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If you have a child, you are familiar with how expensive it can be to raise a son or daughter from birth to adulthood. However, your son or daughter may incur debt related to going to school, using a credit card to pay for living expenses or buying a home. If your child has significant debt, should you feel obligated to pay off that debt?

Can You Afford It?

The first question that you need to ask is whether or not you can afford to pay off your son or daughter’s outstanding debt. Unless you have maxed out your 401k or other retirement accounts, it may be more beneficial to put your money to work for you. You should also avoid paying your child’s debts if you do not have an emergency fund in case you lost your job or incurred a large debt.

What Will Your Child Do After the Debt Is Repaid?

Another important question that you need to ask yourself is whether or not your child is going to incur more debt after he or she has existing debt paid off. The last thing that you want to do is pay off your child’s credit card debt only to find out that he or she has gone out and charged another $10,000. Therefore, you should limit the type of debt that you are willing to pay off if you are able to do so at all. Paying off a secured debt such as a car or mortgage leaves your child with an asset that at least can be leveraged in the future if your child runs into future financial difficulty.

What Options Do Your Children Have to Repay Their Own Debts?

There are many different options that your children will have when it comes to repaying loans or keeping up with debt during times of financial issues. For instance, your son could ask for a student loan forbearance or for a modified repayment plan on his mortgage. Your daughter could refinance her credit card debt or transfer the balance to a 0 percent interest credit card. Doing so may allow your child to take care of his or her own problems and learn what it means to be financially independent.

Did You Cosign for Your Child’s Loans?

If you decided to cosign on your child’s loan, you may be on the hook if he or she stops making payments. For example, if you cosigned for your son’s student loans, you essentially agree to pay that money back if your son doesn’t. That also means that your credit could be damaged or other actions taken against you if you don’t make the payments even though it isn’t your loan. For some, it may be easier to simply pay the debt off now if possible instead of worrying that a $10,000 auto debt or credit card debt could impact how you spend your retirement years.

What Do You Get From Paying the Loan?

It may be a good idea to repay your child’s loans if you are going to get something out of it. For instance, your daughter may decide to have you pay off the original loan and then pay you back over a period of several years. The benefit to your daughter is that she may not have to pay as much interest over the repayment period. To ensure that payments are made, you may wish to sign a contract that provide consequences for failure to repay on time. For instance, you could place a lien on certain property or give yourself the right to go to court just like any other creditor.

Take Equity In Your Child’s Business

If you are asked to pay off a business related debt or loan, you may wish to ask for an equity stake in the company. What this does is makes you a part owner of the company in exchange for the funds. This could turn into a long-term arrangement that helps your child now and helps you out as the company becomes more successful.

Are Your Children Entitled to an Inheritance?

Instead of waiting until you pass on to give your child his or her inheritance, it may be better to give your child his or her inheritance now. Doing so may help your child get out of debt and move on with his or her life. If your children are working and otherwise financially stable, eliminating a student loan or mortgage debt could help provide for your grandchildren. Money that would go toward a mortgage payment can now go toward paying for braces or saving for their college funds. In the event that money is being taken out of an inheritance, make sure to communicate this to your children. Otherwise, it could create tension later on.

Have Your Children Done the Same for You in the Past?

Paying off a credit card debt or making a student loan payment may be a nice thank you for financial assistance that you have received in the past. While you should still only do so if you can afford it, there is nothing wrong with helping those who have helped you when you needed it. If this money is meant as a gift and a thank you, make sure to stress that you are not expecting the money to be repaid.

There is nothing worse than being saddled with debt at a young age. However, it doesn’t mean that you are obligated to help your children overcome their own mistakes or circumstances in life. While it may be difficult to tell your kids no, only spend as much as you can afford as you don’t want to become financially vulnerable yourself helping your kids.

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Many people don’t keep close track of their spending and have no idea how much money they spend each month on things they don’t need. Taking a look at some of the things you spend your money on can help you stop throwing away money. Here are 10 ways in which you may be throwing away your money.

1. Food

You might not think you could throw away money on a staple you need for survival such as food, but most people probably spend a lot more than than they need to. For example, if you are eating out every day for lunch, you are likely throwing away money. Say you are conservatively spending $8 a day for lunch five days a week. That’s $40 a week. You could take your lunch every day for about $2 to $3 a day, saving $20 to $25 a week, which is over $1,000 a year.

2. Insurance

It’s easy to throw money away by paying too much for insurance. With the various types you need, there are numerous opportunities for you to pay too much. For example, if you don’t bundle policies with the same insurer, you could be missing out on discounts of 10 percent or more. You also might have lower deductibles than you need. If you have a $500 deductible on your car insurance, for instance, your premium will be higher than if your deductible is $1,000. You can also save on car insurance by not carrying coverages you don’t need, such as comprehensive.

3. Credit cards

If you are carrying monthly balances on your credit cards, you are likely throwing away a ton of money. Even the best credit cards have interest rates in the double-digit range, meaning you can rack up significant finance charges on even small balances. If you can’t afford to pay off your balance each month, you should stick to cash. Other ways you wind up throwing away money with credit cards is paying extra fees for things such as late payments or cash advances and failing to fully take advantage of any rewards programs. If you are carrying high-rate credit card balances, look into balance transfer deals that will allow you to get a lower rate.

4. Utility bills

Another easy way to throw away money is to pay too much on your utility bills, such as your electric and gas bills. Remembering to shut off lights when you leave a room, lowering your thermostat in the winter and raising it in the summer and quickly fixing small plumbing leaks are all ways you can cut down on unnecessary spending on utility bills. You can also do more pro-active things, such as using energy-efficient light bulbs, weather stripping doors and windows and installing water-saving devices.

5. Entertainment

Few people want to live cooped up as a hermit in their own homes, but you could be wasting a lot of money entertaining yourself. For example, if you go to the movies weekly, you could be spending $40 to $50 a month just on tickets. Stay in and watch a movie a couple of times a month instead and you will cut that expenditure in half. The same goes for other events. Taking in a free play or concert instead of paying to see major acts can save you a lot of money.

6. Drinks

Alcohol and coffee are two drinks that can drain your wallet quickly. If you get a daily latte, it’s probably costing you $3 or more a day. Brew your own and you can cut that cost in half or more. Likewise, if you go out for drinks a couple of times a week, you can spend a significant amount of money. Inviting friends over instead and buying a bottle of wine of six pack of beer can be a much cheaper option.

7. Smoking

If you smoke, you definitely are throwing away money. A pack-a-day smoker can easily spend $2,000 or more in a year on his habit. In addition, smokers are more likely to have health problems and miss days of work, which costs additional money. Quitting smoking can save you big time.

8. Gambling

You don’t have to go to the casino to throw away considerable amounts of money gambling. Simply playing the lottery or buying scratch cards regularly can mean you are throwing away hundreds of dollars a year, with very little chance of winning much if anything. Illegal gambling, such as card games and betting on sporting events, is another good way to waste your money.

9. Phone

Unless you need your land-line phone line for DSL Internet, there’s probably no need to have a wired phone at all. You can stick with just a wireless phone, but make sure you don’t throw money away there, either. Don’t opt for unlimited talk, text and data plans if you don’t need them. Gauge your usage for a month or two, and if you can, move to a cheaper plan.

10. Cable TV and Internet

One of the biggest areas where people waste money is on their cable TV and Internet bills. For example, one cable movie channel usually costs as much or more per month as a streaming movie service. You also want to make sure you aren’t paying for tiers of channels you don’t use, such as a sports tier if you aren’t a sports fan. If you watch mostly scripted shows and don’t mind waiting on new episodes, you can cut the cable cord altogether and rely on streaming services. On the Internet side, make sure you know how much data speed you really need and don’t pay too much. And make sure to bundle your TV and Internet service if you can, because you are likely to save on your monthly bill.

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The last couple of weeks before the New Year mark a time when people relax and have fun. However, this is also the time when financial worries loom over most people’s heads. A new year can be a new beginning for all areas of life and finances are no different. The following are some New Year’s resolutions that would save people a lot of money –

1. Improve Savings – Saving rates are at an all-time high in America as compared to the past couple of years. The reason is that people have realized the importance of short term saving in light of long term saving. The economic situation has been sobering to the majority of the population and this has led to more money being saved in the bank. Thus, instead of going with the “save what is left after spending” approach, people need to adopt a “spend what is left after saving approach”. Depending on the condition and financial goals, saving money must come before spending money in every individual’s life.

2. Analyze Income – In order to understand finances, two important areas need to be considered – incomes and expenses. A budget cannot be created without having thorough knowledge about every income and saving earned or saved in the month. Thus, individuals need to sit down and make a budget. Most people think that they have a lot of disposable income and refrain from making a budget. By the end of the month, they find things getting rocky. To prevent this from happening, an understanding of the reason for saving money, exploring avenues and resources, and budgeting accurately is extremely important.

3. Analyze Expenses – Most people don’t know where their money went at the end of the month. To prevent this from happening, there are a lot of apps or good old pen and paper to note down the littlest of expenses. This would aid individuals in making an accurate budget. There are some expenses which cannot be controlled like – rent, telephone bills, conveyance, utility bills, internet, et al. However, some other factors like eating food in a restaurant on a regular basis, having a high speed-high cost internet plan, using cell phone when free calling apps are available, et al can be controlled.

4. Use Credit Cards Carefully – As per credit experts, Americans have changed their credit card usage and are using their credit cards more carefully. Every individual can use this statistic in their life. In the last 3 years, many individuals have paid off their credit card balances in full. The New Year’s resolution for the coming year should be about paying off one credit card in full. This doesn’t mean that the credit card with the highest interest rate should be chosen – it means that the card with the lowest balance should be paid off first.

5. Start an Emergency Fund – An emergency fund offers an individual peace of mind because it is a practical fund that can be used in the event of a medical emergency, loss of job, sudden expenses, necessary repairs and almost everything else. Another under-appreciated benefit of an emergency fund is the relaxed feeling that comes with it. An emergency fund doesn’t have to be too fancy either. It can just be in the form of a savings account. In fact, the most important factor of an emergency fund is that it should be easily accessible during an emergency situation. Withdrawal should be hassle free.

6. Living Beneath Instead Of Over One’s Means – The concept is simple – given the current economic imbalance and uncertainty, if individuals lose their job, they take an even bigger hit because they are not used to the life they are forced to live. The biggest reason is that everyone is living above what their pockets can manage. Thanks to easily available credit everywhere, this hasn’t been a problem so far but in case of a crisis, it would be. Thus, even if a Mercedes is affordable, people should look for a lower priced car that would be easier to maintain when an emergency hits.

7. Consolidating Credit Card Debt – A lot of people have difficulties paying off their credit card debt. The first step should be to pay off the card with the least amount of debt. However, it isn’t that simple for everyone. Many individuals have multiple outstanding credit cards and to deal with all this debt, they can use credit counselling. Experts can help them consolidate their credit card debt and they would be able to pay off the debt with lower interest rates. Not just that, counselling can also reveal some important flaws in their budget and spending habits.

8. Pay Back At 0% Interest Before Last Date – The credit card companies do not charge any interest if the debt is paid within a month. However, when borrowers fail to do so, the interest rates jump from a meager 0% to an astounding 15%. To avoid this hefty interest rate, attempt should always be made to repay the borrowed amount before last date. A helpful tip is to wait till the last day to make the payment. In that way, the money can earn some interest in the savings account too. It is a way of avoiding interest and also improving one’s credit score.

9. Funding 401(k) Plan – Experts advice that the 401(k) plan should be funded even before a liquid saving account is started by an individual. The plan should be one that matches the employer’s plan. In fact, it is always a great idea to max out 401(k) contributions. The benefits of doing this are long term. Retirement can be a safe, secure and peaceful time if early funding of 401(k) is done. The fund can be chosen depending on risk tolerance and investment philosophy. A fund manager’s services can also be used for ensuring proper allocation of funds.

10. Learn to Save Unexpected Income – People tend to spend all their unexpected windfall incomes on luxuries. Instead, the rule of One Third should be applied when such an income is received. This means that 1/3rd should be used for paying off past debts, 1/3rd should be put in a long term saving account and the rest should be used for any present purchases, shopping or luxuries that are needed. This rule will make saving grow and debt shrink in the life of an individual.

With proper planning and a few practical resolutions, the coming year can be smooth and fuss free. The biggest tip is to think about the future, about the necessities and requirements, set aside some money for luxuries and ensure that the financial precipice is always far away.

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There are many reasons that a credit score can drop. Some of the reasons are obvious, while others are subtle. In some cases a credit score can drop far, while at other times a credit score may only drop a few points for reasons that escape the consumer. The following are things that can affect a consumer’s credit score in ways that may not be obvious. Keep in mind that some of these causes can influence a credit rating more than others.

One Late Payment

Although most people are aware that late payments can bring down a credit score, it only takes a single payment for this to happen. Often a person will make a late payment and forget that it happened. Later, when looking at their credit score, they discover that it has dropped, but they forgot about the late payment. This can happen because there can be a significant delay from the time of the late payment until the time it affects a credit score. It’s also true that people think that a payment needs to be more than 30 days late before it is reported to a credit agency, but this is determined by the policy of the lender. Many consumers believe that as long as the account did not go over 30 days, it will not be reported. Later, when their credit score drops, they don’t understand that it was a late payment that was responsible for the drop in the score, even though the late payment was not over 30 days.

A Large Purchase on Credit

Even when a person is making all of their payments on time, a credit rating can drop because of a large purchase on credit. Part of what makes up a credit score is the factor of the percentage of debt a consumer has relative to the total credit available. For example, if an individual has a total amount of credit available of $10,000 and has an outstanding balance of $1,000, their balance represents 10 percent of their total credit limit. If a person were to suddenly add a purchase of $2,000 to his or her total debt, this would bring the percentage to 30 percent. Going from 10 to 30 percent may be enough to drop an individual’s credit score.

A Change in the Type of Debt that is Owed

A mortgage is not given as much attention in factoring a credit score because it is considered investment debt. Most people who are paying on a mortgage have a home that is worth more than the amount owed on the mortgage. However, other types of debt are treated differently. Loans secured by collateral show good credit worthiness, but when a consumer has a lot of unsecured debt, such as credit cards, then the debt can lower your credit score. Open credit accounts should reflect more than credit cards, or a credit rating can be penalized. This is especially true when an unsecured account reaches its credit limits. Once this happens, a credit score may dip downward, if only slightly.

Closing an Account

Most people wouldn’t think that closing an account that goes unused would hurt a credit rating, but it can happen. The reason is that one of the factors in calculating a credit score is the amount of time that an account has been open. This is calculated on all open accounts to give an average length of time that all accounts have been open. The longer the time, the better it will reflect on a credit rating. The problem for many people is that they will have an old account that is no longer used, so they decide to close it. After all, if it is not being used, there is no reason to keep it open. However, this is not true. Once the old account is closed, the average amount of time that all accounts have been open may drop, and this will lower the credit score. This is a common reason for a credit score to drop for people, when there is no apparent reason for a score to drop. As a general rule, old accounts should not be closed, even when they are no longer being used.

Too Many Inquires

Every time someone checks a person’s credit, there will be an inquiry listed on a credit report. There is little, if any, information to accompany this notation. Of course, everybody who applies for credit is going to have an inquiry, and this alone will not affect a credit rating. The problem is when there are several inquiries on a credit report in only a short time frame. This is a red flag, and it makes it looks like that a consumer is desperate to find credit from several sources. This usually won’t drop a credit score greatly, and when it does, it will usually be only a few points. If this is the only reason for a credit score drop, over time the score will move back up to where it was previously.

Incorrect Information

This is a big problem with credit scores, and is one of the main reasons why consumers need to check their credit reports once a year. It is also a good idea to check a credit report before shopping for a major loan such as a car or a mortgage. An individual’s credit rating can drop slightly or even greatly due to inaccurate information on the report. It is possible that a lender has reported the correct information to the wrong account, and in this case, the lender will need to be contacted to have the information removed. In more sinister situations, a person’s identity can be stolen. A credit report can show a delinquency on loans that were never taken out. It was simply a case where a person’s identity was used without them being aware. It is also possible to have credit cards stolen, and then used without a person’s knowledge. This can happen with accounts that are not used often.

Conclusion

It important to keep in mind all of the factors listed above, so a credit rating can be kept as high as possible. Lower credit ratings mean spending more money over time when anything is financed, and in the case of a mortgage, this can mean 30 years.

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Nobody wants to be poor yet, somehow, it always seems like you can never achieve financial freedom. No matter how hard you budget or plan, the savings never grow. Take a deep breath and take a step back. Maybe it’s the people around you thwarting your financial potential.

The Child

Kids are expensive, costing the average person around $245,000 for 18 years of support. On top of this, over half of the population’s pregnancies are accidental, forcing many to simply stumble through their financial life, hoping they stay employed long enough to rear their child or children. The best thing to do is simply plan for a child. Make sure you are in a good financial place with a clearly laid out plan before taking any chances. If that doesn’t work, no one said you had to keep the child.

The Spouse

People all come with their own issues in regards to money. Some are draconic, hoarding everything they make for fear of not having enough to stave away the apocalypse. Others, however, are spenders, choosing to seize the day at face value no matter how much debt it will put them into. When these two personalities combine, as they often do in marriages, the results can be disastrous. The husband who believes he deserves toys every week for working his full time job or the wife who will settle only for the name brand stuff can quickly run any savings into the ground. In addition, when you do marry, their bad financial set up is now your bad financial set up, resulting in bad loan rates or debt.

Aside from that, if both spouses work full time jobs, you can unintentionally but easily shoot up into the next financial bracket where taxes are doubled and the cost of living is much more expensive. Honestly look to see if this is happening. If so, it’s time the lower paid spouse quits their job and takes on an active at home role. While it may be a kick to the ego, it makes for a much more comfortable financial situation, affording you the ability to enjoy what you are making.

The Pet

Though not as expensive as children, pets are nonetheless an investment, totaling in at an average of $15,000 per pet per lifetime. This includes their food, their toys and any vet visits they have to endure. Even smaller pets like hamsters or snakes end up costing a pretty penny in the end. Figure out how much it will cost you and work that into your budget. Also, make some changes to keep your pets healthier. For instance, making outdoor cats permanently indoor cats can greatly reduce how much they cost if only because you don’t have to make monthly vet calls.

The Parents

Not all parents are financially responsible. Some are leeches just waiting to suck out whatever support they can get from their adult children. On the bright side, many are just victims of the recession that hit, wiping out many people’s retirement funds just as they hit retirement age. No matter the situation, parents are a little worse that children because children at least have a cutoff age. Parents, however, can go on living well beyond 18 years while still needing full financial support. Trying to care for both is a drain on all resources, both mentally and financially.

Now that you are an adult, it’s time to lay down the rules with your parents on what they can expect from you. They might have made poor choices in the past, prompting you to learn better habits, but they will never improve if you keep enabling the abuse. Openly set down your guidelines. If they need the help, they will take it. Also, reach out to a counselor who can help them get back on their own feet, freeing you from the fiscal responsibility you, arguably, should never have had in the first place.

The Boss

Know your value. Too many of us work underpaid jobs under the guise that we’re lucky to even be working. This is a lie to keep you in check. You would be surprised how much you can make for what you do if you only go out and look. Ask your boss for a raise. Track what your market value is. If your boss is unwilling to match or even consider paying you more, it’s time to start looking for another position. When you go in to hire, know what salary you will work for and what you won’t. In the corporate world, it’s up to you to make your own financial progress.

The Friends

If you can’t afford something, don’t buy it. It is not shameful to admit your budget doesn’t cover the new flat screen TV all of your friends are raving about. Peer pressure drives people to do a lot of crazy things they wouldn’t normally do on their own. In its own right, it is a healthy practice but only if it helps you grow as a person. Giving in to the request of friends making more than you will only set you back from your dreams of saving for retirement and otherwise improving your standard of living. In these cases, the best thing you can do for yourself is to learn how to say “no”. It doesn’t have to be mean, but it does have to be firm. Also, you can be the one to suggest outings that fit your budget. This way, you can all still enjoy time together without breaking the bank.

The Helpers

Cleaning ladies, gardeners, babysitters and pet sitters are all under this “other” category. They are extra expenses that save you time for a price. Unfortunately, there’s a good chance you just don’t have the means to keep them paid. Think of it in hourly pay. If you make $10 per hour of an eight hour day and a cleaning lady once a week costs $60, you just spent six hours of your day working to pay for her to tidy up your house or apartment in maybe an hour to two hours. Is it that worth it? You could probably take care of all of that stuff on your own in less time and save yourself $60.

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Festive parties, twinkling lights, and gifts under the tree – the holiday season is a wonderful time of year. But between parties, decorations, and gifts for the whole family, it’s easy to spend much more than you planned and end up in debt at the start of the new year. If you’re looking for ways to avoid damaging your credit and your bank account, here are some tried and true methods for saving money during the holidays. Make the most of your finances by learning smart ways to celebrate.

Create a Budget

The first thing that most people do when they start thinking about Christmas shopping is make a list of people they have to buy gifts for. This is a surefire way to get over your head. Instead, decide on a realistic amount of money you can afford to spend on the holidays. Remember to add in things like food shopping, decorations, postage, and all the little extras that can make a real dent in your wallet. Once you’ve settled on an amount, make the list of people you need gifts for. Then you can decide how much to spend on each person and adjust accordingly.

Don’t be Afraid to Edit

What usually happens during gift-giving season? You think of one person you should get something for, and it spirals – you remember more and more names, from your child’s teacher to your postal worker. Cut yourself some slack. Some of these people would be very happy with a card, and others can be given homemade gifts like baked goods or arts and crafts. Learn something new like how to make scented candles – these can make great gifts for a long list of people in your life! Eliminating names or trimming the amount of money you’re willing to spend on someone doesn’t make you a bad person. Remember, the expression “it’s the thought that counts” is actually meaningful.

Make Smart Credit Card Choices

It’s easy to feel like you will save money by using credit cards to purchase big-ticket items and bail you out during a financial crunch over the holidays. But this is a slippery slope that can lead to debt. Shopping smart means you should use cash whenever and wherever you can. Set yourself a limit, and stop buying when your limit is reached. However, this is often easier said than done, and sometimes you have to pull out some plastic to get through. In this case, use the card with the lowest interest rate and plan to pay off the purchase as soon as possible. Credit card transactions are like short-term loans, and you’re not meant to let the amount you owe accumulate over time.

Don’t Spoil the Kids

For younger children who still believe in Santa Claus, it might be tempting to splurge on toys and gadgets. But don’t go overboard. Make sure they’re getting the most important couple of items on their Christmas lists and let everything else be a compromise. As children grow older, they should understand the real-world financial limits of the holidays, and that they won’t be getting every single toy they want. Help them set realistic expectations for gifts, and teach them the value of giving as well as receiving.

Don’t Spoil the Adults Either

As you get older, the holidays become less about presents and more about family and friends. Never feel like you have to impress your relatives or people close to you with glamorous, overpriced gifts. It’s okay to focus on thoughtful gestures, personal touches, and presents that have real meaning. An adult should appreciate the gift of something you found at a thrift store that really reminds you of them far more than that expensive catalogue item they won’t really use.

Budget Time as Well as Money

Sure, maybe you didn’t start your holiday shopping in July. But you can still make room for what needs to be done so that you’re not scrambling around at the last minute. If you plan early for shipping, decorating, and grocery shopping, you are sure to save money. And you especially don’t want to be caught at the mall a few days before Christmas trying to find the perfect gift, because that’s a sure way to end up paying more.

Think about Weddings

If you’re getting married, November and December are excellent times to find bridal gowns, bridesmaid dresses, and all sorts of wedding decorations at premium prices. There’s simply not a lot of demand for wedding items in the winter season. If you know someone who is getting married like a child or niece or nephew, contributing to the ceremony can end up being an affordable gift idea. It’s even affordable to get married over the holidays. An intimate ceremony can be held at a church already decorated for Christmas, and since it’s the off-season for weddings, many venues will have budget packages ready. You just have to find a DJ who isn’t booked up with holiday parties.

Consider Holidays for the Holidays

Sometimes you want to spend your winter vacation away from it all. The holidays are also an excellent time for a getaway, because cruise lines and resorts are in need of customers and willing to offer surprisingly great deals. Instead of planning your family’s summer vacation, save money by going in December. Any tropical destination you think of is warm all year round, and there will be plenty to do. You can save on car rentals, rooms, and more.

There are so many ways to cut your budget over the holidays, and all it takes is some careful planning to explore them. Don’t get in over your head with debt this year. Your family will thank you for spending wisely and getting 2015 off to a great start.

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If you have a credit card, you have an effective tool in your financial arsenal. While you may have heard horror stories about how credit card debt drove people to bankruptcy, that is not a common result. Responsible use of a credit card can actually help a person get great rates on loans or help an individual consolidate his or her credit card and other debts.

Using Your Credit Card to Consolidate Outstanding Credit Card Debt

A common method of debt consolidation is to put all eligible debts onto a credit card. To consolidate credit card debt, an individual can transfer all of his or her balances onto one card. The goal is to find a credit card with a low interest rate, which acts to lower the amount that must be paid while increasing the percentage of each payment that goes toward the principal balance. This allows a credit card user to pay off his or her high interest credit card debt months or years ahead of schedule.

Using Your Credit Card to Consolidate Other Secured or Unsecured Debts

Many lenders will allow you to pay your debts with a credit card. If the credit card has a lower interest rate than the interest rate on the loan, you can effectively consolidate student loan, auto loan or tax debt into one monthly payment. However, it is important to note that not all lenders will accept credit card payments. In some cases, a lender may add a fee for accepting a credit card payment. Those who choose to put student loan debt on a credit card may still be liable for paying that debt. If the government can prove that a debtor intentionally put student loan debt on a credit card with the intent of declaring bankruptcy, that could be considered fraud.

Use a Credit Card to Build a Credit History

Using a credit card can be a great way to build up a credit history. Even if you only charge a few dollars a month, the fact that the monthly payment is made on time will establish a person as a responsible user of credit. Whether or not a person makes timely credit or loan payments makes up 35 percent of an individual’s FICO credit score. Having a credit card in addition to a student loan or auto loan can add to a person’s credit mix and make them more attractive to lenders. This is because having multiple types of debt proves that an individual has experience with both unsecured and secured loans and can handle them without issue.

Secured Credit Cards Can Help Rebuild Credit After a Bankruptcy

Those who have just gone through a bankruptcy may not have many loan options available to them. However, a secured credit card may be the foothold that they need to climb out of credit purgatory. A secured credit card requires an individual to secure their credit line with an initial cash deposit. If payments are made on time for a predetermined number of months, the line may be converted from a secured loan to an unsecured loan. The credit card issuer may also return the cardholder’s security deposit with interest.

Use a Credit Card for the Rewards Points or Cash Back

Many credit cards allow an individual to acquire points that can be redeemed for a variety of rewards. Frequent travelers may be able to acquire points that can be used for free flights or hotel rooms. Some cards allow their users to acquire points on every purchase that they make that can be redeemed for airline miles or other perks.

Credit cards for those with even average credit may offer 1 percent cash back or more. There are often rotating categories that offer as much as 5 percent cash back on gas, online retail purchases or money spent at restaurants. This enables anyone to get a discount on the things that they buy on a regular basis. It can be an effective way to save money on holiday shopping.

Make a Large Purchase and Pay for it Over Time

If the stove breaks or one of the kids needs braces, a credit card can come in handy to help cover that emergency expense. Instead of raiding a bank or retirement account to get $1,000 or more quickly, it may be easier to simply put it on the credit card. If you open a new credit account, it may be possible to get 0 percent interest or save money on the first purchase made with the card.

This can help you avoid a dire financial situation while also helping you save money at the same time. However, make sure that you have some sort of a plan to pay the purchase off. Many people get into trouble because they don’t stick to their plan or have any sort of plan to pay off the debt. This can lead to making minimum payments and paying more in finance charges than you have to.

There are many great uses for credit cards. Whether you are trying to consolidate debt, gain rewards points or just trying to cover an emergency expense, credit cards are an excellent financial tool. As long as they are used responsibly, they can help people save money both now and in the future in the form of low interest rates and low finance charges when debts are paid off in a reasonable amount of time.

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Credit cards can be beneficial in many ways to an individual’s finances. When used properly, they offer consumer protection on purchases, greater security than carrying cash, a financial cushion for emergencies and are inexpensive. However, there are many reasons that credit cards can hurt a consumer’s personal finances. Some of the uses of credit cards have their root cause in ignorance, while others are due to a lack of responsibility. The following are a few of the most common things people do with their credit cards that should be avoided.

Saying your credit card number where others can hear

The physical credit card is simply a convenience. A consumer can simply show or swipe it on a machine without having to memorize the digits. But that means that anyone with access to the number can use the credit it represents. So consumers must be careful when mentioning the number, such as in phone transactions, because anyone within earshot can take down what is said and use it for nefarious purposes. If consumers have to speak the number, the safest way is to do it in isolation or by turning away from public hearing. They can also lower their voice and cup their mouth.

Entering the number on a public and unsecured network

It’s convenient, efficient, and money-saving to be able to use your laptop, tablet, or smartphone on the public wifi networks offered by coffee shops, in public libraries, or when riding some public transportation. Busy people can multitask, such as by sipping coffee or traveling to the office, while continuing to get work done online. However, that free Internet access is not secure, allowing anyone with the proper tools to eavesdrop on whatever is being accessed. Performing financial transactions that involve a credit card number is unsafe because anyone can watch and capture the number without the consumer’s knowledge. For greater security, such transactions should only be performed in protected networks, such as at home or at work.

Writing down the number even in email

The physical credit card can be tracked and kept secure in a wallet or purse. If the number is written on a piece of paper, the paper can be lost or taken by someone and viewed, exposing the account to people who may have bad intentions for it. Putting the number in an email is worse because that form of communication is not secure. The email has to pass through several intermediary computers before it reaches its final destination. At any point in the journey, it can be intercepted and the number stolen. If someone requests a credit card number in writing, it’s best to phone him or her and recite the number verbally. If that’s not possible, sending a fax with the number is slightly safer than sending the information via email or letter.

Entering credit card details in an unsecured website

Online shopping is only possible because websites allow the entry of credit card details to make a purchase. But such entries pose the same risks as emailing or posting photos, if the website does not encrypt the information. Unsecured websites use “http” (Hypertext Transfer Protocol) in their address bars, indicating that data is transmitted in plain text, which contains no security features. To make online transactions safer, shopping sites use “https” (Hypertext Transfer Protocol Secure), which encrypts sessions using a Digital Certificate, making information harder to hack. Consumers must be sure that websites that demand their financial information use this standard.

Throwing away an old credit card in one piece

As a security measure, a credit card has an expiration date. The consumer has to use an unexpired version for it to be valid. However, throwing an old card in the trash can raise issues. Often, the credit card number remains unchanged, so the number on an old card is still correct. Someone digging through the trash could take the card and using the number to make fraudulent charges. The best thing to di with an old card is to either put it through a special card shredder or cut the card into pieces. However, each of the pieces should be thrown into separate receptacles. If they’re all put in the same trash can, someone could put together the cut pieces to decipher the number.

Paying only the minimum

The minimum payment specified on the credit card statement is the smallest amount a consumer must pay to remain in good standing with the issuing company. It has little to do with getting out of debt. Consumers who only rely only on the minimum payment will never pay off the balance, if they keep buying with the card, and will pay more in interest. Savvy buyers should pay all of their bill or more than the minimum to eliminate their debt more quickly.

Paying late

Paying late once or twice increases the interest owed and incurs late charges. Paying late frequently can also damage the consumer’s credit score, which can lead to higher rates and make additional credit more difficult to get. If the cause of late payments is slow mail service, credit-card holders can often pay their bills instantly by using the credit card website. Consumers who are interested in this convenience must set up it up in advance with their banks. Credit card companies may need several business days to ensure that payments are possible from the specified bank account.

Not checking credit accounts frequently

Waiting until the bill arrives to discover issues with the credit card may be too late. A thief may have had almost a month to rack up thousands of dollars in charges and then disappear so he’s never caught. Consumers need to check their accounts more frequently to minimize any damage. Fortunately, most card companies feature online account access for free. Consumers should check their accounts daily whenever possible.

Federal law generally limits consumer liability to $0 if the victim reports the card stolen before any charges are made. Liability jumps to $50 if the theft is reported within two business days after it is discovered, and to $500 if the the theft is reported within 2 to 60 calendar days. In addition, consumers must spend time and effort straightening up their accounts. The only way to avoid this monetary and time inconvenience is to be vigilant with all credit cards.

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As most consumers have experienced at one time or another, an unexpected declined credit card can quickly side-line an enjoyable occasion and create an awkward or annoying situation. When a credit card is declined, at the very least, it will cause embarrassment and take up excessive time by having to run an alternative form of payment. As the universe would have it, a declined credit card transaction usually occurs during the most inconvenient time, and when it is needed most. With increasing credit card fraud, many card issuers continue to implement and improve internal policies that can unfortunately result in a declined transaction. Managing a credit card with personal diligence and caution is no longer sufficient for guaranteeing credit reliability.

Reasons Credit Transactions are Declined

While it is encouraging that anyone experiencing a declined credit card is in good company (even the President has encountered this experience) there are primary reasons credit card transactions are declined, and some that are surprisingly educational:

  • Intermittent, infrequent card use
  • Failing to activate an account or update personal information required for card use
  • Using a card with enhanced security features or a “flagged account”
  • Excessive charges or annoying account authorization holds
  • Non-routine charges
  • Using an account away from home
  • Insufficient funds
  • Multiple online transactions
  • Missed payments
  • Incorrect information (such as zip code) entered after swiping the card; and
  • Expired card or recent card issuer credit line decrease

How to Avoid Getting Your Credit Card Declined

Not all credit card declined transactions are due to a problem with the account holder, nor the card itself. In fact, common rejection reasons can be altogether avoided by letting the credit card company know pre-purchase what to expect.

Infrequent Card Use

Like the President’s situation, when a credit card is presented for payment when normally used infrequently, the transaction may be out of character for the card holder and generate a declined credit card. Both banks and credit card companies use sophisticated fraud alert systems that work by recognizing non-routine transactions that would potentially indicate a fraudulent situation. Declining a credit transaction of this nature safely halts the payment process in order to bide time and obtain further appropriate verification and authorization from the customer.

Account Activation and Valid Personal Details

Sometimes credit cards require activation, sometimes not. Navigating the process of proper activation and ensuring that up-to-date personal information has been recorded correctly in crucial, but numerous electronic databases, is both daunting and can become burdensome quickly. Fortunately, consumers can sync devices like personal computers and smartphones and create a blanket log-in username and password system so that when one update is performed, the information effectively arrives where it needs to go quickly in order to prevent a declined credit card for the sake of ill-matching account data.

Enhanced Security Features and Alerts

Credit conscientious consumers are intelligently, and all too unfortunately, aware that identity theft is a reality. In order to prevent being the victim of credit card fraud or in the misfortunate case that a credit card customer has already experienced a fraudulent situation, card holders may be thrilled to take advantage of the enhanced security features and alerts card companies currently offer. The not so convenient part of increased fraud protection however, will result in thorough presentation of identification and even require a high-level password in order for a credit transaction to go through successfully.

Limits and Authorization Holds

Account holders know their maximum line of credit, and do their part at keeping transactions within the available credit parameters. The most common situation that arises around excessive charges pertains to annoying account authorization holds when traveling. Three excellent examples of authorization holds include:

  • Rental Cars
  • Hotel Stays; and
  • Restaurant Charges

The best approach to avoid a declined credit card transaction is to use more than one credit card on a regular basis, even for small, every-day purchases. Asking for an amount before handing over a credit card is another good strategy for negotiating with merchants (hotel check-in staff) about how much is going to actually be held on a card. By keeping buying habits consistent and understanding the necessity of advising the credit card company about non-routine transactions such as large purchases, travel, and intent to use the card out-of-town, card holders can reduce the chance of their card being declined. Keeping in contact with the card issuer, by conveniently managing an account online, allows the cardholder to review data, keep information updated, and ensures that transactions will be successful by keeping the credit card active and available for use.

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The decision between using cash or credit is not always an easy one, and there are definitely instances where cash is the better choice. Those small, day-to-day charges, for example, should be paid for with cash because constantly relying on plastic for these seemingly small purchases can lead to a large bill at the end of the month. Those who have trouble spending within their means may also want to use cash almost exclusively as this is the best way to stay out of debt. For those capable of responsible use of credit, however, there are multiple situations in which people should use credit rather than cash.

Beating Store Return Policies

One area in which credit cards are useful is defeating the sometimes short return policy length of many popular stores. Since 90-day return is often a credit card policy, shoppers may want to use credit to purchase products from stores that they might want to return outside of that one-month window. Shipping the item to the credit card company may be required, so this should only be done with merchandise that is easy to ship.

This strategy may also be effective with purchasing clearance items since stores often will not take back items sold via clearance. Many credit cards, however, offer 90-day return for clearance items, meaning that “all sales final” does not necessarily refer to the person who used plastic to buy one clearance item too many or a clearance item that turns out to be defective.

Getting a Better Warranty

As with return policies, credit card companies also often offer better warranties than manufacturers or stores. People who are looking to buy appliances especially may want to consider using credit to buy appliances or other similar items in order to take advantage of the extended warranty often offered by the credit card company. If a store offers a warranty of up to a year on a new range, for example, then using credit rather than cash to buy the range could result in a warranty that would cover a breakage after, say, a year and a half.

Buyer protection is a similar concept in that it, as the name implies, protects the buyer from breakage, loss, or theft of a particular item for up to several months after purchase. Expensive items, things likely to be stolen, highly fragile items, etc. may be good options for credit card purchase in order to take advantage of buyer protection. This may also be useful for items that do not come with a warranty but still might easily break or get stolen.

Keeping a Record of Transactions

Another benefit of using credit is that it provides a record of transactions. Disputes often arise over whether a person has paid this bill or bought that item, especially when the person uses cash for the transaction. Credit, however, leaves a paper trail—or at least a digital trail—which can greatly assist with such disputes or with record-keeping for tax purposes. Medical expenses, for example, are often hefty expenses that may be tax-deductible. Paying for such things with credit leaves a digital/paper record that is, if not legally binding to the IRS, at least helpful to the citizen for figuring out tax expenses.

Donations to charity should also be paid for with credit if possible since doing so would also leave an easily traceable trail. Taxes become that much easier to do when the person has easy access to credit records with the donations clearly labeled. Using credit here could help users get the most out of their tax deductions by having a clearly-labeled donation total.

Getting the Most out of Regular Purchases

Routine expenses are a fact of life, and paying for them with credit can make life much easier. If a service provider disputes a claim of payment, the record of payment via credit will be easily provable for the customer. Automatic withdrawal disputed claims are difficult and time-consuming, while credit card companies may honor a request for resolution of such a case more quickly. Also, the credit card company makes a more formidable opponent than the average customer, and businesses do not generally want to go to battle with credit card companies.

Those who routinely purchase items from popular stores that offer credit cards may want to consider using store cards instead of regular cards for purchases. Those who have trouble paying off credit balances on time may not want to go this route as in-store credit cards often have significantly higher interest rates than regular cards, but responsible credit card users may be able to get fairly significant savings via discount offers and points rewards for cardholders.

Buying a House

Not many people have to worry about being able to buy a house with cash due to the sheer expensiveness of even a relatively cheap house, but credit is the vastly superior option anyway. Paying on a mortgage is good for credit history and mortgage rates are fairly low, meaning that any cash put towards a house would be better off invested wisely than put towards a house. Mortgage interest is also tax deductible, which goes back to the notion of keeping a record of certain types of transactions.

Traveling Well

Credit card companies often offer a wide variety of services and protections in regard to travel options, so paying with credit over cash often makes the traveling experience better. Renting a car with a credit card may grant the customer special discounts and offers; insurance offered by the credit card company may be cheaper than and superior to that offered by the rental company itself. Paying by credit can also leave another records trail, assisting the customer with any necessary claims.

Purchasing airline tickets via credit can offer even more perks such as baggage protection and packing, free baggage checking and lounge access, and emergency situation assistance. Many of these services will not likely be needed, but people who end up needing these services often did not expect to need them beforehand. Besides, purchasing peace of mind can enhance a traveler’s enjoyment of a vacation.

All credit cards are different, so credit card users should read the fine print on their contracts and find out what benefits the credit card company offers them. Many of these savings will only actually be savings if people pay their bills off by the due date and avoid late fees; otherwise, the fees charged may override any potential savings. A little bit of research and diligence can increase a credit card user’s savings and provide more benefits than cash.

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