then take the gift cards you’ll probably get and use them on yourself with the after-Christmas sales!
5. Shop Early Online
   • This is a great tip if you know you will have trouble controlling your spending. Avoid the mall and do targeted online shopping. No need to wait till Thanksgiving, this type of shopping you can do all year and put the items away till the proper time.

Lots of online stores offer free or discounted shipping (plus most of the time you don’t have to pay sales tax). I just recently discovered that KBB toys would offer you $20 off or free shipping (whichever is cheaper) on your purchase if you agree to a 90 day billing. Who wouldn’t do that!

6. Keep A Running List Of Things You Want And Shop For Them Throughout The Year As They Come Up For Sale
   • Many times the perfect gift will be on sale after Labor Day for 50% off. You can save money by taking advantage of that and pocketing the difference. The same thing for After-Christmas sales - they are the same online as at the mall plus you avoid the temptation to over-spend.

Look for opportunities to save money and you will find them. Instead of paying full retail you can get them for practically wholesale and save money all year long.

For more credit help, please visit our site. We have been there and know how bad credit can affect everything, including your health. Take a look!

If you know someone struggling to quit smoking we found a great site that offers genuine  help. You can Quit!!

Here is a great site for some wonderful Spiritual articles, short stories, plays, family stories, Bible studies etc. Check it out.

I was talking to a friend of mine the other day. I knew he was deep in credit card debt. When I enquired how things were going with his New Years Resolution to get out of debt he hemmed and hawed and finally told me it wasn’t going very well.

They were supposed to sit down and make a Simple One Month Budget but his wife and he just never seem to get around to it. Confidentially I know it’s because he thinks if they budget their money they won’t have the freedom they think they have now to buy things when they want them. But the truth is, by having so much credit card debt they are never really free at all.

They can’t take any big, fun vacations with the kids. They want to own a home, but can never save for a down payment. And getting a new car is not anywhere in the near future because they don’t have any money to spare on a car payment.

So they fill themselves up with TV’s they don’t need, clothes that don’t get worn, etc. etc.

This got my wheels spinning because I have been in credit card debt in the past; maybe you have too and can identify with what I’m about to say. Here are some of the dumbest reasons for NOT getting out of debt.

1. Our credit card debt is all (his or her) fault. Money is the #1 reason for divorce in this country. Instead of taking personal responsibility they play the “blame” game. One of you needs to provide some financial leadership. It’s not always the man’s job (or woman’s). It’s whichever has the best head for money management. The other partner needs to cooperate.

2. Credit cards are the only way that I can get what I need. (Translated: want). What is really needed is a budget. We have provided both a Simple One Month Budget and a 12 Month Budget that are guaranteed to work if you really want to get out of credit card debt. If you are in too deep then try a credit counselor. Credit counselors will structure your debt so that you’re debt free in three years. How great would that be!

3. Spending makes me feel good. I love being spontaneous! I’m not a psychologist but I have read of people that get a high from spending. There’s also a section of people who get the same feeling from shoplifting. If you fit this get professional help. Someone once told me that they feel “free” when they spend. They are lying to themselves, they are not free, but rather a slave. Don’t be foolish!

4. If I get too deep, I’ll get another credit card with 0% and transfer the balance. Well, duh! That’s so unintelligent that I won’t comment!

5. I’m not paying “that” much in interest. Oh, really! If you run an average credit card bill of $6,000 and if that amount remains level for a year and your interest is 21% which is average for this type of person, you are spending approximately $1500 in interest charges alone! AND that’s just for one year of credit card debt. Einstein’s definition of insanity is “doing the same thing over and over expecting different results”. Still think you don’t need help (LINK)

6. I don’t think I can ever afford to retire; besides I love my work. I’m not sure our Creator ever intended us to completely retire as we see it done today. But consider what would happen to you or your family if a disaster should happen. You’ve got to have an emergency fund, otherwise you’re just one paycheck away from being homeless!

7. I’ve had credit cards so long now that I don’t think I can live without them. You can and you must if you ever want to be free. There is nothing wrong with using a credit card occasionally for an emergency. However a night out is not an emergency. If you can’t handle a credit card responsibly, then don’t carry one.

Let me make a confession; When it comes to credit card debt I am no different than you, so I don’t carry my credit cards. I carry a debit card only most of the time and always know exactly how much I have in my checking account so I don’t overdraw. I know all too well the lure of “free money.” But using credit cards obligates you to spend a portion of your pay each month to pay those cards off. Money you could use for a lot of other things!

If you need help with your credit card debt we have it. Our site is dedicated to helping people with bad credit get the help they need. Don’t keep fighting month after month to just keep up with the bills. Take some simple steps right now to start paying them off completely and you’ll find that the real adrenaline rush comes from having extra money in your pocket (and bank account)!

For more credit help, please visit our site. We have been there and know how bad credit can affect everything, including your health. Take a look!

If you know someone struggling to quit smoking we found a great site that offers genuine  help. You can Quit!!

Here is a great site for some wonderful Spiritual articles, short stories, plays, family stories, Bible studies etc. Check it out.

BY: Dewey Kearney

All my friends are having a good time and all I ever get to do is sit at home because I don’t have the money to go out! So I started asking my friends how they did it and they gave me a formula that they all use and I thought I would try it. I did and it worked!

1. First thing to do is get a credit card (s). So I started looking over the Internet for a good deal on credit cards and low and behold they were all over the place! I applied to several and just like that I had what I needed to have a good time – instant money!
2. Well, that went so well that I slowed down a bit. Not wanting to panic the banks by getting in debt too fast. Then one of my friends showed up with a brand new red convertible and everyone wanted one – me too! Someone told me that it was easy to get a car loan from a dealership so I had to try that too. Having those credit cards sure was handy! I put a big down payment on my new car with them. Because my credit was so stretched I had to get a co-signer, but no big deal! My mom came to the rescue! I found just the car I wanted with only 78 easy payments! Now I’ve got the shiny new convertible like my buddy. No trouble getting the girls now!
3. Then my boss cut my hours at work. I was able to juggle my payments and keep up but barely. Someone said that I should check my credit report just to be sure they were reporting things right and sure enough I found a bunch of things that were wrong. I’m a nobody, but it seems that someone had stolen my identity . I thought that only happened to people who had lots of money. Not poor schleps like me. What a mess.
4. I contacted the credit agencies to report this but they must have been busy because it took them a month to get back to me. After months and months of back and forth with them they finally solved the problem. My identity had not been stolen; they just got me mixed up with someone with the same name. How could that happen?
5. So now I’ve got a shiny new car and credit cards out the wazoo – every penny I make goes to pay the bills. I am in debt over my head – but so are most of my friends. It’s a status symbol a friend told me. So I don’t stress about it. In fact, I’m online now shopping for a new flat screen TV. Someone out there is offering no payments for 3 years. I just know it . .

For more credit help, please visit our site. We have been there and know how bad credit can affect everything, including your health. Take a look!

If you know someone struggling to quit smoking we found a great site that offers genuine  help. You can Quit!!

Here is a great site for some wonderful Christian articles, short stories, plays, family stories, Bible studies by Kathy Kearney. Check it out.