Personal Finance Ology

Credit cards often get a bad reputation, but they have many benefits that are often overlooked or ignored by the general public and financial experts. A credit card is a double-edged sword and it can be tempting to abuse one; but with a solid understanding of how a credit card works and how to use them to an advantage, a person can improve their credit and earn benefits or rewards.

One of the most important steps in responsibly using a credit card comes before a card is even applied for - making sure the right card is chosen. There are numerous credit card options available and should be considered carefully. There are two basic fees attached to any card that need to be compared: the annual percentage rate (APR) and is there a holder fee. The APR is the sum of the interest on the card. If the card does not list an APR, just multiply the monthly interest rate by 12. Holder fees are fees charged by the credit card to use the card and not all cards have one. Many rewards cards come with a yearly fee, but most cards from credit unions do not. Obviously, the lower the interest rate the better. Some credit cards offer introductory rates that will increase after the first six months or the first year, so be on the lookout for the fine print. There are credit card comparison websites that will present the information from several different cards in a clear format to help people avoid confusion and make the best choice for them.

One of the most positive things about using a credit card is the convenience. They can be used to pay bills, book travel reservations, make purchases where cash is unavailable or impracticable and be used in emergencies. Credit cards are also safer than cash in many ways - a lost or stolen card can be canceled immediately to prevent fraudulent purchases, while cash is gone for good. Many credit card companies also offer purchase protection which helps protect the card holder from purchases that are flawed, such as a brand new computer that breaks and the store will not accept fault. Purchasing with a credit card actually allows a person to legally dispute the purchase - something that cannot be done with cash or a debit card.

A credit card is also one of the best ways to build or credit scores. Credit scores determine the rates of interest a person will be charged on future purchases such as cars or homes, and are also often checked by landlords and even employers. Essentially, a credit score is the financial history of person and how well they pay their bills. Using a credit card sensibly allows the person to build a solid credit score and show that they can handle a line of credit and pay it back according to the cardholder agreement. One of the best ways to do this is to pay off the credit card every month, which will build credit while avoiding paying interest on the card. Rewards cards are doubly helpful, since they reward the cardholder with airline miles, hotel stays, cash back or other incentives. This can help save money over time as well as being convenient. These rewards cards may charge a yearly fee, requiring the cardholder to make sure the rewards are equal to or greater than the fee so they do not lose money.

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You know it is the festival season and Christmas time when you start feeling the strain in your pocket. Christmas is the season of joy, festivities and celebrations. Thus it is quite natural that during this time your expenditure will increase. Dinners, parties, food, and of course gifts not leaving out shopping for oneself, takes up most of your earnings during Christmas. It has been observed that most people end up in debt during this time. For those who have incurred credit card debts while happily shopping have credit card debt consolidation as a way out of your trouble.

However, as is said, prevention is better than cure; you should not bank upon credit card consolidation and go on spending beyond your budget. It is better that you practice frugal living during and before the festive season to save money so that you will be able to spend on things required and not get into debt in the process. Here are some methods you can use to save money during Christmas.

1. Save on Christmas cards – If you see that Christmas cards are not on your budget then you can refrain from spending on them. Instead of sending Christmas cards to your friends and family you can send them normal postcards. This will help you to save money as postcards require less postage as compared to Christmas cards. Also if you really want to send Christmas cards you can use some tricks. You can wait till the months of December to buy Christmas cards as you can get them on sale in many places. You can also be innovative and make Christmas cards on your own by cutting out cards from last year and sending them as postcards.

2. Save on decoration of gifts – Christmas is that time of the year when you need to give presents to friends and family. As much as buying presents takes up money, so does decorating these gifts. You can save money on the decoration by doing some work on your own. First of all you can use colorful magazines or the comic section of a newspaper to wrap your gifts instead of using costly wrapping paper as these would look attractive enough. You can save wrapping papers from gifts you received all the year round and fold small pieces of these to make gift tags. You can also cut up old Christmas cards to make gift tags.

3. Save on shopping – Christmas is the time for shopping and it is mere torture to refrain from doing so with all the wonderful things displayed around. However, if you shop wisely, you can avoid excess expenditure. First of all start collecting coupons and use them to buy things from different store. You should also compare price, especially while shopping for food stuffs. There are times when you get discount if you buy items in bulk. You can buy non perishable items in bulk to get a discount.

Thus you can see how the above methods can help you to save money during Christmas and avoid debt.

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Perhaps you’re young and new to finance and are just starting to look into credit cards and what they offer? Or maybe you’re a more seasoned spender but just want a refresher on exactly how credit cards work? However you’ve stumbled across this blog, it’s our aim to give you a brief, back-to-basics explanation of what a credit card is, how it works and the pros and cons of using one.

A credit card offers a flexible way to pay for goods and services, based on the user’s promise to pay for the transaction at the end of the month. Once issued with the card, the holder is given a credit limit, which the maximum amount of money that can be spend within one calendar month. People can choose to use credit cards for their spending due to the fact they offer better protection than cash, checks or bank account transfers. As part of the Consumer Credit Act legislation, you’re much more likely to get your money back if a supplier (for example, a travel firm) goes bust if you’ve used a credit card.

Of course, as with any financial product, there are pros and cons to consider – although in most cases, the key is to get the card with the features that most suit the user.

Some common pros include that they:

• Offer a flexible way to borrow money
• Can boast rewards, such as cash-back or air-miles
• Give you more protection than debit cards or cash
• Offer the chance to clear your outstanding balances on other cards using a balance transfer credit card

On the other hand, some of the cons are:

• If not used properly, they can wind up putting the user in debt. The fact that interest is incurred on this debt can be particularly problematic, as it can make it harder and harder to get back in the black as time moves on.
• Loyalty isn’t rewarded – the longer you stay with one card, the worst its deals and rates are likely to be. New customers on introductory deals usually get the best bonuses and 0% deals, so it’s always worth comparing credit cards once your initial period is over to make sure you’re getting the best deal.

Ultimately, the way you use a credit card will determine whether it’s a good move for your finances – use them wisely and they could end up saving you money each month, use them recklessly and you can expect the opposite effect in some cases.

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With home prices continuing to fall and interest rates at record lows, many renters are wondering if now is the time to jump into the real estate market and buy a home. While its tempting to buy when homes seem to be “on sale,” a favorable market is not the only factor relevant to whether you are ready for home ownership. If you are not financially prepared to be a homeowner, you could find yourself faced with serious financial struggle.

The Financial Side of Buying a Home
When you are considering buying a home, there are several essential steps to take in order to make sure that your finances are in order. Before considering purchasing a home, you need to:

• Check your credit score. A credit score over 720 or so should qualify you for the best rates. If your credit is low, consider taking some time to build your score by paying off debts and making payments on time before you buy a house. A low score can lead to a higher interest rate and a more expensive mortgage over the life of your loan.
• Consider your job status. Banks and mortgage lenders like to see that you have been in the same job for a while and that you have a reliable source of income. For the self-employed, this requirement is usually more stringent, with most lenders requiring at least 2 years of tax returns before they’ll count income you earn.
• Have a healthy down payment. Today, most banks and lenders require that you put down at least 20 percent in order to qualify for a home loan. While you may be able to find a lender that will let you put down less, you will have to pay something called PMI (private mortgage insurance) if you borrow more than 80 percent of the value of the home in a single loan. You also take a risk if you don’t have a down payment because if property values continue to decline, which is a real possibility in an uncertain real estate market, you could find yourself under water and unable to sell if you need to.
• Have an emergency fund: Home ownership can come with a host of expenses you don’t have to deal with as a renter. When the furnace breaks, the pipes burst or the roof needs replacing, the money for this comes out of your pocket. An emergency fund can provide you with the cash you need for unexpected expenses and can also be used to pay your mortgage if you end up out of work or unable to pay your bills for a period of time.

Living Like a Homeowner
If you believe your finances are in good shape and that buying a home is right for you, it is a good idea to actually practice making your mortgage payment before you have to make it. In other words, if you are considering buying a home that will have a $1200 a month mortgage payment, you should pretend you have to make that payment before actually buying a home. If your rent is only $800, for example, then set aside the extra $400 each month. You can use this money to build up your down payment or your emergency fund and you can see if you can really fit the mortgage payments comfortably into your budget.

If you are able to make your “mortgage payment” for a few months without feeling a pinch in your pocket book, and if you have carefully evaluated all other aspects of homeownership including your financial readiness and your long and short term goals, then now can be a great time to jump into the real estate market.

Author: Christy Rakoczy writes about PPI claims and bank charges at www.PPIRefundsUK.co.uk a UK based mis sold PPI reclaim website in the financial claims sector. Christy also writes about personal finances, mis-sold mortgages, unfair loan agreements and credit rating advice.

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