Free From Broke

A Personal Finance Blog for Regular Folks

Credit Card Use and Reviews

Credit cards can be a gateway to debt but can also be a powerful personal finance tool. See articles that will teach you about credit cards,keep you up to date on credit card rules, show you the best credit cards, as well as show you reviews.

Credit Cards Suck!

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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

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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

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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 SMART – Specific, 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

7 Credit Card Tips From ING Direct

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I was just on the ING Direct site checking out my savings accounts and decided to check out their tips. They list seven great credit card tips. Check them out (descriptions are mine):

  • Make your payments on time – Very important! Late fees can be very expensive on credit cards and can negatively affect your credit score. If you have problems with the due date you may be able to change your credit card due date.
  • Try to pay off the full balance every month – Pay off the full balance to avoid any interest charges.
  • Avoid cash advances – Cash advances on your credit card have different rates than normal credit. Yeah, it’s gonna be more expensive than if you just charged it.
  • Shop around – Compare rates and services from different credit card companies to get the best credit card offers.  Find one that fits your spending habits.  Make sure to read the fine print as well.
  • Use savings to pay off the cards – It’s great that ING Direct exists offering high interest rates on savings but that high rate doesn’t compare with the interest on your credit card (unless you have a low introductory rate).
  • If you’d like a better rate, just ask – If you have been a good customer you can call the credit card company and ask for a better rate. Try telling them that you received an offer from another company with a better credit card rate; odds are they can lower it for you. Make sure you understand what the new rate is though. It may only apply to new purchases not your outstanding balance.
  • Don’t be left holding all the cards – If you have a lot of cards it means you can do a lot of spending damage. This is bad for both you wallet and your credit score. Get rid of credit cards you hardly use or ask that the credits limits be lowered (a high credit limit can hurt you for some credit card companies).

Of course you should also watch your spending as well.  Don’t abuse your card and know what you can really afford.

Do you have any credit card tips to share?

Interesting Credit Card Marketing From AAA and Bank Of America

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My wife paid her credit card a couple of days late.

Between work and taking care of the kids (that includes me too) she forgot the exact due date.  It isn’t a card that’s used often.

It happens.

Unfortunately we got hit with a no payment fee (about $30) and an interest fee (a couple of bucks). There were no other late payments on the card so I decided to call the company and ask if they can drop the fees. We’ve been good customers and have been paying in full every month.

So I called the number on the back of the credit card.

I go through all of the phone hoops and get to an account person. He asks who I am. I give him my name and tell him I’m calling on behalf of my wife (this is a credit card she had before we were married). The account rep then says he sees my account. My account? This is my wife’s card! It seems that Bank of America is the issuer of the AAA card and since we have a banking account there he could see my account.

So I tell him our situation, that we never pay late and always pay in full, could you drop the late fees? He tells me since I’m not on the account he can’t authorize it. My wife has to tell the rep to put me on her account. So now I give her the phone which kind of defeated the purpose of me calling since she was taking care of the kids, and she gives him permission to add me to the account. Took two minutes maybe. Easy process. I get the phone back and go back to the original question of removing the fees. He looks at the account and says he can remove the no payment penalty but there’s nothing he can do about the interest fee. I press on the interest but he won’t budge. It was a couple of bucks and it was our fault so OK we’ll pay that. At least we got the no payment fee taken off! The whole process was a bit annoying but in 15 minutes we were able to eliminate a $30 charge.

Fast forward a week or so and we get a package in the mail.

Two new credit cards for the account. We didn’t ask for a new card. Since they added me to the account they assumed that I too would need one of their cards.

Hmm…interesting. I guess they want me to start charging on the account too! Now they double the chance of a late payment or interest charges (not really for us but hypothetically)! What they did wasn’t wrong from what I can tell but it annoys me that they automatically sent out another card assuming I wanted it. Very aggressive marketing on Bank of America’s behalf.

This gets me thinking though.

What cards do we have between us? Should we consolidate some accounts with both of us on the accounts? Until now it hasn’t even been a thought. We’re both responsible with our spending and very open with our spending habits. I like the idea of one separate card between us so we can buy gifts for each other without the cost popping up on a shared statement. How can this affect our credit scores? I need to do some research on this.

P.S. To prevent future late payments we signed up for email alerts from the bank that tell us the payment is due in a few days.

Do you think Bank of America was sneaky in sending us another card?

For those married folks out there – How do you handle credit cards between you and your spouse? I’m interested in hearing your stories.

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