Using Credit Cards to Survive the Corona Virus Shutdowns

Over the past few days, as we’ve watched industry after industry getting hit by closures, slowdowns, and collateral damage because of worldwide efforts to stop the spread of COVID-19, we’ve also watched the economy tank in nearly every country.  We’ve heard of “temporary” shutdowns, pauses, and already, many, many layoffs.  And, while the government’s new economic relief package is supposed to help in cases where people lose their jobs, where they’re sick, or where they are taking care of someone who is, how long will it take for that “help” to actually funnel itself down to those of us who literally don’t have the money to miss work?  Days?  Weeks? Months?

credit cardsWhere does that leave you?  How do you pay the car payment?  The house payment?  Buy medicine?  Groceries?  How do you live day to day until the “relief” is made available or until the virus is contained?  And, since they’re only really talking about 2/3 of your normal salary, where do you get the extra third?  Your normal bills aren’t going to just magically drop by a third, are they?  So what do you do?

One thing that we’ve noticed in all this panic buying at the stores is that people are using credit cards to get those items that they’re buying that are out of the norm.  Is this a smart way to handle the extra expense that all of this self isolation is creating?  And what of the long term expenses?  Is it smart, if you are one of those affected by the crashing economy, to utilize credit cards to make ends meet?

The answer is not nearly as simple as you might think.  First off, how much credit do you have available?  You might want to take stock of your available credit first off.  Then, once you have that information, consider your circumstances.  Are you in an industry that will likely be affected long term?  If so, how will you pay back any of the charges that you create while we’re all in panic mode?  Will your job reappear?  Do you have savings to rely on?  Are the things that you’re using those cards for directly related to actually surviving the financial crisis created by this virus or are they something that you wouldn’t normally buy, but you’re only buying now because you’re in panic mode?

These questions and the answers are very personal to each and every one of us, but they are things that you MUST consider.  This virus will not last forever, but the financial decisions you make now will have an effect on your life long after this crisis has passed.  And those of us here at Fresh Start Card Offers want to make sure that everyone is using common sense as we navigate through a worldwide pandemic, something that has never happened in our lifetime, and will likely not happen again soon.

Remember this, if you remember nothing else. The choices you make right now will have long term financial consequences, so make them wisely.

Why Does Your Credit Score Go Up and Down?

Ever notice how your credit score goes up or down a few points every month?  Even worse, have you ever had your score just drop like a rock and you have absolutely no idea why?  Maybe you’ve been one of the lucky ones and seen a boost?   If you’re one of those people who gets their credit score emailed to them weekly or whenever there is a change, there’s no doubt that you wonder why it changed 2 points last week, or why it went up a point this week.  Every little score change makes you wonder… why doesn’t it just STAY THE SAME?

Actually, there are a lot of reasons why your credit score changes:

Your Balance Changes:  If you make a large payment (for example, with your tax refund), you might see your score suddenly shoot up like a little rocket (the larger the payment, the bigger the spike in your score).  Or, let’s say you make a large, new purchase, maxing out a credit card… you might actually see your score take a big nosedive.  That’s because your credit utilization goes up, leaving you less available credit.  This makes up about a third of your credit score, so keep your balances as low as possible.

You Apply for a New Credit Card:   Applying for a new credit card usually causes a hard inquiry on your credit file and this typically drops your score a few points for a short period of time.  This doesn’t make up a lot of your credit score, but if every point counts, don’t apply for new credit cards unless you really need them.

You Close a Credit Card Account:  Anytime that you close an old account, you shorten your credit history, which can negatively influence your credit score.  As tempting as it is, many experts now advise you not to close a credit card account unless you absolutely have to.

You Miss a Payment:  Missing a payment goes directly into your credit file and then stays there for seven years.  Since your payment history amounts to about a third of your score, missing just one payment can really drop your score and keep it down for a long time.

You File Bankruptcy:  Even though it’s usually a last resort, bankruptcy will have a very detrimental impact to your credit file. Therefore, it’s always wise to seek an experienced attorney to help you to make an informed decision before filing for a Chapter 7 or Chapter 13 bankruptcy. The statute of limitations for a bankruptcy can range from 7-10 years.

Your Identity is Stolen:  Unfortunately, by the time your credit score is affected by identity theft, it’s usually too late.  That’s why you need to regularly review your credit report and score.  You might even want to consider a paid subscription for identity theft protection.

Your Credit History is Short:  15% of your credit score is based on the length of your credit history, so if you’re just starting out, know that it’s going to take time to build up a strong credit history (and likewise, a strong credit score).

Believe it or not, over half of the population today cannot tell you if there has been a recent change in their credit score.  Don’t be one of those people – pay attention to your score, review it regularly, and investigate anything that you’re not sure about.

How Credit Cards Affect Your Overall Financial Picture

Credit CardsCredit cards, when used correctly, an be a valuable asset to your overall financial picture.  They can improve your credit score, leading to even higher credit limits and better interest rates, and you may earn cash back, air miles, hotel discounts, and other rewards.  However, failing to use them wisely can result in a much lower credit score, higher interest rates, and fewer options when you really need credit.  So, what are the best ways to use credit cards to your advantage?

Carry Fewer Credit Cards

Although it can be really tempting to apply for, and even carry, lots of credit cards, you really don’t need more than a couple of good credit cards.  And by good credit cards, we mean credit cards that carry the lowest interest rates, have reward options that you will actually benefit from, and that have no annual fees.  Of course, if you’re working to improve a damaged credit score, or if you have no credit, then you’ll have to start with a subprime card.  With subprime, it’s imperative that you review the terms!  Make sure you choose a starter card with the lowest interest rate and watch out for hidden fees!

Don’t Spend Carelessly

One of the biggest mistakes that people make with credit cards is spending recklessly.  We see something we think we just have to have, but then we don’t have the cash, so we use the credit card.  And that’s fine if you can pay the balance off when the bill comes.  But, nine times out of ten, we can’t, and that just makes you a little more short of cash until you get the new bill you’ve just created paid off.  If you’re not careful, you’ll end up having to use those credit cards to make ends meet when you’re over your budget because you’ve got several credit cards you’re paying on. A good rule of thumb I once heard regarding credit cards is this:  Buy it once, pay for it twice.

Of course, that doesn’t mean you should never use your credit card.  Keeping them “just for emergencies” or never using them doesn’t really help your payment history – just make sure you occasionally buy something, then pay it off when the bill comes in.  That is the best approach, by far.

Review Every Transaction

Pay attention to what you spend, where you spend it, and make sure you were actually the one who used your credit card!  If you’re close to your limit, log in to your account online and make sure you don’t go over your limit.  No one wants to pay those overlimit fees, trust me!

Pay Your Card Off Monthly

Pay your credit card bills off every month!  Save yourself the interest charges and keep your credit score on track!

Use Those Rewards

Personally, I like the cash back rewards.  I ALWAYS credit them to my account, although there are those who “save” them up all year and then have the credit card company send them a check.  And I have a friend whose husband uses his card to fly for work, and then they use the air miles for vacations.  Whatever works best for you – just don’t let those rewards go to waste!

Closing or Opening Accounts

Assuming you’re using your credit cards wisely and then paying them off each month, you probably won’t want to close the card out.  But, if you do decide to get a different credit card that better fits your lifestyle, or you close an account, be sure that you do so carefully.  Too many changes too fast can cause your credit score to drop more than just a few points.  It’s better to wait three, six, or even twelve month between opening or closing accounts so that your credit score has a chance to level out before the next change comes along.

Remember, credit cards are great financial tools, but if not used wisely, it’s really easy to get in way over your head!  And then, it can take years to pay off bills that you could have avoided creating just by thinking before you slid your card through the machine!

Gotten an Unexpected Credit Line Increase Lately?

Have you checked your credit line on your credit cards lately?  If not, you may have missed an unexpected, even unrequested, increase in your available credit.   But, before you rush out and use that extra available credit, you might want to reconsider. 

Credit CardsIn the last few months, without much fanfare, many banks have begun automatic credit limit increases for customers who are near or at their credit limit.   These “Proactive credit line increases” (PCLIs) were very common prior to the 2008 credit crisis, and infact, post-crisis rules essentially stopped the practice of increasing credit limits without customers requesting the increase.

However, since credit cards are among the most profitable loans originating in the finance industry, and with interest rates at a 20 year peak, banks have begun to find loopholes in regulations, allowing them to issue these proactive credit line increases to those consumers already carrying high levels of debt.

And why is that?  It’s all about the money.  Last year, US banks made approximately $179,000,000,000.00 (yes, that is billions) from credit card interest and credit card fees.  This year, that number is expected to be even better for banks!  Of course, that’s not so great for consumers!  Credit card debt levels are the fastest growing form of debt in our country, currently at a record high ($880,000,000,000.00 as of September, 2019), and that number will only continue to rise as people go out and utilize those credit line “surprises” that arrive with their monthly statement.

Unfortunately, many of these PCLI’s are in the subprime credit sector, where companies are extending additional credit to those who may already be overburdened by debt, who may miss payments, who may incur high penalties, etc.  All of which are extremely profitable for banks.  In fact, the number of people aged 19-29 in the USA who are more than 90 days late on their card payments just reached a ten-year high.

What should you do?  While that little surprise credit line increase may tempt you to go on a shopping spree or two, your best bet is to do nothing.  That’s right, don’t do anything.  Don’t spend it.  Don’t reject it.  Just continue on your normal budgetary path and keep trying to pay those balances down.  Remember, the ideal situation to be in is to keep your credit card balances to an absolute minimum, and then pay them off every month (or as quickly as possible).

New FICO Scoring Could Change Your Credit Score!

FICO's new scoring model, which was announced this past week, will likely lower credit scores for those with a current credit score below 600, as it is based more on the past two years of payments, and it takes personal loans into account.  However, those who already have good credit scores, and who continue to whittle away at existing loans, make payments on time, and don't acquire new balances, will likely see higher scores under the new model.  

“We’ve unfortunately found ourselves in an era where it’s becoming commonplace to water down the breadth of information on credit reports,” Ulzheimer says, adding that tax liens, judgments, medical collections and medical debt have all been removed or delayed from some credit scoring models.

“All of this is great for consumers who have tax liens, judgments, and medical collections…but it’s not great for scoring models and their users,” Ulzheimer adds. But he notes the new scoring model is not “consumer unfriendly” either. “People with good credit are going to score higher with newer models. People who have elevated risk are going to score lower.”

Despite the changed scoring model, it may take a while for it to hit your credit report.  “Change comes slowly in credit monitoring,” says CreditCards.com’s industry analyst Ted Rossman. “Rather than getting too hung up on which model a particular lender is using, consumers should practice fundamental good habits such as paying their bills on time and keeping their debts low,” Rossman continues.

Of course, ultimately, which model is used will be decided by banks and other lenders.  FICO 9, released in August 2014, is still not used across the board.  Many lenders still use FICO 8, whick was released in 2009.  And still other lenders use VantageScore, which is produced by the credit bureaus Experian, Equifax and TransUnion.

10 Ugly Truths About Credit Cards

Credit card debt is one of the most difficult financial obstacles to overcome – interest rates are high, minimum payments barely scratch the surface of the actual debt, and it's just so, so easy to fall into the trap you set for yourself whenever you use your credit cards without having a real plan for paying them off.  Unfortunately, the ugly truth about credit card usage has only gotten uglier in the past few years.  Not only have interest rates risen, but credit card use itself has tripled, and there doesn't appear to be an end in sight.

Here are just a few of the down and dirty truths about credit cards and the debts we carry… and you might be surprised at just how much you don't really know!

1. Nearly Half of the Population is in the Same Boat You Are

That's right, you're not alone.  Nearly half (46%) of all adults carry a balance on their credit cards from month to month, and since interest rates rarely drop, we're all paying a premium for those purchases we made on that card. 

2. It Takes Years to Pay Off Some Balances

If you're like most people, and there are months when you can only pay the minimum payment, it can be very difficult to pay your credit card balances in full, ever.  For example, if you carry $3,000.00 in debt, at 17% interest, over time, your interest charge can easily amount to another $3,000.00.  That's DOUBLE your initial balance – take a look at how much of your monthly payment actually goes toward the principal.  You might be sick.

3. Americans Aren't Paying Off the Balances

Even though we're really good at spending money, it turns out we aren't nearly as good when it comes to paying the balance off.  In fact, for every dollar on average that we pay off, we're adding another $2.65 in new debt.  It doesn't take a genius to figure out that this cannot continue indefinitely.  

4. The Average Household Credit Card Debt Is $5,700 

Even though the overall economy has improved significantly, the average household still carries around $5,700 in credit card debt, and are still unable to pay off much of that debt. 

5. Interest Rates Are Not Coming Down

Even though the economy has improved, and mortgage rates, car loans, and other types of loans have low interest rates right now, most credit cards average at or above 16% interest.  Make just one late payment, and that can jump to 30% (or higher).  

6. Just One Late Payment Will Damage Your FICO Score 

Even though it's better to pay late than not at all, making just one payment that is more than 30 days past the due date can really harm your credit score for a very long time.  Payment histories stay on your credit report for up to seven years and can cause your score to drop significantly. 

7. Baby Boomers Have the Least Amount of Credit Card Debt 

Perhaps it's because baby boomers are aging, but the least amount of credit card debt belongs to the Baby Boomer Generation, while Gen X owes the most.  Born between 1967 and 1981, the average Gen Xer holds a credit card balance that is nearly $8,000. Even more telling, credit scores have historically dropped lower with each successive generation, meaning the successive generations will likely carry a larger balance than the Gen Xers.

8. 20% Of Americans Have More Credit Card Debt Than They Have In Savings

Even though it's recommended that we all build an emergency fund that will cover three-to-six months of living expenses, most people have less than $1,000 in savings, and another 12% don't have any emergency savings at all.  That means an emergency can quickly put most people into credit card debt. 

9. Women Carry Less Debt Than Men 

Even though women are the "shoppers," men actually carry more credit card debt, coming in at an average of $7,407 vs. women, who carry about 22% less, or $5,245. 

10. Most of Us Will Die Carrying Credit Card Debt

Approximately 65% of Americans will owe credit card debt up to the day we die.  That’s more than those of who are not expected to leave this earth without a mortgage.  The average debt, which is more than $4,000, also leaves a legacy that family members have to deal with.

In closing, understand that credit card debt is an ugly problem that we Americans have yet to take control of in our own lives. But, it doesn't have to be the norm – not if you take action now.  Control costs where you can, pay as much as you can on those balances, and stop the cycle before you find yourself struggling. 

Controlling Debt While You’re in College

1. Don't wait until you finish school to start paying back your loans.  Begin immediately and skip the grace periods if at all possible.  Even if you're only paying the interest that's accruing.  . Absolutely do not wait up till you finish, or take that six-month grace period. Why do banks offer a grace period? Due to the reality that interest still builds up, and when it'' ' ' s over, they can include it onto your principal balance. That recommends your interest now has interest developed on it. Discover out the interest you'' ' ' re acruing while in school, and pay that back month-to-month. Pay back more if you can, however at the very minimum, the interest.

2. Work at your college school tech center, or for a teacher. These jobs generally pay over base pay, AND they look outstanding on a resume. Even if you'' ' ' re just grading files, it'' ' ' s cash. 3. Move off school as soon as possible. Some colleges require you to reside in a dormitory for their really first year, however not after that. If you'' ' ' re REALLY into conserving cash, draw it up and live with your moms and dads for a little bit longer. My dorm cost $12,000 a year, and I had to leave throughout summer seasons! Think about the house or condo you can get for $1,000 a month. AND you can have your own toilet!

4. Eliminate the college meal technique. Seriously. The food isn'' ' ' t that great anyway. Discover to prepare, and make meals ahead of time on a Sunday. You can freeze and microwave them.

5. But won'' ' ' t working interfere with my studying? In reality, no. Nevertheless partying will. I'' ' '' m not stating wear ' ' t go out ever and be unpleasant, however attempt to wait for Fridays and Saturdays. You can study/recover while your meals prepare on Sunday, no?

6. Attempt to keep your odd expenses to a minimum. Coffees that cost $4 a day are probably wonderful. Nevertheless, alright. Picture you go to Disney World EVERY day. After a long time, you'' ' ' d be tired and most likely think, """" wow, I have to be here ONCE AGAIN?"""" Now picture you only go once every 5 years. You'' ' ' re going to like it each time. Only get a latte or cappuchino on Fridays. You'' ' ' ll conserve $ 20 a week, which latte will taste a lot better!

7. I'' ' ' m going to appear like your mom here. However cut the drinking. Not permanently nevertheless! Don'' ' ' t buy pricey bottles of red wine all the time, and save the seasonal IPAs for vacations, not year round. Boxed red wines are the method to go!

8. Are you learning composing, psychology, sociology, or a significant that many individuals say isn'' ' ' t going to be a fantastic future? I disagree. You want your task to be making up? Get to! Write some simple study guides for Amazon. Make up a cook book. Are you from a substantial city? Make up an evaluation of your town! If individuals are going to, a guide of Philadelphia or NYC is much simpler to continue your phone than your pocket! Individuals delight in real, ever day experiences. And you have those! Use them!

Controlling Debt While You’re in College

1. Don't wait until you finish school to start paying back your loans.  Begin immediately and skip the grace periods if at all possible.  Even if you're only paying the interest that's accruing.  . Absolutely do not wait up till you finish, or take that six-month grace period. Why do banks offer a grace period? Due to the reality that interest still builds up, and when it'' ' ' s over, they can include it onto your principal balance. That recommends your interest now has interest developed on it. Discover out the interest you'' ' ' re acruing while in school, and pay that back month-to-month. Pay back more if you can, however at the very minimum, the interest.

2. Work at your college school tech center, or for a teacher. These jobs generally pay over base pay, AND they look outstanding on a resume. Even if you'' ' ' re just grading files, it'' ' ' s cash. 3. Move off school as soon as possible. Some colleges require you to reside in a dormitory for their really first year, however not after that. If you'' ' ' re REALLY into conserving cash, draw it up and live with your moms and dads for a little bit longer. My dorm cost $12,000 a year, and I had to leave throughout summer seasons! Think about the house or condo you can get for $1,000 a month. AND you can have your own toilet!

4. Eliminate the college meal technique. Seriously. The food isn'' ' ' t that great anyway. Discover to prepare, and make meals ahead of time on a Sunday. You can freeze and microwave them.

5. But won'' ' ' t working interfere with my studying? In reality, no. Nevertheless partying will. I'' ' '' m not stating wear ' ' t go out ever and be unpleasant, however attempt to wait for Fridays and Saturdays. You can study/recover while your meals prepare on Sunday, no?

6. Attempt to keep your odd expenses to a minimum. Coffees that cost $4 a day are probably wonderful. Nevertheless, alright. Picture you go to Disney World EVERY day. After a long time, you'' ' ' d be tired and most likely think, """" wow, I have to be here ONCE AGAIN?"""" Now picture you only go once every 5 years. You'' ' ' re going to like it each time. Only get a latte or cappuchino on Fridays. You'' ' ' ll conserve $ 20 a week, which latte will taste a lot better!

7. I'' ' ' m going to appear like your mom here. However cut the drinking. Not permanently nevertheless! Don'' ' ' t buy pricey bottles of red wine all the time, and save the seasonal IPAs for vacations, not year round. Boxed red wines are the method to go!

8. Are you learning composing, psychology, sociology, or a significant that many individuals say isn'' ' ' t going to be a fantastic future? I disagree. You want your task to be making up? Get to! Write some simple study guides for Amazon. Make up a cook book. Are you from a substantial city? Make up an evaluation of your town! If individuals are going to, a guide of Philadelphia or NYC is much simpler to continue your phone than your pocket! Individuals delight in real, ever day experiences. And you have those! Use them!

Ten Debt Facts You Should Know

There are a lot of methods you might participate in trouble financially, however among the most tough to recuperate from is charge card financial obligation. With its common high interest rate, anyone who utilizes them and doesn’& & rsquo; & rsquo; t settle the balance within the initial thirty days could discover themselves struggling.

1. You Are Not Alone.

If you feel you’& rsquo; re in the minority when it concerns credit card debt, think again. With 46% of the adult population carrying an exceptional balance on their credit cards, you’& rsquo; re in business with a great deal of people. It appears that while it is advised to pay off the balance monthly, more individuals are making it a practice of carrying it forward and paying the hefty insurance rates with it.

2. Large Balances Can Use Up To A Decade To Settle.

Utilizing your card to the max might be simple but paying it off can be really tough. Today, with the average rates of interest at nearly 17%, a $6,000 financial obligation could easily incur another $6,000 in interest in time. Often, if you pay over an extended amount of time, you will wind up paying more in interest than you provided for the purchase itself.

2. Big Balances Can Use Up To A Years To Pay Off.

Utilizing your card to the max may be simple however paying it off can be really tough. Today, with the typical interest rate at almost 17%, a $6,000 debt could quickly incur another $6,000 in interest in time. Frequently, if you pay over an extended amount of time, you will wind up paying more in interest than you did for the purchase itself.

3. We’& rsquo; re Including More Than We Are Settling.

US customers are excellent at spending however not so great when it concerns paying. According to CardHub, in 2016 customers paid their credit card companies $26.8 billion dollars, however they added $71 billion in brand-new debt. That indicates they are just paying off $38% of the quantity they in fact owe.

4. Typical Financial Obligation Owed Is Almost $6000 Per Home.

On average, American homes hold around $5,700 in unsecured debts like credit cards. This suggests that many families weren’& rsquo; t able to make a significant damage in their credit card debt, although other economic factors enhanced over the years.

5. Rates of interest Are Not Boiling down.

While you may think that the financial situation would bring down the high interest rates, however the majority of United States charge card still average 16% or greater. Contribute to that the penalty interest customers should spend for every late payment they make, and you may discover yourself paying as much as 28%.

6. One Late Payment Can Badly Damage Your FICO Rating.

Paying late is much better than not paying at all, but you will pay in other ways. If you are repeatedly late or you pay more than 1 month past the due date, your lender may report you to the nationwide credit bureau. Even one late payment can stay on your report for approximately 7 years and can bring your score down as much as 100 points.

7. One of the most Indebted are the Gen Xers.

The least quantity of charge card financial obligation comes from the Baby Boomers, however the generation that owes the most are the Gen Xers. Those born between 1967 and 1981, hold a typical credit card balance that is almost $8,000. In addition, credit rating have historically dropped lower with each successive generation.

8. One-Fifth Of Americans Hold More Charge Card Debt Than They Have In Their Emergency situation Fund.

It is recommended that everybody have on hand an emergency situation fund that will cover three-to-six months of living expenditures. Nevertheless, a minimum of 12% do not hold any emergency cost savings at all. That indicates that even if they put on’& rsquo; t carry charge card financial obligation, an emergency situation might put them into debt at any time. 8. One-Fifth Of Americans Hold More Credit Card Financial Obligation Than They Have In Their Emergency situation Fund.

It is recommended that everybody have on hand an emergency situation fund that will cover three-to-six months of living expenditures. However, at least 12% do not hold any emergency situation cost savings at all. That suggests that even if they wear’& rsquo; t carry charge card debt, an emergency situation might put them into debt at any time.

9. Men Tend To Carry more Financial Obligation Than Females.

While women are often considered more shopping oriented, it is the men that carry the most financial obligation. With an average debt load of $7,407 rather than ladies with an average debt of $5,245, it is clear who are the most significant spenders. Women’& rsquo; s debt load is a full 22% less.

10. Chances Are High That Many Will Pass Away Carrying Charge Card Financial Obligation.

Records reveal that 65% of Americans can anticipate to pass away still owing a balance on their credit card. That’& rsquo; s more than those who are anticipated to leave this earth with a home mortgage payment due. Usually, people tend to leave a balance of more than $4,000; a legacy that their relative might need to deal with.

It is clear that charge card debt is a substantial problem that Americans have yet to handle. If you’& rsquo; re dealing with charge card debt, it doesn’& rsquo; t need to be the standard in your case. It is better to do something about it now to decrease this cost and offer you a bit more financial liberty so you can really get into enjoying life.