The whole world revolves around money. unfortunate, but all too often the case. When you’re young, you quickly spend money without giving a second thought to the possibility of adverse effects. You’re certainly not thinking of how to avoid debt.

It’s essential that children are educated about the value of money, so they understand it’s worth in the real world. Saving money is one of the most important things to learn if the goal is to establish a financial foundation.

Many of us learned to save money through experience. It was not really taught at school. But, by teaching and developing habits to avoid debt from an early age, we can empower the next generation. However, it is not as easy as it sounds though to inculcate the idea of money management. Listed below are a few ways that will help you teach the tots about managing money from an early age.

It all starts with a piggy bank

The piggy bank is one of the most common forms of “savings” for a youngster. For those that aren’t familiar, a piggy bank is a small plastic bank (usually shaped like a cute pig), for coins. As simple as that, but a couple coins every week fills his belly pretty quickly.

For young kids, it can be the simplest way to start saving money early. They can set goals, and then use the piggy bank to save towards those goals. The main lesson of the piggy bank is to teach saving for the future, and how money grows as you save it.

Open up a bank account

The next step is to open a bank account. Once the piggy bank has run its course, take your child to the bank to open up a savings account for them. A first savings account is a big deal for a kid. The feeling of responsibility, and your very own place to save all of that money. Of course, you’ll need to make some money first 🙂

With a new savings account comes many lessons. Interest if applicable and how it can increase wealth simply by saving money. How to deposit money, and review financial statements. You’ll find many other lessons in this process, maybe more than you hoped for!

Avoid debt using savings jars

Kids always long for the latest and greatest toy or a new action figure. The good news is, they can have it, they just need to make a few smart financial decisions.

Give them a jar for their desired toys and offer them small pocket change each week to bolster the savings.

For example, if you give your child five dollars a week, give it to them in one dollar bills, once a day. They can save all their cash for one purchase of one toy if they wish, or they can contribute to different “jars” for more than one saving goals. Some will learn the hard way, and spend that dollar every day. The lesson comes when a youngster learns discipline to put that dollar in the jar every day.

Each day may be tough as you learn discipline. But, the reward of a new toy at the end of the week cements the lesson of saving with a purpose. Not only does this result in a new toy, it teaches children to avoid debt by saving for their wants.

Creating a timeline

As a kid, it can be hard to grasp the concepts of money and time. In order to make the message clear, money education should be repetitive and ongoing. One way to keep money lessons ongoing is to create a timeline so that your child can visualize their set goals.

For example, if you give them five dollars a week and they want to save up fifty dollars. If they saved one hundred percent out of their pocket money, they’d reach their goal in ten weeks.

Every time an amount is saved, ask them to keep track of how much was saved. Let them know that they will get small perks at each checkpoint. Small rewards can encourage kids to retain their interest and keep going. Visuals are also helpful in explaining their goals for savings and about how their money is growing.

Teach your kids about why and how you are saving for their college education. Teaching little ones about saving money may seem like one of the toughest tasks. But using these tips, you can help your child understand the concept of saving money in a play-way method. It’s actually an investment of knowledge which truly pays the best interest.

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When an account becomes severely past due, the account is turned over to collections by the creditor. This generally occurs between 60 and 180 days of being overdue. The creditor will either pass it on to their in-house collections department, or sell the debt to a an outside collection agency. The collection agency then become the “owner” of the debt, and can begin pursuing you for repayment.

If you have old collections on your credit report, then you know it can drop your FICO score significantly. Let’s discuss how collection accounts from your credit profile can be removed?

When you are thinking about paying off old collection accounts, the date reported should be noted. The older the reporting date, the better. If you were to pay off the collection, you would be changing the date reported to today. This action will temporarily make the credit score go down.
My credit contains old collection accounts, should I pay those off first or focus on current/open debt?

There are different factors on which your payment of old collection accounts depends. If the collections are a settled amount and are not accruing interest or penalties, it is advisable to pay off the credit card first as it accrues interest on the debt.

The general rule is to pay off whatever is costing you more to have outstanding. This means the interest that accrues every month and of course, penalty you might incur from missing an agreed repayment schedule.

How paying off old debts affects your score

Debt collections are bad for your credit report for sure. Now, any past due account along with old collection accounts leaves a negative mark on your credit. The factors below will help you decide whether or not the old collections should be paid off first or not.

The Statute of Limitations

A debt actually becomes time-barred after an account has been inactive for a long period of time. The best way is to find out the statute of limitations in your state to help decide whether you should pay an old debt. Keep in mind, a debt statute may be reset if ANY activity occurs on the account, sometimes even acknowledgment of the account.

Moral Obligation

Since you’ve already consumed the goods or services financed by the debt, it’s your moral responsibility to pay for it. For old debt collections, you can have the debt collector first validate the debt. Then, decide if you should pay it off.

Impact on your credit score

According to FICO, paying an old collection debt won’t hurt your credit score, as long as it is not listed in the credit reports.

Future Credit card and Loan applications

New loan or credit card applications may not be approved easily as long as you have outstanding debt on your credit report. Or, if you get approved, you may not be offered a very good interest rate.

So never pay old collections?

Not exactly. Pay them when it makes sense to for you personal financial situation. Unfortunately, simply paying off a collection account without getting it removed from your credit reports won’t improve your credit scores. As long as a collection account is listed on your credit reports, it’ll have a negative impact on your credit scores.

While it’s discouraging to know that paying collection accounts won’t directly help your credit scores, remember that as this information gets older, it’ll have lesser of an impact. That’s particularly true if new, positive credit references are in process.

Paying off an old debt won’t necessarily do much to reduce the negative credit score caused by the delinquency.

How to Remove Collection Accounts from Your Credit Reports

The stain of collection accounts on the credit reports lowering the credit score can be removed using the following steps.

• Do a little homework to get information from your credit reports and your own records. Pull all reports, review and have a good understanding of your credit picture.
• Dispute any lingering debts or error in collection accounts.
• Seek Goodwill Deletion if you already paid the debt.

Benefits of Paying the Old Debt

You may not want to spend money to clear off an old collection debt. But, it can be a good feeling, and it does have some benefits.
Improves points in the payment history portion of your credit score report.

• Debt-to-income ratio decreases
• New credit can be easier to obtain as you will have less obligations.
• If the collections are a settled amount and do not accrue interest or penalties, it’s advisable to pay the credit card first as it is accruing interest on the debt.

The rule of thumb is to pay off whatever is costing you more to have outstanding. This means interest that accrues every month and any penalty you might incur from missing an agreed upon repayment schedule.

It’s a stressful, tedious process to clear off your collections account. That said, you must still persevere and get it done to avoid further negative marks on your credit account.

The post Should my old collections accounts be paid off first or focus on current debt? appeared first on Consumer Credit News.

Debts of any kind have to be paid under the set terms in order to maintain your credit score. Unfortunately, the terms of the multiple loans don’t care much about each-other, or your wallet. Now, to prioritize your debt debts, you have to understand the types of debt.

Excessive credit card debts are considered ‘bad debts’ because they come with high interest rates and are generally not beneficial in the long run. On the other hand, student loan debts are considered to be ‘Good debts’ as it is an investment for your future and helps to build credit.

To prioritize the payment of credit card debt and student loan debt, a few things need to be understood.

Prioritize your debt by interest rate.

Debts with higher interest rates should be paid first:

The debts with higher interest rates need to be dealt with and paid off first. It will save you paying more interest over a longer period of time. Focus on paying the credit card with the highest interest rate first. Then, follow the same for the other cards in descending order of interest rates. Remember, the interest rate is the “cost” of the credit to you. Eliminating the debt that costs you most first is key in digging yourself out.

Effect on your credit score:

The accumulation of credit card debts will substantially damage your credit score, while a student loan debt will not. The reason being, a student loan is an installment loan and is a fixed amount scheduled to be paid regularly. Credit cards are not issued for a fixed amount making it a revolving debt. In addition, lenders for credit cards and auto loans tend to view student loan debts at a lesser degree.

Credit Utilization ratio:

The ratio between the credit card balance and credit limit is called ‘Credit Utilization Ratio’. Student loan debts are not categorized in this ratio as they are to be paid regularly in fixed limits. This means they’re not having a long term effect on this key part of your FICO score.

Staying current on payment of debts:

Always try to stay current on your student loan payments which will create good-will that you are managing your payments aptly and wisely. The goal here is to stay current with your student loans, but any extra money should go towards high interest debts.

Avoid complete ignorance of payment on one debt while paying off the other:

It is very crucial that you don’t completely ignore the payment on one debt while paying off the other. This will not only lead to a bad credit score but also make it more difficult to catch up.

Flexibility of Repayment:

There are more options available for repayment of student loans depending on the financial status whereas credit cards do not have many repayment options.

Occasionally you can move your payment date one time for some breathing room, but this is temporary.

Which debt costs more:

This is a no brainer. The interest rates of credit cards are much higher than that of the student loans. Non-payment of debt for a longer time will increase the amount of interest.

Obviously, you must resort to payment of credit card debts first.

Conclusion – How to prioritize your debt

Having discussed different factors which may affect your credit score, budget, and savings, it is advisable to knock out the credit card debts first. This debt costs you significantly more in the long run, and causes more severe impact on your credit. You need to be sure to maintain your student loan repayments in tandem with credit cards. Once the credit cards are lowered, consider paying extra towards your student loan principles.

Remember, the ultimate goal is to have no debt.

The post How to prioritize your debt, the smart way appeared first on Consumer Credit News.

When creating a budget, you’re told to keep your expenses as low as you possibly can, and it’s good advice. Unless of course you’re making credit card payments. Most people are tempted to make the minimum monthly payment on their credit card in an effort to offset other bills. In the long run this is an extremely costly mistake.

We’ve all been there. We make the minimum monthly payment on our credit card to avoid delinquency and tell ourselves, I’ll pay more next month. But, we end up putting ourselves in more long term credit trouble by doing this. This is because depending on your credit, most times the minimum payment barely covers the interest rate. You’ll find yourself accruing more interest on your balance than your minimum payment can keep up with.

Simply put, if you pay the minimum now, you will have to pay more later. Eventually, your minimum monthly payment will rise. Once the minimum payment exceeds what you can afford, you’ll find yourself making delinquent payments, the very thing you tried to avoid.

Reasons you should avoid minimum monthly payment

It will take you longer to pay off your credit

Finance website NerdWallet crunched the numbers and did the calculation on how long it will take you to finish paying your credit if you consistently pay just the minimum monthly payment. The amount used is $6,081, which is the average credit card debt for the a household in America. This is what they found out:

• If you pay the monthly payment only, it will take you 169 months (or 14 years and one month) to pay off the credit debt
• If you pay twice the minimum monthly payments, it will take you 65 months (or 5 years and five months) to finish the payment.

Note that these results do not show how long you will have to pay if you keep adding debt to your credit card every month, which is a common scenario.

You will accrue more interest

By dividing your Annual Percentage Rate (APR) by 12 months, you get your interest rate every month. That number multiplied by your balance will give you the interest payment you have to make every month to keep up. If you do this calculation, you’ll see that by paying just your minimum monthly payment every month, most (sometimes all) of your payment is going directly to interest.

Your credit score will take an eventual hit

While paying just the minimum is better than delinquent payments, it has its own problems. Eventually, it gets to a point when your debt will be more than half your yearly income. This is when consumers should consider other options such as the variety of debt relief methods, or in extreme cases, bankruptcy. Doing this will affect your credit score and it will take some time to bounce back.

In all you do, try to pay at least the minimum on your credit debt, but don’t do it for too long. It may feel like a short term relief to make a small payment, but remember how much it’s costing you down the road when you do this. Future you will past thank you.

The post How long will paying minimum monthly payments really cost me? appeared first on Consumer Credit News.

A credit card is a payment card issued by financial houses that allows the holder to pay for goods and services. Of course, this is based on the premise that the holder of the card will pay for them later, generally with interest. The idea of having something now and paying for it later is pretty enticing to many Americans, but also contributes to the outrageous credit card debt in the US.

Today, the use of credit cards remains the most common way of getting a loan in the United States. In fact, a survey carried out by Statista in June 2018 showed that 83% of American citizens between the age of 39 and 49 years own at least one credit card. This means that at least four out of five adult citizens of the US have, and use a Credit Card. If that isn’t enough, the average unsecured debt of a U.S. household in December of 2018 was $8,187.

The payment of debt incurred by a holder of a credit card is done with interest. According to WalletHub’s Credit Card Landscape Report, the average interest rate placed on a credit card is 19.24% for new offers and 14.14% for existing accounts. Not all credit companies give credit with the average interest rate. For instance, the Sears Credit card offers an interest rate of about 24%.

Who can get a credit card?

In most cases, getting a credit card does not pose that much of a problem. The fact that a lot of Americans have credit cards should be a good indicator of this. Even with mediocre credit, there’s likely some options for you. The problem that comes with the usage of credit cards is the deferred payment of the debt. If you are lucky enough to receive a credit card, the interest is likely quite high. Remember, an interest rate is the percentage of money the credit costs you. This is due to the fact that when credit card companies loan you money, they don’t have a lien or collateral on it. This is known as an unsecured debt. Credit Cards are the most widely used sources of unsecured debt in the Country.

Over the past six years, the credit card debt in America has grown by 9%. According to a report by Bloomberg, Credit card debt in the United States reached a record 870 billion dollars by the end of 2018. This report revealed that based on Federal Reserve data, credit card debt increased by 26 billion dollars. This made it the first time since 2008 that credit card debt reached such high levels.

What’s the future of unsecured debt? like credit cards?

The future of credit card debt relief looks bleak. While there is income growth which helps fight inflation, some things like medical costs, personal expenses, vehicle expenses, and cost of living continue to outpace income. This makes it difficult for debtors to repay their debts. Also, the interest to be paid on credit cards is very high. For instance, households that have revolving credit card debt would pay an average of about $1,200 in interest alone this year.

With the rate at which credit cards are continually being issued to consumers, it is very unlikely that this 870 billion dollars’ debt will be paid back anytime soon. Kimberly Palmer, a credit card expert has posited that “credit card debt is the stain on millions of America’s finances that doesn’t scrub off easily, if ever”.

There are options

For consumers with unsecured debt specifically, there are some good options out there for you. Debt settlement, debt consolidation, and debt management programs are all viable options with the new federal regulations in place for these companies. The great people over at Consumer First Financial would be a good place to start if you’re looking for a reduction on your credit card debt, and a quick path to payoff.

The post What is the Average Credit Card Debt in America? appeared first on Consumer Credit News.

Bad credit can affect you in innumerable ways. Applying for credit cards results in the all too common denial screen, and lenders laugh at a request for a personal loan. When you have a bad credit report, not only will it be tough to get a loan or a credit card, even when you do, the interest rates will usually be outrageous. So outrageous in fact, a high interest rate like those on payday loans can double, or even triple what you actually pay back. If these scenarios are familiar to you, it’s likely time to rebuild your credit.

In 2019, many Americans are entering their careers with significant debt. Some have federal student loans or private personal loans, others rely on credit cards for their expenses. With an economy where compensation has not kept up with inflation and cost of living, these debts take many years to pay off once you graduate.

Did you know some employers check your credit?

Another way in which bad credit can affect you is not getting hired. Nowadays it’s not uncommon for employers to review a credit report when dealing with any sort of financial or consumer data handling position. All of this rests on whether people can trust you or not based on your past dealings. Here’s a great article that gets into the finer details of what an employer can and can’t see. So, if you will ever get your finances right, it is important that you successfully rebuild your credit.

In order to do that, below are some steps that you can take.

Know your financial status

If you will ever rebuild your credit, you must know where you are presently. Having a firm understanding of where you stand financially will help you know where to improve. Knowing your delinquent payments and ensuring that your debt to income ratio is very low is a good way to start.

Resolve to pay on time

Having known your current status, the next step to take is to decide to catch up on your payment and settle all dues in time. This might be difficult especially if you already have a bad habit of paying late, or a low household income like many people. However, be reminded that your payment is on of the largest factors affecting your credit score.

Do not close credit card accounts

Contrary to popular opinion that credit card accounts, especially if you have a low credit score, are not good if you want to rebuild your credit. Rather, here’s to encouraging you not to close the accounts. More than anything, credit accounts are monitored and reported, so when you have turned a new leaf and started paying in time and clearing your debt, how do you want the authority to find out? It is true that you might be advised to close your credit card accounts, but more than anything, avoid it.

Pay down debt first

In order to rebuild your credit, it is important that you are free of debt. Alas, you cannot talk of saving until you are free of debts. So, you need to create a simple yet disciplined method to pay off your debt quickly. You might even need to evaluate and cut back your expenses. There are several debt relief options out there, just be sure to use a trusted company with the proper accreditation. We highly recommend Consumer First Financial as a trusted name in the industry.

Practice good financial habits

So you’ve turned over a new leaf and started regaining control of your debt It might take some time to see improvement in your credit score, but don’t give up, you will eventually get the desired result. Practicing good financial habits will definitely help rebuild your credit, so keep at it. Live within your means, set aside money in case of emergency and save for the future, and you will have one less thing to worry about.

The post Simple steps to rebuild your credit, and maintain it appeared first on Consumer Credit News.