credit card practices and debt solutions practices

It’s important to note, though, that Brooks doesn’t excuse consumers from their responsibility in all of this. He makes it very clear that if you incur debt, you should repay. What he takes issue with, though, is the fact that the system is so rigged that even those who are trying their best to make changes and make good on their obligations have a hard time getting ahead. And once you start sinking money into a debt solutions program, he warns you that there is a good chance you will be had.

But it isn’t all doom and gloom. Indeed, Brooks strikes a hopeful tone toward the end of the book as he provides useful information that can help you get out of debt — without the help of the debt management and negotiation industry. He talks about using a boundary system rather than a traditional budget, as well as provides insight on improving your credit, rather than having a mindset of “repairing” something that really isn’t broken. Brooks also offers helpful information on stopping debt collector harassment, and provides sample letters and scripts to use.

In the end, Deceptive Money is a great resource if you are in debt and wondering what you can do to get out of debt. It is also a must-read if you are thinking of joining up with a debt solutions company, since it provides detailed information on various scams and how to avoid the pitfalls.

Post from: EveryJoe

Book Review: Deceptive Money by Bob Brooks

Selling what you don’t need

Go through your home and look for items that you haven’t used in years. We’ve been trying to get rid of stuff we don’t need for quite some time. It’s amazing the useless stuff that accumulates. It is equally surprising when you realize that it’s all in good shape because you didn’t use much in the first place. Figure out what you could sell, then consider these options:

1. Craigslist offers a place for you to connect with local buyers. And, unlike the Classifieds section of the newspaper, Craigslist is free. This is a great place for larger items that are hard to ship.
2. eBay is a tried and true method of selling. However, you should only put up your best items, and remember to consider the cost of shipping as well.
3. Amazon Marketplace offers a great opportunity for things like music, movies and books. You can sell your used stuff at Amazon and get a little cash. (Sign up for the affiliate program while you are at it and monetize your blog).
4. Garage sales are a lot of work, but they can be helpful in moving all that stuff you couldn’t get rid of online. You will have to offer deep discounts, though.
5. Freecycle can be a place to go if all else fails. If you can’t sell your items, you can give them away on Freecycle. Maybe someone else could use what you have. And you might find something that you actually need.

In the end, there is always donation. Your local thrift store can accept items in good condition and offer you a receipt for their value. This way you can at least get a tax deduction for the stuff that you don’t need anymore.

image source: eBay Web site

Post from: EveryJoe

Make a Little Extra Money: Sell Your Stuff

Because our economy runs on consumption fueled by debt, a Fed rate cut is expected to help stimulate the economy be stimulating more borrowing. Here’s one example of how it’s supposed to work for you and the economy:

1. The Fed cuts its rate, which influences consumer loans (including credit cards). This happens because the prime rate, in most cases, is the Fed Funds rate plus 3. So, the prime rate drops from 4.5% to 4% — assuming 50 basis point cut to 1%.
2. Your credit card interest rate drops. Credit card rates are prime plus whatever (I have one that is prime +7 and one that is prime +11), so theoretically, those drop as well.
3. With a lower interest rate, your monthly credit card payments drop. If you keep paying the same amount, more money goes to the principal, giving you more room on your credit card. If you just go with the minimum, you pay less money overall and have that money in your pocket. Either way, the hope is that this newfound “disposable” income finds its way into the economy when you buy stuff.
4. The economy is stimulated as people have more spending power and use it.

Also, the lower interest rates are meant to lure people into buying things with debt, since the rates are lower. Auto loan interest rates will drop, and that could make buying a car more desirable. Which would help a segment of the economy that is suffering rather badly.
Will the Fed rate cut work this way?

The big question now is whether or not today’s likely Fed rate cut will work this way. With credit card companies worried about increasing defaults, they are starting to tighten their requirements. Credit lines are being reduced (that’s right; check your statement — your $5,000 limit may only be $4,700), so even with lower rates, it may not mean more available for spending on the credit card.

Another issue is that credit cards may not see the benefits of today’s Fed rate cut.  Companies are raising their interest rates. Even if the Fed does cut rates, what if my card goes from prime +7 to prime +9? My credit card rate rises, and that means payments go up, leaving less discretionary income.

Fed funds rate and your savings account

Finally, for those who are trying to pay down debt and start saving money, this move really won’t help. While in most cases a Fed funds rate cut can help you with your debt issues, it never helps with your savings account. Your yield on cash (money market, high yield savings, CDs, etc.) is about to get lower. This means that yesterday was the time to lock in a relatively decent rate on a CD. Because the yield is about to go down.

image source: sxc.hu

Post from: EveryJoe

Fed Rate Cut: How Will It Affect the Economy (And You)?

This was the first time I heard someone state this truth so baldly. But what has me worried is that now we’re treating this as something that’s no big deal. We *need* credit — and by extension we *need* debt so that we can keep the economy going.

Well, when tough economic times loom, if you want your personal finances to survive a recession, you actually need to do your best to get out of debt. Now is not the time to rack up the credit card bills. Debt make you vulnerable to economic downcycles and we are in one right now.

The basics of getting out of debt

I submit that it is time to practice some solid personal finances basics and remember the three rules of getting out of debt:

1. Cut back on your expenses (making a budget can help).
2. Make a debt reduction plan (a lot of people like the debt snowball).
3. Do not add more debt to your personal finances.

While now may not be the time that you can aggressively pay down your debt, it is the perfect time to follow rules 1 and 3.

Post from: EveryJoe

Get Out of Debt: Back to Basics

As the economy gets a little more challenging, it is time to rethink the way you do things, and to make a new financial beginning. Consider some of these “new beginnings” for your financial life:

• Re-evaluate your wants and your needs and cut back on some of your wants.
• Start a savings plan to build (or pad) your emergency fund.
• Make greater efforts to get out of debt.
• Begin living within your means.

The old way of doing things in the “easy” economy was spend, spend, spend and do it now, now, now. That way is unsustainable.

If your personal finances need a new beginning, now is the time to start — so that you are ready when things get even more challenging.

image credit: sxc.hu

Post from: EveryJoe

B5 Business Channel Theme Day: New Beginnings in a Challenging Economy

Debt costs you money. Sometimes thousands of dollars. The interest charges don’t bring you anything tangible — or even tangible — in terms of benefits. All interest from debt represents is money you pay to get someone else rich. My guest post on My Dollar Plan offers a way to plan your way out of debt.

image credit: sxc.hu

This post is part of the b5media Business Channel Great Blog Off! Find out more about the Blog Off here: http://www.b5media.com/b5media-blogs-for-a-cause-and-raises-money-in-support-of-charity/

The Business Channel is supporting Accion International for the Great Blog Off. You can make a donation directly to Accion (http://www.accion.org/b5media). Donations are tax deductible.

Post from: EveryJoe

Personal Finance Tip #5: Pay Off Consumer Debt

Rise Above Debt Relief has a different approach. Recently, I spoke with Jeff Boulton, CEO of the company, about his approach to debt management.

“We really take a counseling approach to debt relief,” Boulton said. “We help people pay their creditors, as well as help them set up a savings plan. And we counsel with them to help them build a solid financial foundation.”

The other thing I really like about Rise Above Debt Relief is that the program actually says no to some people. “We actually turn a lot of people away,” Boulton explained. “because debt settlement isn’t for everyone. Some people would do better with another approach. We talk to potential clients, and if there is another service, or if they could do it themselves with a debt snowball, we tell them how to do that instead — at no cost to them.”

“We are really rigorous about the people we accept into the program,” Boulton continued, “We view this as the last option before bankruptcy.”

Of course, this debt negotiation program has a fee, but Boulton is up front about it. “It’s a 13 percent flat fee, based on total debt entered into the program.” But he also pointed out that in many cases, borrowers pay much more than that when they struggle to pay interest.

Additionally, Rise Above Debt Relief offers financial counseling and free budgeting software. “We want to help people move on from their debt and start building wealth,” Boulton said.

Right now, debt settlement is all that is offered by Rise Above Debt Relief, but Boulton hopes to offer other debt management services soon. But, for now, his company remains one of the best debt negotiation programs I have seen.

“It comes down to education,” Boulton explained. “Get people on a budget, and get them away from living off credit cards. And with Rise Above Debt Relief, anybody can call in and get sound advice and not be pushed into something they aren’t going to need.”

Disclosure: I have not been paid by Rise Above Debt Relief. I am impressed, however, by Jeff Boulton and his ideas. I have not tried the company’s services, but they appear to be sound and helpful for those in serious debt.

Post from: EveryJoe

A New Kind of Debt Negotiation? Rise Above Debt Relief

Some credit card companies (Discover notable among them) are in the habit of periodically checking your credit report. They look for things like increased purchases or credit inquiries that result in a lower score. And then they use it as an excuse to jack up your interest rate. This is a somewhat cruel and disheartening practice for some, especially since it makes it extra difficult to pay down a balance.

So I repeat my mantra: If you use credit cards, pay the balance off each month. If you do make a large or emergency purchase, do what is necessary to ensure that it is paid off in two or three months (six months at the very outside).

Credit cards benefit when you carry a balance. And you can destroy the value of any rewards by paying interest on credit card balances.

Post from: EveryJoe

What’s Your Credit Card Interest Rate?

Why home equity loan debt consolidation seems attractive

If you have a great deal of debt, home equity loan debt consolidation seems attractive because you would never be able to get a debt consolidation loan that would pay off such a large amount unless it were secured by a large asset. Putting your home up as collateral makes it more likely you will get the loan to begin with.

Then there are other advantages. The interest rate is lower on a home equity loan debt consolidation because home mortgage rates are lower than other loan rates. Additionally, that interest rate is often tax deductible. If you are very disciplined, and you have wherewithal to stick to a debt plan, you can benefit from a home equity loan debt consolidation. But watch out for the risk.

Risk of home equity loan debt consolidation

The main risk to home equity loan debt consolidation is the fact that your home is at risk. Rather than having unsecured debt, it is now secured – by arguably your most valuable asset. If something happens and you can’t make the payments on your second mortgage, your home can be taken from you. This is quite a blow! Before you go the home equity loan debt consolidation route, make sure you carefully consider your alternatives. And if you do take that route, make sure you have a good debt plan in place for paying of the loan as quickly as possible.

Post from: EveryJoe

Home Equity Loan Debt Consolidation

In many cases, debt management involves shifting debt about, trying to lower monthly payments (and hopefully interest rates), in an attempt to make it “easier” to get out of debt. Sometimes, these debt management programs actually spread out how long you have the debt, in order to accomodate friendlier payments. The better option is to get out of debt as fast as you can.

Getting out of debt fast requires that you have a debt plan. You need to create a plan that shows your income, as well as details how much of it is available to use to pay off debts. And you need to look at your spending to see where you can cut back (fewer trips to the movies, more homemade meals, etc.). Then develop a plan that allows you to put extra money toward your debts. You’ll pay them down faster, pay less in interest and be on track to build wealth more effectively.

Post from: EveryJoe

The Faster You Get Out of Debt, The Better Off You’ll Be