Default Credit Card Interest Rates to Increase Across US By Mid-May 2009

February, 2009 was a month of change, yet not the type that the average credit cardholder needs. Credit card lenders spent the month advising tens of millions of customers across the U.S. that their credit card interest rates were about to change. This article discusses these rate changes and the options available for the credit cardholder who carries a balance.

EXPECT INTEREST RATE INCREASES BY MID-MAY

The across-the-board increase in interest rates may prove to be a death blow to the finances of millions of Americans who are in debt and have lost their jobs. An argument could be made that, for American corporations to betray the American people in this way, when taxpayers are being called to bail out some of the largest and richest financial institutions in the world, is not just unhelpful, but unpatriotic.

Yet, no hyperbole is required to know that these increases are bad news for the cardholder who carries a balance. The good news - if there is any - is that not all increases are effective immediately.

The typical letter has informed the credit cardholder that his interest rate is going up in about 90 days and, for many, that's around the middle of May, 2009. So those cardholders still may have time to formulate an escape plan.

Second, purchase rates - and the balance carried on the purchase segment of their credit card accounts - will not necessarily be affected, or not right away. Most of these notices are informing credit card customers that their "default" rates are going up.

MORE BRUTAL "DEFAULT RATES"

Not every customer understands what a "default" rate is, or that not all credit card accounts have a default rate.

For those accounts that do have a default rate, it is best described as a penalty rate. Higher than the rate that the customer has been paying, it is the new percentage to which the interest rate on an account "defaults" when the cardholder has violated the terms of his credit card agreement.

Being late with a payment twice in one year is one example of what has, in the past, triggered an account to automatically default to a penalty rate. Since these default rates are increasingly brutal - they can be 25% to 30% per year or even higher - being on time with each credit card payment will now be a matter of survival.

WHAT TRIGGERS A DEFAULT RATE

In general, an event that results in a penalty fee can trigger the default rate. Such events include being late with a payment or exceeding an account's credit limit. And, although some account terms stipulate that there must be two such incidents in a 12-month interval, other accounts require only one.

EXAMINE YOUR STATEMENT FOR CHANGES

However, not only default rates are being changed. Millions of customers whose accounts have had a 7% to 8% APR for the last few years are also having their rates increased. Typically, the rate is being doubled.

There are three credit segments (purchases, balance transfers, cash advances) on every credit card account and, most typically, three different interest rates: purchase rate, balance transfer rate, and cash advance rate.

The interest rate on any - or all - of these segments may be affected by these across-the-board increases. Any or all of those three can default to a higher rate should there be a "default rate clause" in the cardholder's terms that an event, such as a late payment, triggers.

HOW TO RESPOND

Options at this point are limited for most credit cardholders.

When a credit card company doubles the rate on the balances it is carrying for a customer, that's a signal that it is no longer worried about losing that customer.

As a result, it is unlikely that such a customer will be able to call and negotiate his way back to a lower rate, although certainly he should try. Be aware, however, that even should he get the new rate "lowered," it is likely to still be higher than the rate he was paying before these changes began.

Most credit cardholders will need to pick one or more of the following options, discussed in more detail below.

• Pay off as much as possible using savings and/or other assets.
• If possible, transfer high interest balances to low-interest accounts.
• Choose to "opt out" of the new terms BEFORE they come into effect.

Plus, every credit cardholder affected would be wise to write to his Congressional representative with these requests: 1) that the credit card reform legislation slated to go into effect in 2010 be made effective immediately, and 2) that the interest rate increases being implemented as of January 2009 be rolled back.

PAY OFF AS MUCH AS POSSIBLE

Obviously, if at all possible, the best move is to pay off any credit card balance prior to the date on which the new rate takes effect. For those who carry balances, yet who have savings with which they can pay off those balances, the advice is to pay off the debt.

While it's frightening to give up a nest egg in these economic times when layoffs are increasing, it's the smart thing to do when it means getting out from under an interest rate of anywhere from fifteen to thirty percent because it reduces the cost of living. For those who have no savings, yet may have other assets convertible to cash, again, the advice is to do whatever is necessary to get out from under the tyrant's foot.

And, as independent as we Americans like to be, it may be time to downsize and/or share living space in order to reduce the cost of housing, and then apply the savings toward becoming debt free.

TRANSFER HIGH INTEREST BALANCES

This is not the panacea it once was. While it may be possible to still find a six-month or one-year 0% promotional offer, it may come with an upfront balance transfer fee that contravenes any savings. Credit cardholders must pull out their calculators and do some number crunching to see whether a balance transfer makes sense since it is a stop-gap measure that will buy time and nothing more.

The credit cardholder who gets a great offer must expect a heavy shoe to drop after the promotional period expires. The non-promotional interest rate may, in fact, be higher than the one the credit cardholder escaped. Plus, should he be late with a payment or go over his limit during the promotional period, his rates may be raised dramatically with just a 15-day notice.

Once a balance is transferred, the credit cardholder must put the card away and not use it, unless there is a penalty clause for not using the card. Should there be a requirement to make at least one purchase per month on a card, the cardholder is advised to mark his calendar and, once in each billing cycle, use the card to buy himself a cup of coffee in order to circumvent the penalty.

Goal number one for the credit cardholder during this time is to do anything he or she can to pay that balance off, before the rate is raised.

"OPTING-OUT" OF THE RATE INCREASE

When a credit cardholder's rates are scheduled to be raised, he will, typically, be given an "opt out option" which will allow him to freeze the balance on his credit card account at the "old" or existing rate that he had been paying.

This, however, requires that the account be closed for all other purposes except repayment. Also, the credit cardholder must "opt out" BEFORE the date upon which the rates are going to change. Should he opt out of the rate change and agree to have his account closed, he will then be able to pay down his balance at the old rate.

Once his rates have been raised it is too late to exercise this option.

CONCLUSION

Credit card lenders are raising interest rates for tens of millions of credit cardholders across the United States. The interest rates that may be affected on a cardholder's account may include any or all of the following: purchase rate, balance transfer rate, cash advance rate, and/or default rate. Most of these increases will be in place by the middle of May, 2009.

The options available to credit cardholders who are carrying balances appear limited to: 1) paying off as much of their balances as possible before the new interest rates take effect, 2) attempting to buy time in which to pay off their balances with low-interest promotional balance transfer offers, and 3) "opting out" of the new rate in exchange for closing the account and paying the balance off at the last interest rate in effect.

There is, however, nothing to prevent the savvy credit card holder from combining strategies. He can do a balance transfer to an existing card that has had a low rate (not promotional) and then opt out of the rate increase on that card, provided that he can do both before the date on which his new rate comes into effect.

Credit cardholders are also advised to write to their Congressional representatives and ask for credit card reform legislation, slated to go into effect in 2010, to be enacted immediately, and for 2009 interest rate increases to be rolled back.

Warning Credit Crunch Brings Out the Loan Sharks

If any of you are old enough to remember the effects of the last major recession in the late '80s and early 90's, you will recall that with the collapse of stock market prices in 1987 even greater than the 'great recession' of the 1920's. For several years after, personal savings, along with many stock-market related investments, suffered badly, leaving many families very short of cash.

In the UK this recession not only sent house prices tumbling, but also inflation, which had been running at around 4.2% in 1987, climbed to over 9.5% in 1990. People's savings were hit in every way conceivable because of this.

So many families ended up being out of pocket for many of the essential of life, including food, turned to the 'doorstep loan shark' for instant money, not realising the draconian penalties that were attached to many of these loans. Interest payments sometime greater than 100% were being charged, and sometimes enforced by men in black wielding baseball bats.

But those days had long since gone forever we thought, especially with the advent of buckets of 'cheap' money being offered to the consumer from every angle, whether from high street banks, credit card companies virtually forcing you to take on 0% interest rate credit cards, and low interest refinancing on your own home ... or so we thought.

Now with this global credit crunch happening in a deeper and more threatening manner squeezing the very liquidity out of main stream banks, facilities like 125% mortgages on homes have disappeared, first time buyers are going to have to stump up bigger and bigger deposits, and more and more credit card companies are cutting back on your card spending limit, or in cases like EGG, cancelling well over 100,000 credit cards.

With this lack of liquidity between banks means that more and more consumers are being squeezed out of any available mainstream credit and this foretells the return of the doorstep lender, with interest rates around 100% in many cases.

Now in the UK at least this in itself is not illegal, believe it or not, but the trouble will come when authorised 'friendly societies' that offer a genuine helping service to people in need will get mixed up with the old-style loan shark, with ludicrously high interest rates (100% or even more), plus all sorts of nasties if payments are not made on time.

The moral of the story has to be that increased indebtedness is going to be more prevalent over the next few years, but you should really look at your options carefully - even bankruptcy, rather than fall into the clutches of these parasites that will bleed you dry.

Credit Card Consolidation

Consolidate! It seems to be the new fad in the world of consumer debt—the magic bullet that will effectively rid your life of all problems with credit card debt.

The advertisers, credit counselors, and financial experts are all shouting out:

“Slash your interest rate!”

“Save thousands of dollars!”

“With one low, monthly payment you’ll have extra money!”

And you know what? Consolidation can be a great option for digging your way out of credit card debt. But what the advertisements don’t tell you is that it’s not a magic bullet. Consolidation is a re-payment plan that is successful only when you are determined to do what it takes to make it work. It will take planning, determination, and a little elbow grease. But you can do it! Here’s what you need to know.

Find the Underlying Cause

The first step in any debt re-payment plan is determining the underlying cause; otherwise, the problem will happen again and again. Typically the problem is not the credit card itself. They are a great tool of convenience and security. Many people use them in a financially responsible way everyday. So if the problem is not the credit card, what is?

Overspending Habits

Let’s go ahead and face it. Sometimes the problem comes with just the bad habit of spending too much money. Credit expert Gerri Detweiler, author of The Ultimate Credit Handbook and founder of DebtConsolidationRx.com, says the two largest areas people tend to overspend is in the area of food and transportation. She’s heard of people spending $160 a month at the office vending machine! So maybe it’s time to take a reality check. Spend a month tracking every single expense down to the penny to see where your money is going. Then take the time, and maybe even help from a credit counselor, to setup a budget and a plan to stick with it.

A Life Crisis

Emergencies happen to everyone. Unfortunately people we love die, life-long careers disappear, and, as we’ve all seen in the news lately with Hurricane Katrina, natural disasters create havoc. All too often we are unprepared for such events and we end up putting a lot of expenses on credit cards. As you analyze your budget, it’s a good idea to determine a set amount to save each month for emergencies. Ideally, if your budget allows for it, a good amount is 5-10% of your take-home income. But if you can’t manage that much, then set aside as much as you can.

Big Life Events

Now I’m talking about events we expect—weddings, babies, college educations, family vacations, etc. Don’t let these events sneak up on you without some financial planning. The earlier you start, the better off you’ll be. And if for some reason the anticipated event doesn’t occur, at least you’ve built yourself a nice little nest egg.

Setting Aside Credit Cards for a Time

When you start consolidating debt it’s important not to accumulate any new debt. Trying to deal with a consolidation loan along with new consumer debt only builds layer upon layer of financial trouble. The accounts don’t have to necessarily be closed, but at least put the credit cards in an inconvenient location such as in a cup of frozen water in the back of the freezer, a safe deposit box, or even six feet under in your backyard! Once the consolidation loan is paid off, you’ve brought your finances back under control, and you’ve learned new healthy financial habits, then go ahead and bring them out from hiding if you want.

Lower Payment vs. Lower Cost

A big mistake many people make when consolidating debt is looking at the payment amount alone. Sure you can lump all your payments together into one low monthly payment, but what is your interest rate, fees, and length of the loan? A $5,000 loan at 10% for 15 years with a monthly payment of only $53 will cost you $2,000 more than the same amount at 18% for 5 years with a monthly payment of $126.

Consolidation Options

Now let’s take a look at some of the options for consolidating. When it comes to consolidating your credit card debt you have several options at your disposal, each with its own set of pros and cons. Here’s a brief description of some popular options along with their relative pros and cons.

Low-Rate Credit Cards

If your credit rating is good enough to qualify for a low-rate credit card, possibly even a zero percent introductory rate, transferring all your higher rate credit card balances could be a good option. This option generally works best if you can pay the balance off within one year. Check out our Card Reports section to evaluate different low-rate credit card offers.

Pros

• If you qualify for a low-introductory rate card you may get the benefit of not paying any interest for a time.

Cons

• Excessive transfer and new account activity on your credit history could cause you to have a poor credit score. This is bad when your low-rate credit card expires and you aren't able to qualify for a new card. You could be stuck with a high interest rate.
• Watch out for balance transfer fees. Fees could potentially outweigh any interest savings that you might realize.

Home Equity Loan or Home Equity Line of Credit

Because you’re using your home as collateral for this type of debt, it’s imperative that you really understand your repayment plan and deal with the issues that got you into debt in the first place. Detweiler suggests this is not a good option in a hardship or crisis situation, including a job loss, since failure to pay back a home equity loan could result in the loss of your home.

Pros

• Usually a lower interest rate.
• Interest is normally tax deductible.
• Your monthly payment will usually be lower so you can use the difference between it and your fixed monthly debt payment to start building an emergency fund.

Cons

• You will be trading unsecured debt for secured debt putting your home at risk. If you miss even one payment you could lose your home, whereas if you left it as credit card debt you would still have a place to live.
• You could end up paying a lot of money in fees such as closing costs and appraisal fees. Make sure you shop around to find the best deal.
• The entire loan must be repaid before you can sell your house.

Personal Loan

Because of the potential effects of high credit card debt on your credit rating it may be difficult to qualify for an unsecured personal loan with a decent interest rate. If your credit rating is good you may qualify for a rate in the low-teens, but if it’s poor you may end up paying around 20 percent. Shop around at a variety of financial institutions including credit unions to compare the cost of fees and interest. And be aware that generally the extra products they try to sell aren’t worth the cost you’ll pay.

Pros

• Can get good rates, especially if you are a member of a credit union and have good credit.
• Unsecured so you don’t have to worry about losing your home.

Cons

• Your credit rating could drop further because of credit inquiries, closing old accounts, and opening new accounts.
• Additional fees.

What Are Interest Free Credit Cards

Credit cards that charge no interest on your purchases or on your balance transfer for a certain period of time are said to be interest free credit cards. This interest free period is for a certain time and limit. This gives you the chance for more shopping around and spending without any tension of being levied any extra amount. Thus you can save a lot on these cards.
At times it is so that the interest you pay would depend entirely on how good or bad you fair in credit ranking. Your annual income and nature of past payments also matter a lot. If you have had a bad credit history then you might have to pay a higher interest as compared to those who have good credit ranking. Thus, by paying off your balance on time or even before the due date you can easily assure the interest free credit card for your good credit ranking. Today all the major credit card companies provide customers with interest free credit cards whether they are Virgin credit card or Egg credit card or even Natwest credit card accompanied with additional offers.
Any interest free credit card can prove very advantageous for you by many means. This option gives you the chance of balance transfer and helps you to pay off your existing outstanding balance of your borrowings without added burden of interest. This card proves to be the handy tool when you are looking forward to a big purchase and want to repay in the easy installments. This card proves to be a boon for you if it is used wisely. Unfortunately the credit card issuers generally hide the actual APR and which comes into picture once the interest free period is over. This proves hard because now you have to pay more than what you may wish to.
Interest free credit cards are a great option for those running into high debts. Since, you can get an opportunity to pay back your debts without mounting any more of them. But do not let the concept of interest free credit cad pile up your debt any further. Within that interest free period you have to repay your outstanding amount within the stipulated period. The best way to find the interest free credit card is to go for a detail market research, seeking all the avenues available for the information and then go for any credit card.

A Guide to Building a Nest Egg One Paycheck at a Time

It's a very rare person who has become a millionaire at an ordinary jobs working ordinary hours - or is it? From the waitress who made her millions through smart investing to the normal couple next door who are sitting on top of a sizable nest egg, becoming wealthy isn't a matter of striking it rich with the lottery. In fact, no matter what job you have now, it's possible to build a nest egg - one paycheck at a time!
If you're ready to have the kind of nest egg that you've always dreamed of - and a future full of financial comfort - then here's your guide to saving a serious chunk of change:
Work On Your Performance. Sure, you can start saving money with the paycheck you have now - but earning a promotion would make that process a lot easier! Despite the recession, it's still possible to earn a boost in your salary; you'll just need to get all your ducks in a row first. Streamline your performance in the workplace, start impressing your boss and negotiate a better salary - you'll be surprised at how likely it is to earn a promotion!
Invest, Invest, Invest. Think that you need to earn a second degree in finance in order to make millions in the market? Think again: investing under $300 each month at the age of 25 will see you attaining your first million by the time you reach 65. The older you are, the more you'll need to put aside towards investing, so calculate this into your monthly budget to make sure you stick to it.
Avoid "Get Rich Quick" Schemes. Ever see those "make money at the push of a button" ads when you're surfing the internet? As tempting as it may be, avoid these schemes at all costs, as they'll only drain away your hard-earned cash. Many internet programs fall under this category, so remember this key advice: getting wealthy takes a lot of effort, so if a program is promising otherwise, run for the hills!
Contribute Your Maximum To Your Retirement. Saving a bit of your paycheck every few weeks won't make you an instant millionaire overnight; however, putting money into your retirement fund will make you a millionaire by the time you retire. Contribute the maximum amount to your retirement fund, and you'll live out the rest of your days in financial comfort and luxury.
Stay The Course. Saving can be an arduous task, especially if there are certain luxuries that you can't live without. These temptation pitfalls are exactly why you should set up smaller goals along the path towards wealth - they'll keep you in check, make you feel encouraged and consistently remind you about your inevitable path towards a sizable nest egg!
Saving a bit of paycheck after paycheck won't have you living the life of luxury in a few years; however, if you do it right, you'll be seeing those seven figures by retirement!

The Credit Crunch Finding Money and Loans

With the current economic meltdown, much of the media's attention is focused on Wall Street. But what about Main Street? Yes, the stock market has plummeted, and yes, there is a lot of blame to go around. The federal government has bailed out huge corporations like Fannie Mae, Freddie Mac, and AIG. They've arranged for some companies to buy out other companies. They've enacted legislation that will pour $700 million into the ailing U.S. economy. But it appears that each of these rescues or bailouts has largely served the interests of big business, and hasn't addressed the real fallout: the credit crunch that is making it difficult for people to find money and obtain loans.

Hanging On

In times of economic scarcity, lenders tend to hang onto their money. The freezing of the credit markets is often reported in the context of affecting the ability of business to get operating capital to make payroll, pay their vendors, and so forth. But what about the regular people who live in the U.S. who may desperately need loans but who don't have the credit necessary to obtain them?

The Good News

Well, the good news is that there are still ways for people with poor credit to get loans, and for people who are in financial straits to find a way out of the morass. The first step is to take a deep breath and calm down. In order to find viable solutions, you have to think clearly and go about the business of finding the right resources that will help you to solve your problems.

Potential Solutions

There are any number of ways that people can get credit, repair credit, and obtain loans. Here are just a few:

Credit Cards - There's a chicken-and-egg dilemma with credit cards. To improve your credit, you need a credit card, but in order to get a credit card in these tough times, you need good credit. The solution? Selectively apply for credit cards. First, start with a secured credit card, which is similar to a debit card in that the money you charge is withdrawn from a savings or checking account. Once you establish a track record with the company, they will most likely issue you a credit card. Another tactic is to apply for a store credit card. You'll likely have a low credit limit, but that's okay. The idea is to charge something small each month, and then pay each bill on time. A history of on-time payments is a surefire way to build your credit.

Eliminate Debt - In order to get your credit back in good standing, you should take decisive steps to eliminate your current debt. You can often negotiate lower interest rates with lenders, and then focus on paying off the highest interest rate loans first (but make sure to continue paying the minimum payments on the other cards or loans).

Debt Consolidation - If you have a lot of debt, your best bet may be a debt consolidation loan. This will enable you to make one monthly payment instead of a dozen different payments. The key here is to resist the temptation to rack up additional debt.

There are many more potential solutions for bad credit loans, debt restructuring, and other money issues. A good online source will tell you where the money is and how to get it, as well as provide valuable advice about all the options open to you.

Is A Big Green Egg As Good As They Say It Is

Do we believe the hype? I've read the brochure, visited the website and watched all the DVDs. In fact if there's any piece of promotional material for the Big Green Egg that I haven't read I'd be surprised and it all sounds too good to be true. That is of course if you are a barbecue nutcase like me!

If you're lucky enough to live in North America (and to some extent in Europe) you've probably heard of a Big Green Egg but I have to confess that it wasn't until I started to publish my smoker grill recipes that I actually discovered the Egg and it's humble origins in the Orient. I was intrigued, but living in the UK, how do I get hold of one? I phoned Big Green Egg in the US, they were really helpful and everyone that I spoke to said they cooked on an Egg and all year round at that! OK I'm sold, I've gotta have one to see what all the fuss is about.

To be fair, it was a big decision because these ceramic barbecues aren't cheap and by the time it landed at my door in England it has cost me the best part of $2000. It had better be good. So am I happy?........ABSOLUTELY!

It's the middle of winter and I'm outside preparing the charcoal, my neighbors are looking at me as if I'm demented but my kids are so excited when I tell them that it's ribs for supper. I have my own favourite barbecue sauce recipe which I use first as a marinade, then as a mop and finally I warm it up for sauce. Good use of ingredients and just the right amount of chilli. The best bit of all is that I get the last laugh as the smoke rises over the fence into my neighbours garden and they get the aroma full on!

I do my ribs for about an hour per pound at a temperature of 225°F with the plate setter in place for indirect cooking. To maintain a constant temperature I find that leaving the bottom draft door open half an inch and the small vents on the top daisy wheel open half is about right but once you're in the vicinity use the daisy wheel to fine adjust for the final preferred temperature.

There's a couple of things that I found out using the Big Green Egg that I'd like to share with you and the first is the economy and thorough burning of the charcoal. Compared with a conventional BBQ grill the consumption is so low and any charcoal not burnt just stays in the firebox until next time. The other point is do take care to clean out the ash on a regular basis otherwise this will prevent you getting up to the higher temperature ranges. I clean mine out after every third cookout but I guess this depends on how much ash you're generating.

So should you believe the hype? In my view, the answer has to be yes. It's everything that they say it is - and more (I use it as a tandoor and do Indian cooking on it too!) so I'm going to be cooking on mine for many years to come.

Accelerate Mortgage Payments to Plug the Hole in Your Nest Egg

If you are planning to pay off your mortgage, making acceleration mortgage payments may be the most effective way to pay off your mortgage faster and save thousands of dollars before you retire.

There are many ways to paying off your mortgage, know that the gateway to living a debt free life is to decide that you want to be debt-free and that youre willing to do whatever it takes for you to live that kind of life.

Accelerating mortgage payments allows you to escape from the risks that come with investing in the stock market. When you pay off your mortgage debt, you will be able to spend all the extra cash you get from your employer the way you like. Thus, paying off your mortgage and accelerated mortgage payments are seen to be wise financial strategies.

There actually are a couple of benefits that paying off your mortgage will allow you to enjoy. If you decide to spend a little more from what you are earning, youll be able to live a debt-free life in no time. A settled mortgage debt is synonymous to having extra cash left to spend at the end of every month. Talk about spending a lifetime of financial independence.

There is no better feeling in the world than not sending a check to your bank for the mortgage payments every month. For some of us this mortgage payment may mean 30 to 40% of our paycheck that goes directly to mortgage debt each month.

The biggest obstacle to paying off your debt may be your monthly financial commitments.

Because banks tend to design mortgage payment processes to be favorable only to them, you can be assured that you are not alone in this kind of situation.

Even if you spend extra money on mortgage remittances at the beginning of the term, you would later find out that most of it goes to mortgage interest. This somewhat annoying fact will later make you decide against paying off your mortgage ahead of and time.

There is, however, a technique that will allow you to make accelerated mortgage payments, get your mortgage paid off 13 years earlier, and lets you save more than $63,000.

They call this accelerated mortgage payment technique mortgage acceleration.

Mortgage acceleration is a payment system that helps you make sure that you will not be incurring additional expenses when you pay off your mortgage faster. When you choose to pay off your mortgage using this method, you will be borrowing money from a low rate account to pay for mortgage which is regarded as a high rate account.

Take for instance, you already have two loan accounts, one at a rate 0f 3% and the other at 6%, would it be wise for you to borrow money from the 3% loan to get your 6% loan account settled?

Of course you would and you would end up saving thousands of dollars in the process.

Mortgage acceleration is a method that uses a home equity line of credit to pay off the first mortgage. The simple trick is done by depositing your money and paying your bills directly from the home equity line of credit which you can convert it to the HELOC that has a 3% interest rate. And when you borrow money in small chunks from your HELOC and pay it off to your mortgage, you could end up paying off your mortgage 13 years faster.

The best thing about this is that you dont have to go out of your way or have your mortgage refinanced just so you can get pay off your mortgage in full.

Discover How to Retire Debt Free With a Nice Nest Egg Too

Not so long ago most Americans retired debt free, or close to it, and it was considered the norm, but that was then. Right now however, a growing of Americans are entering retirement buried under staggering amounts debt, including home-equity lines of credit, partly paid off mortgages, credit card debt and auto loans.

For many decades, there was extraordinary asset growth and low interest rates, and that combination allowed people to increase their net worth easily and significantly, and that in turn, made the paying off of debts a relatively painless experience. It was always expected however, that the baby boomers would encounter a few bumps further down the road, but it was never seriously considered that the road might disappear completely!

Debt laden baby boomers have now become a major worry, and it's not surprising, given the facts.

Over a fifth (22%) of baby boomers presently owe at least $50,000 in non-mortgage debt, and just two short years ago, only 12% had debts of that magnitude. Right now, four out of ten baby boomers owe more than $25,000 in non-mortgage debt, compared with one third in 2007. According to various polls, the present recession has positively changed the way that many Americans are thinking and acting, and many Americans are now looking at ways to save money, and they're trying to pay off their car loans, credit cards, mortgages, home-equity loans and overdue bills. The big exception to the above, if you haven't yet guessed it, are the baby boomers. They believe that they'll retire debt free, and seem to think that it will somehow just miraculously happen.

Most of them are not willing to make any lifestyle changes.

If however, you're a baby boomer who realizes that there's going to be a problem if you don't make some changes fast, then here are four tips that will hopefully be helpful.

1) It might seem like a good idea to borrow money from your 401(k) to pay down your debts, but don't do it. It's a low cost solution and therefore seems like a great idea, but it could create real problems if you get laid off.

In almost every case, a person that stops work is required to pay off the loan within 60 days.

2) Work either full-time or part-time for as long as you're able, so as to eliminate as much debt as possible before you retire. Remind yourself from time to time, that paying a mortgage and trying to pay off debts at the same time, while living on a fixed income wouldn't be a whole lot of fun.

Do the work now, pay off the debts, and then retire.

3) Should you pay off debts, or save for retirement?

There are differing opinions on this one, but I'd suggest doing both at the same time.

It will obviously take longer to pay off the debts, but it also means that you'll have some money set aside for retirement, and the savings habit can be a real good one to get into. Once you start saving, your mindset will change and you'll start to think like an investor, and will become less prone to impulse purchasing.

Let's take a quick look at some figures, which will hopefully help to put things into perspective.

a) A debt of $15,000 at an interest rate of 24% would take five years to pay off, if you paid $432 per month.

b) However, you'd pay off the same debt, with the same interest rate in nineteen months if you paid $1000 per month.

If you went with (a) you'd be able to save $600 per month, and be debt free in five years, plus you'd have a nest egg of around $41,000 - assuming that you got 5% rate of return.

Going with (b) you'd have close to $45,000 in your retirement account, so on paper it looks like the best deal.

Most behavioral finance experts would recommend plan (a) however, because they believe that most people would lack the willpower to pay off their debts, as required.

4) Means looking at, and then probably changing your lifestyle, and your spending habits. For a pampered baby boomer, this is one of the most difficult things to do, and it's often suggested that one way to help break a lifetime habit of spending, is to to reward yourself every time you eliminate a piece of your debt.

If you have a partner, then it's really important that they want to get out of debt too, because if they don't then the odds are against you.

If you haven't got a partner right now, but might consider one, then try to make sure that he or she either has no debts, or at least shares your desire to be free from them.

Borrowers Should Get To Grips With Credit Report

Those looking to get a loan or access any other form of borrowing should get to grips with their credit report, it has been suggested.

According to Equifax, an increasing number of Britons are becoming concerned that their credit history may not be good enough to secure them a type of credit. The company's announcement follows a decision by credit card provider Egg closing 160,000 of its accounts because their customers do not have a good enough financial rating.

Following on from this it is possible that prospective borrowers are increasingly unable to get cheap loans or other cost-effective financial products.

Neil Munroe, external affairs director for Equifax, claimed that the move by Egg reflects the general tightening of access to loans and other types of credit throughout Britain. He said: "Since the credit crunch last summer, we have seen a number of lenders tightening their credit granting criteria with the result that some consumers have not been able to get the credit deals they wanted. This goes to reinforce the fact that credit is not a right - and that consumers need to understand what lenders are looking for when granting credit and operating credit card accounts."

The director pointed out that prospective borrowers must remember that money lenders not only want to ensure that customers can afford to make repayments but also look at them from a "profitability perspective". However, it was suggested that although access to credit is diminishing, taking out a copy of their financial history could assist borrowers in getting a loan or other borrowing product.

He added: "What Egg's decision does indicate more than anything is that consumers need to be as well informed as possible about how they look to a lender. Many consumers see the credit process as a complete mystery - something over which they have no control. But that doesn't have to be the case."

To help improve a credit file - which in turn may help to secure access to a cheap loan - Equifax advised consumers to ensure that they are registered on the electoral roll and that more than the minimum monthly repayments are made on credit agreements. By doing so the credit reference agency claimed that borrowers will be able to pay back their debts at greater speed and will be able to build up a positive repayment history. In addition, those who have gone through a change in circumstances, for instance being made redundant or getting divorced, which has seen them fall behind in making repayments, were advised to ensure that such alterations are reflected in their report.

For those concerned about their ability to manage their money over the course of 2008, applying now for a cheap loan could be advisable. In taking out this type of UK loan it is possible that consumers can meet a number of demands on their spending quickly and efficiently. However, getting a copy of their fiscal report beforehand may help borrowers to spot any discrepancies with their file, allowing them to rectify such errors with creditors and improve access to online loans.

Research carried out by Axa in December indicated that four million people think that problems in getting to grips with their finances have caused them to develop an adverse financial status. Those consumers who have a poor borrowing background but are confident they can now make repayments, however, could find that a bad credit loan is of assistance.

Avoid These Retirement Nest Egg 'Bandits'

After you have spent your whole life to date skimping and saving to accumulate enough funds with which to retire on, the last thing you want is to have them 'taken' from you, right? Unfortunately, there are many subtle and legal 'Bandits' that can rob you of your comfortable retirement.

All of these are perfect legal and most people give in to them willingly without thinking of the negative effect that they have on their nest egg. They have become routine expenses and are thought of as being minimal, but when you add them all together, their aggregate cost can be incredible!

Here are a few of the most obvious nest Egg 'Bandits'

Credit Card Interest

When you are on fixed income, you obviously need to also 'fix' your expenses so that you don't get into a negative situation. Whenever you use a credit card to purchase something that you don't have the cash for, you unconsciously agree to pay interest on that item in order to have it now. Debit cards, on the other hand, can be used at the same merchants to purchase products and services with the funds immediately withdrawn for your account. With a debit card, you never have to pay interest charges. For retirees on fixed income, credit card interest is perhaps the most violent of 'bandits'!

Brokerage Charges and Fees

When you invest your nest egg in stocks, bonds, index funds and mutual funds, there is usually a 'load' or brokerage fee or other thinly masked cost associated with the investments. You can research any mutual fund, stock fund, or index fund and look for their 'Expense Ratio". This is a number, expressed as a percentage that will be collected each year, out of you invested funds, for the honor and privilege of owning that particular account.

For mutual funds, this fee is somewhat higher since you have to pay for the team of people who routinely manage the fund on a daily basis. Since index funds are invested in a whole market segment, there is no management or research team and there is little buying and selling going on. Therefore, Index funds normally have Expense Ratios (.02% - .80%) considerably less than managed Mutual funds (1.2% - 3.4%). These fees can be 2% to 3% or more of your money and that's a pretty heavy load for you to carry when you are trying to live off of your investments.

After deducting fund's expenses from your profits, very few stock mutual funds have outperformed the index or the markets over the years. The broker's argument is that, through their careful management of your money, you earn considerably more in their fund than can be had elsewhere. That, in itself, may be true, but you must deduct the funds expenses before comparing. The only thing that is very certain is that they will deduct their fee from your funds!

Index funds are perhaps the best way of minimizing the expenses related to your nest egg investment. There are all sorts of index funds, Large Cap, Small Cap, Real Estate Investment Trusts (REIT's), Bonds, Emerging Markets, International, etc are just a few of the index fund types that are available with a very small expense ratio.

Service Contracts

Whenever you purchase an appliance or a car or some other 'big ticket' item, it is increasingly popular for the dealer or vendor to offer you an extended warranty on the product -for a fee. These typically extend the manufacturer's warranty for an additional period and can cost from 2% to 8% of cost of the product. More than 90% of extended warranties are never utilized and this is a very high profit item for the vendor. They routinely pay their salespeople very high commissions for selling these 'add-on' contracts.

Extended Warranties and Service Contracts are normally insurance products and the insurance company will pay the repair or replacement cost of the product should there be a problem after warranty expiration. By refusing all such extended warranty offers, you will likely save considerably more money than you will ever have to pay for out of warranty repairs. Avoid this Nest Egg 'Bandit'!

If you think about it, there are several of these bandits to avoid. If you do so, you can enhance your Nest Egg considerably! It is not difficult to do.

The Credit Card Debt Pay Off

There's a difference between taking control of your finances and letting your finances take control of you. The results vary, of course, but when finances - particularly financing involving credit cards - are taking control over an individual, debt is the awful and too familiar end result. Yet, at the same time and conversely so, one of the most tangible financial issues anyone can easily take complete control of, conquer and even, dare I say it, pay off, despite popular belief, are substantial amounts of credit card debt.
Don't Get Caught Up and Give Up
The worst thing a credit card indebted individual can do is get overwhelmed by their credit card debt, subsequently leaving it to sit and linger. This is major financial mistake number one; do not sit on credit card debt. You're not a hen and your debt is not an egg. Leaving credit card debt to stay stagnant and hence, accrue interest, is blocking off a clear path to future life options, particularly ones calling for polished financial standing. Financial goals such as buying a car or even owning a home could be jeopardized if credit card debt is not dealt with immediately and in a well-done manner. Bad credit means difficulty for anyone seeking upcoming and monumental purchases.
Doing Well Means Getting Organized
Firstly, you must get your, well...stuff together. Despite the mess, gather all the credit card information and place it down on a table, a big, long table. You must then be prepared to tally the necessary information needed to see just how bad a credit card debt scenario is. Take note of balances due, the actual due dates and the payment amounts required (both minimum and higher payment options).
Factor in if you have multiple balances -like most individuals do- on different cards. What are the balances like? Are there a few smaller balances and one large balance, or vice versa? If so in either case, then you might be in need of some consolidating, simply to make some sort of headway on those due credit card payments.
Making headway on payments though, can be a curious event, simply because there are numerous options one can take. Regardless of which option is selected in the end, some progress is assuredly being made in lessening your debt.
Highest APR Balance Pay Off Option
This makes the most monetary sense, paying off the credit card balance with the interest rate which hurts the most, financially speaking. Take all your multiple balances and pay off the one with the highest APR rate first. Do this until the highest balance is paid off in full then move to the other lower interest rate balances and continue paying them off until each is erased from your financial history, not to mention, memory. Paying off balances this way will take some more money, but stick with it. A great rule of thumb to stick to is paying more than the minimum requirement, even doubling or tripling the amount (when your budget can. Holding strong to such a plan will completely eliminate credit card debt.
On The Other, More Budget-Inclined Hand
Paying off the lowest credit card balance is a great way to ease into paying off credit card debt. Doing this will take longer, yet will provide capability to gain financial endurance (not to mention responsibility), in this case, stamina, to pay off debt slowly but surely. Once the lowest balance is paid off, then it's just a matter of moving onto the next lowest and so on. Think of numbers and figures here. You've got three balances, each varying in financial weight. One is $5,000, the second $2,500 and the third $750. Clearly the third amount is the best option, especially if money is tight and financial stamina is weak and in need of strengthening.