Why a credit card can be a bad idea for debt management

Credit cards can do more harm than good. If you weren’t aware of this before then it’s really time to put it into perspective. Credit cards not only tempt you to make exorbitant purchases, but they also can have high interest rates that are detrimental to your financial situation. Acquiring a credit card is exactly what credit card holders want you to do when you’re in debt. What they don’t tell you about is the loan sharks and harassing phone calls that could possibly await you when your cards get canceled and you’re left with an incredible amount of debt. As illegal as harassing phone calls are, they still happen in this day and age.

Bottom line, credit cards aren’t the answer to your debt problems. They only create more debt! Let’s look at an example of how a credit card can be detrimental to your financial situation. The average person has 2.7 credit cards to their name. The average amount of debt a consumer has to their name through their credit cards is way more than they should have. It runs into the thousands of pounds! If you don’t pay off what you owe each month the interest starts to pile up. How so? Well, credit card companies are clever. Let’s say you charged £1,000 in purchases. If you don’t pay back the full amount you charged on the cards, the full £1,000 within the grace period, then you would owe the interest on the full £1,000 in purchases until you paid back every cent. Even having 1 measly pound left in debt on the £1,000, after the grace period, would cause the full £1,000 to accumulate interest until the balance of the debt is paid back in full.

So you see, even having a measly £1 in debt from purchases can cause the entire £1,000 to incur interest charges. If you must own a credit card, which we highly disapprove of, then you must pay back every penny you owe within the grace period. Otherwise, all of the purchases, every single one, will acquire interest charges until it is paid back.

So you see, this is just one way that credit cards have you trapped. They know that the average person is never going to pay back within the grace period. You can be sure that they are counting on you making purchases that aren’t within your means. Anything you can do to save money without having to own a credit card would be a wise decision. Therefore ensure you check the small print to ensure your card has interest free purchases for a set introductory period.

Don’t fall into the credit card trap, and if you’re already part of it, check out more of our articles on how to save enough money to cancel them for good. We have tons of money saving tips and ways to live frugally. Not only that, but we show you how to live frugally and use it to your advantage. The more money you can get saved and invested, the better your debt situation will become.

Some Simple Debt Management Tips for Christmas

While it is exciting to watch as someone opens an expensive gift from you, the excitement dies quickly when the bill comes due. Christmas has gotten out of hand. There is no need to spend £100 on each person you buy presents. Instead of going into debt this year, try a few of these
tips.

1. Make your own presents. You do not need to be an artistic genius. Homemade gifts come from the heart and will be cherished much longer than anything you could buy. Set aside a couple of days and make sweets and cookies to give to friends.

2. Set limits on the amount everyone spends. Talk with your family and set a limit for the amount to be spent on each gift. Fifteen pounds is a reasonable amount for a gift.

3. Draw names from a hat. Instead of buying a gift for each and every person in yourfamily, have everyone draw a name from a hat and only buy for that person.

4. Impress upon your children that Christmas is not all about the presents, but about spending time with those you love.

5. When buying for your children, Santa only needs to buy one special gift for each child. A few small, inexpensive gifts can be added to the special one. Again, set your limit, and stick to it.

6. Plan ahead for next year. Start a Christmas savings account. Put £10 in the account
every week. By the time next year rolls around you will have the money you want to
spend and will not need to charge anything.

7. When using your credit cards for Christmas, only spend what you know you will
pay off in the next month. Do not get any new cards and charge them to the limit. If you
cannot pay it off in one month, it is too much.

It is hard to change everyone’s expectations, but it is time to start. Take the commercialism out of the holidays. Spend time together playing a few games, what you get out of an evening with family can never be replaced. If you instil this in your children while they are young when they are older they will keep themselves out of debt by knowing the Christmas is about giving vs. receiving. But, at the same time they will also know that they do not have to go broke in the process while trying to please others.

Making your money go further for Christmas

As Christmas is just around the corner i felt it was appropriate to share a couple of quick tips you can think about to get a little bit back into your bank accounts during a particularly expensive month. There are numerous quick debt busting tips to share that can help you reclaim some money back or reduce your outgoings.

Making use of 3-2 offers, store discounts and promotional items

During the festive season, there are numerous companies clambering for your attention and will try this by offering numerous deals and offers in major supermarkets. Take advantage of these deals whilst they are on to extend your shopping budget further.

Use cash back and voucher sites

Use popular cashback sites like Quidco and Topcashback to help earn a small percentage back on your online purchases. Every time you click a link through from Quidco to the merchant site you may earn a percentage back on your shopping.

Cashback percentages range from 0.5-2% for big ticket items like iPads etc to over 10% for groceries and shopping with some of the bigger highstreet retailers like Boots.com and Argos.

Also, lets not forget the voucher sites like MyVoucherCodes.co.uk and Vouchercodes.co.uk etc.

Get money back from mis-sold Payment proection insurance.

Look out for specialist PPI claims companies that can help you reclaim fees from unscrupulous or missold payment protection plans. These commonly include loan and credit card payment protection that is sold in on a policy unnecesarily.

The PPI claims companies often handle the claim on your behalf if you think you have been unfairly sold such insurance on your credit product. They will then take a percentage from your lump sum before paying the rest back to you.

Trade in old items on Gumtree or eBay

If you have lots of unwanted DVDs, games and CDs etc, why not consider using auction and classified sites like eBay and Gumtree to sell them. The advantage of Gumtree is an absence of commission or listing fees for adding products. That can add up considerably if you sell a large number of items, or higher value items.

Whilst you may not necessarily say thousands, these things could certainly help strecth budgets during a very expensive time of the year. Happy Christmas and new years!

Borrowers advised to budget for Christmas

Financial solutions company Think Money has advised anyone covering the cost of
Christmas on credit to make sure they have a carefully considered plan in place to repay
what they owe.

With Christmas being one of the most expensive times of year, it’s likely that many
people will turn to credit cards, personal loans and other lines of credit to cover their
seasonal spending. And with the base rate at an all-time low for over two years, there’s
every chance that borrowing money will be an increasingly attractive option for many.

However, there are concerns that borrowers who don’t plan ahead financially, or have a
well-thought-out budget, could face debt problems as a result.

A spokesperson for Think Money commented: “Financial planning is as important as it’s
ever been - especially when it comes to borrowing money.

“[...] Some people might be making a New Year’s resolution to get their finances in
order. For some, that might involve taking out a debt consolidation loan to simplify their
finances and set out a clear plan for repaying their debts. This can be a good way of
managing debt, but borrowers still need to make sure their repayments fit in with the rest
of their budget.”

How to Deal with Loan Sharks

In these troubled financial times, you may be tempted to borrow money from a loan shark just to make it through to your next payday. Unfortunately, once you are involved with this type of loan, it can be very hard to get out of it. Loan sharks are notorious for adding to your principle for no reason; upping your interest and generally making it so you have no idea how much money you actually have to pay them to be done with them.

So, in the end of it all you will realise that all that you have went through was not worth the little amount of money that you needed. The good news is you do not have to handle the situation alone. There is a national hotline available for anyone who is in trouble with a loan shark. You can call 0300 555 2222 or text ‘loan shark’ and your message to 60003. Your call will be kept confidential. Remember, you are not in trouble with the law for borrowing money, but it is illegal for them to loan the money to you without a license from the Office of Fair Trade.

While you are not legally bound to repay any money you borrowed from a loan shark, you may find they are threatening you with physical harm. If you are being threatened or harassed in any way, it is important for you to not only report them to the Illegal Money Lending department and contact the police.

Any time you borrow money, be sure to get all the details in writing. If you are not sure, contact the consumer Credit Public Register to make sure they are licensed to loan money. If they are not, report them immediately. If they are licensed, you may still want to shop around. Be sure you are getting the best deal you can before borrowing money.

There are licensed agencies that will lend you money even if you have a poor credit rating or a low income. You will have to pay a higher interest rate than someone with good credit does, but you will be building your credit if you make your payments on time. In the long run, you will benefit from going through the steps instead of dealing with a loan shark. However, ultimately the decision remains up to you but these are just some words of wisdom.

Top Money Management Tools to Help Manage your Debt

Debt can be confusing. You borrow a certain amount of money, but then have to pay back much more. Interest may be calculated annually or monthly. In most loans, you are paying off any interest first, and then anything left comes off the principle. If you want to figure what the best way to pay off a debt is, or how long it will take you to pay of a credit card if you only pay the minimum payment, there are tools to help you. Below, you can find some of the different tools that are available which have proven to be rather useful to other individuals like yourself.

1. Credit Card Pay-Off Calculator - This tool will give you an amortization schedule. You can figure how long it will take you to pay off your card if you keep the same payment monthly. You can use this to see how much interest you can save if you pay just a bit more each month, taking it right from the balance due.

2. Citizens Advice Bureau - The CAB has people who will sit and help you with a number of problems. The can help you to sort out your debt and determine which needs to be paid urgently. You will learn how to talk to your creditors to have them lower your payments or interest.

3. Credit Consolidation Companies – These companies talk to your creditors for you, making arrangements for a lower pay –off by eliminating late fees and high interest charges. They will lump your debt into one loan and have you pay it off that way.

4. Personal Finance Software – If you can see exactly where your money is going, you can take charge of it. Often the problem lies with the little things we forget about. You may not realize how much you are spending on fast food because you only ever spend £1 at a time. Over the course of a month, it all adds up. Using software that tracks your every expense may be your first step towards financial stability.

5. Budgeting software - Once you understand how you spend your money, take charge and budget your spending. Be sure to stick to the budget by using a variety of limits and tracking to keep your spending in check.

Taking charge of your finances may hurt at the start, but in the end, you will be much better prepared for the little emergencies that crop up.

Reducing the costs associated with Payday loans

I would first like to caveat this article by saying that payday loans are a very expensive long term way to borrow money, but when used correctly can help get individuals out of difficult situations. We must realise that getting any form of credit or loan to pay off existing debt can in many cases increase the overall amount of debt that you have to your name. With this in mind, we need to be aware that sensible money management and planning is a better long term solution to financial hardship.

If you are in the unfortunate situation (like many of us here) of being short of money towards the end, then it is possible that you may need quick cash fix to tide you over until payday. The payday loans market has rapidly expanded over the last few years in response to the UK’s weak job market and overall impact of global financial crash, so there are a number of ways we can reduce the associated costs of using these kinds of services.

But what exactly are Payday loans?

Short term or ‘payday loans’ are commonly seen as short term loan that helps an individual keep above board until their next payday. Typcially these loans are granted on a repayment schedule or a few days to a few weeks. The interest rates (APR) are typically in the hundreds or commonly, thousands of percentage points which can be overseen by the short repayment periods.

Many payday loan companies do not require proof of income or similar such documentation which enables a large percentage of the UK population to get access to money, when they may be refused from typical lenders (such as high street banks and credit card companies). The payday loan industry is also considered a common source of lending for individuals with bad credit ratings (people that have had IVAs etc).

How can we reduce the costs associated with taking out such a loan?

The first tip would be to borrow no more than is required at any one time - if you need £50 to cover you until payday, dont borrow £75. This will reduce your overall repayments dramatically and will lower your dependence on this type of lending.

Also shop around for the best interest rate for the type of loan you want. The APR% does change dramatically from lender to lender, so do your research when looking to compare payday loans. You can look them up online at many of the bigger comparison sites and deal aggregator sites.

Also, do ensure you put all of your efforts into paying back the loan as soon as your salary comes in. This will ensure you arent faced with any repayment charges or additional interest.

Watch out for the pot holes!

We can often forget that your health can be an expensive thing to keep in check as i learned quite recently. Usually, we talk mainly about financial matters, tips and the like - but today we will be looking at compensation. Many people are unaware that if you suffer from an accident out in the public domain, for example in the highstreet then you can claim against the council or private party responsible for the accident if it can be proved that they were at fault.

I recently had a run in with a large pot hole, which cause serious damage to my bike. I usually bike to keep costs down, and it is also great for keeping my heart in check - i would recommend it to anyone…! However when i hit the pot hole i bent my wheel badly and came off my bike, hurting my arm when i landed on the road.

Accidents can be a pricey affair - especially if you dont consider a no win no fee personal injury company. There are lots of expenses, such as having to take time of work - medical care and medication for example. If you do have an accident, make sure you follow up any potential opportunities for compensation as there are a many laws that are out there to protect you. You can often employ solicitors that work for you for free, and will pay back any compensation should you win your case in court. Always worth considering if you want to be paid for any accidents that were caused by the wrong doings of others.

Councils are held responsible for poorly maintained public roads, which is why you can often put in a claim if you suffer injury as a result of potholes and the like..

Ill keep you posted on how my claim goes, but i hope i can be compensated ! Im not looking for a large lump sum, just enough to get my bike back on the road and some money to cover the inconvenience of a sprained wrist!

Goal Setting: The Key to a Successful Budget

The first thing you are told by most people is that to get your finances under control you need to draw up a budget that you will stick to. A budget is a critical tool to getting your finances under control but it is only a tool. If you don’t have a goal that drives you no matter how many budgets you draw up you will never stick to them.

If you are only drawing up a budget because you have a vague notion that you want to spend less than you earn, you may have fun creating it but as soon as you are finished it will slip to the back of your mind. However, if you have a driving need to pay off all your debts because you want to be free or you want to buy a home or to achieve any other goal that is extremely important to you then sticking to your budget will be incredibly easy.

So, the first step to getting your finances under control is finding that goal that drives you, that makes you want to push yourself further than you thought possible. And don’t just keep it in your head, write it down and put it in a place where you can see it every day. If it’s something you want to buy, such as a car or a home, then print a picture out and put it in a visible place as it will serve as a reminder and you won’t fall back into your previous habits of spending without thinking. Alternatively, buy 24 hour car insurance and take your dream motor out for a spin - it might help you appreciate the feeling you will get when you finally save up enough for your desired car.

Many people spend money to fill some emotional need, whether out of boredom, the need for variety in their lives or to even loneliness. The best way to overcome these issues is to have a goal, a higher purpose in life than just going down to the shops to buy something you don’t need. If you have a goal to buy a car then every time you walk into a shop you will question yourself ten times before buying something as you will be focusing on buying the car and every pound you save can get you closer to that goal.

Financial Freedom through Compound Interest

Becoming financially independent so that you only have to work if you want to is not such an impossible dream as you may think. Most people, though, think that they need much more money than they actually do to reach that stage of complete financial freedom and they feel overwhelmed so they do nothing about it.

So, what does financial freedom mean to you? If your housing costs, food and other essentials, cars and a little entertainment were covered for you each and every month for the rest of your life, would you not be financially independent? Most people don’t need millions of pounds to cover these costs therefore it isn’t such an unattainable goal.

The secret is spending less than you earn and investing those savings. Most people spend much more than they earn and this is how they end up in the never ending cycle of working to pay off things they have already bought which they may rarely use. The easiest way for most people to save money each month to put in an investment is to set a certain percentage of their income which is allotted to savings and then have it automatically deducted from their wages.

Once your savings are invested you will benefit from compound interest which is basically the equivalent of a snowball that rolls down a hill, picking up more snow as it goes. Essentially, if you invest £10 in February, in the first month you will earn interest on your tenner, but the following month you will be earning interest on your tenner plus the interest you earned the previous month. So, if you invest a small amount every month then you would be surprised how much you can earn over time.

For example, if you invest £50 every month for 20 years at an annual rate of 9%, which is extremely conservative, at the end of those 20 years your investment would be worth over £33,000. Essentially you have almost tripled your money because your total investment works out to £12,000. What if you could invest £100 every month? Or even more.

If you think it’s impossible to set aside even £50 a month you really need to draw up a budget and see where your money is going. You will often find that if you cut out a couple of pints each week you will save even more than £50. Isn’t your financial freedom worth it?

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