Category Archives for "credit"

Cure for a Credit Hangover

Guest Post by Paula Drum

Often, the cheer of the holiday season can be all consuming and shoppers forget that unlike Santa, their budgets are real. The exhilarating high of making a memorable December is quickly forgotten when the next year’s financial hangover settles into our banking accounts.

So what can you do to rebound from the holidays and start anew this year?

This post will provide suggestions to those relying on credit to create a budgeting plan. We’ll begin by taking a look at one potential cause for a financial hangover, and then discuss how to start a credit budgeting plan to alleviate and prevent future financial hangovers.

 

The Cause

One catalyst for a financial hangover takes the form of credit purchases. Evaluating the total price paid for credit purchases is an area that people often neglect when using plastic. If you don’t pay off your credit card bills in full every month, then you are financing your purchases and need to add in the interest costs to your budget. Budgeting credit purchases based solely on the price paid during checkout can put you in a difficult financial position.

 

The Cure

If you are a person that relies on credit, you should plan a 2010 credit budget. To create a successful plan, it is imperative that you take the time to research total purchase cost, which includes the retail price plus interest accrued over time. To avoid creating “perma-debt” this credit budget must outline both the total cost of your purchases and how long it will take you to pay off the debt. Before you decide to make a credit purchase, follow these steps:

  1. Tally the retail price of your purchases – “The retail cost of this purchase is $219.99”
  2. Target a date to pay off your debt = “Based on my budget, I can pay this off in four months”
  3. Estimate your total cost plus interest

 

Of course your total credit card payment will depend on your particular card and the balance you currently have on your card.  But you can estimate your real purchase price with interest to make an informed decision.  Try a loan calculator at a site like Bankrate.com.  After all a credit card line is a form of a loan.  Note that many calculators list the length of time in years. If you plan on paying off the loan in less than 12 months you’ll need to convert it to a fraction of a year (4 months divided by 12 months =.33)

Using the Bankrate.com loan calculator, the total cost to pay for this purchase over four months with a 14.9% interest rate is $226.81 broken into four monthly payments of $57.27.

Making good spending decisions depends on having the right information. By creating a credit budgeting plan, you’ll have complete transparency regarding the total cost of using credit and know exactly when you’ll have a zero balance.

Unfortunately, being able to calculate your total cost plus interest may not always be convenient when shopping. One avenue where you may find a better deal is by researching retailers with alternative payment plans, such as Gettington.com, that provide a choice of payment plans along with a clear breakdown of a total purchase cost and interest paid before you make a purchase.  Transparency in understanding your total cost before you make your purchase enables you to make better budget decisions.

Remember: if you’re hungover, you take aspirin, have a greasy breakfast, get hydrated and sometimes swear that you’ll never do that again! Treat a financial hangover the same way. By creating a credit budget and researching the Web, you’ll be on the road to recovery and well-equipped to avoid future credit headaches.

How do you plan to budget credit purchases in 2010?

 

About the Author

Paula Drum is General Manager of Gettington.com, an e-commerce retailer that provides three payment options to help customers budget purchases that fit their individual financial needs.

Repost: ID Theft

ID TheftI stumbled across this ID Theft article today and thought I'd pass it along. I've written about ID theft before, but this serves as a good reminder.

It's interesting to note that most ID theft does not occur online; rather, it's in the physical world. Things like discarded mail, stealing your credit card info, and stealing your wallet. Sad but true.

If you're really concerned about online ID theft, get a really good security program like Trend Micro Internet Security Pro and a password manager like LastPass or RoboForm. Anonymizer is a good program for covering your online tracks.

For the most comprehensive ID theft prevention available, check out LifeLock.

Interesting FICO Facts

Did you know that 40 percent of couples wait until they are engaged to discuss their finances? According to a recent FICO survey, some even wait a full year after they’re married – likely a statistic that supports the fact that ½ of all marriages, these days, end in divorce!

FICO’s survey also found:

  • Women were twice as likely (than men) to choose “a good FICO score” as the most important characteristic in a date while men are six times as likely to choose “good looking” as the most important characteristic in a date. Having an excellent FICO score ranked third – which topped being “rich,” “good looking” and “having great teeth” by both the men and women.
  • 20 percent of couples described their partners’ spending habits as “drastically different” from their own and over 45 percent described them as moderately different. (Only 20 percent of couples rated each others’ spending habits the same.)
  • Please see the complete survey results and downloadable images, here.

With survey findings like these facing Valentine’s Day, FICO’s Credit Cupid has solutions which will help your FICO scores in tip-top shape, see below:

1)     Maintain a good history of paying bills on time. Payment history is the most important component of your FICO score. People with a long history of paying their bills on time, are expected by lenders to continue their good payment pattern, and will be more willing to extend credit in the future.

2)     Encourage good spending habits from your partner. Everyone has their own credit report and FICO score; when couples begin applying for credit together their shared accounts affect both FICO scores.  This is why it’s doubly important to pay on time when you’re responsible for a shared account.

3)     Don’t overspend on your lover.  While it’s easy to get caught up in buying gifts for your sweetheart, spend within your means. If you have a lot of debt, adding more debt or maxing out your credit cards can hurt your FICO score – and potentially your relationship.

4)     Don’t apply for credit you don’t need. Your FICO score not only considers the existing credit accounts on your credit report, but also applications for new credit. Applying for many new accounts in a short amount of time can be a sign of looming financial problems, which can hurt your FICO score.

5)     Discuss finances with your partner. Your partner’s financial burdens can ultimately affect your credit if you feel compelled to help out with their debts and obligations. Have an honest financial discussion early and avoid surprises later!

If you would like to learn more about the survey or how FICO can help keep you in top credit shape, please visit myFICO.com.

How Wall Street Ruined Main Street

Wall Street’s Stranglehold on the Economy Is Choking Americans

America’s Founding Fathers were afraid of any concentration of power in the republic. They were particularly afraid that banking interests could hijack our fledgling democracy.

And yet today, 234 years later, our Founding Fathers’ worst fears have come true. Wall Street’s stranglehold on the economy threatens our very prosperity, and the future of a truly democratic republic.

It’s high time we address the truth about Wall Street’s tyranny and set a course for a more secure economic future – one that’s anchored by a safe banking system, not a system rigged by banks.

This is a good article that delves into the banking and financial system crisis a little deeper than most I’ve seen. It’s a bitingly sarcastic look at what has happened over the past decade (or so).

Bank Failure Revisited: Washington Mutual

This one hits close to home. I was a WaMu employee for a total of 5 years, finally losing my job as fallout from the WaMu "bank failure" that occurred in late 2008.

This video points out that, quite possibly, WaMu could have survived on its own and implies that perhaps the FDIC wanted JPMorgan Chase to take over WaMu.

I've had similar suspicions myself, thinking that there was some sort of grudge between Sheila C. Bair of the FDIC and somebody at WaMu. Was it Killinger? Rotella? Who? Anybody?

Who knows? When will the tell-all book come out? After all, this was the biggest bank failure in US history. Somebody smart should have something to say about it.