If you like many others in the United States are reeling under credit card debts and facing non-stop calls from the credit card company and its debt collectors, contact an experienced Provo Utah bankruptcy lawyer.
There are three categories of loan agreements, but lenders in each category will be most eager to lend money to someone with good credit. Credit is extended to a borrower either through a revolving agreement, a charge agreement, or an installment agreement. In a revolving agreement, the holder pays some or all of the outstanding balance each month. Whatever remains is rolled over to the next bill. Most credit cards, department store cards, and gas cards are revolving agreements. In a charge agreement, the holder promises to pay the full balance each month. This agreement does not involve interest payments because no balance is carried forward. American Express cards are probably the best known in this category. In an installment agreement, the borrower agrees to pay a specific amount each month until the debt is repaid. This is traditionally the way auto loans and furniture and appliance sales are financed.
About two-thirds of card-holding Americans carry a balance on their card each month and pay interest on that debt. Yet many of these same people get an offer for a card with no annual fee and they jump at the chance, without considering whether the interest rate is high. They could pay far more in interest charges than what they save on annual fees.
Then there are people who choose a card primarily to get free airplane tickets, bonus points toward trips or cars, cash rebates, the logo of a favorite organization or sports team on the card, or other “rewards.” They can end up paying more in fees or interest than the value of their “freebies.” This doesn’t include cases in which people buy items they might not otherwise buy just to rack up more points or miles on their card.
In general, if you expect to pay your credit card bill in full each month, your best bet is a card with no annual fee and the kinds of rebates or rewards you expect to use the most. If you don’t expect to pay your card balance most months, go for a card with a low interest rate and the right mix of rebates or rewards to justify any fees.
Misunderstanding card offers
It’s easy to assume too much or read too little when sorting through solicitations. At first glance, every offer may look like a good deal. But there are differences and potential dangers, depending on how you plan to use your card.
A low interest rate prominently featured in a mailing or advertisement actually may be a short-term “teaser” rate that, as noted in the fine print, may increase dramatically after six months or so. That low introductory rate also may only apply to balances you transfer to your card from other loans or cards you have, and not to any new purchases you put on the card. Be aware that an interest rate advertised as “fixed” still can be changed with advance notice to card holders. And if your card company does raise your rate for any reason, that new rate usually will apply to any outstanding balance plus new purchases.
Consumers who routinely carry a balance on their credit card should pay closer attention to how their interest is calculated. Perhaps the most common and the most advantageous method for consumers is the “average daily balance” approach, where you’d have a 15 to 30-day “grace period” to pay before facing charges on the daily average for that period. However, a few cards have much costlier calculation methods, including the “two-cycle” system. Under that method, if you pay in full one month but only pay part of the bill the next month, you’ll be charged interest for both months instead of just one.
This doesn’t mean you’re guaranteed a card. It means that a “pre-screening” indicates you may meet the income, employment, and other criteria the card company might want in a customer. You still must apply for the card and await the results of a credit check. Also, you’re not guaranteed the credit limit stated in your offer.
Before you sign up for a credit card, carefully review the solicitation and the application. By law, key terms must be disclosed; they’re usually described in a separate box somewhere on the application form. If after reviewing these documents you don’t understand something, call the card issuer and ask for an explanation.
Not shopping around for the best deal
It’s a big mistake to assume that interest rates, credit limits, grace periods, and other card features are pretty much the same no matter which card you choose. You can shop for good deals nationwide, for free, by checking the listings of cards and toll-free phone numbers that appear regularly in major consumer and financial publications.
Having too many credit cards
There are good reasons to have more than one card, especially if your credit limit isn’t high enough on one card to suit your needs. You don’t want to be traveling and discover you can’t charge a hotel room, car rental, or airline ticket because you’d exceed your credit limit. Even so, most experts agree that two or three general-purpose cards and a few (if any) cards issued by stores or oil companies should be enough for the average family.
What’s wrong with too many cards? One, they make overspending too tempting. And two, they become part of your credit history. Your record will show the number of cards you own, the total amount you’re eligible to borrow on your cards, the number of times you’ve applied for cards, plus your rejections. This can haunt you the next time you apply for a loan you really need–perhaps a mortgage or a car loan.
Getting too deep in debt
Each year millions of people drown in debt–from mortgages, home equity loans, auto loans, credit cards, and other borrowings. Many people bring on their own troubles–they can’t control their spending or manage their finances wisely. But many others are responsible people who became overwhelmed by expenses or reduced income triggered by a serious illness, a job loss, or some other unforeseen event.
If you’ve got a serious debt problem, there may be corrective steps you can take involving your credit cards. For example, you can reduce your expenses by paying off the balance on your highest-rate loans first-usually your credit cards–even if you have higher balances on other loans. Also, you can pay for future purchases using a debit card, which deducts funds directly from your bank account.
There also are reliable credit counselors you can turn to for help at little or no cost. Unfortunately, there also are scams masquerading as “credit repair clinics” and other companies that charge big fees for unfulfilled promises or services you can perform on your own.
If you are deep in credit card debt, an experienced Provo Utah bankruptcy lawyer can be the person who can help you get rid of your credit card debt.
Running up fees and penalties that could easily have been avoided
Pay your credit card bill late–even by one day–and you may face interest charges on the outstanding balance plus your purchases. Pay with a check that bounces or exceeds your credit limit, and you could pay $20 to $30 in penalties. Become a habitual offender and your card company could significantly raise the interest rate on your card. These problems can be avoided simply by keeping better financial records and being aware of your card’s fees explained in the fine print. And make sure your payment arrives at the card company by the due date; having it postmarked by that date won’t suffice.
Many consumers also use their credit cards to get quick cash at an automated teller machine (ATM) or teller window, or they use one of the blank checks or “convenience checks” that card companies send to customers. In many cases these “cash advances” carry sizable up-front fees–often 2% of the amount advanced and not less than $2–a higher interest rate than regular card charges, and no grace period before interest begins accumulating. You may be better off writing a check, using a debit card, or charging purchases rather than trying to pay in cash.
Skipping a payment or paying less than you can afford
It’s tempting, especially during the holiday shopping season, to take advantage of an offer from your card company to skip a payment or two. You also might like the idea of paying back only the minimum required each month or even reducing your minimum payment. But these aren’t really good deals, especially if you can afford to pay off all or much of your card balance.
When you pay only the minimum on your credit card bill, you’re simply taking more time to pay off your debt. That means more money in interest charges– perhaps thousands of dollars and a debt that takes 10 or 20 years longer to pay than necessary. Your card company also may begin to see you as more of a risk and decide to substantially increase your interest rate.
Not closely reviewing the notices sent by your card company
Card issuers are required to give you notice (typically at least 15 days) before increasing your interest rate, lowering your credit limit, adding fees and penalties, reducing or eliminating your grace period, or cutting back on bonus programs. But if you don’t monitor your monthly billings or other mailings from your card company., you could end up paying more for a credit card that offers you less–and not even realize it.
So, to avoid paying a higher interest rate than you expected, to avoid penalties for actions that in the past were allowed, or to make sure you still get the services and bonuses you want, read that junk mail! This also gives you the opportunity to negotiate a better deal from your existing card company or to shop around for a new card.
Not correcting errors in your monthly billings
Many people don’t check their monthly statements for over billings. And even those consumers who do spot a problem don’t resolve it the right way. For example, in the case of a simple overcharge, the Fair Credit Billing Act allows you to withhold payment on a disputed amount until the situation is resolved. But to be fully protected, you must report the problem to your card company in writing within 60 days of the postmark of the bill.
Closing out a card for the wrong reasons, or in the wrong way
Many consumers try to cut costs by transferring the balance on one card to a new card offering a super-low introductory interest rate, but some later find out they’re paying about the same money or more. That can happen if you don’t pay down the transferred balance before the low rate expires–usually within six months– or if the transferred balance is subject to hefty cash advance fees or other charges. So, look before you leap from one card to another.
If you don’t use a card anymore, cancel it out. Why? As previously noted, too many cards on your credit record could prompt a lender to reject your application for a mortgage or some other loan. Also, even if you don’t find the card of much value, a thief who takes it from your home or wallet can use it fast!
Once you decide to cancel a card, take the following precautions. First, send a letter to the card issuer stating that you have decided to stop the card. This clarifies, for your credit records, that the card was closed by you and not by the card issuer because of any problems you may have created. Also, cut up your old card and dispose of it in such a way that a thief rummaging through your trash can’t piece it together and get your account number and expiration date– it’s all he needs to go on a shopping spree over the phone.
Before you sign up for a credit card, you should be careful. However, if you have one, use it carefully. If you unable to make you credit card payments, speak to an experienced Provo Utah bankruptcy lawyer to know your options.
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When you need help with a bankruptcy case; whether it is a chapter 7 bankruptcy, a chapter 13 bankruptcy, a chapter 11 bankruptcy, a chapter 9 bankruptcy or a chapter 12 bankruptcy, please call Ascent Law LLC (801) 676-5506 for your Free Consultation. We want to help you.
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West Jordan, Utah
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