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Posts Tagged ‘Debt’

Majoring in Credit-Card Debt

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Many times when it is mentioned how much credit card debt college students carry, the credit card companies’ strategy is hardly examined beyond the fact they offer free goodies to get students to sign up. This article looks at how some companies are pursuing unethical tactics to get students cards, even when they don’t qualify. HEre’s an excerpt:

Ryan Rhoades, who graduated from the University of Pittsburgh last year with more than $13,000 of debt, remembers his credit-card company’s employees telling him not to worry about being unemployed. Lukasz Kozoil, formerly a student at DePaul University, says that Citibank’s representatives told him to fill in his tuition on a card application where it asked for income. (A spokesman for Citibank says, “no representative from Citi is authorized to fill in tuition cost on a credit-card application.”) Woodworth got his American Express card without a job, and it had a credit limit of $6,000. “Within three months, they upped it to $10,000,” he says.

Ryan Rhoades, who graduated from the University of Pittsburgh last year with more than $13,000 of debt, remembers his credit-card company’s employees telling him not to worry about being unemployed. Lukasz Kozoil, formerly a student at DePaul University, says that Citibank’s representatives told him to fill in his tuition on a card application where it asked for income. (A spokesman for Citibank says, “no representative from Citi is authorized to fill in tuition cost on a credit-card application.”) Woodworth got his American Express card without a job, and it had a credit limit of $6,000. “Within three months, they upped it to $10,000,” he says.

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Thanks to Slevinat Flickr for the photo!

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credit-cards.jpgIf you’re one of the 75% of college debts who have a credit card, you should at least give this article a look. It has three sections. The first is for those who have a card, but are not into heavy debt. The second deals with those already in debt and how to minimize the sting as you start paying the cards off. Some of the tips are basic (ex. ‘Pay more than the minimum balance’. The last section breaks down typical credit card terms and how to understand the contract that you signed with that credit card company.read more | digg storyThanks to Slevinat Flickr for the photo!

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your_image.jpgI’m thinking that many people share our goal to retire comfortably without taking a vow of poverty now. It’s definitely possible, but sacrifices will have to be made. There’s no free ride, it takes work. The trick is to decide what you’re willing to cut back on so you can save for the future. That’s for everyone to work out on an individual basis, but there are some universal concepts to follow.Here are the tips to use:

  • Attack your credit card debt. This debt is the worst to have, as they typical have high interest rates.
  • Live like college kids for a couple of more years. I’m not saying eat ramen and spaghetti everyday, but learn to live on a little. It does feel good to get a good paying job compared to your college jobs. Don’t spend your paychecks on getting new furniture and fancier clothes. Instead use your better paying paychecks for family savings and investing.
  • Put money into your retirement fund(s). Have it automatically taken out and you’ll never miss it. Ten percent is good, but if you’re limited on funds, at least go for what your employer matches. It’s basically free money. Starting early in your life is to your advantage since you’ll be utilizing compound interest.
  • Pay your bills on time and keep an eye on your credit scores. A huge part of your FICO score is determined by your payment history. Don’t be late and check your scores annually. When you two decide to buy a house, the diligence will pay off with lower interest rates and a lower mortgage.
  • Automate bills and paychecks. It’s one of the best things to do and will make your life so much easier. Our bills are usually consistent and we have it automated. If the amount is different for a particular month, it just takes less than 5 minutes to change that.
  • Have health insurance. It would be a shame to lose all the money you saved because a hospital visit sucked it all up. The reality is if you don’t have any insurance you’re charged even more.  I’m not saying health insurance covers all bills, but it reduces it but a huge amount.

Well, that’s about it. It’s not rocket science, but it’s not a walk in the park either. Managing your money is an ongoing process. It’s up to you to decide if you want to build wealth or fight to stay on top of bills.If you enjoyed this post and want more, please subscribe to my RSS feed!

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bills.jpgI’m late by a couple days, but between my finals and this horrible car situation, it couldn’t be helped. Good News: I didn’t spend money on eating out. Bad News: I spent more money then planned. 😦

Here’s what I budgeted:

Income 283.37

Expenses
Joint 160
Gasoline 40
Pet 15
Savings 20
Total : 230

Net Income 53.37

Here’s how I spent it (drum roll please):

Expenses
Joint 160
Gasoline 48.88
Pet Supplies 15
Savings 20
Total 243.88
Net Income 39.49

With only one car now, the gasoline budget will be increased for awhile. I’ll include that in the next budget.

Again,I want to thank Flexo and Krystal for this idea. I’m hoping it’ll help me become better with my finances.

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Bernanke: Just Say No To Lowering The Interest Rate

I’m sorry for the lack of original posts, but I have a final tomorrow. My priority is to get ready for the exam. Next weekend I’ll go ahead and write original posts like usual. I was reading an article in BusinessWeek on the Fed’s decision with the interest rate. It’s the same as before, 5.25%.

Here’s the quote that I found interesting in this article:

Nodding just slightly to concerns about a credit crunch, the committee said “credit conditions have become tighter for some households and businesses, and the housing correction is ongoing.” But it went on to say: “Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.” The committee even said it continues to regard inflation as a bigger risk than an economic slowdown.

Some people may think that in the wake of the increase in foreclosures this tactic is insane. The other side of the coin is :

Bernanke’s approach recognizes that the Fed can’t be all things to all people. If the Fed lowered rates to rescue subprime borrowers and their lenders, it would raise the risk of excessive borrowing and speculation in other sectors, possibly causing higher inflation and a stock bubble. Bernanke’s approach is being supported by many of his fellow academic economists.

Well, what do you guys think? Did the Fed make the right call? Please leave a comment.

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Update: Wise Bread has an excellent article going into more detail about the Fed’s purpose. Phillip Brewer gives his opinion on why there’s no need for a panic. Please go over and check it out.

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July 2007 Budget

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It’s August 1 and I have only 3 weeks before I start my final semester. Yea! It’s also time to put up my monthly review. It was painful to look at this month, but sometimes you have to just stare the monster down.

July 2007

Income  
 1046.82 
  
Expenses
Bank Fees         29.75 
Car                    235 
Household         54.31 
Joint                 360 
Pet                         7.09 
Transcript          20 
7-11                    57.63 
Savings              40 
Doctor                75 
Gasoline          114.49 
Credit Card      25.9 
                         1019.17 
 

Ok,  let’s review the month piece by piece.

Bank Fees: My credit Union charges 75 cents for every debit transaction that I use.  That’s very frustrating.  I bounced a check (forgot about the 75 cent charges) and that dinged me really bad.

Household: Just the basics of cleaning supplies and what not. I expect this to be smaller next month.

Joint: We have individual account and then we have our ‘family’ bills like rent, groceries, etc. We calculated the amount as based on how many hours we work, we put a percentage into the joint account.

Pet: My cat needs to eat.

Transcript: My university was missing some test scores that I need to graduate, so I went ahead and paid for the transcript.

7-11: A load of unecessary stuff like coffee, snacks, and magazines. I’m most upset with myself on this expense.

Credit Card: Iam happy with the account becaus ethat means that my balance on that is still $0.

 

Summary: If I cut out 7-11 and just use credit on my credit union card, then I would’ve had $87.38 more to keep in my checking account.

Goals for August:

1. Stop buying magazines from stores. Just read it online.

2. Use my credit union card wisely. I’ll keep better track of my finances, so I would need to use the debit feature.

3. Drink the coffee in the breakroom. Sure it doesn’t have the international flavors, but it’s free.

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  I decided to use Money’s Debt Planner tool to see how long it would take to pay off two debts:

  • My car loan has a balance of $ 6250 and has an interest rate of 13.75%.
  • Medical bills that were supposed to be covered by insurance (long story) but now are $350 with a 20% interest rate.

I looked at all three of their options: pay by a certain date, pay a set amount per month, and pay the minimum balances.

Here are the results I got for paying it off in 2 years:

If you pay $309.40 a month, it will take you 2 years to pay off your credit cards.
Based on your current combined balance of $6,550.00, you will pay a total of $895.51 in interest.

Here are the results of the $350/month plan:

If you pay $350.00 a month, it will take you 1 year and 9 months to pay off your credit cards.
Based on your current combined balance of $6,550.00, you will pay a total of $771.88 in interest.

Finally, here are the results if I only pay the minimum balances:

By making minimum payments only, it will take you 10 years and 3 months to pay off your credit cards.
Based on your current combined balance of $6,550.00, you will pay a total of $2,504.66 in interest.

Just looking at that I realize that I have got to be more aggressive about paying these off as soon as possible. Try using that calculator and notice the huge difference between the payment plans for yourself.

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