Understanding Credit Card Debt

Are you in credit card debt and only making the monthly minimum payment on your credit cards?  If so, you will be paying a lot more than your original balance and your payments will last for a long time.  


This chart shows how much you'll pay and how long it will take to become debt free if you pay a 2 percent monthly minimum payment on your credit card.  Note that even with interest as low as 12% on a $1,000.00 debt, you'll end up paying an additional $373.00 in interest and it will take you 5.7 years to pay it off.  With higher interest rates, the payments last longer and you'll pay more. 


Consider paying just a little more toward your debt with the highest interest each month and you'll save significant time and money.  This chart shows that with as little as an additional $10 payment per month, you will pay much less interest and will pay for a much shorter duration. 

		Minimum Payment Comparison Chart  $1,000 Credit Card Balance Interest Rate 12% 13% 14% 15% 16% 17% 18% 19% 20% Total if you pay monthly minimum (2%) $1,373 $1,425 $1,482 $1,546 $1,620 $1,704 $1,804 $1,924 $2,073 Years to pay off the loan 5.7 6 6.2 6.4 6.75 7 7.5 8 8.6 Total if you pay monthly minimum plus $10 each month $1,208 $1,231 $1,255 $1,280 $1,308 $1,336 $1,367 $1,400 $1,435 Years to pay off the loan 3.3 3.42 3.5 3.57 3.63 3.7 3.8 3.9 4 By paying $10 more each month, you save this amount $165 $194 $227 $266 $312 $368 $437 $524 $638 Source:  National Endowment for Financial Education

How to Save Money

If you save a little money regularly, you will be surprised how much accumulates over time." If you're struggling to save money, here are some great ideas to help you get started:

1. Set savings goals. For short-term goals, this is easy. If you want to buy a video game, find out how much it costs; if you want to buy a house, determine how much of a down payment you’ll need. For long-term goals, such as retirement, you’ll need to do a lot more planning (figuring out how much money you’ll need to live comfortably for 20 or 30 years after you stop working), and you’ll also need to figure out how investments will help you achieve your goals.

2. Eliminate any debt first. Simply calculating how much you spend each month on your debts will illustrate that eliminating debt is the fastest way to free up money. Once the money is freed from debt payment, it can easily be re-purposed to savings.

Establish a timeframe. For example: "I want to be able to buy a house two years from today." Set a particular date for accomplishing shorter-term goals, and make sure the goal is attainable within that time period. If it’s not attainable, you’ll just get discouraged.

Figure out how much you’ll have to save per week, per month, or per paycheck to attain each of your savings goals. Take each thing you want to save for and figure out how much you need to start saving now. For most savings goals, it’s best to save the same amount each period. For example, if you want to put a $20,000 down payment on a home in 36 months (three years), you’ll need to save about $550 per month every month. But if your paychecks amount to $1000, it might not be a realistic goal, so adjust your timeframe until you come up with an approachable amount.

3. Keep a record of your expenses. What you save falls between two activities and their difference: how much you make and how much you spend. Since you have more control over how much you spend, it's wise to take a critical look at your expenses.

• Write down everything you spend your money on for a couple weeks or a month. Be as detailed as possible, and try not to leave out small purchases.
• Assign each purchase or expenditure a category such as: Rent, Car insurance, Car payments, Phone Bill, Cable Bill, Utilities, Gas, Food, Entertainment, etc.
• Keep a small notebook with you at all times. Get in the habit of recording every expense and saving the receipts.
• Sit down once a week with your small notebook and receipts. Record your expenses in a larger notebook or a spreadsheet program.

4. Cut your expenses. Take a good, hard look at your spending records after a month or two have passed. You’ll probably be surprised when you look back at your record of expenses: $100 on lunch at work each month, $300 on ice cream per year? You’ll likely see some obvious cuts you can make. Depending on how much you need to save, however, you may need to make some difficult decisions. Think about your priorities, and make cuts you can live with. Calculate how much those cuts will save you per year, and you'll be much more motivated to pinch pennies.

• Can you move to a less expensive apartment or house?
• Can you refinance your mortgage?
• Can you save money on gas, or give up a car altogether? If your family has multiple cars, can you bring it down to one?
• Can you drop a land line and only use your cell phone?
• Can you live without cable or satellite TV?
• Can you cut down on your utility bills?
• Can you restrict eating out?
• Buy food in bulk?
• Cook more at home? You might be able to save a lot of money on food.

Reassess your savings goals. Subtract your expenses (the ones you can't live without) from your take-home income (i.e. after taxes have been taken out). What is the difference? And does it match up with your savings goals? Let's say you've decided you can definitely get by on $1500 per month, and your paychecks amount to $2300 per month. That leaves you with $800 to save. If there’s absolutely no way you can fit all your savings goals into your budget, take a look at what you’re saving for and cut the less important things or adjust the timeframe. Maybe you need to put off buying a new car for another year, or maybe you don’t really need a big-screen TV that badly.

5. Make a budget. Once you’ve managed to balance your earnings with your savings goals and spending, write down a budget so you’ll know each month or each paycheck how much you can spend on any given thing or category of things. This is especially important for expenses which tend to fluctuate, or which you know you're going to have a particularly hard time restricting. (E.g. "I will only spend $30 a month on movies/chocolate/etc.")

6. Stop using credit cards. Pay for everything with cash or money orders. Don't even use checks. It's easier to overspend when you're pulling from a bank or credit account because you don't know exactly how much is in there. If you have cash, you can see your supply running low. You can even bundle up the predetermined amount of cash allocated for each expense with a label or keep separate jars for each expense (e.g. a bundle/jar for gas, another for miscellaneous). As you pull money from a jar for that particular expense, you'll see how much remains and you'll also be reminded of your limit.

If you need to have credit cards but you don't want the temptation of having them available to use day-to-day, restrict that section of your wallet with a note or picture reminding you of your savings goals. Credit cards are not inherently evil; it's all about your self control. If you use them responsibly (i.e. completely pay them off every month), you can benefit from them. But the reason most credit card companies make money, however, is because people end up spending money that they don't have. Unless you are one of the people who can religiously pay off the balance in full every month, you're better off foregoing the promotions that credit card companies use to lure you in (cash back, introductory APR, airline miles, and so on).

7. Open an interest-bearing savings account. It’s a lot easier to keep track of your savings if you have them separate from your spending money. You can also usually get better interest on savings accounts than on checking accounts (if you get interest on your checking account at all). Consider higher-interest options such as CDs or money-market accounts for longer savings goals.

8. Know where your money is. And how much of it, too. If you accidentally overdraw your bank account, you will incur hefty bank fees; worse yet, the place you paid with that check may slap a bounced check fee on top of that, and send the check in again, resulting in a second overdraft fee from the bank! So just a few cents missing to cover that check could result in over $100 in fees. To avoid that, you should always know how much money you've got in your account(s), so you never cut a check for more than what you have.

9. Pay yourself first. Savings should be your priority, so don’t just say that you’ll save whatever’s left over at the end of the month. Deposit savings into an account (or your piggybank) as soon as you get paid. An easy, effective way to start saving is to simply deposit 10% of every check in a savings account. If you get a check or sum of cash, say 710.68, move the decimal point one place to the left and deposit that amount: 71.07. This works well and requires little thought; over several years, you've a tidy sum in savings. Over decades, you'll be a millionaire.

You can set up an automatic transfer from your checking account to your savings account.  Many employers allow you to deduct savings from your paycheck. The money is directly deposited in your savings account so you never even see it on your paycheck.

You can also have investments for retirement taken directly out of your pay, and the taxes may be deferred with this option.


Source: Adapted from an article in Wikihow.

Obtaining a Free Copy of Your Credit Report

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Here are the details about your rights under the FCRA and the Fair and Accurate Credit Transactions (FACT) Act, which established the free annual credit report program.

Q: How do I order my free report?
A: The three nationwide consumer reporting companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report.

To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The form is on the back of this brochure; or you can print it from ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order your report from each of the companies one at a time. The law allows you to order one free copy of your report from each of the nationwide consumer reporting companies every 12 months.

A Warning About “Imposter” Websites
Only one website is authorized to fill orders for the free annual credit report you are entitled to under law — annualcreditreport.com. Other websites that claim to offer “free credit reports,” “free credit scores,” or “free credit monitoring” are not part of the legally mandated free annual credit report program. In some cases, the “free” product comes with strings attached. For example, some sites sign you up for a supposedly “free” service that converts to one you have to pay for after a trial period. If you don’t cancel during the trial period, you may be unwittingly agreeing to let the company start charging fees to your credit card.

Some “imposter” sites use terms like “free report” in their names; others have URLs that purposely misspell annualcreditreport.com in the hope that you will mistype the name of the official site. Some of these “imposter” sites direct you to other sites that try to sell you something or collect your personal information.

Annualcreditreport.com and the nationwide consumer reporting companies will not send you an email asking for your personal information. If you get an email, see a pop-up ad, or get a phone call from someone claiming to be from annualcreditreport.com or any of the three nationwide consumer reporting companies, do not reply or click on any link in the message. It’s probably a scam. Forward any such email to the FTC at spam@uce.gov.

Q: What information do I need to provide to get my free report?A: You need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide consumer reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.

Q: Why do I want a copy of my credit report?
A: Your credit report has information that affects whether you can get a loan — and how much you will have to pay to borrow money. You want a copy of your credit report to:
make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.
help guard against identity theft. That’s when someone uses your personal information — like your name, your Social Security number, or your credit card number — to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don’t pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.

Q: How long does it take to get my report after I order it?
A: If you request your report online at annualcreditreport.com, you should be able to access it immediately. If you order your report by calling toll-free 1-877-322-8228, your report will be processed and mailed to you within 15 days. If you order your report by mail using the Annual Credit Report Request Form, your request will be processed and mailed to you within 15 days of receipt.

Whether you order your report online, by phone, or by mail, it may take longer to receive your report if the nationwide consumer reporting company needs more information to verify your identity.

There also may be times when the nationwide consumer reporting companies receive a high volume of requests for credit reports. If that happens, you may be asked to re-submit your request. Or, you may be told that your report will be mailed to you sometime after 15 days from your request. If either of these events occurs, the nationwide consumer reporting companies will let you know.

Q: Are there any other situations where I might be eligible for a free report?A: Under federal law, you’re entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft. Otherwise, a consumer reporting company may charge you up to $10.50 for another copy of your report within a 12-month period.

To buy a copy of your report, contact:
Equifax:1-800-685-1111; equifax.com
Experian: 1-888-397-3742; experian.com
TransUnion: 1-800-916-8800; transunion.com
Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont already have free access to their credit reports.

Q: Should I order a report from each of the three nationwide consumer reporting companies?A: It’s up to you. Because nationwide consumer reporting companies get their information from different sources, the information in your report from one company may not reflect all, or the same, information in your reports from the other two companies. That’s not to say that the information in any of your reports is necessarily inaccurate; it just may be different.

Q: Should I order my reports from all three of the nationwide consumer reporting companies at the same time?A: You may order one, two, or all three reports at the same time, or you may stagger your requests. It’s your choice. Some financial advisors say staggering your requests during a 12-month period may be a good way to keep an eye on the accuracy and completeness of the information in your reports.

Q: What if I find errors — either inaccuracies or incomplete information — in my credit report?A: Under the FCRA, both the consumer report­ing company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take full advantage of your rights under this law, contact the consumer reporting company and the information provider.

Tell the consumer reporting company, in writing, what information you think is inaccurate.
Consumer reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting company must give you the written results and a free copy of your report if the dispute results in a change. (This free report does not count as your annual free report under the FACT Act.) If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.

Tell the creditor or other information provider in writing that you dispute an item. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct — that is, if the information is found to be inaccurate — the information provider may not report it again.

Q: What can I do if the consumer reporting company or information provider won’t correct the information I dispute?A: If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your state­ment to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.
If you tell the information provider that you dispute an item, a notice of your dispute must be included any time the information provider reports the item to a consumer reporting company.

Q: How long can a consumer reporting company report negative information?A: A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. There is no time limit on reporting information about crimi­nal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, which­ever is longer.

Q: Can anyone else can get a copy of my credit report?A: The FCRA specifies who can access your credit report. Creditors, insurers, employers, and other businesses that use the information in your report to evaluate your applications for credit, insurance, em­ployment, or renting a home are among those that have a legal right to access your report.

Q: Can my employer get my credit report?
A: Your employer can get a copy of your credit report only if you agree. A consumer reporting company may not provide information about you to your employer, or to a prospective employer, without your written consent.

For More InformationThe FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To learn more about credit issues and protecting your personal information, visit ftc.gov/credit.
To file a complaint or to get free information on other consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.  The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information.

Source: The Federal Trade Commission http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre34.shtm