5 Dirty Tricks Credit Card Companies Like to Play

While your credit card company might like to pretend they have your best interests at heart, it turns out that’s not always the case. Credit card companies, like most other businesses, have ‘loopholes’ in place to drain every cent they can from you.

Being aware of these tactics is the best defense. Otherwise, you’ll be paying astronomical interest rates and navigating through a minefield of penalties that are only mentioned in the very fine print of your credit card agreement.

Explore the following ways to monitor your interest rate and avoid those penalties:

1. The grace periods are shrinking or don’t exist at all. Back in the good old days, you had 30 days to pay your balance without suffering the financial burden of paying any interest. Most cards now have a grace period of either 20 or 25 days.

* Some credit cards have no grace period. This means that the interest starts accruing the moment you make your purchase and continues increasing until you pay off the balance.

* If you want to use your card and not pay any interest, find out when your company starts charging interest. The longer the grace period, the better.

2. Fixed interest rates aren’t really fixed. It would seem that a fixed interest rate card would actually be ‘fixed,’ but it’s not. Credit card companies can actually change rates whenever they please.

* To change your rate, all that’s required is a 15-day notice to you as the cardholder.

* Your credit card company is hoping you don’t pay attention to those pesky notices they send in the mail from time to time. That’s how they try to deceive you.

* Be certain you’re actually reading the mail from your credit card companies.

3. One late payment can result in 2 penalties. You might be all too familiar with the Late Payment Fee, which can be as high as $35. There’s also another possible fee that can be incurred: The Penalty Rate. This penalty can be charged if a payment is made 60+ days late.

* The penalty rate is actually a new interest rate that’s imposed on your account. The rate can be as high as 29.99%, and that’s exactly what most credit card companies charge.

* The law requires that the penalty rate be removed after six consecutive on time payments. The Card Act of 2009 has all the details.

4. That same penalty rate can be placed on all your credit cards. That 60-day late payment can result in all your credit cards having the penalty rate. This is true even if you’ve never made a late payment to those other cards.

* One mistake can cost you a lot of money. Having all your cards bumped up to 29.99% interest rate is significant if you carry balances on your credit cards.

* Make your payments on time. It saves you money and preserves your credit score.

5. Balance transfers can be expensive. Maybe you’ve seen those balance transfer checks credit card companies periodically send out. Depending on your situation, they can be great. But be careful!

* These checks seem like a convenient way to consolidate everything into one account. But many of those checks have a 3 to 5 percent fee attached to them.

* These fees can often cancel out any savings you would have gotten by transferring your balance to a card with a lower interest rate. Do the math before you write one of those ‘checks.’

Be aware of these dirty tricks so that you can avoid them. Avoid making late payments and always read the fine print. Remember the credit card companies are trying to separate you from your money. Don’t make it easy for them! If you always pay your balance in full and read the fine print, you’ll be in great shape with your credit.

Is Bankruptcy the Right Choice for You?

Bankruptcy is a very scary term to most people. Many who are considering filing for it are already in a highly stressful situation.

Bankruptcy is a tool that exists in order to give people a second chance when there doesn’t appear to be any viable alternatives. Just be certain it is the right tool for your situation.

Consider these points:

1. There are two types of bankruptcy.

* Chapter 7. This eliminates essentially all of your debts (excluding student loans). The process is very straightforward, quick, and simple in most cases. There are certain requirements that must be met. Contact an attorney or do some research online.

* Chapter 13. This is like a bankruptcy payment plan. If you don’t qualify for Chapter 7, Chapter 13 is the alternative. You would make a single payment to a trustee, and the money would be dispersed to your creditors. This usually lasts from 3 to 5 years.

2. Consider an alternative. Sometimes bankruptcy is an effective choice, but sometimes it is not. Consider the possibility of cutting back on your expenses or getting a part-time job.

* Frequently, if you let your creditors know that you’re considering bankruptcy, they will accept a reduced amount as payment in full. After all, getting something is better than nothing. You might be able to settle your debt for as little as 20% of the real balance.

3. Understand which debts won’t be discharged. The two big debts that are not covered with bankruptcy are student loans and child support delinquency. A federal judge can choose to discharge your student loans, but it’s highly unlikely.

4. What will happen to your house? This varies dramatically from state to state. Some states allow you to keep up to $1 million of equity in your home. Other states only allow $10,000. Find out before you file.

* You might be forced to sell your house if you file Chapter 7. Chapter 13 always allows the debtor to keep the home.

5. What about your other property? It is possible you might be forced to sell some of your assets, including your car (depending on equity and the state you live in). Again, find out before you file the paperwork.

6. Check on your pension, 401(k), and IRA. In most states, these items are free from bankruptcy proceedings. Do your homework!

7. Consider your co-signers. If you file Chapter 7, any co-signers you have will get stuck with your debt. If you file Chapter 13, co-signers are in the clear.

8. How will it affect your personal life? Other people will probably find out about your bankruptcy.

* You’ll have to disclose everything to the court and most records are public.
* In addition, bankruptcy notices are frequently printed in the local paper by law.

Bankruptcy provides a viable way to get a new start if you’re in way over your head with debt. However, it might not be the best choice for you if you can avoid it with other options. With bankruptcy, there is a major blemish on your credit report for at least 7 years. But it is not the death of your credit.

Once all your debts have been eliminated and you’ve gone through a waiting period, you might be surprised to find that you will actually have pretty decent credit. In fact, you will probably receive many credit cards offers.

After bankruptcy, companies can feel more comfortable that you’ll pay back your debts for 2 reasons:

1. You probably don’t owe any more money. You’ll be much more capable of paying back any new debt if you have little to no existing debt.

2. You can’t file bankruptcy again for several years. Bankruptcy won’t be an option for quite a while. This can make creditors more comfortable with giving you credit.

Consider whether or not bankruptcy makes sense for your situation. As with any legal issues, an attorney can be invaluable while looking for solutions to your financial troubles.

Best Time to Buy a Mutual Fund

In an ideal world, we would all have the time and expertise to pick our own investments. Unfortunately, most of us don’t have an MBA from Harvard and our other responsibilities keep us from having the time to worry about our investments.

For many individuals, getting a financial advisor can make a lot of sense. One way to indirectly hire a financial advisor is through the purchase of mutual fund shares. The fund advisor will make a lot of your investing decisions for you.

When should you invest in a fund?

These times are opportune:

1. After you’ve determined that the fund manager’s track record is based on skill, rather than luck. Investors are notorious for looking at a fund’s short-term results. Don’t fall into the trap of believing a fund’s manager has the Midas touch based on a couple of quarters of good performance. A market cycle of 3-5 years is a good start.

* Spectacular short-term results are rarely repeated.

2. After you’ve completed your due diligence. While you won’t have to spend time analyzing individual securities, it’s wise to spend some time researching a profitable mutual fund to purchase.

* Consider the track record of the fund manager. Also consider the fund’s reputation and any turnover in the management team.

* Keep in mind that certain types of funds tend to do well in certain types of markets. Remember to consider the fees associated with the fund.

* The most important thing, and the most difficult, is to attempt to project the fund’s likely success in the future. Unfortunately, most fund ratings and metrics can only look at the past.

3. If the fund is an index fund. Index funds are difficult to beat. While it might seem that active managers should be able to beat the market, more often than not, they do not.

* Most fund managers cannot provide a large enough return to overcome the fees they charge and still beat an index fund. Index funds are great for defensive investors.

* Many investors scoff at the idea of investing in an index fund. But try not to jump to conclusions. Look at the returns over the long haul. You might be very surprised.

4. When you have no other options. Many 401(k) and 403(b) plans don’t offer any options besides mutual funds. The question isn’t whether or not to purchase a fund. It’s a question of figuring out the best fund from the available offerings.

* Realize that your retirement plan sponsors cannot provide advice. You’ll have to pick a fund on your own.

5. When there’s no other reasonable way to invest. If you’re interested in foreign or emerging markets, it might not be reasonable to attempt to invest in these markets on your own.

* For example, many European markets are neither very liquid nor friendly to individual investors. In this type of situation, a mutual fund is a smarter move.

* Mutual funds provide a great way to have diversification in many different asset classes. It’s not easy to become an expert on precious metals, foreign currency, and auto manufacturing. Sometimes it’s more effective to just hire experts.

When buying a mutual fund, it’s your responsibility to do the necessary research and homework. While the amount research required is likely to be less than the research required for individual stocks, there are some differences in the type of information you need to examine.

One of the greatest benefits of investing in a mutual fund is that your account is managed by a registered investment advisor. Be wise when choosing how to invest your money. There are many times when a mutual fund can be the best choice.

How to be Frugal and Still Live Well

Not every household has someone bringing in a six-figure income. Living well on a modest salary can be a challenge, but it certainly isn’t impossible.

Try out these tips for living well, regardless of the size of your income or bank account:

1. Forget about the neighbors. The social world can be highly competitive, and it’s completely natural to strive to maintain appearances with the neighbors.

* When a neighbor purchases a new car or remodels her kitchen, the urge to start making comparisons can be strong. Take control of your life and resist the temptation to compete with others.

* Focus on the real necessities and set aside the extras you’d like to have in a perfect world. It takes practice, but anyone can rise above this type of thinking. This simple exercise will make you happier and more grateful for the things you already have.

2. Think smaller. Everyone seems to be under the impression that bigger is better. However, by making a conscious decision to live in a smaller home, more money will be available to spend on more meaningful purchases.

* Many families have already made this decision, as evidenced by the trend in new construction. For the first time, the average square footage of new residential properties has decreased.

* Others are living successfully in apartments or condos. Perhaps you could downsize a little and just focus on being happy.

3. Cook at home. Eating out is one of the surest ways to ruin your budget. Cooking at home can be just as good, but it does take some practice. Consider purchasing a good cookbook and experimenting with some new recipes.

* Groceries are always going to be cheaper than eating out.

* Instead of meeting friends out for dinner, invite them over. You can even request they bring a dish or dessert to share.

* At home dinner parties are a great way to be more social and keep some money in your bank account.

4. Shop in the classifieds and at thrift stores. Stay out of the department stores and malls as much as possible. In many instances, secondhand items are 99% as good as new and they’re a fraction of the cost. Keep an eye out for great deals.

* If you’re not in a hurry, you’re likely to find exactly what you need and save a ton of money in the process. Websites like Craigslist even have items available for free. Nobody else needs to know where you purchased your furniture, car, or clothing.

5. Check out the local library. Instead of purchasing movies or books that you’re likely to only use once, try borrowing them from the local library for free.

* Some smaller libraries may have a limited selection, but most libraries are part of an interlibrary loan program with other area libraries. You might find that even your small local branch can find just about anything for you.

6. Go outside. Many outdoor activities are free or inexpensive. Take a trip to the local beach or park. Go hiking. Nearly every area has its own type of natural beauty. Kids love to get outside and explore new places. For the cost of little gasoline and a few sandwiches, your family can have a great day. How can you beat that?

Living frugally doesn’t have to mean being miserable. Although it might require a little thought and planning, it’s really not difficult to live well on a modest income.

Consider how you can incorporate these tips into your current lifestyle. You might just find that you can live an even better life than you are now – on less money!