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Falling Behind On Student Loans

By: Christina
12/11/2008

One of our readers, Richie, had this question for us:

Hi,
I really need good advice about my private student loan. Sallie Mae has increased my monthly payment so much that i cant pay it.

I have missed about 3 or 4 payments now, I’m behind. My loan payment i was told, was going to be about $282 before i took the loan, and when i got my payment schedule it was about $309 then it went to $332 then $360.

My balance was around $25,000 , now its $31,000 and i have been paying it for about 2 years.. I don’t understand why am i paying $300 plus only to see my balance go up $5000. I stopped paying. Someone said if i continue to pay then they wont help lower it, if i don’t pay they will work with me.

However my main question is , how does this affect my dad who cosigned? I mean how bad can this one account hurt his credit, if it is perfect otherwise ? will it kill him ? or will he be ok to still borrow money ? I don’t care what happens to my credit right now, but his I do ? and since this is not a gov’t student loan, what happens if i never pay them ?

Thank you so much for your time I greatly appreciate your help.

Richie C

Thanks for your question Richie.

Let’s start with the question about your father’s credit rating. Since he is a co-signer his credit will be affected just like yours if you do not pay. Even if his credit is perfect otherwise your student loan will do enough damage to completely ruin his credit for a long time.

What’s even worse is that if you never pay, they will come after him for the full amount of your loan. Co-signers are legally responsible for the debt just like you are. For more information on that you can check out our article on “How Does Co-Signing A Loan Affect Your Credit?“.

As for the question about private vs. government student loans – the only time it matters is if you declare bankruptcy. Private student loans can sometimes be included in a bankruptcy, while government student loans (or any money that you owe the government for that matter) can not.

So, the only real option if you don’t want this to hurt your dad’s credit rating is to work something out with Sallie Mae.

You should treat this just like negotiating with your credit card companies. Go ahead and give them a call – but follow these steps when you do:

Step 1: Speak with someone in the collections department.

If you are getting phone calls from Sallie Mae asking about your bill, then you are already speaking to the collections department. If you call them to arrange payments, make sure you ask to speak to someone in collections.

Collection reps (or anyone trained to handle a past due account) are going to have the most leeway when it comes to negotiations.


Step 2: Ask them why the total amount of your debt increased from $25,000 to $31,000.

If there were fees added, you need to know. If they changed the interest rate on your loan, you need to know!


Step 3: Ask them to remove the fees

You may need to speak with a manager. If the representative you talk to won’t help you, hang up and call back!

Make sure that you get any late fees, or other penalties off of your total balance. It doesn’t hurt to tell them that you are willing to make a payment that day if they will negotiate with you.


Step 4: Reach an agreement and negotiate a payment schedule

When you do get all of your penalties removed, and you set up a new payment schedule, make sure that you stick to the schedule that you set. Otherwise, the fees will get added back on, and you will be right back where you started.

Also, make sure you check out these options for deferring student loan payments. (From Sallie Mae’s site).

Richie, please come back and let us know how this goes. If you have any other question I’ll be happy to answer them.

Thanks,
Mr. CC



We also had another reader, Fran, who had this question:

I’m looking for a birthday invitations that look like a credit card. wondering if you could help me find some?

Hi Fran, thanks for your question!

I looked around a bit online, and couldn’t find anything like what you requested. So, my best advice would be to create an account with Dreamstime.com (A legitimate site that sells photos – we use things from them on this blog occasionally). Find a credit card photo that you like, and the image. (Anywhere from $1 to $5).

Then, visit Shutterfly.com where you can upload the image and create your own birthday invitations. They will mail them right to your door, and shipping is cheap.

Alternately, you could check out the deal Kodak has going on, you may be able to have them printed even cheaper.

It’s a really great idea, I hope this helps!

Thanks,
Mr. CC

Have a question for us? Leave a comment below!

How To Get A Car Loan After Bankruptcy

By: Christina
12/10/2008

Getting a car loan after bankruptcy is easier than you think. I started getting offers for car loans even before my bankruptcy was discharged. Not all loans are good deals though, and who you borrow from does matter. So, let’s take a look at the best way to get an auto loan after bankruptcy.

Why you might want an auto loan after bankruptcy:

Getting a car loan right after your bankruptcy does have some advantages. The biggest advantage is because it will help to repair your credit score from the damage the bankruptcy caused. Having a record of regular, on-time payments to a bank or car lot will raise your credit score over time. Also, auto loans are considered part of the “good mix of credit” that your future lenders will want to see.

So, all the way around, if you can reliably make the payments, getting an auto loan is one of the best things that you can do to repair your credit after your bankruptcy. It’s a personal decision though, and it depends on where you are with your finances – make sure you are ready for that payment!

When we had to replace our car after bankruptcy, I ended up choosing not to get an auto loan because I wanted to save the money instead of making a car payment.

Yes! I want to finance a car, what do I do?

Here’s the short and sweet step-by-step guide to financing a car after bankruptcy.

Step 1: Check your credit score.

You need to know your credit score before you ever walk on to a car lot. There are plenty of unscrupulous car dealers, and some of them will actually try to convince you that your credit score is lower than it is! That means that you will only get financing at the highest interest rate possible, and that will cost you far more money over the life of your loan.

So, visit My FICO and pay to see your credit scores. You can also get current copies of all of your credit reports for free at Annual Credit Report.com. If you do those two things, you will know exactly where you are starting out, and that will help you determine what interest rates you should be able to finance a car at.

Step 2: If you have time, clean up your credit report.

With this step, I want to stress the “If you have time”. It can take a couple of months to challenge items on your credit report and get them removed. Also, if you challenge too many things at once your credit score will be frozen, and you won’t be able to borrow money at all until your disputes are resolved.

If you have two or three months before you know you need to finance a car, then challenging items on your credit report is a wonderful thing to do. In nearly every case, it will raise your credit score – which means that you will get an even better interest rate when you finance.

We have a free step-by-step guide to disputing items on your credit report. It walks you through the dispute process, and gives a sample letter of dispute. If you have the time to do this step, definitely take the time to do it. It could save you thousands of dollars over the life of your car loan.

Step Three: Who you borrow from matters!

If you have declared bankruptcy, you are definitely going to get financing offers. One of our readers, , suggested keeping a folder of your offers so that you can compare them all when you get ready to finance a car.

Keep in mind though, that who you borrow from really does matter. If you can finance a car from a major dealer (Ford, Toyota, Kia, etc.) it is going to look a whole lot better to your future lenders than Bob’s -here-pay-here lot.

It’s very normal to feel like you have no options after bankruptcy, and to think that you have to go to one of those sub prime lots. The truth is, you may have to – but don’t start there. Start with the major dealerships first because they do sometimes finance people with bankruptcy. The trick is to investigate the dealership first.

Step 4: Investigate car dealerships in your area.

Do NOT fill out online applications. If you do, the dealership will run your credit report, pull your credit scores, and may not even call you back. When they run your credit report it will count as an inquiry and it will lower your credit score. Then when you go onto the lot, they will run your credit report again. It’s just a useless inquiry – so skip that step! Instead, pick up the phone and give them a call. Ask them point blank if they offer financing to people who have declared bankruptcy.

Personally, I would call every major dealership in your area, speak to a financing officer and give them the following information:

  1. Your current credit score
  2. The amount of your down payment
  3. Ask them about financing after bankruptcy.
  4. What do I need to bring with me when I come in for financing?

Then before you hang up, there is one more very important thing to ask. If they do not sound like they are going to be able to finance you, or they hem and haw around, ask them these questions:

What do you think I should do? Who should I try to finance through? Where is the best place for me to go? Do you know of any car dealerships that would be willing to work with me?

This will help you explore your options a little.

Step 5: Choose a dealership, and get your paperwork together

Make an appointment with the dealership that you like best, and make sure that you take the following things with you:

1) A current copy of your credit reports. Yes, I know that the dealership will pull your credit reports no matter what. However, taking in a current copy shows that you are serious about your credit, and it may discourage them from trying to cheat you – especially at a less reputable car lot.

2) Proof of income – The one thing that everyone is going to want to know after you have declared bankruptcy is “Do you have a job?” So make sure that you take in six months to a years worth of paycheck stubs.

3) Proof of a checking and savings account – This just shows that you are prepared, and legitimate. It’s a stretch to get anyone to lend you money after bankruptcy. The more prepared you can be, the easier it will be to get financing.

4) If you are trading in a car, make sure you have the title and tags current, as well as current car insurance.

5) Bring in anything else the dealership said they needed when you spoke to them on the phone.

Step 6: On the lot

When you first step on to the car lot, you can pretty much forget about looking at the cars! I know, that’s harsh, but it’s true. Because you’ve declared bankruptcy, you are going to want to do things the other way around. Get financed, then choose a car.

When you first walk onto the lot you have no idea if you can get any sort of financing, so figure that part out first before you get attached to a car that you can’t get a loan for.

So, walk straight into the main office and request to meet with a loan officer. Ask them what they think your best option is. Should you finance a new car? A used one? Should you lease? Get their opinion on it. It doesn’t mean you should completely change your plans around based off of their opinion, but it does mean that they may be able to finance you under better terms if you consider some alternate options.

The loan officer will walk you through the application process. Just be as honest as you can. You’ve come in prepared, and done your research, so you have nothing to worry about!

If you’ve chosen your lot well, I have no doubt that you will be able to get financing on a vehicle. However, in the unlikely event that you can’t, just move on to the next lot on your list.

As long as you shop for a car within a one month period, the repeated credit inquiries are not supposed to hurt your credit score too badly if you have to go several different places.

Mostly I would just encourage you to relax, and have confidence that you can get financed at a major dealership, under slightly higher than normal interest rates (Instead of sky-high sub-prime interest rates).

Just take the time to get prepared, and ask questions. It really is easier than you think!

Before I bought my last car used, I took these same steps, and I found two major dealerships willing to help me finance a car. So, it’s definitely possible, and you can do it too!

Don’t forget that you can pick up our free RSS feed. You can also discuss your financing experience in our forums.

Have a question? Leave me a comment below!

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Should You Pay Your Credit Card Bill Late? The Answer May Surprise You

By: Brooke Kaelin
12/09/2008

One of our readers, Jay, sent us this question about debt negotiation:

My wife and I earn $145,000 per year combined but have over $600,000 in debt. This includes over $308,000 in mortgage loans for rental properties, over $170,000 in student loans, over $8000 in 401(k) loans, over $18,000 in car loans, and over $93,000 in credit card debt.

Although our debt is exorbitant, we have been making real progress towards paying off debt (over $15,000 in the last 6 months). We have never been late on any payments, and aside from a high-interest credit card that will soon be paid off, our interest rates are pretty manageable.

After reading this article, I am considering a new strategy for paying off debt. When I am ready to pay off the full balance on a card, I would like to hold payment for 2-3 weeks (just before the 30-day past due note would be made on my credit report). Then, I want to negotiate a full payoff at a reduced amount. I would like to do this in a way where a certain percentage of the interest charges are removed from the account retroactively instead of the debt being “forgiven” so that there are no tax consequences or necessary notations on my credit report aside from “Paid as Agreed”. Do you think this is the best strategy?

Thank you for your question Jay! You are certainly being intelligent about your debt, and I am really glad to see that because it means that you will be successful in your negotiations – as long as you are persistent.

I think you have a couple of strategies available to you actually.

Since you are current on your bills, and you want to negotiate your interest rate retroactively (which is an excellent idea because otherwise you will owe taxes on the “forgiven” debt) you might be able to do it while you are current.

Negotiating your debt while you are current won’t be easy to do, but it is the best way to protect your credit score. The truth is, it is always easier to negotiate with the collections department – this is one reason that credit counseling agencies typically hold your payments until you are past due.

However, since you’re handling your debt yourself, you should really go ahead and give your credit card company a call while you are current. Typical customer service reps may not be able to help you do what you want to do, so you will definitely have to talk to a manager.

Really the key, the entire key to negotiating with credit card companies is to be polite, and persistent. Never forget that it is your money! So no matter how many people you have to deal with, or how often you have to hang up and call back, if you don’t give up you will be successful.

Beginning your debt negotiations:

You do have some leverage because you are a good customer and (I am assuming) do not have a history of past due payments or over the limit charges. Go ahead and call each of your credit card companies when you are ready to pay the bill in full. Tell them that you would like to do a full settlement if they are willing to retroactively reduce the interest on your credit card, and see what they say.

If you are told at least three times by three different customer service managers that there is no way they can retroactively reduce your interest rates, then it would be smart to go slightly past due and deal with the collections department.

Collections reps (and especially collections managers) have authority that the regular customer service reps do not. They are the ones who typically remove late fees, renegotiate interest rates, and actually help you get where you are going.

The reason I am advising you to begin your negotiations earlier, rather than later is simple: You are going to want to get everything in writing if at all possible. It may work out perfectly…you may be able to call your customer service departments, have them renegotiate the interest, and make a payment that day. Most likely though, it’s going to be a slow, drawn out process that involves a lot of phone calls, management approval, faxing, and certified letters.

Getting things in writing covers your bases. You don’t want the credit card company coming back later and billing you for the difference because there was no written agreement, and you don’t want to end up getting taxed on the adjusted debt.

You also don’t want your account closed unless it has to be (which sometimes happens when you negotiate, so be careful). Make sure that keeping your account open is a part of the deal and don’t make a payment until both you, and your credit card company have written copies of any agreement.

If you wait until you are three weeks past due to begin your negotiations, then it is entirely possible that you will end up having a late payment record on your credit report. You can certainly challenge it later – so you have options there too, but it’s best to avoid it if you can.

Start early, and be the pain in your credit card company’s rear end that won’t go away. You’ll get your debt resolved! Use going past due as an “ace in the hole” plan, and not your first resort. It is easier to negotiate with the collections department, so if you get nowhere with customer service, it makes sense to try that approach. I just wouldn’t use it as your first approach because it can damage your credit.

In the event that you do end up with a late mark on your credit report, you can use our step – by – step walkthrough for challenging items on your credit report.

Also, in your situation, I would definitely advise picking up a copy of The Guerrilla Guide To Credit Repair – you can get it from your library, or order it used off of Amazon. It has a ton of short sample negotiation letters in it and does an excellent job of explaining the process. In my opinion, it’s the only book you really need to negotiate your debt, and clean up your credit report after the negotiations.

Please feel free to come back, and let us know how things go? If you have any other questions, or run into problems as you negotiate, we are happy to help.

Thanks,
Mr. CC

Have a question for us? Leave a comment below!

If you are negotiating your debt, you can always ask us a question, or discuss your negotiations in the forums.

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How To Guide For Your First Free Flight

By: Jason Steele
12/08/2008

Thank goodness for family. Once word got out that I was the reward credit card guru, I have been getting some great questions from them.

How To Snag That First Flight

The latest question comes from my brother in law. A couple years ago, he started a consulting job that has him flying to a different destination every other week. At my suggestion, he wisely signed up for a reward credit card from the airline he flies the most, United. While regular readers know of my intense dislike of everything United, this really was the only choice for him. Almost all of his travel is from Colorado to small cities in neighboring states, many of which have little other service from Denver. While both Frontier and Southwest have hubs in Denver, neither will earn him mileage towards and overseas award ticket.

Where To Start

That said, I cautioned him that there are some very significant problems with United and their Mileage Plus program. For one, United doesn’t even fly to his destination in the middle east. I explained to him that United is the member of the Star Alliance, a one of three major global airline alliances. He would seemingly be in luck that United does not serve his destination, as their service stinks, and he can get there by several other Star Alliance partners. By far the best connection and service out of Denver would be with Lufthansa.

Nothing Is As Simple As It Seems

The problem with getting a partner award with United, is a little thing known as Starnet blocking. It turns out that United cares so little about it’s customers, that it actively blocks them from claiming award seats available on its partners via it’s reservations program, StarNet. Like the evil computer system SkyNet, Starnet is intent on destroying your dreams of a partner award ticket. (Interestingly, it seems United’s employee intranet is actually named SkyNet! Coincidence?) For example, an award seat on Lufthansa might be available to members of every other Star Alliance partner, such as US Airways, yet calling United only results in frustration. Think of it like Santa tackling you when you try to open your presents.

The only way I know to get around Starnet blocking is by being very flexible and booking your ticket way in advance, preferably when they are entered into their computer system 11 months before the travel date.

Why Bother With United?

Since he signed up for the Chase United Gold Card, he received a generous sign up bonus, and started charging his travel to that card. He now has 50,000 miles in United’s MileagePlus program. The award seat he wants, an economy class ticket to the middle east, is a mere 75,000 miles. Once I heard that, I realized it would be rather pointless to start accruing miles into another system, especially since he will have almost no opportunity to travel with another international carrier.

With 50,000 MileagePlus miles already, I quickly realized that he could also get the United Mileage Plus business card, which has a sign up bonus of 21,000 miles. He would be very close in no time. Unfortunately, he would prefer not to get an additional credit card at this time.

Plan B

I then told him he needs to focus on accumulating as much mileage as possible on every business trip. Start by visiting United’s Mileage Plus partner page. I recommended that he go through each one and figure out if any of their services can be used on each trip. Make sure to work in the Mileage Plus Dining program to each of your meals. You have to eat somewhere, you might as well earn mileage. It is also important to regularly look at any major promotions. Be sure to sign up for the promotion and to confirm your registration, otherwise it doesn’t count.

Getting That Ticket

As he is approaching the magical 75,000 mile mark necessary for his award, he should start looking into flights. Unfortunately, he will have to call United in order to book an international partner flight. He should start by asking specifically for the flights he wants by number. With United, their reservations agents can be a mixed bag. I often hear misleading and contradictory information, especially from their poorly trained representatives at their overseas call centers. If they won’t help you, simply hang up and try again. Often, you know that they are not helping you when you ask a complicated question, and they instantly give you a simple answer. Are there any flight awards available for return in the month of October or November on any other Star Alliance carriers, No. I learned that if they claim to actually be looking for an award seat for less than two seconds, they really just want you to get off of the phone. That is the time to either hang up or ask for a supervisor. They have a terrible system, but none of that matters when you are getting a free ticket to the other side of the world an a quality carrier, one other than United.

How to Get Credit After Bankruptcy

By: Christina

Getting credit after bankruptcy is easier than you think. This series of article will tell you exactly what you need to do to get back on your feet after a bankruptcy – without paying the high fees you might expect, or having to struggle to get credit.

Did you miss part 1? Check it out here: Credit After Bankruptcy – How to Get Credit and Manage New Credit Accounts

Once you know that you are ready to begin applying for credit after bankruptcy, you probably have tons of question. Which are the best credit cards to get? Which types of credit will help you rebuild your credit score the fastest? Can you still get a car or a home loan after bankruptcy?

You will most likely not qualify for a home loan, or a car loan (at a decent interest rate) until a couple of years after your bankruptcy. The very best thing that you can do is to start with the steps below.

Step 1: Get a Secured Credit Card

A secured credit card should definitely be your first credit application after bankruptcy, for a number of reasons:

So, whenever possible, make getting a secured credit card the first thing you do after your bankruptcy. You can put in a credit application on the day that your bankruptcy is discharged if you want to, you don’t have to wait. If you want to know more about secured credit cards, and read our reviews, check out our secured credit card page.

If you don’t have a large amount of money to put up as a deposit on a secured credit card, you can also check out prepaid credit cards. They are a little more flexible, and you can pay a small fee monthly for them to report your information to the credit bureaus, so they can still help to raise your credit score.

Step Two: Use a CD to secure a personal loan from your bank

Basically you are going to want to use a Certificate of Deposit as collateral for a personal loan at your bank. Then, you take the loan money, put it into your savings account (do not spend it!) and make your payments on time each month. This gives you a record of a personal loan on your credit report, and also shows your on-time payments.

In order to repair your credit score quickly you have to have loans of different types – not just credit cards. This step is especially important if you are not already making a house or a car payment. If you do have a mortgage or auto payment, this step is still a good idea because it gives you one more monthly record of an on-time payment. That is what is going to raise your credit score!

We have full step-by-step instructions for how to do this in our article : Credit Repair Tricks: Using CD’s and Personal Loans to Raise Your Credit Score
There is a downloadable walkthrough at the end of the article, so if you want you can print it out, and use it as a guide.

Step 3: Get an Unsecured Credit Card

If you use a couple of secured credit cards for about a year, and you get a personal loan from your bank you are going to be in a good position to start applying for unsecured credit cards in about a year.

If you do not want to wait to apply for an unsecured credit card, you can always apply for a sub-prime (“bad credit” credit card) any time you want. However, be aware that the fees can be pretty high, so research your cards well before applying.

If you take the two steps above, and you make all of your payments on time for about a year, you should qualify for a regular (not sub prime) credit card. Be sure that you check your credit scores before applying for anything though, so that you do not get rejected if your credit score is still too low. Ideally, you are going to want to see a credit score very close to, or above 600 before trying to apply for a regular unsecured credit card.

The easiest types of unsecured credit cards to get approved for are actually department store credit cards. After my own bankruptcy Target was the first place to issue me a regular credit card. a couple of warnings though:

Step 4: Get a Regular Visa or MasterCard –

There are three excellent credit cards out there designed specifically for people with improving credit. When you are approaching a credit score of around 650, you might want to consider applying for one of these cards. You can read detailed reviews of each of those three cards on our Fair Credit Credit Cards page.

Just remember that as you take these steps there are two important things that you must do each and every month.

Part three of this series will talk about how to get a car loan after bankruptcy, and part four will discuss getting a home loan after bankruptcy.

You are also invited to check out our forums, where you can discuss the bankruptcy and credit-building process with other readers who are doing it too.

See you soon!

Have a question for us? Leave a comment below!

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The 9 Steps to Financial Freedom by Suze Orman Part 3

By: Connie Brooks
12/07/2008

This is a continuation of a four part series reviewing The 9 Steps to Financial Freedom by Suze Orman. If you missed the first parts, you can view them here:

Step 5: Being Respectful of Yourself and Your Money

Well, the first sentence of this chapter had me cracking up, and I completely disagree. BUT, the financial law Orman states below is still sound. Here’s the excerpt:

Money is a living entity and it responds to energy exactly the same way you do. It is drawn to those who welcome it, those who respect it. Wouldn’t you rather be with people who respect you and who don’t want you to be something you’re not? Your money feels the same way.

So, uh, yes Mr. Orman….I want my money to be exactly what it is: a financial tool and a vehicle to get me where I am going. I do not want it to be a personification of my great auntie. I did enjoy the financial law that immediately followed this sentence.

The Second Law of Financial Freedom:
Respect Attracts Money, Disrespect Repels Money

Orman goes on to use this as proof of the “Rich get richer” theory. Personally I believe the rich get richer because they constantly take time to educate themselves about their money and investments, they spend the necessary time to manage that money, and they are smart enough to hire other people to manage specific areas of their finances when they need to. They also regularly save, invest, and spend less than they earn. Summing that up by saying “respect money” leaves a lot to be desired, but I do think it is essentially correct.

Next, Orman asks a series of questions designed to get you thinking about ways that you are respectful and disrespectful towards your money. Things like:

If I were to answer honestly, there are a few things on that list that are bad habits of mine. Things like spending too much on my friends and my child – I am definitely guilty of that. I do put away money for retirement, but I have not yet managed to max my contributions in any given year – that is my goal for 2009. One of my goals this year was to stop eating out so much, and I have accomplished that.

We are all works in progress – my issues may not be your issues, but I do think that The 9 Steps to Financial Freedom does a great job of highlighting the most common issues and shedding some light on the psychology behind them.

Orman goes on to explain one of the most important financial principles : Pay yourself first. As she puts it:

It is not respectful to yourself, to others, or to your money not to take full advantage of the 401(k)’s, IRA’s, or the other retirement plans that are available to you.

It is not respectful to yourself, to others, or to your money not to face your debt, learn the basics of investing, and to guard over your money, making sure that every penny you’re spending is a penny that must be spent.

We all think that a bigger paycheck would be the answer to our financial woes, but that is rarely the case. Respect starts with the money you are earning right now, and what you do with it.

Orman goes on to give an excellent rundown of the traditional retirement vehicles, (IRA’s 401(k)’s and the tax advantages of these. She also spends some time talking about retirement vehicles for the self employed, which I was very impressed with. That’s not something always you see covered in traditional retirement books, much less basic financial management books. If you are new to the topic of retirement then The 9 Steps to Financial Freedom is a good book to start with. It won’t bog you down but pretty much everything you need to know to get started is covered throughout the book.

Orman also has an excellent section on how credit card companies work. If you regularly carry a balance on your credit cards, then this section will be a real eye opener. Let’s take a look at some of the high points.

Orman uses a case study to highlight some of the following issues:

There is another truly excellent quote here that I wanted to pull out for you:

If you spend just a few minutes working on your debt as hard as you work at your job you will at least create intelligent debt – debt at the lowest possible cost.

That is a brilliant, brilliant quote. Generally you prosper in direct relation to the amount of time an energy you devote to a topic. If you spend your time and energy taking care of your debt, it will decrease, and you will become wealthier. If you ignore your debt, and let fear or resistance be your guide, you will only get poorer with time.

If you are carrying large amounts of debt on your credit cards, Orman also discusses the pros and cons of Home Equity Loans vs. borrowing from your 401(k). This is a realistic discussion too! Most books just tell you that you should pay down your credit card debt (yeah you know, right?), but they don’t discuss the nuts and bolts of actually doing that. One more point in favor of this book in my opinion.

The last bit of excellent financial advice in this chapter I really loved. Orman advises not getting a tax return at the end of the year. She puts it very well when she says:

Would you lend me, every year for the next thirty years, a few thousand bucks interest free?

Well, then why would you make that loan interest free to the IRS?

Orman’s basic point is that you could have begun investing the money months before and been earning interest on it ever since. I know I generally look forward to getting that money back when it happens, but that statement right there really got to me, and I am going to rethink my own finances, especially where taxes are concerned!

Step 6: Trusting Yourself More Than You Trust Others

Orman actually gives her own case study here, and I loved reading it. Basically, she highlights her time as a stock broker. She was trained to sell stock to people, and did things like using affirmative questions. She would call her clients, and suggest a stock. Instead of asking them if they wanted the stock, she would ask them how many shares of the stock they wanted. According to Orman about 85% of her clients would the stock that she suggested.

However, over time, she noticed something: Some people would get nervous and sell when the stock she suggested dropped, while others would hang on to the stock and more at the lower price. On average, the people who got nervous and sold the stock ended up with far less money than the people who held. And they were often dissatisfied with her!

So when Orman asked them why they had chosen to invest in the stock, without fail they responded “Because you told me to Suze.”

This really troubled Orman. It bothered her enough that she stopped encouraging clients to stock when she felt they weren’t comfortable with it, left her job as a stock broker, and started her own firm where she could give honest advice to her clients.

The moral of the story here is, trust yourself first. It’s your money, and you should be comfortable with where it’s going – not dependent on the advice of a financial advisor, or a stock broker.

I definitely support Orman’s theory here, but I do believe you need the financial advisor and stock broker too! However, there is no excuse for not educating yourself about your possible investment options. I believe in choosing my advisors well, taking their opinion into account, and making my own decision based off of my own research. Never off of a phone call where someone says “You should this stock, it’s great!”

Always, always choose investments based off of your own research and conclusions – the point of experts, in my opinion, is to highlight and explain options for my money that I might otherwise have missed. Not to run around willy-nilly and make all of my decisions for me. No one is that good!

That ends this week’s review of The 9 Steps to Financial Freedom. Next week, we wrap up the book!
I hope that you have enjoyed reading these reviews. If you have questions, comments, or suggestions for things that you would like to see me cover, please let me know! I will definitely act on your feedback.

Have a question for us? Leave a comment below!

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Are You Spending Less This Christmas?

By: Connie Brooks
12/06/2008

With the current economic downturn, I was wondering, are you going to spend less on gifts this Christmas?

My family and I are going to stick to our regular budget. We’ve had the same budget for the last four years, and it’s working well for us.

We know how much we need to save before Christmas, and we don’t end up in debt after Christmas – even though we have a large number of family members that we have to for. So, the economy can do what it will, but we are sticking to our plan.

How about you guys? Has the economy had an impact on your Christmas spending? Are you putting more or less on credit than usual? Tell me about it in the comments section – I’d love to know!

The articles below were my very favorite articles of the week. They all made me smile, or made me think, so I saved them to share with you. I hope you enjoy them!

Holiday Cheer:

Keeping it Real:

Freebies, Deals and Giveaways:

Carnivals:

We participated in several carnivals this week. Thanks to everyone who took the time to host them!

That’s it for this weekend’s link roundup. I hope you are having a wonderful weekend!

You’re officially invited to grab our RSS feed and check out our forums! We’d love to see you there. Thank you for visiting Ask Mr. Credit Card’s Blog!

Credit After Bankruptcy – How to Get Credit and Manage New Credit Accounts

By: Christina
12/04/2008

This article is part one of a three part series that takes an in-depth look at getting credit after bankruptcy, and the best ways to raise your credit score.

Bankruptcy can be devastating to your credit score. Especially if you had a number of late payments, charge offs, or settlements prior to your bankruptcy. So how do you start to rebuild your credit? How do you know which credit cards to choose? How do you raise your credit rating?

There are a series of very simple steps that you can take after your bankruptcy to get back on track. It is possible to get credit and loans after a bankruptcy – even in the current economy.

Step 1: Find out what your credit score is

The first, and very important step to rebuilding your credit after bankruptcy is to know where you are starting from. The best thing you can do is to pull your credit scores at MyFICO.com. Once you know what your credit score is, you can decide which types of credit you would like to apply for.

If your credit score is:

Step 2: Pull all three of your credit reports

Before you apply for credit anywhere, please pull your credit reports at all three credit bureaus. Take the time to challenge any incorrect, or negative information. Check up on your past due accounts, and make sure that they all say “included in bankruptcy”.

You can check your credit reports for free once each year by visiting Annual Credit Report.com

You can check out our complete guide to challenging information on your credit reports for a step – by – step walk through.

A word of caution: Do not challenge too many accounts at once. If you do, then you could unintentionally freeze your credit report for a month (because you have too many things being challenged for the credit bureau to compute your score). This will keep you from being able to get credit because the credit card companies will not be able to view your credit score until your disputes are resolved. So, just pick a couple of items each month, and dispute them that way.

Alternately, you can dispute everything at once, just expect to wait a couple of months before you apply for any type of credit card.

Step 3: Make Sure You’re Ready to Use Credit Correctly

Bankruptcies are caused by a number of things – not just credit card debt. Only you know what your situation is though. So if you are fresh out of a bankruptcy, take a long hard look at your finances. Are you ready to pay several hundred dollars for each new line of credit that you open up? One way or another, you can expect each credit card to cost you that much after you declare bankruptcy. At least at first.

Make sure that you are able to make regular payments – Are you regularly employed? Will you be able to make your credit card payments in time each month? Are you ready to learn how credit works, and use that knowledge to raise your own credit score? When you can answer yes to all of those questions, then you are ready to start exploring your credit options.

If your bankruptcy was caused by credit cards, be extra careful when you start applying for credit again. After my bankruptcy, I took this view of my credit cards:

“My new credit cards after bankruptcy are tools. They are tools that I am paying a lot of money for because they are raising my credit score. I know that if I raise my credit score I will have an easier time getting loans in the future on a house, or a car. “

In order to manage your credit well after your bankruptcy it is important to look at your credit cards as an investment. You are investing your time, and your money into your credit score so that life will be a little easier several years down the road. Just remember that raising your credit score after a bankruptcy takes time.

Time, and lots and lots of good behavior, and on time payments.

The one thing you cannot do is look at your credit cards as “free money”. If you think that you will not be able to stop yourself from charging your new credit cards to the limit, then you are better off waiting to get credit until you can keep all of your balances under 20% of your available credit. In other words, if you have a $100 limit on your credit cards, you can never charge more than $20 on that card, etc.

The hard truth about credit after bankruptcy is that for the first year at least, you will pay paying a fair amount of money just for the privilege of having a credit card, and a chance to rebuild your credit score. It is worth the investment of your time and money if it does actually raise your credit score to have the cards.

When you apply for credit after bankruptcy, just be sure that you can change the financial habits that led you to bankruptcy in the first place. You may not have owed a ton of money on credit cards prior to your bankruptcy. (I didn’t – I had overwhelming medical debt. Each bankruptcy situation is different). But you will still have to admit that something you were doing was destructive financially, even if there were other factors involved. In my case, not carrying health insurance was one of the financial mistakes I made.

So, just take the time to sit down with your finances, and do a quick checkup before you take the plunge. If you have already done these first three steps, congratulations! In part two of this series we’ll take an in-depth look at the process of acquiring new credit after bankruptcy, and what to do once you have it.

Stay tuned! You can pick up our free RSS feed to get our articles delivered directly to you.

Have a question for us? Leave a comment below!

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The Money Hacks Carnival: The Best Crazy-Simple Money Hacks Edition

By: Mr Credit Card
12/03/2008

Welcome to The Money Hacks Carnival at Ask Mr. Credit Card.com!

If you are new here, please pickup our RSS feed, and check out some of the excellent articles below!

This edition of the Money Hacks Carnival features some of the easiest “Money Hacks” available to us today. Every tip included here is a way to “work the system”. In other words, how to get insane deals, earn money for yourself every time you spend it, and basically just make out like bandit every time you go shopping.

It’s hard to get by without spending any money at all (though there are people who do it) so my philosophy is, If I need to spend money, I want to spend the least amount possible, and get something extra in the bargain.


Money Hack #1: Get Cash Back From Your Credit Cards

Credit cards can be dubious financial tools – especially if you don’t know how to work the system to your benefit. Let me also say that I completely respect people who live a credit free lifestyle – sometimes it is better not to use credit cards at all.

However, I have found that my credit cards are one of the best financial tools that I could ever have. They are a small, but constant source of cash back and rewards because I pay my balance in full every month and don’t charge more than I can pay back in one billing cycle.

Here’s the lowdown:

I use my American Express Blue Cash card to get 5% of my expenses back each month on my groceries, gas and drugstore items and 1% back on everything else. That’s like getting a 5% discount on nearly everything I .

When I combine that with coupons, rebates and in-store sales there are actually times when I get things for free, or even earn a little money ing them. Can you imagine getting 5% off of almost everything that you in a year’s time? What about five year’s time? It really does add up.

5 percent may not sound like a lot until you figure up what you spend on groceries and gas a year, and then knock 5% off that total. Over time, I save more money by using this credit card than by almost any other method.

However, there is definitely a caveat to this technique that the other Money Hacks I featured don’t have. Cash back credit cards only work if you pay your balance in full. So you’ve got to have tight control over your purse strings and not be tempted to charge more than you can pay off. Otherwise, you’ll be paying more to the credit card companies in interest than you earn as cash back. And that’s not a money hack, that’s a money sink! So just make sure if you choose to try this one, that you know the rules of the game and you’re playing to win.

Editor’s Picks!


Money Hack #2: Rebates

Rebates! Rebates are trouble, no doubt about it. First, you have to save your receipts, then you have to fill out a form, copy the receipt, and mail it off….then, eventually you get check or a store credit for the amount of the rebate.

But you know what? I save hundreds of dollars a year by taking the time to mail my rebates back in. And now, with everything becoming easier over the internet, there are even automated rebate programs that you can use when you shop online. That eliminates the need to save your receipts, or mail anything at all. All you have to do is log into your rebate account and request a check once you hit $25 or $50 in rebates.

Combining rebates with sales means that you can definitely gets items for next – to – nothing.

Want to know more about the online rebate websites? Check these out: UPromise, Ebates, Mr. Rebates, and Fatwallet.


Money Hack #3:Coupons

Billions of dollars of coupons go unused each year. The worst part is, most of the time when you a regular priced item, there was probably a coupon on it that you could have used to save some money. Especially for the necessities like shampoo, toiletries, dish soap, detergent, etc.

I know that technically, coupons are trouble…you have to deal with cutting them out, handing them to the cashier, hoping they don’t roll their eyes, and then usually, fighting to get them to take the coupon when it doesn’t ring up.

I pretty much treat coupons just like cash. Because that’s what they are – my cash, cash that I don’t have to spend if I can get a store to take a printed piece of paper instead!

Typically, my family saves well over a couple thousand dollars a year by using coupons alone. I save a lot more than that by the time I factor in rebates, store sales and any cash back I get from using my credit card.

So, if you’re new to coupons, how do you get started? Well, cut them out of your Sunday paper (which you can usually later in the evening to get a discount). You can also print them out online, or get them directly from the stores you shop at by going to their websites. Alternately, you can them on Ebay pre-cut for around $3-$4 per hundred coupons.

The best places to print coupons online: Valpak, CoolSavings, ShoppingBargains.com, Coupon Pages, and Smart Source. You can also check out The Grocery Game, and it’s competitor, The Coupon Mom. Both are sites that tell you when to use your coupons to get the maximum benefit.


Money Hack #4:Dumpster Diving and Reselling Junk

Ouch! Dumpster diving?? Are you kidding me? How is THAT a money hack? Well, I told you these were crazy money strategies! Besides, it’s kind of a fun thing to suggest 🙂

While I’ve never done this personally, I had a very good friend who did! He earned a nice regular side income by stopping on the side of the road to pick things up when people had thrown them away.

I watched him one day:

He stopped at an antique/junk shop right before a big storm. The store regularly set things out onto the sidewalk to entice people in and the employees were working quickly to bring everything in before it rained.

So, he sauntered up, and offered them $10 for an old couch that they hadn’t carried in yet. The employee looked relieved that he wouldn’t have to pack it in out of the rain, and he sold it to my friend on the spot.

I helped him load the couch into his truck, and off he went, down the street. As it turned out, he went two miles down the road, and sold the couch for $90 to some tenants of his. The whole transaction took less than 20 minutes, and he made $80.

So, the point I’m making here isn’t really to go digging through your local dumpsters – but just to keep a “junk flipping mentality”. I watched this guy over several years, and he did this stuff frequently. It’s like the deals just seemed to magically find him – but they didn’t, not really! He knew what he was doing, and he kept his eyes open. He could take advantage of those opportunities because he was looking for them, and he was always ready to act on a deal when he found it.

Moral of the story? Be prepared! And remember that your trash probably is someone else’s treasure – especially on EBay!


Money Hack #5: Promo Offers

Promo offers fall into all sorts of different categories. They could include trying out a service for free, 0% introductory rate balance transfers, BOGO (Buy one Get One Free), Loss leaders (The sale items in your grocery store each week) and a whole mess of other deals.

Black Friday, and Cyber Monday are a Mecca for thrifty shoppers because so many stores feature promotional offers all at once. We’ve unfortunately passed both of those hallmarks, but the sales and deals will still continue until a couple of weeks after Christmas. So, now is the best time to take advantage of them when you’re doing your holiday shopping.

Whenever possible, try to combine them with other offers, free shipping, rebates, and hopefully some cash back on your purchase.

The key to taking advantage of promotional offers is easy – remember what you are there to , and don’t load up on a bunch of other items. This is particularly true of “loss leaders”. When a store takes a loss to sell you an item, they expect that you will three or four more things while you are in there. Don’t bite – it will eat away at the money you are saving by ing the discounted product. The best thing that you can do is to just get what you came for and leave the store with only what you planned to .

Another excellent way to take advantage of in-store promos is to shop for your wardrobe at the end of each season. Stores regularly reduce out of season clothing up to 75%. So combine that 75% off with free shipping, rebates and cash back. You can have a new wardrobe each year for next to nothing.


Money Hack # 6: Rain Checks

In my opinion, this is the number one least used money hack. Mostly because people don’t think to ask for them. If a store advertises a sale price on something, and then sells out of it, make sure that you visit the customer service desk on your way out and get a rain check for it. Alternately, you could try subbing a higher value item for the one the store is out of. Something like a larger package, or a competitors brand. Not all stores will let you do that, but some do, and that’s when it’s really worth your time.

For more on how to use rain checks easily, you can check out this article at About.com

The Money Hacker’s Magic Formula: Combining Rebates + store promotions + coupons + credit card rewards is the winning combination. If you can do all of these things as often as possible, you will save thousands of dollars a year with very little effort. Add in a nice secondary income (not necessarily dumpster diving, but you could flip websites, or sell ads on your blog, etc.) and you will easily be master (or mistress) of the Money Hacks!

That’s it for this edition of the Money Hacks Carnival! I hope that you have enjoyed reading it as much as I enjoyed putting it together. There were some truly wonderful articles featured here, and I want to personally thank everyone for their submissions. I found some new blogs that I had not visited before, and reacquainted myself with a few blogs that were old friends.

I look forward to talking to you all soon. If you like, please feel free to leave a comment below.

Thanks,
Mr. CC

What’s Your Favorite Money Hack? Please Tell Me About It In The Comments!

Should You Pay A Fee To Use Your Card?

By: Jason Steele
12/02/2008

My mother called me today to ask a question. She was trying to maximize her credit card awards by paying her taxes using a credit card.

Some Restrictions May Apply

First off, you can be sure that when accepting payments by credit card, your local, state, and federal governments will charge an additional fee. There appears to be two companies that can accept credit card payments on behalf of the government: Official Payments Corporation, and Link2Gov Corporation (also known as Pay1040.com). Both of these companies charge you a 2.49% “Convenience Fee”.

Is This Worth It?

My first instinct is to say no way. We are lucky if we can get 2 or 3 percent value returned on our awards, so paying that is just a wash. Upon further examination, and at the insistence of my mother, I am willing to accept the fact that there are some situations where this may actually be justified.

In my parent’s situation, they are both heavy Delta travelers. I know from my past experience that the only way to endure frequent travel on Delta, or most other domestic carriers, is to hold elite status in their mileage program. With it, you get domestic upgrades, waived baggage fees, and free standbys. Elites also get bonus miles every time they fly. The only way to qualify for elite status is to gather Medallion Qualifier Miles, or MQMs. These are miles earned through actually flying, and are rarely earned on the ground. The generic term for these “super miles” is simply “base miles”.

One of the only ways to earn base miles on Delta without traveling, is through the Delta SkyMiles American Express cards. The Reserve and Platinum cards both offer base miles as sign up bonuses, as well as additional base miles with their “Miles Boost” feature. The program rewards Platinum card holders with 10,000 base miles at with $25,000 annual spending, and another 10,000 at $50,000 of annual spending. The Reserve card gives you 15,000 base miles at $30,000 of annual spending, and then again at $60,000.

Why It Could Make Sense

If it makes the difference between reaching the Elite level status and not, I can definitely see paying the %2.49 for your tax payments. Furthermore, the “convenience fee” itself is actually a tax deductable expense, so it’s real cost is diminished. I could even speculate on whether or not you would earn miles on the “convience fee” itself, and what their value would be, but then my head would start to hurt!

What Is The Value Equation?

Start of with 2.49 cents per mile, when you pay with your standard Visa or Mastercard. Obviously you would be nuts to put this on your cash back cards, as no one will give you %2.49 back. 2.49 might be worth it for some rewards, especially when there is a mileage bonus involved. For example, American Express Membership Rewards program is currently offering a %30 bonus on mileage transfers to Delta. Therefore, the you are paying something more like 1.7 cents per mile, which is much closer to their actual value. The real value is in attaining elite status with Delta, which is worth quite a bit to frequent travelers.

What About Starwood

You could also charge your taxes to your Starwood Amex. Redeeming 20,000 Starwood Starpoints, you get 25,000 Delta SkyMiles, a %25 bonus. This also brings your price per mile to the 1.8 cent per mile range, although there is no Delta base miles involved. Actually, you might earn Starwood Gold status if you get to 30,000 miles in one year on your Starwood Amex. Starwood Gold is good for unlimited complimentary room upgrades and free 4 PM checkouts.

What About Super Awards

Super award is my new term for awards that are worth far more than the %2-4 value most award tend to be worth. A super award should earn 5-10 cents per mile. If you are are certain to be redeeming your miles for super awards, %2.49 starts to look very reasonable.

My Favorite Super Awards

My two classic examples of super awards are these: Stay 4 nights in a Starwood hotel and get the fifth night free. The hotel redemptions are often worth more than 4 cents per StarPoint, and that number goes up past 5 when you get the fifth night free.

The second is the Singapore Airlines First Class partner award on Delta. They offer a round trip, first class ticket on Singapore Airlines from a US gateway for only 140,000. Yes, that is a lot of SkyMiles, but consider two things. First, Singapore Airlines first class cabin is consistently ranked as either the best in the world or one of the top three. They make first class on most US carriers seem like coach. We are talking amenity kits, turn down service, and personal high definition televisions. Check it out here. Secondly, these seats can easily sell for over $14,000 each. That is over 10 cents per mile in value. On the other hand, if you were to pay $14,000 you would get a seat on any flight, even at the last minute. The award might be hard to redeem if you are not flexible.

So consider you options carefully when it comes to paying a fee to use a credit card. To your surprise, it just may be worth it.

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