5 Ways to Wipe Out Your Credit Card Balances.

The following is a guest post from by Jordan E. Goodman with Bill Westrom, Authors of Master Your Debt: Slash Your Monthly Payments and Become Debt-Free.

Now, you really want to pay off your balances once and for all, don’t you? Here’s all you need to know about that. In truth, paying off your balances is simple; there’s nothing complicated about it. But it’s not easy, because it does require sacrifice and scraping together the cash that will get it done. Here are five techniques you can easily put into practice to pay off your credit card debt.

1. Set your goal. Make paying off your credit cards your top financial priority. Use the Federal Trade Commission’s calculator (www.ftc.gov/creditcardcalculator) to see just how credit card interest drains your household budget. The average balance-carrying customer now owes $5,729 on his or her cards, according to the findings of a TransUnion survey. Even at the comparatively low (for credit cards) interest rate of 14 percent, that’s taking $67 a month in interest payments alone out of your budget.

2. Squeeze your budget. Turn a cold eye toward your expenses and find some extra money to send to your credit cards every month. Do whatever it takes: cancel cable, eliminate dinners out, stop buying shoes, skip a summer vacation. Seriously. Once you burn this debt for good, you’ll have even more extra cash for the niceties of life. But until you do, make this your priority.

3. Throw extra lump sums at the problem. Tax refund? Check. Christmas present from Mom? Check. You can really jump-start your debt-paydown plan if you take drastic action. Hold a yard sale, moonlight as a babysitter or lawn mower, or do something at a higher earnings rate, if you have that option. Send all of your earnings to your credit cards.

4. Pay off the highest-rate card first. That is, pay minimums on all of your cards, but send all of your extra payments to the card with the highest interest rate. Some credit card experts disagree with this advice, but they are wrong. They suggest that if you instead send extra money to the lowest-balance card, you’ll burn that balance faster and it will make you feel better about the whole enterprise.

You’ll see why this advice is wrong once you look at the numbers. Here’s an example from the excellent DebtSmart web site (www.debtsmart.com). Your Costly Card has an $8,000 balance at 19.8 percent interest and a minimum monthly payment of $160 a month. Your Bitsy Card has an interest rate of 5.9 percent, a balance of $6,000, and a $120 a month minimum. The two minimum payments equal $280, but you’ve figured you can pay an extra $120 beyond that every month.

If you pay the extra $120 to Bitsy Card, you’ll get it paid off in 27 months. At that point, you’ll still have a balance of $7,068 on Costly Card. By the time you pay that off, at $400 a month, it will take you another 21 months, and you’ll have paid a total of $5,120 in interest.

Now go the other way. Pay only the monthly minimum of $120 on Bitsy Card, and pay $280 a month to Costly Card, the high-priced card. That balance will be burned in 39 months. You’ll be left with a $2,124 balance on the cheaper card, and it will take you less than six months to pay that off. Your interest total will be $3,740. At the end of the day, you’ll have paid both cards off five months earlier, and you’ll have paid $1,380 less in interest.

5. Use your HELOC. If you’re struggling under the weight of a high-priced credit card debt and you have a home equity line of credit on your house, you can consider using that line to pay off your credit card. The danger, of course, is that you’ll run into trouble, lose your job, and not be able to make your payments. Then you could lose your house, instead of just your credit rating!

So, don’t take this step lightly. But HELOC rates are really low now; some are hovering just over 2 to 3 percent, and that interest is usually tax deductible. If you can easily afford the payments and have a secure source of income (and a backup source for a rainy day), you can take the credit card issuers off of your creditor list altogether by simply paying off your card with your home equity line. Then follow the same drastic action techniques to kill that debt as soon as possible.

With the new legislation going into full effect on February 22, there will be rate protections, billing and payment protections, easier payments, account management, and protection for young borrowers. In the meantime, work on implementing these practices and develop good credit card behavior.

The above is an adapted excerpt from the book Master Your Debt: Slash Your Monthly Payments and Become Debt-Free by Jordan E. Goodman with Bill Westrom.


Money Quote Friday – Reputation Edition.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.“– Warren Buffett

Sometimes I wonder if people spend any time thinking of the possible negative effects of what they are doing, rather than only concentrating on what they are gaining in the present. Think about it, and have a great weekend.


Avoid Giving The Gift Of A Gift Card.

This guest post comes from Michael, a contributing editor of the Dough Roller, a personal finance and investing blog, and Credit Card Offers IQ, a credit card review site.

Every year, there are certain dates on the calendar where friends and family expect to receive a gift. Whether it’s Christmas, Valentines Day, a birthday or some other special occasion, the gift buyer can go through a stressful time in looking for the perfect gift. Part of the gift itself is the pain and suffering that others have to go through in order to get you something, and I’ve always been of the mind that giving cash was a cop-out; something that meant “I really didn’t want to think about your gift, so go buy whatever you want”.

Instead of giving cash, at least for the last few years, I’ve been on the gift card bandwagon. Best Buy, McDonalds, Chili’s “¦ the list of cards I’ve purchased in the last few years is quite long, and I’ve always felt good about giving it to others because I know it’s something they will use. But then I got to thinking, “Not only is giving a gift card like giving cash, it’s a specific kind of cash, which is even worse.” One of my 2010 New Years resolutions was to never again buy a gift card as long as I live and the evidence would suggest you shouldn’t either.


The gift card industry is a billions of dollars a year business and almost every retail outlet in the country offers a gift card or gift certificate. Generally, there are two types of gift cards available:

  • Retail Gift Card (Closed Loop Card) ““ These are the cards you will find at the counters of your retail stores, which are only redeemable at that specific merchant, or their respected website. There are usually no fees associated with these cards and a good chain will not have an expiration date on when you can cash their gift card in.
  • All Purpose Gift Card (Open Loop Card) ““ An all-purpose gift card is usually issued by a card processor like Visa or MasterCard and carries an abundant amount of fees. Activation fees, usage fees, termination fees, monthly fees; it could very well be renamed a fee card instead of a gift card.

Like with any gift, I can expect some kind of depreciation after I buy it but some gift cards are so far over that line, it’s no longer visible. In 2006, Consumer Reports found that $8 billion in gift cards went unused from a year before. EIGHT BILLION. Thousands of consumers were given gifts that not only were forgotten but also are now worthless and can never be used. Credit card merchants and processors are making millions and millions of dollars on consumers each year without having to do anything other than making gift cards.

Then there’s the principal of the matter; giving a gift card because you can’t think of anything else. You are forcing people to buy things they don’t necessarily want or need and sometimes they buy things that are more expensive than the gift cards you give, making them spend their own money in the process. Why waste my time in driving to a store and buying a gift card, then your time driving to a story to use the gift card when I can just as easily give you cash that is good anywhere and everywhere.

So now I’ve rightfully returned to the gift and cash giving experience, not even giving gift cards a second look. Never again will I worry if my money is donated to retailers and credit card processors and I now get to spend 3 weeks tormenting myself to find the right gift, like my father did and his father before him. Feels good too be back to my old ways.


Completed My Move From BofA Over To Charles Schwab Bank.

Phew – that was more work than I thought it would be! Sure, I could have moved a boatload of money from one of my ING accounts to Schwab to cover any expenses, changed all my automatic bill pays, and hoped for the best – but I didn’t. Instead I did it slowly over a month or so, changing my direct deposits right after they went through for January, changing my e-bills as soon as they were paid for January, and slowly funding the Schwab checking account with money from my BofA savings account. As of this morning, all my e-bills have been moved, all my direct deposits have been redirected, all my automatic payments (like for my Subaru) are switched over, and my BofA check card has been removed from my wallet. There is still a few hundred bucks left in the account just in case I missed something that may yet come through, but otherwise I am completely switched over. And so far, I think it’s the best decision for my banking needs that I could have made. I considered moving to a credit union, which are fantastic, but I also wanted to consolidate 5 different brokerage accounts to the same place/company – so I also opened a new Schwab brokerage. This will make tracking all this stuff way easier now!

So here is where I stand right now in terms of the accounts I have:

Checking = Charles Schwab bank
Brokerage for individual stocks, bonds = Schwab
Brokerage for Roth & Mutual Fund = T. Rowe Price
Savings = ING Direct (emergency fund, quarterly taxes fund, motorcycle fund)

Consolidating down to these accounts has certainly made my life a little easier and a little less confusing.

As for why I switched to Schwab from BofA, well, there are many reasons:

– Free checking
– Free checks
– Free address labels
– Free deposit by mail envelopes, postage already paid
– Free use of any ATM, anywhere. Any fees I am charged by the ATM owner are refunded to me in my account
– Checking account pays 0.60% APY
– No account minimums, fees, charges
– And for the brokerage, they have $8.95 trades, no-fee ETF’s, and no account minimums

While they are still a bigger bank than a local credit union, they are nowhere near the size of BofA or Wells Fargo – and that’s what I was trying to get away from. I have grown very tired of hearing about big banks and their problems, and then watching them hand out million dollar bonuses while nickel and diming me to death. So, I moved my money somewhere else. And if Schwab starts doing it too, I will leave them as well. But for now, I am very happy.

How about you? Have you moved your money to a different bank lately? If so, why? Many are participating in the “Move Your Money” campaign as of late – are you?


Lemonade the Movie: A Free, Must-Watch Documentary To Inspire You.

If you haven’t already seen, or possibly haven’t even heard of, Lemonade the Movie, you need to go watch it ASAP. I watched it online last week for free and was terrifically inspired by the 35 minute film. It is about what people who were once paid to be creative for a living do when they’re laid off – it was great. Way too often I hear people complain about the fact that they hate their job or their boss, yet they stay in the very place that drives them crazy for years and years. Well, most of the people featured in this documentary got laid off from jobs they actually liked…and used it as a catalyst to discover things they enjoy even more. It’s about 16 advertising professionals who lost their jobs and found their calling, encouraging people to listen to that little voice inside their head that asks, “What if?”. This same little voice plagued me for years in the corporate world before I finally had enough and just said “enough” – and walked out the door without a backup plan. And I haven’t looked back since. Sure, sometimes things are tight and sometimes they are going really well…but I work for myself, doing something I enjoy, and there is still food on my table and a roof over my head. What more could a person ask for? Well, the people in this film are doing practical things that they love and making it work. It should be a “must-see” for everyone as a reminder that you don’t have to stay in a job you hate – you have other options if you start brainstorming a bit. Take a look at the trailer for the film:

I absolutely love hearing stories of people doing something different with their life than they were “used” to doing…and succeeding. So this was a great reminder that no matter what happens in life, you DO have other choices. When life gives you lemons, make lemonade. And even if you like the lemons you have, what else could you be doing that may be even better? Watch Lemonade the Movie over at Hulu.com and be inspired by these stories.

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