If you are going to be late with your
payment, call your creditor immediately.
Explain your situation. Many creditors
will gladly accept credit card payments
over the phone.
If paying by credit card is not an option,
notify the creditor that you will be sending
payment today. Most creditors will make
notation to your account to avoid late
If you find that the creditor needs payment
by the next business day to avoid late
fees, consider using a payment exchange
service such as Western Union. Their fees
are less expensive than overnight express
If you don't have enough money to make
payment for the month, suggest to your
creditor that you can pay perhaps half
the payment now and the rest next month.
If unemployment, divorce, sickness, etc.,
puts you in a situation where you need
to suspend payments, discuss your situation
with the creditor. Many creditors have
deferment plans for financial hardships.
The key point is contacting and working
with your creditor. Never assume that
your creditors are going to "walk
away" from your debt obligations.
You want to avoid having your account
sent to collections. Creditors will be
happy to work with you if you make a honest
attempt to resolve your situation.
Keep and maintain all records when speaking
with your creditor. Note the date and
time, the person's name with whom you
are speaking with, the issue that you
called about, and the recommendation the
creditor offered. Request a confirmation
or other ID number that proves that you
spoke with your creditor.
These records are important proof in the
event you receive non-payment notification
with penalty fees and other "account
suspension" or "account collection"
What if Collectors
If you receive a collection notice, contact
your creditor immediately. Find out why
your account was sent to collections after
a repayment agreement was reached. Request
that they remove your account from collections
and renegotiate your repayment plan.
If the creditor is unable to help, you
might consider taking the following steps:
Never ignore collections notices
or payment due notices. Get them resolve
as quickly as possible.
Fees charged for scheduled payments that
are past due.
Creditors generally have a 5-10 day grace
period beyond the due date before charging
late payment fees. But note that creditors
are in the business to make money. So
many are moving the grace period up.
Fees charged for making purchases over
your credit line limit.
Your best rule is keep your credit line
balances at 50-60% of the total credit
line limit. This keeps your credit rating
strong and avoids going over your limit.
Fees charged for carrying a credit balance
beyond the 25-day grace period.
Many of these interest rate charges are
around 16-22% — considerably high
penalties for "borrowing" money.
If your credit card balance is $4,800
at an interest rate charge of 17%, your
monthly interest fees will be: $68.00.
If you have the same credit line balance
($2,500) at an interest rate of 9.90%,
your monthly interest fees will be: $39.60.
If you consolidated your debt under a
consolidation program such as a home equity
loan with interest rates at 6% or lower,
your monthly interest fees will be: $24.00
Now consider this:
If you paid just the minimum payment on
a $4,800 credit balance at the average
annual rate of 17% plus 0.005% for principal
reduction, it would take you a little
over 21 years to pay it off your balance
(considering that you did not have any
That means paying $13,376.35 in interest
charges alone, for a total repayment of
$18,176.35 for the privilege of charging
Your best rule is to always payoff your
credit cards each month to avoid interest
rate fees. If you maintain a credit card
balance, you might want to review some
consolidation programs to reduce your
The most common form of payment. You should
schedule time weekly to review bills so
that all debt obligations can be paid
2-3 days prior to their due date.
This is where the creditor to automatically
DRAFTS your money account each month for
the payment due. This is very common for
home mortgages and other fixed loan payments.
Some creditors, especially for home equity,
student loan payments, and other personal
loan payments, will reduce your interest
rate by to 0.25% or more if you use this
feature. This is one of the easiest and
most rewarding ways to pay your bills.
You need to make sure you have enough
money in your account to cover automatic
drafts. You must keep good accounting.
You want to avoid overdraft fees from
your bank and non-payment fees from your
creditor if your DRAFT account has non-sufficient
Automatic draft is best when you have
an overdraft protection account that covers
non-sufficient fund situations.
There are two types of online bill payments:
Bill paying using Personal Financial
Management software (PFM).
These software programs load on your
computer and function like checking
accounts. You simply schedule payments
that are sent automatically to your
There is only one reason for using your
credit cards to pay bills: to build rebate
credit awards. Never take out a cash advance
to pay an obligation. It will cost you
plenty. It is much better to work with
your creditor if cash is short: see
Paying by credit card involves the following:
you pay your obligations with
your credit card
you take advantage of the credit
card's 25-day grace period
you collect rebate awards for
you pay off your credit card in
full each month
You can use your card to pay utility payments,
living expenses, and other family purchases.
— incorrect purchases that was posted
to your account
— purchases that were to be refunded
— payments that were not properly
— fraudulent use of your account
— errors made by your creditor
The Fair Credit Billing act entitles you
to certain protections in the event of
a billing dispute on open-line credit
accounts, such as credit cards, store
cards, etc.) The act does not protect
fixed, closed-end accounts (mortgages,
car loans, etc).
When speaking with you creditor, keep
notes of the time and date, the name of
the person assisting you, and creditor
action to resolve your situation.
Basic Rules of Debt Management:
How Much Debt
The Debt-to-Income Ratio measures your capacity to repay your loan
Basic Rules of Debt Management:
Solving Your Debt Problems
Step 1: Accept
Your first step is to accept responsibility
for your debt. You need to accept its
existence with determination to repay
and control your debt position. Failure
to accept your debt problems will only
allow it to continue.
Understand that your debt has repercussions
on your family and others. Failure to
assume control makes it difficult to save
for college, plan for retirement, and
prepare for family needs. Likewise, your
mismanagement may be carry forward by
your children who learn by your example.
Step 2: Rid
Yourself of Instant Gratification
You must forgo your pleasure of short-term
"wants" for the more important
long-term "needs" to reduce
your debt. This may require:
— buying "used" instead
— buying not the latest gadgets
— buying not the latest trends
— allowing the car to run another
Access to credit cards means instant gratification.
Say good-bye to instant credit and rely
on pre-paid credit cards as your means