Blogging Away Debt

Two Ideas for Your Credit Card Debt Reduction Plan

This guest article comes from Mr Credit Card who has a blog all about credit cards at Ask Mr Credit Card. If you like this article, you may want to check out his article on credit card debt reduction basics or his article on 0% Apr Balance Transfer Credit Cards.

I find that when you are attempting to reduce your credit card debt, there are two areas that you have to work on. I would assume that you will be working on your budget already. But two things that you have to focus on is to firstly, reduce your interest payments. Secondly, you have to ensure that you are doing everything to improve your credit score because improving your score allows you to borrow at much lower rates in the future and it also allows you to realistically consider refinancing some of your debt.

Lowering your interest payments

There are several things you can do to lower your interest payments. The first thing to do is to call your credit card company and simply ask them to lower your payments. You will have a much stronger bargaining position if you have always paid your bills on time and have a credit score that is improving. See Tricia’s article on How I reduced my credit card interest rate.

Consider getting a 0% balance credit card to reduce your monthly credit card interest payments. Get a card with a 12 month introductory period and make sure there is no balance transfer fee. The better your credit score, the larger credit limit you will get.

If you have a decent credit, you may want to consider getting a cash rebate credit card. These cards allow you to earn rebates for every dollar you spend on the card. Typically, you earn 1% cash rebates for every dollar you spend. Some cards will pay you slightly higher than 1% when you use the card on certain items like gasoline purchases etc. Though you will get the most benefit if you pay in full (PIF), earning some cash rebates will help in reducing your credit card payment. To ensure that you use the rebates to reduce your credit debt rather than spend it on something else, get a card that use your rebates to automtically credit and reduce your next monthly statement, rather than one that sends you a cheque.

Improve your credit score and Pay on Time

Aside from trying to lower your interest payments, you should also work on improving your credit score. The reason is the better your credit score, the better chances you have of getting a higher credit lines for your next 0% apr credit card application or your next auto loan.

Firsly, have a systematic plan in place to reduce your credit card debt one at a time. Stick to your plan and over time, your credit score will improve because your debt to credit limit ratio will improve.

You must also have a system in place to ensure you pay your bills on time. The last thing you want is to have a late payment which results in your creditor reporting to the credit bureaus. When that happens, credit cards will invoke the universal default clause and increase your rates even though you have paid on time for that particular card. Any 0% deal you have will disappear as well.

One of the things you can do is to set up automatic payments through your bank account. That way, you will not forget and your payments will always be on time. However, if you do not have a lot of emergency funds, this may not be viable. Instead, make sure you check your mailbox for your bills. Set up an online login and password for each card company and choose to get email alerts for your bills. Mark your calender to check for these emails and bills every month. Even if you do not choose to enroll in automatic payment, try to pay as much of your bills online via your bank. Using snail mail can be tricky if your credit card issuers payment center is far from you and it takes a few days to reach them. Some issuers also do not accept online payments. Be very careful and send your payments way in advance.

Be very careful should you change your address. Credit card issuers do not have bulletproof systems to ensure that your bill will be sent to your new address. I have known people who moved, changed their address by informing the operator, but somehow their bills did not get delivered to their new address and it resulted in late payments (This is another reason why email alerts and having online access is so important).

Aside from this, find out how late can you do for different creditors before they report to credit bureaus. You will need this information because there will be times when you have a cash crunch (see Tricia’s post on This would be an argument for an emergency fund. With this imformation in hand, you can at least juggle your payments should you face any near term cash flow problems.

I hope you will find these ideas helpful.

Thanks Mr Credit Card for the article! 🙂

Zen and the Art of Financial Prudence

by Tricia

This guest article is from Golbguru over at Money, Matter and More Musings. Over there, you’ll find some thought provoking writing, such as this post about if it’s easier to be frugal when you are single. So far, it has 17 comments and I’m sure it will get more. Feel free to head over there and give your two cents.

It’s one of those “deep-thought” days when I switch myself into a philosophical mode. Sometimes, this results in some extreme contemplation about the things I have been generally doing in my life. Today it was all about financial contemplation. The choice of the title is obviously inspired by the book “Zen and The Art of Motorcycle Maintenance” by Robert Pirsig. In the following, the words I, you, we, and they are all synonymous [come on, it’s about the Zen, what are you expecting 🙂 ]

Before I start my rant, let me give you a very brief summary of what is the concept of Zen. It essentially means going back to the basic fundamentals, starting from zero, and building your way up (Robert Pirsig’s Zen, not the original Zen). This much knowledge is sufficient for the purpose of this article. If you want to read more about this concept click here and here.

Your financial life is a big machine with a lot of odds and ends thrown into it. To maintain this beast, you require some kind of financial prudence. Now, if there is a problem with this machine, the *Zen* way is to start looking at some fundamental issues. To do that, you have to take it apart and try to put it back together. In doing so, you will realize the significance of each component. This is exactly what I will attempt to do in the following.

I have listed some potential fundamental roadblocks that defeat financial prudence. Along each factor, there is a short line of description that sort of adds financial relevance (it’s deep…you could apply this to many other issues in life). Please note that these are from my personal experiences. I will encourage readers to find some peaceful time and do this exercise for themselves at least once.

Greed: This is foremost cause of most financial troubles. We want more, and we just don’t want to stop.
Lack of self-control: Sometimes we acknowledge our greed, but we just can’t stop spending any how. Credit cards don’t swipe themselves, we swipe them.
Lack of foresight: Greed also blinds our foresight. We buy stuff, but we simply fail to estimate how much it is going to cost us in the long run.
Underestimation of consequences: Sometimes, we have all of the above, but we grossly underestimate the financial repercussions of our decisions. You can also term this as too much optimism or lack of judgement.
Ignorance: Ok, people don’t like to acknowledge this, but this is true. How many of us really know how credit card payments are calculated? Whether your card is a charge card or a credit card? Whether not paying telephone bills affect your credit score? What is the grace period on your credit cards?
Inability to recognize a problem: Sometimes we don’t realize that we have a problem. At times we don’t recognize the *right* problem. If you earn $120K a year and still live paycheck-to-paycheck, low income is not your problem, it is something else.
Inability to learn from previous mistakes: Ok we made that late payment once and paid for it with heavy fines and increased APR. What did we do about it? did we make changes to the way we do things to avoid making the same mistake again?
Lack of organization: Oh ! I forgot to make the minimum payment. Oh ! forgot to mail in the rebate. Oh! I thought this due date was for the other card that I have.
Sheer laziness: Ah!..what’s the hurry, I will do it later. 🙂 I have seen countless people not willing to check out more than one store for some of their large purchases…the reason: “I am bored already”
Overconfidence: This is really dangerous when coupled with ignorance. Leads to situations like “I can make this mess and then I will easily bluff my way out of it”
Circumstances: This one is tricky. There are two types of circumstances. Type 1: self-inflicted; these are due to some or all of the above reasons. Type 2: sheer bad luck; these are just out of your control: medical expenses, car trouble, job loss, etc.,

Except “Type 2” circumstances, there is a scope for improvement in all of the above. We just need to look into ourselves before pointing fingers for our financial mess. Once you do that, you will be an expert in the art of financial prudence, and hopefully stay out of trouble for a long time to come. This is more philosophy than practicality, but you can give it a try..it may work for some of you.

Thanks Golbguru for the article! 🙂