Debt Help

How Interest Rates Work

When people hear the words ‘interest rates,’ the only thing that hits their head is how to decrease interest rates.  However, before you can decrease interest rates, you need to understand exactly how interest works.  The trick to interest is reading the fine print and trying to determine whether that loan has a fixed interest or a fluctuating interest.  Here’s how interest works:

• Whatever money you owe, if you have an APR of – arbitrarily speaking – 19%, that means that on whatever you owe, at the end of the year, you will have to pay back 19% of the total bill.  But, interest is collected monthly.  So, it’s dangerous because you’re paying SO much interest on a monthly payment that could be high already.  That’s how people get so caught up in debt.
• If your interest was 0% when you signed up for the credit card, the second that you miss a payment in full, interest might completely jump to a phenomenal number.  That’s the way credit cards make their money.  They’re banking on your failure to come true to your debt.  That’s why it’s so important NOT to get in debt.
• You can argue and try to decrease interest rates, especially with credit card companies, because they do want your business.  So, if you’re confident that you can continue to pay, call them up and say “9% doesn’t do it for me, drop me to 7%.”  If they want to keep you, they’ll do it.  They can afford to do it.  They can’t afford to lose you.

Interest is a tricky game.  Interest is tacked on and continues to be tacked on to whatever debt you have which is why it’s so hard to get OUT of debt.  But, if you work hard on it and really focus on it, getting out of debt does not need to be an impossible task.  It really can be as easy as cutting up your credit card and paying large chunks of money a month.  I hope this clears up how interest rates work.

How to Stop Pre Approved Credit Card Offers

For many who are in debt, you might find it weird that even though you are in debt with other credit companies, you continue to receive pre approved credit card offers in the mail.  Often times, these pre approved credit card offers are from companies that you have never heard of, yet they’d love to approve you for up to $5,000!

Whether or not there are benefits to such offers (and there’s aren’t many, if any) if you came to this page, you’d probably love to know how to get them to stop.  When I found out how, I was getting 4-5 pre approved offers a day!  It was filling up my mailbox and wasting my time since I had to make sure none of them were real cards I needed to shred.

If you are in debt, then having all of these extra credit cards is probably not the best idea.  In my debt reduction tips I talk about how you should cut up your credit cards, not add more to your collection.

So, anyhow, here’s how to stop pre approved credit card offers:

1) You can call 1-888-5-OPTOUT (1-888-567-8688) and they will guide you through the process of opting out.

or

2) You can go online to OptOutPreScreen.com and you can fill out a form online or print out and mail in a form.

I have not used the phone number, but when I used the website, I was able to choose between opting out for 5 years or opting out permanently.  I chose to opt out permanently because I didn’t want to have to go through the process to stop the pre approved credit card offers anymore.

Also, it’s not a fact, but I have heard that it can increase your credit score a little bit, since it is seen as less of a risk if you aren’t receiving those offers anymore.  Whether or not it does increase your credit score, it definitely can’t hurt you!

6 Tips for Reducing Your Debt

Here are some tips to help you to reduce your debt:

1. Pay Your Credit Cards EVERY Month
Your debt shouldn’t be one of the things that is put off if you don’t have enough money.  If money is too tight, get a part-time job or work some overtime.  If you don’t even have enough money for bills and to pay minimums on your debt, then debt reduction shouldn’t be your goal, increasing your income should be the goal.  Be sure to pay the minimums on all credit cards and loans, preferably more.  Be careful not to spend all of your money paying off debt.  Make sure that you pay your other bills and can buy groceries and gas.  It’s not worth it using your credit cards every month to buy groceries because you don’t have enough money to buy groceries, because you paid more on your credit cards.  Can you see the lunacy?  Plus, you can incur more debt because we live in a world of late fees and adding $39 to your debt because you couldn’t pay the minimum is counterproductive to your goal of reducing debt.

2. Keep Track of Your Finances/Make a Budget
You need to find some way to keep track of exactly what you are spending your money on, and how much money you have coming in.  I wrote an article entitled: How To Make A Budget.   It breaks down the areas that you need to cover in your budget.  Once you know what you are spending your money on, you can see which of those areas can be cut out or cut down, in order to free up more money to pay down your debt.

3. Stop Using Those Credit Cards
Just stop… if you’re in a spot where you’re not paying your credit cards debts off each much, then just stop using them.  Will it be hard… probably, but it’s going to help to reduce your debt.  Tips that others have recommended are to put your credit cards in a gallon zip lock baggie full of water and freeze it, so that if you do have that urge to use your credit card, you at least have to wait and think about it while it thaws.  My suggestion is to just cut the credit card up.  That will reduce your use of the credit card by 100%.  By not incurring more debt, you can focus on reducing the debt that you do have.

4. Get Lower Interest Rates On Your Credit Cards
Although transferring higher interest balances to 0% or low percentage credit cards is a temporary fix, it can help.  Usually those promo interest rates only last for so long.  Plus, you have to make sure that you pay every month, or they can increase the rates on you plus charge you late fees.  Consolidating does have it’s benefits, as you have less payments to keep track of and you can get lower rates.  I wrote an article entitled: An Easy Way to Lower Your Credit Card Interest Rates.  Check it out for an easy tip to possibly get your credit card rate reduced.

5. Increase Your Income
The more money you have coming in, the more you can use to pay off your debt.  Whether it be a part time job, working overtime at your current job, or selling stuff on Craigslist or eBay, you can get some extra cash to pay towards your debt.  Especially, if you are wanting to/needing to buy something new. (New fridge, new camera, new TV, etc.)  Don’t just put it on credit.  Work some extra hours or sell some extra things, in order to buy that wanted or needed item.

6. Say NO to “Get Rich Quick” Schemes
Everyone wants to have more money, especially those of us who are in debt.  Get rich quick schemes are very prevalent because the possibility to get rich without much investment or hard work is appealing to almost everyone.  Don’t be one of those fooled by these get rich quick schemes.  Why spend money you don’t have or could put towards debt?  If someone found the sure fire way to make tons of money with little to no work and only 3 easy payments of $19.99, then everyone would be doing it.  Instead, put your efforts into doing something that will for sure pay you, like a part time job or working overtime.  It won’t cost you money (except gas) and you’ll for sure make an income.

By following these tips, you can definitely reduce your debt.  Will it take hard work and dedication? Probably… but it will eventually free you from the chains of debt.