Here’s How You Avoid Debt on Your Credit Card

If you know that you have a lot of debt on your credit card then you will know how frustrating this can be. You will also know how hard it can be to try and pay it off before you accumulate more debt and this can put you in a very dire situation. Luckily, it is very easy for you to avoid debt and if you make the effort to follow these simple tips then you should have no problem getting on top of your debt once and for all.

Always have an Emergency Fund

So many people manage to create credit card debt because they were forced to pay an expense that they did not have the money for. They have absolutely no room for savings but if you were to have an emergency fund then this can really help you to avoid credit card debt. You can easily use the cash to pay for any emergencies that arise and this is a fantastic way for you to really stay on top of everything. Of course, if you are struggling to save then one thing that you can do is put some money away every single month. When you are able to do this, you can then accumulate a savings fund without having to struggle or manually put the money away. There are also many apps out there that you can use to try and really save on your expenses so these are well worth looking into.

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Charge What You Can Afford

You have to avoid the mistake of using one of your credit cards to buy things that you cannot afford. You can easily avoid debt by purchasing the things that you know you can afford or even things that you have the cash for. If you cannot afford to pay with cash then it is important to know that you can’t charge it to your card. If you do have to charge to your card then try and look up www.luckyloans.co.uk as this is a great way for you to find out if it is possible for you to get a lower interest rate when compared to the one that you have on your credit card.

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Avoid Balance Transfers

Don’t transfer any balances that you have on your card so that you can avoid your payment date. The main reason for this is because if you transfer one of your balances to another credit card then you have to have a good reason for this. You may want to take advantage of a lower interest rate or you may even get a cash incentive. Either way, if you don’t do this then your bank will carry on increasing in debt and this is the last thing that you need when you already have so much going on. Of course, if you want to avoid this then there are so many things that you can do, such as researching the card before you buy and even putting in the work to make sure that you are getting the best deal.

The Good, the Bad and the Ugly: Teaching Your Children about Debt and Borrowing Money

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Most people don’t get into debt out of sheer stupidity. Most people get into debt because they have not been educated about money – or more specifically borrowing money. They find themselves in a situation whereby they need money quickly, and they borrow it without fully understanding what they are letting themselves into. There are then those who are enticed by all of these amazing promotional offers, and they sign up to a number of credit cards without considering how this is going to impact their rating. The obvious solution may seem simple: avoid borrowing money altogether. However, if you do this, you won’t have a credit history at all, and this is arguably just as damaging as having a bad credit report. So, we need to educate our children about borrowing money responsibly, the impact of borrowing on their credit report, and what to do if they do find themselves in debt. After all, in some cases, debt is unavoidable.

LESSON ONE: THE VARIOUS WAYS YOU CAN BORROW MONEY

Firstly, you need to make sure your children are aware of the different methods of borrowing money. In general, this can be split into two categories: loans and credit cards. Of course, there are then many different types of loans and credit cards. With regards to the former, you will be given a certain amount of money, which you will then have to pay back to the lender with interest on top. With a credit card, you will have access to a certain amount of money, and you will only be subject to interest if you do not pay the full amount off by a certain day of the month. Credit cards are ideal for those who need access to money to tick them over until they get paid. If you are self-employed, for example, and you don’t know what date of the month your money is going to come in, you can use a credit card to tide you over until then. A loan is more suitable when you are making a large purchase. There are many different types of loans, including bank loans, secured loans, and payday loans. The latter provides a fast loan approval for those in need of money as quickly as possible. However, the APR tends to be very high, so you’ll end up spending a lot of money taking the loan out. A secured loan will be secured against one of your assets, for example, your car or your home. If you default on your payments, the lender can sell your vehicle or your property to cover the payments you have missed. It is important to teach your children about the different factors they need to consider when taking out a loan or applying for a credit card. A lot of people never learn about APR, and so they end up borrowing money without having a full understanding of how much they are paying for it. This is an easy way to get into debt, and it can be avoided with simple education.

LESSON TWO: CREDIT REPORT

The next thing you need to teach your children about is their credit report. Explain that their credit report is something that a lender will view when determining whether to lend them money. This does not only relate to companies who deal with loans and credit cards, but catalogue companies, furniture stores offering financial plans to pay off furniture over the course of a few years, phone contract businesses, and such like. It is, therefore, critical to maintain a good credit score. Unfortunately, a lot of people end up causing damage to their credit report without even realising it. This is why you need to teach your children about the different aspects that do and do not impact a credit score, and the steps they can take to improve their credit score. One thing a lot of people do not realise is that they do not have one set credit score. There are a number of companies that provide credit reports, and most companies and lenders will look at one or several credit reports to gauge whether someone is credible to lend to. People can access their credit reports online, and it is a good idea to do so, so that you can have a general understanding of what your score is, where you are going wrong, and where you are going right.

So, let’s go over the different elements that make up your credit report, and the impact they have:

  • Your personal information – One of the easiest and most effective ways to improve your credit score is to make sure that all of your personal information is up to date. If it isn’t, lenders may struggle to verify who you are, and this can have a negative impact on your rating. Plus, if your personal details aren’t correct, you could miss out on notifications, which could result in you failing to pay a bill, which will, of course, have a bad impact on your credit score.
  • The total balance of your active credit accounts – The total balance of your active credit accounts plays a crucial role in determining your score. If you have a mortgage, this will not be included within the calculations. This includes your credit cards, any purchases you are still paying for, overdraft facilities you are using, and any loans you have taken out. If you owe more than $15,000, this will have a negative impact on your credit score. If you owe more than $30,000, this will decrease your score even further.
  • How much of your available credit you are using – There are a number of factors to consider here. Firstly, your highest credit limit will play a role. If you have a credit card with a limit over $1,000, this will improve your credit rating, as it shows that you are a low risk borrower. However, you also need to think about how much of your available credit you are using. For example, if you are using 95 percent of the credit you have available to you, this is bound to have a negative impact on your score, as it indicates you are relying heavily on credit.
  • Payments – Are you keeping up with your payments? This is the most important factor of them all when it comes to your credit score, as a late or missed payment will stay on your account for roughly six years.
    • The age of your credit accounts – Again, there are a number of factors to take into account here. Firstly, the average age of all of your credit accounts is considered. Having an average age of 33 months or more is considered a positive. Also, the number of new credit accounts you have opened. If you have opened a number of accounts within a three-month period, for example, this will have a negative impact. However, if you have only opened one credit account, this will not have a bad impact on your score.
    • Credit applications – This is where a lot of people have a negative effect on their score without even realising. Many people decide to make numerous credit applications, and then they will accept the best credit card they get approved for. A lot of people also try their luck, applying for cards they are unlucky to get accepted for on the off chance that they will. This will have a negative impact on your score, as credit applications are included in your report. There are soft searches, which don’t impact your score, and hard searches, which do impact your score. The best thing to do is use one of the online services that are available to determine your chances of being accepted. This ensures you only apply for credit cards whereby you have a high chance of approval, so that you don’t need to carry out numerous applications.

LESSON THREE: WHAT TO DO IF YOU GET INTO DEBT

Last but not least, it is important not only to teach our children about avoiding getting into debt, but also about what to do if you do get into debt. The problem can easily get worse and worse when someone does not know how to deal with debt. It can seem like the end of the world, but it doesn’t need to be. In fact, you will find plenty of inspirational stories on the Internet about people that have gotten themselves out of severe debt.

Most people agree that the best way to tackle debt is to pay off the biggest debt first while making the minimum payments on all loans and cards to ensure you are not subject to any further fees. You should also ring up your credit card provider or any other lender you owe money to and see if you can negotiate more favourable terms. It is then a case of examining where you went wrong and how you got into debt in the first place. This will help to ensure you do not make the same mistake again.

 

Getting Over Credit, Debt, And Other Horror Stories

When people think of credit and debt, their minds immediately go to the worse case scenarios of them. We’ve all heard ghost stories of how bad credit can drag you down and limit your options and how debt can become a spiral that can truly be very hard to climb out of. But the problem is that a lot of people focus on the negative consequences of these stories that they fail to consider just how helpful credit and debt can be. Here, we’re going to challenge the phobia and help you use credit and debt better.

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The sooner you come face-to-face with it, the better

There’s a significant portion of adults who have never once checked their credit report. Some of these people might not know to, others have chosen not to because they’re staying well away from credit as much as possible. However, even if your record is immaculate, your report might not be. You might have to repair your credit score by no fault of your own but because there are erroneous accounts on them. For instance, you might be getting bad reports based on accounts that are mistakenly tied to your name but aren’t yours. Or you might be up-to-date with all your payments but your creditors made a mistake in reporting that you missed a payment.

It’s the next step in a better financial life

When used responsibly, credit and debt are the steps you take to make some of the biggest financial decisions in your life. When you get a car, when you buy a house, when you start a business, the chances are you take out a loan for them. With better credit, which is built by taking debts responsibly, you have the chance to get the best discount auto loans and the best mortgages. Having no history of credit isn’t going to help you get better deals. You have no history of being a responsible debtor, after all. Only by building a healthy credit history can you get the best deals.

Credit cards aren’t the devil

Those pieces of plastic might be considered the single most dangerous aspect of credit. Yes, people get themselves into credit card debt they can’t handle by using it to make lifestyle purchases they otherwise couldn’t. But that debt can be used positively to build up your credit so long as you have pre-planned a budget to always keep on top of it. Debt management turns debt from a danger into a simple part of life. You can get rewards cards that turn credit card use into extra purchasing power, whether it’s through air miles or through grocery vouchers.

Wise use of credit and responsibility for debts can be one of the most effective financial tools at your disposal. It can improve your purchasing power and it can help you make some of the biggest financial decisions in your life. In any account, it’s important to come face-to-face with it so you make sure that it’s not marred by errors that could come back to haunt you.