My friend and I are classic examples of two opposing views on credit. I charge almost everything to my credit cards and use my wallet’s cash compartment to store receipts. My friend (let’s call her Kate), however, could pay for anything from a pack of gum to an LCD flat screen with the cash she has in her wallet at any given moment.

Although Kate is of the ‘credit cards are evil’ mindset, her views on credit softened after her month-old iPhone was stolen from her purse on a Seattle Metro bus earlier this year. When she realized her phone was stolen, Kate called Seattle Metro and was told all she could do was report the theft to the local police department.

Kate was deflated when she called to tell me about the theft. Knowing her views on credit and doubtful of an affirmative answer, I asked if the phone was purchased using a credit card. I was surprised and relieved to hear that yes, the phone was purchased a month ago by her husband on his American Express card as an anniversary gift. I then told her why that was the smartest way to purchase her phone: a little something called Purchase Protection.

Purchase Protection is a standard insurance program offered by most credit cards, including all American Express cards, Visa Signature cards, Discover business cards, and MasterCard Gold, Platinum, and World cards. This program protects your eligible purchases in the event of theft or accidental damage within 90 days of purchasing the product on your card. That’s right, if you buy something and within 90 days it is accidentally damaged or stolen, your credit card may reimburse you the original purchase price! What’s cash got on that?

Each Purchase Protection plan differs depending on who is offering the plan (i.e. Visa, MasterCard, American Express, Discover), so be sure to review your card disclosures to read program rules. For example, not all purchases are considered “eligible purchases”. Perishable foods, motor vehicles, and custom-made furniture are examples of some products not covered by Purchase Protection plans.

Also, in cases of theft, proof of the theft is often required to help curtail fraud, which is why you should always file a police report or report the theft to local security. Most plans also require you to submit a claim within 30 days of the incident of theft of damage. If you’re able to prove you were unable to submit the claim within 30 days, then you may receive an exception and be allowed to submit a claim.

The day after I explained Purchase Protection plans to Kate, she and her husband contacted American Express and sent in the required documentation, such as the original receipt and police report. The claim was approved in two weeks, followed by an immediate credit to the credit card for the exact amount paid for the phone.

Kate still carries a lot of cash. But she now makes sure her husband is nearby with his credit card if she ever wants to buy anything she wants protected by a Purchase Protection plan.

~¤~¤~

As a prelude, one of the things that gets the most heated debates and arguments is whether credit cards are good or bad! Write a post like this and you will have tons of comments from folks who either love or hate them. The folks who love them say it is just a tool. If you pay it off every month and earn rewards, that is a good thing and a great deal. The folks who hate them say carrying a credit card makes you spend more and that their teaser offers suck you into the debt game. They advocate that you should live a debt free life by steering clear of credit card debt.

Despite their arguments, both camps agree that one should not have credit card debt. I belong to the camp that loves my credit cards for the rewards that they give me. I feel that the main reason why people get into credit card debt is because they succumb to impulse spending. That is almost a result of not budgeting or asking yourself if you really need what you intended to buy. When I graduated from college, one of the things I “had” to buy was some working clothes. Now, being married with kids, myself and Mrs Credit Card occasionally succumb to sales and “nice clothes” which we do not really need. Since we are ok financially, I guess it is OK to splurge once in a while. But for new graduates, I thought I’d compile a list of “must have” guy clothes so that you can use as a check list.

For anyone who has just graduated or are about to graduate, it’s probably time to take inventory of your life, goals, and yes, your wardrobe. One aspect not to neglect before you hustle off to conquer the world is budgeting for a career clothing overhaul. Odds are, you’ve been living in the same college uniform for a while. My guess is, (being a guy) your daily collegiate wardrobe consisted of a couple dozen t-shirts, several sweatshirts with frayed sleeves and odd unexplainable stains and a few pairs of jeans.

What universal items should stock a working man’s wardrobe?

For those who need a traditional suit

• Classic Suit- Start with navy or gray. For those occasions when it comes in handy, a suit is a classic and should be a staple of every man’s wardrobe. Don’t skimp on quality, but do look for bargains. My best advice would be to get a reputable “local” tailor. A reasonable price might be about $450. Forget about designer for now as the going price starts at $800 and you will probably need alterations anyway. My suggestion (if you need working suits) is to get two. Either the classic 2 button or 3 button should work.

• Crisp White or Blue Dress Shirt- One of the most useful, adaptable items you can pick up. I suggest getting at least five (more if you are lazy about the laundry). Cotton polyester mix should be good. Places like LandsEnd selling decent working dress shirts. I would stick to the basic colors white and blue. You might get away with a yellow or pink you know how to color match. One word of advice, keep your shirt crisp and immaculately white. Nothing looks worse than an off white shirt masquerading as a white shirt.

• Ties- Try to pick up a minimum of three. A solid, a diagonal stripe and a basic pattern that incorporates several colors. You probably do not want to spend $150 on a Ferragamo tie. But you do not want one that is 100% polyester and looks cheap.

• Standard Shoes and Belt- Black or Brown, but keep it coordinating. Most guys find black is more universal in their wardrobe. Make sure your shoes are comfortable and try to buy reputable quality shoes. You do not have to break the bank but there are many poor quality brands that simply wear out very fast.

• A High Quality Overcoat- Like a suit, this is an investment. Buy as good a quality as you can afford. I personally bought my first winter coat at Century 21 in New York 15 years ago and I still use it!

• Underwear – need I say more. Consider your laundry cycle and get enough so that there is always one in the drawer!

Smart Casual Attire Wardrobe

If you end up with a tech firm or a start up and does not require formal wear, then here are some suggestions.

Khaki’s – The essence of casual classic. Again, buy smart, but quality. Pick up a few pairs; you’ll be glad you did. Suggested colors would be Navy Blue and Khaki Brown
Jeans – Go with clean, modern lines. Same with Khakis, at least a couple serviceable pairs.
Polo Type Collar Shirts – Get a minimum of five (once again more if you are not good at the laundry). Basic dark colors like Blue and White will do.
Dress Shirts – You should still get dress shirts as they go very well with Khaki’s.
Shoes – Casual shoes are a little trickier. But a pair of mocs should do.

Other non essential stuff which you probably already have

• Sunglasses – Alright, unless you are a lifeguard, this is not essential. But I think it makes sense to make a mental note of how many you should have so that you do not buy a new one every month just because “it looks cool”.

• Tuxedo – You will wear it a few times in your life – wedding, friends wedding, family’s wedding, funeral, the occasional black tie party. You can decide to rent or to buy. If you buy, then get it tailor made and have the most conservative design so that if you ever get invited to the white house for a formal dinner, you can wear it. (no fancy Versace’s).

I’ll stop here but the point that I want to get across is that I think that planning what you want in your wardrobe is very important. The reason is that, aside from budgeting, it helps prevent you from impulse purchases. For example, if I know you already have 7 dress shirts and they are all in good condition, then mentally, I will not be tempted to get a new shirt even if I see a really nice one. Same goes with Khaki pants and polo collared shirts. I find myself tempted when I hang at Factory Outlets with Mrs Credit Card! But when I remind myself that I already have all the T-shirts or dress shirts, then I’ll just move on and not be tempted.

Paying for your wardrobe

Suze Orman actually did say that it was OK to put your working clothes wardrobe on a credit card and carry the balance if you cannot pay it off because it is an investment in your future. My personal advice would be to disregard what she says and save up for your wardrobe way in advance. You do not have to buy them all at once. Chances are that you have half of the items I listed. In fact, I always recommend that on major purchases, you save up for it, and when you buy them, put them on either you student credit card. Better still, charge them to a cash back credit card or gas credit card or any type of reward card to earn reward points or cash rebates! Then make sure you pay it off at the end of the month.

For guys, I suggest you forget about cutting your own bangs just to save a few bucks!

Final thoughts: So here are some tips to stay on budget track and look your career best:

Before you go out on a huge shopping spree, I suggest you:

1. Evaluate what you have – T-shirts, sweaters, underwear, jackets, jeans, take a gander at all of it and determine what has any more life or can be resurrected in another form, (as in a T under a sweater, or anything still serviceable). Do not buy what you cannot afford, which is a basic rule of shopping (and budgeting). Therefore, try to salvage what you can within reason.

2. Determine your career field-to-be – is it polished and totally professional in attire? Completely casual? Something in between? Spend a few minutes pondering that one. It will help you determine if you need trousers vs. casual pants, and/or how many of each.

3. Prepare – No matter how casual the job, odds are you are going to need a few pulled together staples for occasions such as client meetings, company events or even interviewing for a job.

Related Posts:

1. Uncluttering the Closet Monster
2. Clearing Away the Clutter

Here are some simple tidbits which helped me enormously this past year.

• I stopped digging. This piece of advice (“For the love of God, stop digging!!!”) helped so much in emerging safely out of a burning financial hole. I stopped digging myself into trouble and ardently refused to take on further debt, no matter what.

Even when a sales associate plucked Crème de la Mer from the counter and enticingly waved it in my face, I politely declined. My skin may have cried in anguish and my MasterCard moped for weeks after but my piggy bank cheered the triumph.

I know it’s really none of my business but I cringe when I overhear friends breezily using credit cards as savings accounts. This may have worked in the past but rules for credit companies are rapidly changing and I fear they’ll get caught in a dangerous situation.

In fact, I’ve been a loyal customer of WaMu for over two years and never carried a balance from month to month on their card. Last week I received a letter from WaMu’s new owners JPMorgan and Chase, stating how my new rates are getting jacked up to 30% (!!!!) <- What, are they nuts??

My rule is firmly, a line of credit is not a personal piggy bank. If someone is in a bind and using credit to help close the gap, they’re compounding a previous problem with a whole passel of other complications – ie, going into even more debt. Credit companies are just waiting for you to slip up so please proceed with extreme caution here.

Which is why it’s critical to …

• Build up an emergency savings as quickly as possible. Let’s face it, unexpected expenses always crop up at inconvenient times, which is why it’s crucial to automatically set aside a certain amount to help zap these nasties.

When I started my financial journey with over $20,000 debt and zero savings, it felt absolutely suffocating. I would play with or quickly spend additional money and if anything came up, I was screwed.

One night I finally had some sense beat into me and swore from that moment forward, 20% of any amount of money I received would immediately be stashed away into savings (10% for short term stuff – like food or a night out with the girls and 10% for long term savings not to be touched. The remaining 80% went strictly towards my debt.)

I held myself accountable to the promise and soon that svelte percentage of savings blossomed into a respectable amount. This also brought an immense peace of mind with it.

The beauty of this is, I can still strategically plan for and afford everything I want. But now I’m saving first as opposed to being devoured by the ravenous debt monster over it. Instead of thinking, “I can’t afford to!” my new mantra has become, “How can I afford to.. ?”

• Manage money well. Being stretched too thin was a surprisingly beneficial lesson because it helped me value each dollar more. I became an extremely resourceful chica and nimbly learned how to use available ‘stuff’ more wisely.

If you’re forced to crack into your savings by the way, don’t beat yourself up too harshly over it. But do try to build the amount back up as quickly as possible. I’ve done some really stupid maneuvers where I’ve been forced to dip into some of my long term savings. But take comfort in the fact that feeling stressed or guilty over unexpected expenses defeats the entire purpose of having an emergency savings in place to begin with.

Although it has been a financially challenging year, I’m so grateful for the lessons I’ve absorbed. I was caught in a damaging cycle of inaction and denial until I became angry enough to take back control of my finances. I finally had the courage to ask myself, whose life is it anyway?

=^..^=

Ed Mierzwinski, consumer program director at U.S. PIRG, a Washington-based consumer organization, said companies are telling consumers that “everything you have known for years is no longer true.”

The credit companies no longer guarantee customers will be considered low risk if they pay their bills on time and never exceed their credit limits especially if they don’t like where you shop – even for typical transactions, like Amazon or Starbucks.

“Now you have to watch where you shop, because if you shop where deadbeats shop or live where deadbeats live, we’re going to use that as a reason to lower your limits or increase your rates,” Mierzwinski said.

From The Atlanta Journal-Constitution
Sunday, December 21, 2008

Kevin D. Johnson returned from a dreamy Jamaican honeymoon in October eager to check out wedding photos and help his new wife open stacks of beautifully wrapped wedding gifts.

Before getting distracted by the fun stuff, the 29-year-old entrepreneur opened the mail. Johnson’s mood soured when he got to a letter from American Express, saying it had slashed the credit limit on his account.

Johnson was surprised, since he has a perfect payment history and a high credit score. And he was floored by one of the reasons American Express cited: It didn’t like where he shopped.

“Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express,” the letter said. Johnson complained to American Express by phone and letter.

“That doesn’t have anything to do with whether I’m a paying customer or not,” he said in an interview.

Johnson checked his charges to try to figure out what might have raised a red flag in the American Express data-mining model. He didn’t see anything but typical transactions, including purchases at Amazon, Ruby Tuesday, Wal-Mart, Starbucks and Federal Express.

“I understand the need for and the power of predictive analytics,” Johnson said, “But I think they have crossed the line.”

American Express declined to discuss Johnson’s account. But it confirmed that it examines spending patterns. It’s just one of many tactics that credit card companies are using to try to keep default rates from growing higher. Along with studying shopping habits, American Express considers which mortgage lender a customer uses and whether the customer owns a home in an area where housing prices are declining.

These factors are combined with a review of other details to decide whether to adjust a credit limit.

“We’re just doing this to manage risk,” said Lisa A. Gonzalez, an American Express spokeswoman. She declined to say which retailers or mortgage companies are associated with consumers with higher default rates. She said it makes sense to examine these factors because “customers who have loans outstanding with certain lenders or customers who make transactions with certain merchants tend to have a higher proportion of credit issues or a higher probability of default.”

“It’s not a fair practice,” said Travis Plunkett, legislative director at Consumer Federation of America, a consumer advocacy group. “I imagine this person feels this is guilt by association. It doesn’t work in the justice system, and it shouldn’t work when it comes to credit card charges.”

Full article: Credit Companies Adjusting Credit Limits – For Some, Lowering Based On Where They Shop

Always keep your eyes peeled when your credit statement arrives in the mail and carefully examine any paperwork that arrives with the bill. Those small pieces of paper we love to throw away may contain notification of changes to your credit limit, rate or any other adjustments to the original contract you signed with the credit company.

=^..^=

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

Credit cards can be an invaluable tool when utilized responsibly, and cash back credit cards offer a great incentive to use credit for small daily purchases as long as a balance isn’t maintained on the card from month to month. Usually I’ll use up to 10% of my available credit line on small purchases, but I also immediately pay the bill online as soon as I arrive home from shopping. I don’t ever wait until the bill arrives in the mail before I pay off the full balance, and I never use a credit card unless money is all ready tucked away.

If you’re not careful with how you use your credit card, you’ll crash and burn hardcore. But for the disciplined, credit cards can be a great asset to help reap plenty of rewards with proper diligence.

Previously I’ve written two articles worth mentioning again;

• Be Wary of Unscrupulous Credit Card Tricks – Avoid falling victim to these legal credit card ruses and traps
• A Plethora of Credit Card Offers – Here’s why it pays to read the fine print on your credit card offers.

Now that we’re refreshed on predatory lending strategies and are aware of what to look out for and what to avoid, let’s examine a convenient way to comparison shop for that perfect credit card.

Credit-Land.com - Comparison Shopping and Credit News

Credit-Land.com is a great and convenient way to comparison shop for a credit card that matches your specific needs. Whether you’re just starting out with no credit history, suffering from bad credit, needing a student card, looking to balance transfer to a lower APY%, or simply searching for a great cash-back reward card, Credit-Land.com helps you unveil all potential candidates that will mesh with your unique circumstances.

Once your choices are narrowed down, instant card approval may be available; simply press the application button for a desired choice and Credit-Land.com instantly whisks you away to the credit card’s official site for application purposes.

Credit-Land.com is filled with comprehensive information and offers tips and suggestions on a myriad of relevant subjects, such how to avoid being declined from your dream card, the importance of a credit score, credit building tips, information on account fraud, credit insurance programs, and how to secure a business credit card or responsibly raise your credit line.

The website is extremely interactive and users are able to voice opinions or concerns by leaving a comment at the end of each article, and part of Credit-Land.com’s service allows users to submit any lingering questions for immediate feedback. (The site cordially states, “answering your questions is our job and we love it!“)

And now that my credit score is strengthening, I’ll be on the prowl for a great reward card offer soon!

Just to reiterate, credit cards are great resources when they’re not abused. Always remember to read through all terms and conditions in the fine print carefully to make sure the credit card you’re interested in offers a fair grace period (at least 21-25 days), with very low, or better yet, no annual fees. The competition between credit card companies is fierce so you should be able to nip around and find a very reasonable offer.

~†~ Baby Steps Are Key  ~†~ Be smart with how you manage your finances and learn how to strategically use credit cards to your advantage!

~¤~¤~

The latest Carnival of Personal Finance is up at You Need A Budget, be sure to check it out.

=^..^=

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

A Continuation Of My Struggle Battling Alleged Credit Card Debt

The beginning of this story can be found at Broke-Ass Student Just Got A Whole Lot Broker with a bristled rebuttal at How To Fight Back Against Collection Agencies.

I squinted at the words scrawled across the pages through the dim light, entirely absorbed in my reading, when suddenly loud rasping at the door interrupted my thoughts. Sighing, I set the book aside and took a moment to wiggle into slippers before shuffling toward the door. The clock in the kitchen read 7:03. Was I expecting someone?

A heavier set woman stood outside my door, entirely bundled against the brisk evening chill. Suddenly she thrust fat mittened hands engulfing a clipboard toward me.

“Jennifer Lynn?” the tart voice came.

“Yes?” I shivered and stepped outside.

“Please sign here.”

I surrendering my signature and was presented with an unimpressive plain envelope. I had actually been expecting a mail delivery from Victoria’s Secret, but this small morsel didn’t represent the sleek package I had been anticipating.

“Err, what is this?”

“Jennifer Lynn, you’ve just been served a summons.”

“A what?!”

I gave an incredulous stare as she spun on thick heels and strutted away.

“Hey lady,” I bellowed at the Pillsbury Dough boy retreating back. “What the hell is this?”

“Read the summons. All the information is contained therein,” the curt reply sliced through the air. A car door closed, an engine started, and she was gone.

I immediately felt queasy – as well as utterly baffled and confused. What on earth was I being sued for? I numbly stepped inside and tore open the thin envelope. A neatly typed two-page document was nestled within. After a few minutes, I finished reading and dropped into a chair, letting out a long shaky exhale.

What the hell?

It was indeed a summons for the local city court, and I was being sued by a law firm on behalf of a federal bank for an alleged credit card debt of $5,000.

Since I had been served in person by the female process server, the document stated that I had ten days to file an appropriate answer to the summons with the city court. If I failed to oblige, I would lose by default.

Ironically, a day earlier I had received a letter in the mail from this law firm regarding an alleged debt with almost the same amount stated. I had frantically racked my brain for any outstanding debts I owed but came up blank. All my modest balances were faithfully paid off each month. And $5,000 sure as heck seemed like a pretty hefty amount to simply have forgotten about.

Earlier that afternoon I sent a validation letter disputing the alleged debt through certified mail with return receipt requested. And now a mere three hours after delivering my validation and dispute letter to the local post office, I’d been served a summons at my door.

What was going on here?

I didn’t rest well that night. Nightmares of court rooms and angry judges chased me into an uneasy sleep.

The next morning, I called the city court clerk to see if the summons was a legit document or not. She confirmed the docket number was indeed real. Next, I decided to research the name of the female server who was stamped on the summons to see if she was legit or not. And indeed she was.

Ok, my brain rationalized, so this was obviously serious business. And I was starting to develop a serious headache. The law firm had expended quite a bit of money to issue this summons. The document also stated that all legal fees accrued on their end would be included with the amount I was being sued for.

Thus, I concluded, the law firm seemed pretty confident they would be victorious in court. Well, they should be able to tell me what this alleged debt was all about then and I could finally get to the bottom of this whole ridiculous fiasco.

As mentioned previously in this post (Broke-Ass Student Just Got A Whole Lot Broker ), I called both the law firm and the credit card company to inquire about the alleged debt. No one I spoke to was able to provide me with any information or refer me to anyone who could help. I felt more confused and frustrated than ever.

As I debated what my next move should be, I spent sleepless nights researching anything I could uncover on the actual law firm suing me. And things began taking an intriguing twist.

This suing ’law firm’ had quite a notorious reputation for being a bottom feeder collection agency with an extremely unethical stigma attached to its services. In 2004, New York State residents filed a class action suit against them for engaging in rampant and abusive collection practices. The firm appeared numerous times on different consumer protection resources and sites, such as Ripoffreport.com.

Repeatedly, on each site and message board I visited, the warnings were similar; beware. bottom feeders. notorious for winning by default. unethical collection practices. extremely shady. barely on legal side of the law. watch your back.

So these bastards were mainly hoping to win by default, were they? Unfortunately for them, they had picked the wrong target. Although it was traumatizing to know I was being sued, I wasn’t prepared to give up without a fight. And the more research and information I compiled the more in control of the situation I felt.

I visited a few different attorneys in the area who offered free consultations. Finally I hired a consumer protection lawyer at a very reasonable rate to file my answer with the court in proper legalese. By that point, I had acquired so much knowledge through my personal research that my attorney seemed impressed and asked if I was studying to be a law student.

My attorney chuckled when, in a frenzy, I pointed out the ten day limit to file an answer (which loomed ominously closer).

“Oh boy,” he said as he glanced through the document. “I’ve dealt with this firm before. You give these guys way too much credit.”

The plaintiff, my attorney explained, was responsible for typing up the actual summons and not the courts. And the law firm suing lied about the time to legally file my answer. By law, it exceeded way more than the ten day limit they stated. Obviously these slimeballs hoped the defendant would feel pressured by such a limited time frame and nervously submit a half-assed answer, or feel frazzled and not bother to respond at all.

The receipt for my dispute and validation letter came back a few weeks later, signed in sloppy blue ink. I figured these guys hadn’t anticipated my immediately firing out a validation letter disputing the debt before they had a chance to serve me with the summons. At least now I had proof of disputing the debt in its entirety before the female process server had arrived at my door.

After filing my answer to the summons with the court, I sat back and tried to patiently wait for their next move. Two months later, it finally came. But it wasn’t quite the validation response with the information I expected.

Dear Mr. XXX:

In an effort to avoid the cost and uncertainties of litigation, we would like to discuss an amicable resolution and possible settlement with your client, Jennifer Lynn.

Sincerely,
Scumbag Law Firm  Cohen and Slamowitz

My lawyer presented the letter to me and thoughtfully tapped his fingers together.

“Well, it’s up to you,” he said slowly. “If you want to settle and throw $50 or $100 at these monkeys to get them off your back for good, it might cost less than if we go to court and push for a discovery process. During the discovery process, we’ll be forcing them to reveal any hard evidence they actually have in their arsenal against you.

However, if they can’t intimidate you into settling and have no evidence to support their claims, they may realize it’s hopeless and cut their losses.”

“But,” I protested, “I can’t settle. They still haven’t validated this alleged debt. I have no clue what it’s for.”

My lawyer raised his brow and nodded slowly.

“I’m just laying it all out for you.” He smiled faintly. “You’re obviously a bit smarter than the average bear. They thought they could use scare tactics for payment or a default judgment. And certainly didn’t expect a fight back. I’ll leave it up to your own discretion which direction you feel is best. The ball’s now in your court.”

“No,” I said firmly, taking a deep breath. I felt like a scrawny little David stepping up to the behemoth Goliath. “I do appreciate you laying out all my options. But they need to first provide documentation and validate this alleged debt. There won’t be a settlement.”

“Very well, I’ll notify them of our decision immediately.”

That was  four months ago and I have not heard anything further from them (at least, not yet). I wish I had a more substantial update, but perhaps this little bit can help others in a similar frustrating situation.

One of the most valuable lessons I’ve learned through this nightmare is the criticalness of checking credit reports every year for discrepancies or errors. Again, I encourage everyone to go to Annual Credit Report.com for a free copy of their credit reports from all three credit bureaus (TransUnion, Equifax and Experian).

Stay tuned for further developments.

=^..^=

Avoid falling victim to these legal credit card ruses and traps.

As credit card companies consistently churn out ‘preapproved’ letters offering enticing rates, it’s easy for unsuspecting consumers to fall prey to unscrupulous, yet perfectly legal, credit card tactics. This is why it’s imperative to always bust out the magnifying glass and pick apart the fine print before settling on a seemingly brilliant offer.

Here are a few sneaky tactics to be on a diligent lookout for;

• Always use the credit card mailing address provided on the enclosed envelope which arrives with your most recent statement for payment. Credit card companies sometimes enjoy switching around their payment PO Boxes without informing the consumer. A well-intentioned payment can flop around ‘lost’ in the mailing system for weeks if unknowingly sent to the wrong address. This is a blatant attempt to purposely nab you on late payment fees. It also provides the credit card company an excellent opportunity to raise your interest rate as a result. When in doubt, always call the credit card company’s payment department to verify the correct payment mailing address. Being in the habit of submitting credit card payments as early as possible can help eliminate confusion and last-minute scrambling.

• Make sure the credit card that arrives in the mail is, in fact, the credit card you originally applied for. Carefully check the terms of agreement and fine print before activating your shiny new credit card. You may *think* you’ve been approved for that fabulous offer. But if you didn’t qualify, the credit card company may have sent a completely different card with incomparable (and completely different) terms. Ahh, the good ol’ bait and switch trick. Don’t fall for it. Always keep a record of what you applied for and compare the terms with the newly arrived card. If they’re different, call the credit card company to cancel the account immediately.

• Rates that drift up, up and away. Keep a keen eye on your statement every month and don’t be too surprised if the rate has suddenly ballooned upward. And to think, the credit card company doesn’t even need a reason. If it’s in the fine print of the terms and agreement, the rates can be raised on a whim. If you should uncover a ridiculous rate fluctuation, call the credit card company to request a lower rate. After all, they have no incentive to adjust your rate if you don’t ask. Always remember that competition between credit card companies is relatively fierce. And chances are, if you’re a good customer, they’ll want to retain you. But lenders won’t just offer to lower a rate – you’ll need to ask.

• Ballooning “fixed” rates. Don’t ease into a false sense of security with fixed credit card rates either. A “fixed” rate merely means the credit card company has 15 days to notify if they decide to jack up the rates. You know those shiny little pieces of white paper that arrive with statements, the ones you sometimes toss in the garbage without a glance? Consider the tiny print on the bottom as your legal notification. Thoroughly reading everything that arrives with monthly statements can help you avoid being caught off guard.

• Be aware of the Universal Default Clause. As if credit card companies didn’t have enough ammunition to slam unsuspecting consumers with exorbitant rates … This nasty little gem of a clause basically entitles a credit card company to justify hiking up current rates based on other accounts in your credit report. Slipping behind on a car payment? Don’t be surprised if suddenly your credit card account suffers along with it.

 Nik Agarwal recently shared his thoughts on the Universal Default Clause over at his blog, The Air.

• Shrinking Grace Periods. This is the biggest no-no to watch out for. A grace period is the time between the date of purchase and when the account balance amount begins accumulating interest. If you’re diligently submitting credit card payments on time and not carrying a balance from one month to the next, you can usually slip outside the scary-tactics-and-ridiculous-fees radar to avoid being slammed. However, more and more credit card companies are wisening up and offering crappy credit cards with lesser, or even NO grace periods. Please check the original terms and fine print to make sure you are being offered a grace period of at least 25 days. With grace periods of 20 days or less, your account may all ready be accumulating hefty interest rates before the bill has even arrived in the mail.  

• Costly credit card fees = crap line of credit. There are plenty of credit cards which entail no “side” fees, such as annual fees, one-time setup fees, activation fees, etc. Always shop around, and be extremely wary of those that do. (Nip over to one of my recent posts, A Plethora of Credit Card Offers.) If you’re being offered a credit line of $400, yet paying over $350 in fees, that’s one crappy line of credit! And the credit cards which offer the most abusive fees are also usually the ones which have the highest rates (25% and above) with little or NO grace periods. Yikes. Run from these ridiculous pre-approved offers as quickly as possible. Please don’t be suckered into these disgraceful scams. 

*** 

1. Build awareness by always reading the fine print, as well as any notices sent along with your monthly statements.
2. Only use credit cards to charge items which can be paid in full each month before the grace period expires.
3. Avoid outrageous default interest rates by sending credit card payments early each month. I’ve established the habit of immediately paying all my bills online the day the bill arrives.
4. It’s up to the consumer to request a better interest rate from the lender. If you’ve been a good customer with on-time payments for six months to a year, the lender will most likely grant a lower rate rather than risk losing your business. Don’t feel afraid to be vocal.
5. If you’re still unhappy with your credit company’s current negotiated terms and rates, shop around for a better deal and take your business elsewhere.

~†~ Baby Steps are Key ~†~

Use credit cards to your advantage through awareness and responsible utilization.

=^..^=

Why it pays to read the fine print on credit card offers

Until successfully regaining control of my financial situation, I discontinued using credit cards for the past few years and relied exclusively on debit. However, one of my goals this year is to apply for a credit card and responsibly build my FICO score to an admirable level.  

My strategy is simple; to only make purchases on my credit card with cash I all ready have in the bank, and to pay my balance off in full each month. 

Here are some of the credit card offers I’ve received this past week in the mail:

• You’ve been pre-selected for a VISA with a $750 credit limit! Convenient 60-second online processing!

 Let’s examine the fine print on this one.

• 23.99% APY (ouch!) If any payment is late, the APY jumps to 29.99% (are you kidding me??)
• Grace Period for Repayment of Purchases: None (!!!) Uhh …
• Account Origination One-Time Fee: $50
• Monthly Maintenance Free: $10.95 ($131.40 annually)

The thought that anyone would be suckered into this zero grace period, high annual fee, rip-off piece of crap card makes me want to weep. Seriously. This is the epitome of the sneaky ways a credit card company will profit and become billions richer while simultaneously making the consumer piss-poorer.

The only appropriate place for this pre-approved ‘exclusive offer’ is the trash. I just feel for the poor tree forced to suffer over this ostentatious crap. Or the ignorant sucker of a consumer who neglected to read the fine print before applying.

Shall we continue on to the next offer?

• You’ve been pre-approved for a Platinum VISA! Act now to get your credit line up to $2,000, with 0% Introductory APR on purchases!

Hmm … enticing. Let’s flip through the fine print to see how long this 0% APR lasts, shall we?

• 0% for first three monthly billing periods; after that, 18.9% APR
• Annual Membership Fee: $69
• One-time Enrollment Fee: $39
• Grace Period for Repayment of Purchases: 25 days

This offer is loads better than the first, at least it offers a grace period. But I could do without all the unnecessary fees. Tossed. Next!

• Dear Miss Jennifer Lynn, apply for the DISCOVER card which offers you 5% cashback bonus and more!

 Hmm, interesting. Let’s see what this one offers.

• 0% APR on purchases until November 2007, then 12.99% APR
• Grace Period for Repayment of Purchases: at least 25 days when balance paid in full each month
• Set-Up Fee: None
• Annual Fee: None

Definitely the most attractive of the three offers. No hidden annual or setup fees. A reasonable grace period to avoid finance charges. The APR is still ridiculous in my opinion, but easily avoidable by paying off the balance in full each month. The cashback is an attractive incentive as well.

What to Look For in a Credit Card

The moral of this story; if you’re thinking of applying for a new credit card, please shop around. Don’t get suckered into a card with a high annual fee. And, for god’s sake, please make sure you’re being offered a reasonable grace period to avoid these nasty finance charges.

* Comparison shop for the best credit card deals before settling. Credit card companies are in aggressive competition with each other, so take full advantage of this. Look for credit cards with no hidden fees, low APY, and longer grace periods. *

And if you’re in the bad habit of carrying balances over from one month to the next, you’re going to get slammed. (Your credit card company will adore you, though.)  Only make purchases you can easily afford to pay off in full each month.

If you’re deluding yourself into thinking you’ll be fine because you can afford paying the minimum balance amount each month, think again. You, my friend, don’t own your life. You’re renting it.

Don’t buy into the consumerist mentality. Stop renting your life away by paying for items with future earnings. Unless, of course, you enjoy being a perpetual slave.  

I know what type of lifestyle I’ll choose.

~†~ Baby Steps are Key  ~†~

Stop credit card companies from getting richer as you get poorer. Learn how to master your money instead of allowing your money to master you.

=^..^=

Preserve your rights against debt collectors to make sure you’re being treated fairly

If you’ve been contacted by a collection agency, don’t be afraid, feel ashamed, or become nervous. Remain firm and stand your ground. Never allow yourself to feel manipulated or bullied. You will never, ever go to jail for not paying a debt. Take a deep breath, learn your rights, arm yourself with knowledge and prepare to fight back. You have more power than you probably realize.

The lies, manipulation and deceit of some collection agencies

A collection agency may contain hundreds of employees who are armed with thousands of people’s personal information stored in a computer database. Usually they are paid off a commission and every penny extracted from you benefits their pocket. If collectors reach certain quotas, they might receive fat bonuses as incentives to aggressively collect.

Some agencies are renowned for unethical techniques used to terrorize innocent victims into paying debts. Intimidation, deception and any feasible manipulative means are implemented to ensure quick and efficient payments.

I once knew a debt collector who lied and said he was from Dominos pizza. He was desperate to track down a certain individual in order to collect on the debt and receive his pay day bonus! This may seem harmless in itself, but it is also extremely unethical and *illegal*

What else is illegal?

• A debt collector may not harass you or use intimidating language against you or attack your personal character in any way
• May not call you before 8 a.m. or after 9 p.m. without your specific consent
• May not continue calling numerous times per day, with the sole intent to harass
• May not call your workplace without your employer’s consent
• Can not use false or deceptive statements, such as misrepresenting themselves as attorneys or government officials (or Dominos pizza men;)
• Can not threaten to send you to jail or insinuate you are a criminal
• Can not send you misleading documents that can be construed as legitimate legal papers, such as issuing a false summons
• Can not threaten to garnish your wages or file a lawsuit unless they intend to
• May never threaten you with violence
• Can not be deceptive in misrepresenting the amount of debt they claim you owe

NEVER give a debt collector your bank account information or pay by check with a traceable routing number. Many folks in this industry have no qualms on cleaning out your account and helping themselves to much more than you initially agreed upon.

There’s another pertinent reason not to immediately fork money over until a debt has been properly validated – the debt may, in fact, legally be expired.

Debt Statute of Limitations

Did you know that debts expire after a certain amount of time passes? This is why paying any amount towards an old debt might be one of the stupidest things you could possibly do in some cases.

If you haven’t paid toward a debt in a long time, after a set number of years after the account has gone delinquent (usually four to six years – depending on state), you’re no longer under legal obligation to pay the debt. This is called a debt’s Statute of Limitations (or SoL).

Here’s a complete list of each state’s Statute of Limitations.

However, every time you pay towards a debt before it’s Statute of Limitations has arrived, you’re resetting the clock on the debt. If you’re a few months away from your SoL and pay any portion thereof, the legal timer starts all over again. You’ve just unwillingly renewed your debt, and an agency is legally able to continue pursuing collection from you for another four to six years (depending on your specific state’s SoL).

How ironic is that? In a sense you’re being punished for trying to partially pay what you can on a debt you necessarily can’t afford to pay off.

Be warned also; in some states just admitting guilt on the phone by agreeing to payment is enough to reset the SoL timer – so tread carefully and use common sense. Make sure the agency first coughs up all appropriate legal documents to prove the validity of the debt.

If you don’t know what the debt is or if you suspect the debt may be approaching or past its legal SoL, demand a validation process immediately.

It’s imperative to never admit fault to a debt or agree to pay any amount toward a debt until the debt has been properly validated in writing by the collection agency.

Use Debt Validation To Protect Yourself

Why is this imperative? Because ironically, the majority of the time the collection agency *can’t* properly validate the debt, especially if it’s old. They have a hard time producing the proper legal documents to legitimize that you actually owe a debt.

Many times these scumbag ‘bottom feeders’ bought the debt from the original creditor for pennies on the dollar. Now they’re in diligent pursuit to make your life miserable, and will attempt to strangle as much money out of you as they possibly can. This isn’t even mentioning -on top of- charging exorbitant fees.

For example, a collection agency may pay $20 for an old, SoL $1,000 + debt, and will do anything they can to intimidate the victim into paying. Anything they receive past their initial investment of $20 is lining their pockets and making them extremely wealthy.

And don’t be surprised if the debt has magically morphed into an outrageous sum.

The good news is once you actually challenge these collection agencies, many times they’ll suddenly (and very conveniently) disappear. They’ll sell your debt for a reduced cost of $10 to another collection agency, and then someone new will start to call and harass you.

According to The Credit Info Center, collection agencies may pay for portfolios of debt at the following rates:

• Recently been charged off: 6 to 7 cents on the dollar
• Accounts that are slightly older and on which a collection agency or two has already taken a whack: 1.5 cents to 2 cents on the dollar.
• Years-old, out-of-statute debts: A penny or less.

These types of sleazy debt collectors are famously known as bottom feeders, zombie debt collectors or junk debt buyers.

(Some good sources to check out: Zombie Debt is Hard to Kill, Return of the Living Debt)

What to do if you’re contacted by a collection agency

If a collection agency contacts you over the telephone, politely ask for their name and contact information. Then firmly state you’d like further information about this alleged debt and will be in touch shortly for validation purposes. Immediately hang up the phone.

At the very least, figure out what debt collection agency is contacting you, and then immediately HANG UP. Just knowing their relevant contact and mailing information is all you’ll need to take the next crucial step in fighting back.

Before validation never, ever admit guilt of a debt.

Your conversation will be recorded and any slipup or naive language on your part can be used against you later if it should go to court, especially if you unknowingly use language that admits fault to an alleged debt. So stay off the phone to protect yourself. Keep all further correspondence strictly to writing.

I strongly recommend not speaking with a debt collector over the telephone under any circumstances. You are under no legal obligation to speak with a debt collector over the phone and, in fact, it’s one of the most foolish things you can do.

The debt collector is banking on the fact they can use intimidation scare tactics to shaken the situation and cause you to slip up. They hope you’re uncertain and, unfortunately, like the majority of their victims, aren’t properly aware of your legal rights.

Collection agencies will use any tactics necessary, even extremely unethical ones, to get you to admit fault or force any type of payment.

This is especially true if the debt is an old zombie debt. The collector is desperately trying to force you into unknowingly resetting your Statute of Limitations, especially if the debt is drawing closer to expiration. They know once SoL hits, they’re powerless to legally collect from you.

Remember, paying any portion of a SoL debt is admittance of guilt and will renew the debt and start the ticker again – even if the debt is all ready expired.

Deception is rampant in this industry. Protect yourself as thoroughly as you can with knowledge. Bare in mind that collection agencies have no power and should not be trusted.

Put the Collection Agency on the Defensive With Validation

Once a collection agency has contacted you, now it’s time to immediately take control of the situation and put the collection agency on the defensive. Force the collection agency to first legally validate the debt by proving you actually owe it.

NEVER agree to make any type of payment towards an alleged debt unless you receive proper written validation and must settle as your only option. I can’t stress this enough. Any payment agreement between you and the debt collector is your immediate admittance of fault. In some states it’s also enough to reset your Statute of Limitations.

First make the collection agency responsible for proving you owe an alleged debt still within the Statute of Limitations.

And then make them prove they are legally entitled to collect from you.

You will not receive this type of courtesy unless you demand it.

Restrict all correspondence to writing and keep a record of every type of documentation you receive from the collection agency. Send *everything* certified mail with return receipt requested to keep for your own records. This is crucial in providing accurate proof and documentation that you are trying to resolve the matter but the agency has thus far failed to prove you legitimately owe them anything.

All right, so you have the collection agency’s address. You’re pissed because these scavengers are making billions every year off the misery of others with their sleazy tactics. You’re ready to challenge them and stand up for your rights.

So now what?

1. Validation letter. This is the ultimate weapon in your arsenal to get rid of many unscrupulous debt collectors. After you’ve been contacted by a collection agency, you’ll want to force them to validate the debt to prove you actually owe them something, and that the debt hasn’t expired past the SoL.
2. Limited cease and desist. If these buggers will not stop calling, you can legally force them to by issuing a limited cease and desist request in writing (illustrated below)

Send a validation letter immediately by certified mail with return receipt requested. Here’s an example of a validation letter

Your Name
123 Your Street Address
Your City, ST 01234

ABC Collections
123 NotOnYourLife Ave
Chicago, IL

Date:

Re: Acct # XXXX-XXXX-XXXX-XXXX

Dear Scumbag Collector:

This letter is being sent to you in response to a notice sent to me on February 15, 2007. Be advised that this is not a refusal to pay, but a notice sent pursuant to the Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809 (b) that your claim is disputed and validation is requested.

This is NOT a request for “verification” or proof of my mailing address, but a request for VALIDATION made pursuant to the above named Title and Section. I respectfully request that your offices provide me with competent evidence that I have any legal obligation to pay you.

Please provide me with the following:

* What the money you say I owe is for;
* Explain and show me how you calculated what you say I owe;
* Provide me with copies of any papers that show I agreed to pay what you say I owe;
* Provide a verification or copy of any judgment if applicable;
* Identify the original creditor;
* Prove the Statute of Limitations has not expired on this account
* Show me that you are licensed to collect in my state
* Provide me with your license numbers and Registered Agent

At this time I will also inform you that if your offices have reported invalidated information to any of the 3 major Credit Bureau’s (Equifax, Experian or TransUnion) this action might constitute fraud under both Federal and State Laws. Due to this fact, if any negative mark is found on any of my credit reports by your company or the company that you represent I will not hesitate in bringing legal action against you for the following:

* Violation of the Fair Credit Reporting Act
* Violation of the Fair Debt Collection Practices Act
* Defamation of Character
If your offices are able to provide the proper documentation as requested in the following Declaration, I will require at least 30 days to investigate this information and during such time all collection activity must cease and desist.

Also during this validation period, if any action is taken which could be considered detrimental to any of my credit reports, I will consult with my legal counsel for suit. This includes any listing any information to a credit reporting repository that could be inaccurate or invalidated or verifying an account as accurate when in fact there is no provided proof that it is.

If your offices fail to respond to this validation request within 30 days from the date of your receipt, all references to this account must be deleted and completely removed from my credit file and a copy of such deletion request shall be sent to me immediately.

Also include a limited cease and desist clause.

I would also like to request, in writing, that no telephone contact be made by your offices to my home or to my place of employment. If your offices attempt telephone communication with me, including but not limited to computer generated calls and calls or correspondence sent to or with any third parties, it will be considered harassment and I will have no choice but to file suit. All future communications with me MUST be done in writing and sent to the address noted in this letter by USPS.

It would be advisable that you assure that your records are in order before I am forced to take legal action. This is an attempt to correct your records, any information obtained shall be used for that purpose.

Best Regards,

Your Name

Remember That You’re Not Alone

There is a plethora of information available on properly handling debt collectors and junk debt buyers. I am by no means a professional or a lawyer and I strongly urge everyone to take the time to properly do their research.

These techniques are powerful in fighting against unethical and illegal collection tactics. But they only work if you know how to use them properly.

You can also follow my personal journey on the nightmare of being sued and fighting an invalidated debt. As an update, I filed my answer with the court last month and, ironically, have yet to hear from the ‘law firm’ again.

Arm yourself with as much knowledge as possible and protect yourself from victimization and abusive practices. Even if you legitimately owe a debt, you still have the right to be treated fairly and have your privacy respected.

Strongly Recommended Reading:

1. Privacy Rights Debt Collection Practices
2. Federal Trade Commission Fair Debt Collection Practices Act
3. CreditBoards.com forums

***

Addendum 12/23/07 – The above article pertains to collection agencies only and not the original creditor(s). Collection agencies are covered under the Fair Debt Collection Practices Act and must validate if a debt is disputed, even if working on behalf of the original creditor. If the original creditor is contacting you directly, however, they are not regulated by the FDCPA and have no legal obligation to validate a debt to the consumer.

Related Posts:

1. Broke-Ass Student Just Got A Whole Lot Broker
2. Being Sued For Credit Card Debt
3. By Taking Control of My Finances, I Took Back Control of My Life

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

My broke-ass is being sued.

I apologize for being away from this blog the past week, but things have taken an unexpected turn. Last Wednesday, out of nowhere, I received a notice in the mail that Mr. Scumbag lawyer was authorized to commence a lawsuit against me on behalf of a federal bank for an alleged credit card debt of $5,000.

I immediately fired off a reply that I disputed this debt in its entirety and demanded a written itemized breakdown of any and all alleged purchases therein, along with all relevant dates. I sent the reply via certified mail and waited anxiously to hear a response. I have absolutely no clue what this debt is about or what it is for.

Well, three hours after sending my reply via certified mail, a female server appeared at my door and handed me a summons for the alleged amount of $5,000, plus over $500 for attorney fees for the plaintiff. (For those that don’t know, a summons is basically a piece of paper telling you; your ass is being sued.) My first step was to call my city court clerk to see if this summons was legit or not.

It was.

I now have a few days to file an answer or these slimeballs win by default judgement. This is probably what they’re hoping for, and I’m sure as hell not allowing that to happen.

Once I officially file my answer with the court within a ten-day period as deemed by the summons, I’ll request a legal discovery in order to see exactly what these jokesters are claiming I owe. The ball is thus in their court to accurately validate this debt and let me know exactly what it is for, and to prove I actually owe them something.

But here is the baffling part.

I called the federal bank yesterday to obtain more information and to hopefully resolve the matter. The woman I talked with was unable to provide an itemized breakdown on this alleged debt. In fact, she was unable to locate any type of information pertaining to the account whatsoever. She tried for over ten minutes and seemed at a loss on what to do. When I asked her to please refer me to someone who could assist me further, she had no idea who I should speak with. She finally suggested I try calling a customer hotline, but seemed doubtful it would be helpful. And she had no number to provide me with.

Um, ok.

My next step, I called the scumbag “law” firm today and received some middle aged woman who also had no information on what the alleged debt was for, or any alleged purchases, or any dates of alleged purchases. Her excuse was that the debt was almost six years old and the information was therefore “unavailable”.

Excuse me? You’re suing me and you can’t tell me why and what for? Fucking brilliant. Were you expecting me to just bend over and take it? And if this alleged debt is supposedly almost six years old by now, why haven’t I heard from them earlier about it?

I smell something amiss.

I then did some research on the law firm suing me on behalf of the federal bank. Apparently, a statewide class action suit was filed against these guys in 2004 by residents of New York state, for rampant and abusive collection violations. This seems to be some high-volume collection agency with 100 or so staffers, with one or two attorneys. However, they claim to be a law firm and are some type of scam operation with a double layer of corporate-partnership veil. As one website stated, “not even Degerm, that nice blue liquid in airliner toilets, can mask the stench of these sewer pickles”.

Over and over, on repeated websites I read how this “law” firm is a bunch of scumbag glorified debt collectors who abide on the barely legal side of the law. They’re notorious for adding exorbitant and excessive fees. (The balance on their letter and on the summons are completely different, with over a 114% increase).  They are also renowned for their sleazebag tactics to get default judgements on people without their knowledge, usually by purposely sending a summons to a wrong address, and then holding the unknowing victim’s bank accounts hostage by freezing the account.

It will be interesting to see what legal documents they can choke up for me. So far, I’m completely baffled by this.

I’ll be consulting a lawyer tomorrow to aid me in properly completing my answer form and filing it with the court.

Le sigh.

Not the best way to start the year. But it sure will be interesting to see the outcome. I’ve learned a lot through my research and will definitely share it with my readers after all is said and done.

By the way, if you haven’t checked your credit reports, do so immediately. Only one website is authorized to free annual credit reports you’re entitled to by law, and that is annualcreditreport.com. Beware of any other imposter sites. If you don’t know the importance of religiously checking your reports every year (which I’ve just learned the hard way), I’ll write an article explaining more later . But definitely do some research now.

I urge you all to do it as soon as possible, to protect yourself against any type of fraud on your credit history.

(You can follow the rest of the story here, at Being Sued For Credit Card Debt.)

=^..^=

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

Baby step #6 - Use a ’save first and buy later’ approach to avoid spending money you don’t have

Are you struggling paycheck to paycheck and there never seems to be enough money at the end of each month, like I was? Is it a constant struggle to make your bill payments on time? Do you ever wonder why?

Money is a force which arrives into our lives and seems to leave just as abruptly. We all work hard – sometimes unbearable and monotonous hours – for our paychecks. Therefore, watching our money repeatedly drain away can be an extremely arduous and frustrating process. We know we need money to afford necessities and buy the luxuries we desire. Yet it seems we are constantly trying to catch up on our bills or finding ourselves in some type of debt.

Unfortunately, the system is designed to keep the majority of consumers in a constant debt cycle. Credit card companies are banking (quite literally) on the fact they can tantalize us with appealing opportunities and we’ll jump at the chance to purchase a juicy item we desire – regardless if we have the necessary funds saved or not.

“Well”, you might reason with yourself, as I did, “even if I can’t really afford it now, I’ll slap it on my credit card and do small minimum payments every month.” Sound familiar?

This mentality of ‘charge now, pay later’ is contributing to our inclination to spend money we don’t have. For the majority of us, this results in a mountainous cycle of debt. Thus we continually and desperately try to struggle out of the same hole. We get one debt paid off, but we’re immediately charging the next item. See where I’m going with this? So where will it end?

Since the credit card was introduced in the 1950’s, the past few decades have evolved us into a credit card using ‘n’ abusing, debt-clad nation. Is it any wonder credit companies issue cards to young people, without a thought to how irresponsible teens might utilize them?

Credit companies make millions billions off our hard-earned money each year – all in interest rates from consumers who buy massive purchases they can’t afford. Consequently they’re forced to pay the bare minimum amount each month when the bill rolls in. Remember the beauty of compound interest? Well, this is compounding interest working against you, and it gets ugly.

How does it feel to be paying interest, and then interest on top of interest? Do you know the interest rates on your current credit cards? Are you disturbed yet? I am.

One of the best ways to build a strong financial foundation is to eliminate unnecessary credit card spending unless you’re able to pay the card off in full each month. (There are a few exceptions to this, such as starting your own business, but that’s irrelevant to a broke-ass student charging a new iPod and taking forever to pay it off).

I keep one credit card handy for emergency purposes only and make all other transactions with cash. My monthly expenses are drawn directly from my checking account each month via online payments.

The added benefit of using cash is that it has really helped in cutting back my impulse buying. For some reason, it’s much harder to part with actual money as opposed to signing a credit card receipt. We tend to be more emotionally attached to money. This is a good thing because it ensures that every purchase I make, I really want it.

Using cash for purchases is an extremely productive way to reduce random spending tendencies. The time to change the vicious cycle of accumulative debt is now. Stop allowing credit card companies to profit off you.

~†~ Baby Steps are Key ~†~    Get angry and fight back!

Oh yeah, and go visit Cap over at StopBuyingCrap.com. Maybe you’ll learn something useful.

=^..^=