Another Case For Emergency Savings – Credit Score

Emergency Savings Bank

You know you need emergency savings right?

Should something come up where you need money quick you want to have emergency savings handy to help take care of the situation.  Well here’s another aspect to think about:

You need emergency savings to protect your credit score!
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The Time I Found A Fraud Credit Card Charge

cash-money

Did I tell you about the time I found a fraudulent credit card charge on my statement?

So I open up my American Express bill and look over the charges.  (You do check your credit card charges don’t you?)  I glance through the charges and I notice the restaurant bill for a dinner we had was more than what I remember.  I went through my receipts for the month and pulled out the restaurant receipt.  Sure enough the charge on my statement was more than the charge on my receipt.

Here’s what happened:

When I paid the bill I left a cash tip.  On the receipt I crossed out the tip section.  Somehow, someone at the restaurant was still able to charge my account more that they should have.

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Credit Cards Are Just A Tool

credit-cards-are-a-tool

I wrote two articles recently that looked at two different arguments about credits:

Credit Cards Suck!

Credit Cards Don’t Suck, You Suck!

You can imagine I received a vast array of opinions on the matter between both articles!  Credit cards cause heated debates with lots of people either loving them or hating them.

Let me tell you what I really think:  Credit cards are just a tool!

That’s it! They are a tool just like money is tool.  They are neither good nor bad.  See, it’s all in how you use them.

For many, credit cards are a useful tool that allows them instant loans for purchases; online payments; rewards points; builds up credit history; extends warranties; tracks spending; and more!  Odds are these people are responsible spenders who pay off most, if not all, of their balances every month.  Credit cards help them get what they need and add a few perks as well.

For others, credit cards are the bane of their finances! For these folks credit cards have high rates; exorbitant late fees; unclear terms; ruins their credit scores; creates a temptation to spend, and worse.  Many of these consumers spend way too much and don’t keep a good enough track of their finances and budget.  For them credit cards are horrible.

The point here is that credit cards, in of themselves, are the same for both types of users. The cards don’t really change.  How one uses them changes!

In my credit card history I’ve both loved and hated them.  At first they were this exciting piece of plastic that represented my financial freedom.  Then that freedom led to chains of debt and resentment.  Now that I’m out of credit card debt I understand that it was me all along who controlled what my credit card experience would be.

So if you hate or love credit cards, or your emotions run somewhere in between, understand that you are the master of your destiny.  You control your spending decisions so it’s up to you to decide whether credit cards are a useful tool or a useless tool!

How do you feel about credit cards?

Creative Commons License photo credit: Fosforix

Credit Cards Don’t Suck, You Suck!

I wrote last time about how credit cards suck.

While that may be true at times, it may be more the truth that you suck!

Sounds harsh I know.  But a lot of people who have credit card problems need to take a deep breath and look at themselves.

Let’s look at some reasons you say credit cards suck but really you suck:

Late Fees Suck

They sure do!  That’s why they are there.  It’s meant to punish you for being late and hopefully you remember the next time to get your payment in on time.  If there weren’t late fees then everyone would pay late.  If you pay late once it’s an accident and you can ask your credit card company to remove the charge.  If you’re late more often then it’s all your fault and you have to look at your bill/pay system.  You know you can ask to have your due date changed, don’t you?

They Trick You on Rates

Look, they may put the details in small print but the details are still there.  If you didn’t read through them then that’s your fault.  Read the details and ask questions!

The Minimums Are So Low I Can’t Get My Balance Paid

credit card on computer keyboard

Are credit cards really to blame or is it your fault?

Every now and then we need a little help with our finances.  Something come up this month?  You can pay the minimum.  But if you make it a habit to pay the minimum and you can’t afford more then you have to look at your spending habits and your finances.  It’s not the credit card company’s fault you find yourself unable to pay more.

The Interest Rates Are Too High

Why are they high?  Probably because you don’t have good credit and you are a risk.  The credit card is giving you money remember?  It’s like an instant loan.  You know what it would take to go to a bank to get a personal loan just to buy a new sweater?  Very inconvenient!  That’s why the credit card company can charge you their rate.  If you don’t like the high rate then start paying off your credit card balance and make sure your payments are on time.  Then call them up and ask them to lower the rate.  And here’s something else – If you pay your balance on time every month then it doesn’t matter what the rate is because you won’t have to pay interest!

It’s Too Easy to Spend

C’mon!  Seriously?!?  Have some self control.  Take a look at why you think you need to use a credit card so often.  Why are you spending so much?  You can’t blame the credit card company because you can’t control yourself.

Stop blaming credit card companies!

No one told you to get a credit card.  OK, maybe it helps to have one to build up a credit history but it’s not their fault if you abuse the card.  Take control of you situation and start to do something about it!

What do you think?  Is it the spender who sucks?

Credit Cards Suck!

You head off to college. You’re finally on your own truly feeling like an adult for the first time.  As you head to the cafeteria you pass a table run by a credit card company.  If you sign up today you get a free t-shirt.  Hey, you’ve wanted a credit card and it’s getting close to laundry day so an extra t-shirt will come in handy.  Fast forward a few years and you’re thousands in credit card debt.  Lucky you!

Yeah, credit cards suck!

So you have a big balance that you built up on the card. Wasn’t too bright, you know.  You want to pay it back but you’re trying to make ends meet too.  You get your credit card bill and you see the minimum amount due.  The low amount entices you to pay it.  The extra money can go toward other things like food and rent.  Fast forward a few years and rather than your purchases getting paid off your amount due grows instead.  You look at the interest you’ve paid out and realize it was as much as the original items you bought!

How about this – You need a new refrigerator. You head to the appliance store and find one you like.  As you are getting ready to pay, the salesperson tells you if you open up a credit card with them there will be no payments for 12 months.  A year of no paying would be pretty good.  So you pay the minimum for 12 months.  On the 13th month you see a huge interest charge!  What you didn’t know was if you didn’t pay the whole thing off after 12 months you pay interest on the balance going back a whole year!  Oh, and the rate on the card is like 24%!!  And you thought you got a deal on the price a year back!

Credit cards suck.

Here’s one – Yeah, you had a lot of credit card debt. But you worked your rear off to correct those mistakes and pay it off.  Hours of overtime and scraping by to make sure you don’t have to pay interest payments anymore.  You’ve tuned the page and you’re now a responsible credit card user.  The day comes where you have paid off your entire balance.  You now owe nothing.  Congrats!  You get a letter in the mail a few weeks later saying the credit card company is canceling your account now that your balance is paid off.  Seems you’re not credit worthy now that you’re responsible.

This one’s good – You know you have a high interest rate. You screwed up a few times in the past.  But you have been reliable for 6 months now with no late payments and you have been paying more than the minimum.  You heard that you can call the credit card company and ask to have your rate lowered.  Nervous, you call them up and explain the situation.  To your surprise the CC company is more than happy to lower your rate by a few points.  That wasn’t so hard!  It’s not until some months later that you find out that rate change only applies to NEW purchases.  The old balance is still at the higher rate.  And here’s the kicker – those payments you have been making?  That went to the lower rate balance while the higher rate balance sat back and accrued interest.

Have I mentioned credit cards suck?!?

Last one – You haven’t been the best with your credit card but you’ve been trying.  It’s been tight with the money and you are trying to stretch every dollar out.  Your credit card bill’s due date is the 2nd.  You get paid on the 30th and mail out your bill the day you get paid.  It doesn’t get to the CC company in times and you are charged a late fee of $35.  On top of that your interest rate goes up to 22%.  You call up the company and beg and plead but they won’t do anything since you haven’t had the cleanest credit record the past 6 months.  That $15 CD you bought just cost you a whole lot more!

Yup, credit cards can be killer!

I’ve been in a lot of these situation myself (I remember getting my first credit card on campus and received a Koosh ball too!).  Not fun times being stressed out with credit card debt.

How about you?  What are your credit card horror stories?  Tell me why you think credit cards suck!

Check out the other side of the argument: Credit Cards Don’t Suck, You Suck!

 

Medical Treatment And Your Credit

Human face anatomy

It’s a common theme on the news and in the papers, the cost of virtually everything is going up and more and more families are finding it harder to keep up with monthly expenses, let alone what happens in an emergency situation, especially a medical one. As health care costs rise and medical insurance costs increase astoundingly fast, a medical emergency can complicate the finances of any family.  It is especially tough on those who require prolonged medical care and prescription medication.

What happens when you need to seek treatment but do not have the money to cover the costs? For many, a seemingly easy fix is to pay on credit in order to get immediate attention but financially it may not make sense, especially if you do not have a cash plan to cover the monthly costs. In addition to failing health, you may be faced with long-term financial stress. By charging your health care costs to a credit card, you are going to end up forking over much more money than you otherwise would have to thanks to increased costs and potentially over the limit fees for any missed payments.  Credit limits will also take you only so far.  For prolonged treatment, your credit limit may quickly be maxed; not to mention the changes being made by the credit card companies which are reducing credit amounts and increasing interest charges.

If you have a credit card that offers a cash back rewards program based on purchases made, it might be beneficial to use it for the money coming back to your account or your wallet. However, that alone is not a reason to use your credit card for medical treatment. There are more viable alternatives for paying for medical care. If you are unable to come up with the cash for payment, perhaps the following list can help you find other options.

Start An Emergency Fund

Even if you don’t anticipate an illness occurring (who does?), you can make a point to have a small amount of money each month transferred to an interest-bearing savings account, where it can grow and be available for medical emergencies. With insurance, there are many times that the costs not covered can still run high and it can be a great relief to have access to cash in the event a medical situation arises, especially one that requires a hospital stay or long-term medication.

Check In With The Government

There are many medical assistance programs available in communities and on a federal level to help supplement your medical payments. Many people will not consider asking for assistance whether due to pride or just lack of knowledge. There are also many clinics that base payment rates on your income and expenses. You can often get quality medical care for a fraction of the cost if you make the effort to seek out additional help.

Payment Plans With The Treating Facility

Most health care providers will offer some options for a payment plan, depending on your need. Even if you have to make payments for a long period of time, you will likely end up saving money by eliminating interest charges like those tacked on to a credit card. If you don’t have insurance, or find that your insurance does not sufficiently cover all of your costs, the balance amount can be paid down over a period of time without collection action, provided you continue to make regular payments

Medical emergencies and unexpected illness are stressful enough. It is better to be proactive and prepared for the unexpected than to rely on your credit card to get you through your situation. Adding financial stress to physical stress can often be a fatal combination. As health care continues to be a major issue for many in the nation, it may continue to get worse before it gets better. No one can prevent an emergency but by proper planning, one can be prepared for it.

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Tisha Tolar is a freelance writer providing content for CreditCardAssist.com, where she regularly writes about credit cards, rewards programs and general consumer finance issues.

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photo credit: Patrick J. Lynch

Goals Are Great Motivators

Marathon de New York : Verrazano Bridge

Goals can be great motivators to help you achieve! I find that when I have a specific goal it’s much easier to focus on what I want to accomplish.  For example: For me to save money is one thing but when I have something specific to save for I find that I can save up much quicker.  When I was younger I wanted a new stereo (the hand-me-down I was given still had an 8-track in it).  I made a goal of saving up for a new stereo.  When I sacrificed some expense for savings I knew i was to help me get that stereo.  When I worked extra hours in the supermarket I knew it was for the stereo.  In no time I had enough to go out and buy a new stereo, equipped with not one but two tape decks! (Have I dated myself or what?)

Let me give you some other goals I’ve set for myself and accomplished:

Ran the NYC Marathon – In 2005 I decided I wanted to run the NYC Marathon.  I knew I needed time to train and run enough races (you have to run 9 NYC RoadRunner races for guaranteed entree).  In 2006 I mapped out what races I would run to qualify for the next year’s race.  It was tough to keep up but I ran and finished all nine races for entry.  In 2007 I started a training program to get me in shape for the marathon.  In June I started my longs runs every weekend to get me ready for the distance.  The first Sunday last November I woke up at the crack of dawn and hopped on the Staten Island ferry to get to the start of the marathon.  Later that afternoon I would be able to call myself a marathon runner.  I don’t think I ever would have run the distance without a specific goal of running the marathon.

Paid off my credit cards – Some years ago I finally got fed up with how much I was paying monthly in interest for my credit cards.  I resolved to pay them off.  It started slowly but bit by bit I started to gain ground.  After an incident that led me to move back with the ‘rents I was able to turbo charge my payments and finish off my credit card debt.  I haven’t had more than a month’s charges since then (I pay my cards off in full every month).  Without resolving to pay off my credit cards once and for all I would still be idling along with minimum payments and a ton of debt piling up.

Started a personal finance blog/site – In October of 2007 I had discovered blogging via Zen Habits then Get Rich Slowly.  I was already itching to find something productive to do with my time and had healthy interest in personal finance.  I set a goal of starting up my own blog and making it successful.  I’m still in the middle of this goal but I feel like what I’ve done so far has been a success, especially when I look back at my first month of original posts on my Blogger site.  Without my goal I might be surfing fantasy baseball sites instead of writing this article.

Build up our savings – My wife and I wanted to make sure we had enough in savings for any emergency and then some.  Rather than hope to put some money away with what was left over at the end of every month we calculated a specific amount we could afford to do without and set up our ING savings to automatically withdraw money from our checking every week.  We have since achieved our emergency savings goal and exceeded it.  If we didn’t create a specific plan our savings would be considerably less and we’d be scratching our heads wondering where our money went.

The lesson here is that I was motivated to accomplish different things because I set a goal to achieve!  Having a goal in mind keeps my mind focused.  Without a goal set I would have just floated along in many cases.  My savings would be lower, my credit card debt still existing, my running much less, this site just a thought…

One way to accomplish a goal is to make it SMARTSpecific, Measurable, Attainable, Realistic, and Timely. (Thanks to Cash Money Life for turning me onto that concept.)

I also like to think in terms of short and long term goals. For example – The goal of saving up for a down payment on a home, while an admirable goal, may seem a bit too big to ever accomplish.  That could be a long-term goal.  To make it more achievable you can create a short-term goal of saving X dollars a month towards a down payment.  This way you see your small goals achieved which helps build up the confidence to achieve your bigger goal.

Check out this article on the science of setting goals.  When you set a goal you are actively engaging your brain to help you with your goal!

What goals have you accomplished?  What are your current goals and how will you achieve them?

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photo credit: Martineric