Friday, November 18, 2011

All about Credit Cards, still Make Millions

During the last month I have been submerged in celebrations, so days of glory are now gone, a broken door another party, another feast of pleassure, then go back to normal on the objective of the Million waiting for you, waking up another day to celebrate the father's day, back to life once again, another chance, however and when I felt stronger I tested my luck trainning again trying kick boxing and there it was the crude reality a broken rib, nothing to do but wait... and here Iam writting again and now the "credit crunch"

The objective of this post is to pay and help you pay all your credit cards so you and me could have a fresh start for 2012 as I previously stated cash is king, so the main point is to use your credit card only and only then when you really need to...

I have around 7 credit cards and the more I was offered credit, the more I gladly took, now it is common sense that if you have a daily job and a business here and there, then you can easily afford to pay the monthly and yearly fees, so against the general idea of cancelling your credit cards I would say keep them and use them only when you need them, If you have been reading this blog you could have a certain appreciation to use the credit for Investing ...paying back the credit then cash the gains and start all over again...but to get there first we have to undestand how credit cards work,

Have you ever stood behind someone in line at the store and watched him shuffle through a stack of what must be at least 10 credit cards? Consumers with this many cards are still in the minority, but experts say that the majority of U.S. citizens have at least one credit card -- and usually two or three. It's true that credit cards have become important sources of identification If you want to rent a car, for example, you really need a major credit card. And when used wisely, a credit card can provide convenience and allow you to make purchases with nearly a month to pay for them before finance charges kick in.

That sounds good, in theory. But in reality, many consumers are unable to take advantage of these benefits because they carry a balance on their credit card from month to month, paying finance charges that can go up to a whopping 23 percent. Many find it hard to resist using the old "plastic" for impulse purchases or buying things they really can't afford. The numbers are striking: In 2011, American consumers charged about $2.43 trillion on their general-purpose credit cards.

Let's start at the beginning. A credit card is a thin plastic card, usually 3-1/8 inches by 2-1/8 inches in size, that contains identification information such as a signature or picture, and authorizes the person named on it to charge purchases or services to his account -- charges for which he will be billed periodically. Today, the information on the card is read by Automated Teller Machines(ATMs), store readers, banks and Internet computers.

Here are what some of the numbers stand for:

The first digit in your credit-card number signifies the system:

  • 3 - travel/entertainment cards (such as American Express and Diners Club)
  • 4 - Visa
  • 5 - MasterCard
  • 6 - Discover Card

The structure of the card number varies by system. For example, American Express card numbers start with 37; Carte Blanche and Diners Club with 38.

  • American Express - Digits three and four are type and currency, digits five through 11 are the account number, digits 12 through 14 are the card number within the account and digit 15 is a check digit.
  • Visa - Digits two through six are the bank number, digits seven through 12 or seven through 15 are the account number and digit 13 or 16 is a check digit.
  • MasterCard - Digits two and three, two through four, two through five or two through six are the bank number (depending on whether digit two is a 1, 2, 3 or other). The digits after the bank number up through digit 15 are the account number, and digit 16 is a check digit.

Now If you went too deep on the use of the plastic here are some ways to Pay off your debt...remember 2012= "0" bebt.

You can throw the reminders in the Cuisinart or chuck them into a garbage can, but that won't make the debt go away. Debt hovers like a carrion bird over a dying beast, with annual rates of 20% or more compounded monthly, month in and month out. You can't wish it away. But you can pay it down with determination, and the good graces of a few wealthy relatives here are some ways to get out of debt:

1. Pay more than the minimum
First, break the habit of paying only the minimum required each month. Paying the minimum -- usually 2% to 3% of the outstanding balance -- only prolongs the agony. Besides, it's precisely what the banks want you to do. The longer you take to repay the charges, the more interest they make, and the less cash you have in your pocket. Don't play their selfish game.

Here is a good example and demonstration. This is true to the fullest. In case anyone wants to see the math it goes like this...

debt 10,000 - minimum payment 142 = 9,858

9,858 * .17 * 1 / 12 = 140

17% being the interest rate

9,858 + 140 = 9,998

Real amount paid to credit card company = 10,000 - 9,998 = €2.00

Instead, bite the bullet and pay as much as you can each month. If your minimum payment is €100, double that to €200 or more. Examine your normal expenses -- you can find the money. Skip eating out at lunch, and bring it from home instead. Eliminate desserts. Give up happy hour. We all have "luxuries," and you know what yours are.

Make a few sacrifices, and you will find the extra money needed to increase your debt repayments dramatically. Those increased payments will save you hundreds, if not thousands, in interest payments. Plus, you will get out of the hole you've dug for yourself much more quickly. Is it fun? No. But it sure beats living a hand-to-mouth existence, fearing bills each month.

2. Snowball your debt payments
Take a long, hard look at all your credit cards. Pay particular attention to the one with the lowest interest rate. Have you reached the maximum limit on that card? If not, consider transferring a higher-interest bill to that one. Many credit cards permit this, and it's positively Foolish to trade an 18% debt for one at 12%.

If your entire balance is too large to fit on one low-interest card, pay at least the minimum amounts due on all of your cards except one. Funnel the majority of your debt repayments into that card, and pay it off as quickly as possible. When the balance on that card reaches zero, move on to the next with the same aggressive repayment plan.

Lather, rinse, and repeat. This method of repayment is aptly called "snowballing." As your debts decrease, the amount of money you have to attack them increases. Your payments snowball until all of your debt is pummeled. Pretty neat, eh?

Another way to transfer higher-interest debt to a lower-interest card is to take advantage of the promotional offers many banks use to entice you to their line of credit. You've seen the come-ons. "Transfer all your credit card balances to us, and pay just 5.9% until next January." It could be worth it. Moving to 5.9% from 18% interest could mean substantial dollars to you. And the money saved in interest could then be applied toward the principal each month, thus reducing your outstanding debt balance even further.

Take care, though, before you act. Examine the offer closely. Look for the hooks. Will the interest rate after the introductory period be higher than you're paying now? If so, you may have to switch again at that time. That, in turn, could give rise to another surprise. Banks have caught onto the charge card hoppers who switch from card to card to take advantage of the low introductory rates. Many of these offers now stipulate that if you transfer balances from the new card within a 12-month period, the normal interest rate will be applied to all outstanding balances retroactively. That proviso could be a bitter pill to swallow for someone short on cash, and it certainly doesn't help the debt repayment schedule. Read the fine print.

3. Cash out your savings account
Let's say you have 50,000€ on a savings account but 10,00€ on debt then the smartest thing to do is to cash out your savings and investments and use the proceeds toward debt repayment. Yeah, no one wants to do that. But sometimes it's just Foolish not to do so. Even when debt interest is at 12%, your investments would have to pay more than 20% before taxes to equal that outflow of euros. We doubt the euros in your savings account are earning anywhere near that rate of interest. Pay off the debt, and it's the same as getting that 20% return without any risk on your part. The higher the interest rate on your debt, the more attractive repayment versus investment becomes.

4. Finagle family and friends
This is the best strategy but I can't affort to use it not until 100 years from now...perhaps your family or friends could float you a loan. Who else knows, trusts, and loves you like they do? Unless you're really the black sheep of the flock, chances are you'll get a very favorable interest rate. They may even tolerate a late payment or two. But if you want to maintain the relationship, it's best to keep things on the straight and narrow by using a written agreement. You should clearly establish the interest and repayment schedule in writing to avoid misunderstandings and hard feelings. And it goes without saying that you must be scrupulous about adhering to that schedule. Otherwise, you can forget the family reunions and birthday presents.

5. Get a home equity loan
Do you own your own home and have equity that's accumulated through the years as you've paid off the mortgage? If so, now's the time to consider a (HEL) line of credit for the maximum amount possible.

A HEL gives you two ways to save. First, by using the loan proceeds to pay down your debt, you trade something like an 18% loan for a 6%-7% loan. Second, if you itemize deductions on your tax returns, HEL interest is a deductive item under most circumstances. In a 25% marginal tax bracket, the 6% loan really has an effective rate of 4.5%, and that's probably the cheapest interest rate you'll see on personal indebtedness.

The danger here is falling into a common trap. Many get an HEL, pay off existing debt, and then ring up the charges on the credit cards all over again. Now they have the HEL to repay on top of the credit cards. The hole just got much deeper. you can use the HEL to pay off the credit cards, and then keep them paid off until the HEL is repaid.

6. Renegotiate terms with your banks and creditors
OK, you've done all you can. Savings are gone; relatives have been tapped out; you don't have a home to borrow against. You feel like you're against that proverbial wall. The money just isn't there. Is bankruptcy the only way out? No way. Try pulling an ace out of your sleeve prior to taking that step. What ace? The threat of bankruptcy, of course.

Let your creditors know your situation. Tell them that if you are unable to renegotiate terms, you'll have no other recourse but to declare bankruptcy. Ask for a new and lower repayment schedule; request a lower interest rate; and appeal to their desire to receive payment. Faced with the prospect that you may resort to such a drastic step, creditors will do what they can to protect themselves against a total loss.

Indeed, many will negotiate away the farm before they'll write off your debt. As I love to say, "everything is negotiable" Therefore, what do you have to lose, except time? It's worth a try. And if you don't wish to do this yourself, organizations exist that can do it for you.

7. As a last resort, file bankruptcy
What if you decide you can't pay down your debt using any of the methods listed above? What should you do? The absolute last resort is bankruptcy. Within Fooldom, I firmly believe everyone has a moral obligation to repay their debts to the utmost of their ability. There are times, though, when repayment may be impossible. In those cases, bankruptcy may be the only available course of action. Nevertheless, be aware of the significant drawbacks.

Your credit record will contain this information for 10 years, thus ensuring you will have a tough time obtaining credit you can afford during that period. Additionally, as odd as it seems, it costs money to file for bankruptcy. Attorney and court filing fees cost in the hundreds of dollars, and they must be paid to obtain the relief sought. Finally, bankruptcy laws have gotten a lot tougher in recent years, so you may not qualify for complete relief.

There are two types of personal bankruptcy relief: Is straight bankruptcy that allows the discharge of almost all debts. Those that aren't discharged are alimony, child support, taxes, loans obtained through filing false financial statements, loans not listed in the bankruptcy petition, legal judgments against the petitioner, and student loans.

While you are relieved of the responsibility of repaying most creditors, you may have to surrender much of your property to help satisfy the debt. However, different countries have different laws that grant you exemptions on certain types of property, such as a certain amount of equity in your home, a low-value vehicle, small amounts of jewelry and other personal property, and tools you use in your trade or business. These exemptions usually aren't huge, but they do mean you won't have to start over with absolutely nothing.

You can keep your property but surrender control of your finances to the bankruptcy court. The court approves a repayment plan based on your financial resources that provides for repayment of all or part of your debt over a three-to-five-year period. During that time, your creditors are not allowed to harass you for repayment. You also incur no interest charges on the indebtedness during the repayment period. When all conditions of the court-approved plan have been fulfilled, you emerge debt-free from the bankruptcy.

Now here is the trick make the credit cards work for you and understand the numbers involved and there will be great gratifications.

I just got an e mail from one of my business partners and it seems that I got paid to plubish two articles a month even when I love what I do... I totally forgot this agreement so I will write as much as possible until December. So I can start a positive healthy 2012 in search of the Million Euros in less than 5 years...let's keep the journey toguether!

Here is some inside info I got from the City Boy,