Finances need a clean up, why not do this now for spring
There are times in our lives that we are not able to pay all our bills. Maybe we have lost a job, had a medical illness or other life circumstance. Not being able to pay your bills is one more stresser added to the mix.
I will give you my advice, but please know that you should check with your professionals for what is best for you and your situation before taking any action.
There are several types of bills categories we have:
Utility Bills – You may have noticed that these typically don’t appear on your credit. Yes, you are correct. When your utilities are paid on time, they don’t appear on your credit report. When you are late, most utility company will report the delinquent payment information to the credit reporting agencies. Or even worse, they may send the account for collection and that will appear on your report.
Credit Cards – This is a double-sided question. You want to be able to have credit in case you need it but you can’t afford to pay the credit card. The best possible option when you can’t afford to pay your bills, is to be able to pay the minimum amount due on all your credit cards each and every month. If not, then you want to contact your credit card companies to work out an agreement. You don’t want your credit card companies to send your account to collections and/or small claims court. Both these options will negatively affect your credit.
Non-Credit Bills – These are debts you owe that don’t appear on your credit usually (i.e. your auto mechanic, cell phones, tax bills, medical etc.). You might be thinking that you can ignore these bills, but that’s not the case. Not paying these can lead to judgments and judgments have serious consequences on your credit report. Try to work out payment arrangements to keep this from happening.
In difficult times when money is tight, you may need to access your credit to get by. You will need to keep these tips in mind so that you have that option available to you. Even when you are unable to pay your bills as you have when you making more money, these tips will come in handy.
This month use Equifax
Hello, it’s Jill again, reminding you to get your finances in order so you can relax this summer.
How to Order Your Credit Report
The only authorized source for your report is AnnualCreditReport.com. You won’t be charged and they won’t force you to sign up for “credit monitoring”. It’s yours to review by law. Learn more.
- Select your state, then click Request Report.
- Fill out your information, then click Continue.
- When it asks you to select a service, select Equifax.
Not comfortable ordering online? There are other ways to order your report:
- Mail your postal order by downloading the form at AnnualCreditReport.com
- Call in your order at 1-877-322-8228
What should you do with your report?
- Review it for accuracy!
- Follow the instructions to correct any errors.
- And, always remember to keep copies for your records.
Were you hoping for your credit score instead? Try CreditKarma.com. It doesn’t give you a FICO score, but it comes close by providing scores from TransUnion and VantageScore. And, there’s no charge for you. CreditKarma funds their service through website advertising.
May you have a relaxing and successful summer!
P.S. I’ll send you another reminder in September to help you stay up-to-date on your credit before the holidays.
Last issue we talked about zero percent financing. Now, I want to talk about the benefits of ‘rewards cards’. You know, those credit cards that offer cash back bonuses, airline miles or other rewards that accumulate with each purchase.
Get the facts to determine if rewards cards are right for you.
Annual Fee and Interest Rates
First, rewards credit card generally have an annual fee and a higher interest rate than non-reward credit cards. You have to be absolutely certain that you will pay your balance off each and every month in full or the reward won’t be worth it.
Can You Use the Reward?
Nothing is worse than carefully accumulating points for a year, only to find you can’t use the reward. Ugh!
You need to find out what rewards are available, how many points and/or miles are needed, what are the exclusions? I was just reading an application for someone and for 25,000 points, they could get a free coach airline ticket valued at up to $400. That seems great on the surface, but what does that actually mean? Can you book that reward when and where you want to use it? How much do you have to charge to earn those 25,000 points?
If you were a part of my Nearly Free Travel Group, you know that we don’t have an airline miles rewards credit card. We earn our miles in more direct ways. We used to have several different types of rewards cards (airline miles, cruise points, etc.) but not anymore. But with everything in life, this is a choice we made. You may want to choose differently.
The Terms and Conditions
So what should you look for?
- How the interest is calculated – single or double cycle billing?
- How long is the grace period?
- What percentage is the minimum payment (typically 2 to 2 ½ %)?
Take your time and ask questions before applying. Make a pros and cons list – does it work for your future plans and current spending habits? To start your research, go to Nerd Wallet’s Best Credit Cards of 2015 for a comparison chart that will help you determine if a rewards card could benefit you.
Is there such a thing as good credit card debt? I believe the answer is yes, but you must be able to use the debt to your advantage.
For example, have you ever used zero percent financing to make a purchase?
This is how we did it. Back in November, we purchased a snow blower. It cost approximately $600 and we were offered zero percent financing for 1 year. It was a great offer and well worth it if as long as we paid in full before the free financing period ends.
We did pay it off with $100 installments, so it was all ours before the snow stopped falling. That was a good use of zero percent financing.
Zero percent financing is an expensive mistake if you don’t pay it off on time. But let’s say you still had a balance at the end of the finance period. What would happen?
You would have interest charges going back to the original price on the original date. So, for our purchase of $600 at the regular credit card rate of 18.99%, the minimum payment would be $15.00 per month. If you only paid $15 each month for 12 months, you would have only paid $180 of the $600 balance. If you continued this, it would take you 63 months and cost you $954.27. That’s a lot for a snow blower that’s only worth $600.
This is why it’s so important to know what you can actually afford to pay. We knew we could have the snow blower paid off in 6 months with a series of over payments. Each over payment was like insurance, giving us extra time should something else unexpected come up. Let’s face it, life is great at delivering unexpected surprises.
So, use the zero percentage financing options wisely. They can be a great deal under the right circumstances.
Getting ready for the holidays? That will put extra stress on your time and budget. Every time you shop, you’ll be facing temptations that could send your finances off the cliff. If you want to keep away from the edge , keep listening:
- Every store will push their own card. They’ll offer a 10-15% discount if you sign up at the register. With your little pile of purchases in front of you, it will sound like a good deal. Don’t do it.
Why not? Because they’ll run an inquiry on your credit report, instantly lowering your credit score and costing you more money in the long run. Don’t forget that store credit cards charge the highest interest rates out there. Think about the temptation you’ll face. With one purchase safely tucked away on a new credit card, you’ll find some breathing room in your checking account for more holiday purchases. Before you know it, you won’t have enough left to pay the store card in full. In the end, that discount will have cost you over 15%, putting you in the hole.
- You will be off your routine and forgetful. Between preparation, gatherings, and parties, something will probably slip through the cracks. You might even forget to pay a bill on time. Don’t do it.
Why not? Missing a due date will cost you a late fee – sometimes $35. If it’s a credit card payment, they could penalize you with an increased interest rate at a time you need it least. Worst of all, the late payment could end up on your credit report, lowering your credit score.
- You will want to spend more than you can afford. Don’t kid yourself. Holidays are a time of giving and sharing. You will get caught up in the moment and spend more than you planned. You may even spend so much, that you won’t have enough left over to pay your credit card in full when the bill arrives. Don’t do it.
Why not? It could take forever to pay off. If you have a $500 balance and only pay the minimum amount due (typically 2%) then it will take you 85 months (or 7 years plus) to pay off the balance. That is assuming you don’t make any other charges. Plus, you don’t want to start the New Year with new debt.
Plan ahead and use cash for holiday shopping to stay within your budget. That way, you can enjoy the holiday season without facing budget busting debt in January.