Archive for the ‘credit cards’ Category
The issue of cancelling credit cards that you are not using (or should not be using) is a complicated one.
The advantage of cancelling old cards is that you are not tempted to use them and if you are going to do some type of financing in the near future (mortgage, loan, etc.) the amount of available credit on those cards does not form part of your debt ratio. (Will blog on this one later).
The disadvatage is that your credit score, which is created from several factors, can take a hit. One of those factors is how long you have had credit. The longer, the stronger your score. So, let’s say you have a Sears card that you have had for 20 years (because everyone seems to have had a Sears card starting out with credit), if you cancel that card, you have lost that “length” of credit and your credit score can decrease.
That decrease may or may not affect you depending upon your score to begin with and how long before you apply for new credit, but it is something to be aware of.
A better option – don’t cancel it. Drop the limit an then tuck it away, or, better yet, freeze it in a block of water to avoid impulsively using it. (grin)
The whole credit score system is a bit of a grey area. Watch for future posts as we work through some of the pitfalls, myths and confusion.
As always, if you need specific guidance, ask Dr. Debt at info@drdebt.ca or visit our website for more information.
I ask this question often when giving presentations.
Initially I was suggesting that there was no good reason to have more than one. However, I received some valid arguments against that point.
- some places may not take your visa/master card/(fill in the blank)
- identity theft – you can cancel the card and not be left without
- have one card with a low limit for online purchases to limit loss if your card is compromised
- for points, discounts, and other benefits
- in the event a card is not accepted due to a technical / fraud issue.
These are all good and valid arguments. I add a simple caveat.
Two or three cards? No problem! Providing you do not carry balances on any of them. If you are using an additional card, because your initial card(s) is maxed, problem!
Dr. Debt is provided courtesy of Haley & Associates Inc. www.HaleyTrustee.ca
I received a call today from a Debt Consolidation Company planning to expand into Nova Scotia. They were looking for a Trustee to refer business to. We chatted about what they needed and what they offered to their clients.
He informed me that their objective is to help individuals find the best solution. I thought, “Us too!”. He explained that they have individuals complete an assessment package to assist them in determining the best option. And I thought, “We do that too!”. He further offered that they charge the client a fee for this advice. And I thought “We DON’T do that!”. Our consultations are free. Yet, these credit counselling companies are popping up AND, apparently, expanding.
He indicated that many people call them because they are afraid of the “B” word (that would be “Bankruptcy”); and I totally get that. Bankruptcy should always be your last option and we strive to help individuals find solutions other than the “B” word. In fact, and we pride ourselves on this fact, approximately 40 percent of the people who walk through our doors, walk back out again. Not because we couldn’t help them, but because we helped them to find an alternate solution. And it didn’t cost them anything. Other than, perhaps, the embarrassment of talking to a Trustee in Bankruptcy.
Which leads me back to “the cost of embarrassment”…it seems to me that if you are struggling financially, perhaps you would be better off not paying a fee for a service that you can get for free.
There is a movement in the bankruptcy industry to change the title from Trustee in Bankruptcy to something that better reflects our wide range of advice/services. I would say that’s a movement in the right direction.
What comes to mind when you hear the word “Consolidation”? Do you envision all of your debts being ‘paid off’ leaving you with the manageable obligation of one monthly payment? If so, you are thinking about a “Consolidation Loan”. A financial institution loans you money by paying off your debt and you pay them back. With interest, of course.
Nowadays, the word “consolidation” is being used in a much more liberal term. Many debt-relief agencies offer to “consolidate your debt”. The process is quite different. Your creditors are approached and offered a settlement. That settlement could be in full or in part (a percentage of what you owe) and could result in an elimination or reduction of interest.
In the Insolvency Restructuring Profession we call this “consolidation” or “settlement” a Consumer Proposal
So, what is the difference between a “consolidation loan” and a “debt consolidation”?
The most important distinction is the effect on your credit rating or score. A consolidation loan will not affect your score in a negative way and may, in fact, improve it. A debt consolidation, on the other hand, WILL impact your score negatively, the extent depends upon your credit score at the time of the ‘consolidation’.
A friend recently asked me if I could recommend a reputable debt consolidation company that will not impact your credit score. My answer was “Nope, they don’t exist!”. If you find one, let me know!!
(Blog submitted by 3rd party) / Author: Robin Williams
[Please note that the poster does not offer any recommendation for sites linked to these articles and cautions readers to use good judgement in contacting a company for assistance wth their finances.]
If you have multiple debts, you may face difficulty in making all your bill payments on time. In such a situation, like everyone, you too will wish to get rid of your bills. You can pay off all your bills by obtaining a consolidation loan. You can also seek help from professional debt consolidation companies. They advise you and offer you services to tackle your debt problems.
How can you benefit by professional debt consolidation advice?
Professional consolidation companies provide you with financial advice and help you combine multiple bills into one. They also offer you other benefits. These are:
* Free counseling: A certified counselor of the company will analyze your monetary situation and will help you determine your financial goals.
* Communicate with creditors: A representative of the consolidation company will effectively communicate with your creditors. Your creditors may stop harassing you with collection calls.
* Negotiate to reduce interest rate: The representative will negotiate with your creditors to reduce the rate of interest on all your bills.
* Eliminate other charges: The company representative will also negotiate with your creditors to help you eliminate or reduce late charges and over limit fees.
* Convenient repayment plan: The consolidation company prepares a repayment plan for you based on your credit needs and gets it approved from your creditors.
* Replace multiple payments with one: Instead of making separate bill payments, you have to make a single reduced monthly payment to the consolidation company and they will disburse it on time to all your creditors.
* Become debt free: With the help of a professional consolidation advice, you can pay off all your debts within 4-6 years.
There are also various non-profit debt relief companies that offer debt consolidation programs. By enrolling in one such program, you can obtain relief services at a lower cost. However, you must remember that there are less reputable companies. So, you must verify the company’s status before seeking consolidation advice from them. You must check its accreditations.
For details on all of your options, and an outline of the benefits and disadvantages of each, contact Dr. Debt (info@drdebt.ca) to arrange free consultation.
Recently, I received a question on this site, asking about our credentials – a very important questions. Given the broad range of “advisers” out there in both the real world and the world-wide web, you never really know who is imparting their knowledge on you, do you?
So, I thought I would take a moment and tell you about us…
As I write most of the posts, I will start with my credentials. I have been working in the Financial Counselling / Bankruptcy industry for 12 years. My training has been a combination of professional training and experience. I obtained my financial counselling certificate from The Association for Financial Counseling and Planning Education (AFCPE) while working in this industry. Nowadays (is that word actually in the dictionary?), the Financial Counselling Program is coordiante by the Office of the Superintendent of Bankruptcy and the Canadian Association of Insulvency Restructuring Professionals. More importantly, I feel that I have personally made most of the financial mitakes I write about.
Enough about me…we are supported by our Trustee, Darryl Haley, who has more than 30 year experience dealing with individuals and businesses in everything from money management to business turn arounds. He hold a CA designation and Trustee in Bankruptcy license.
In addition, we have several staff members with a wealth of training and experiences who talk to people every day about their financial situation and we draw upon other business colleagues and experts in their fields, to bring you relevant advice and experience.
So thank you for asking!
(Do you have a question for Dr. Debt? Click on “Ask Dr. Debt” and watch for a post addressing your question.)
I’m in my car. On my way to work. Listening to the radio. And one commercial catches my attention.
A lady comes home with a shopping bag. Her husbands asks what’s in it and then exclaims, “Don’t you have enough dresses?” (Like that’s actually possible)
She replies, “But honey, they were 70 percent off”. He pauses and then replies, “That’s a lot. ”
The message closing off the commercial is, “Save money. Save on explanations”.
This strikes a chord with me on so many levels. First there are all those dresses in my closet (just kidding. I feel confident I have a reasonable number and I wear them all). What resonates with me is the fact that this is a general perception. If it’s on sale and I’m getting such a great bargain, I should buy this.
Of course we don’t know how much the dresses in the commercial cost before the sale. 70 percent off of a 500 dollar dress is still a good chunk of change.
And did she pay cash or use credit? A sale may be well and good, but if you pay for it on credit, and take several months or years (yikes) to pay for it, the total cost of the use of credit could eat up the savings.
The bottom line is, your budget should dictate what you spend, not the ultimate sale price.
Trimming your budget is a lot like trimming your waistline.
Consumers spend millions of dollars every year looking for that magic solution to losing weight. And businesses increase their bottom line while relatively few consumers decrease their bottoms/middles etc.
The same phenomenon happens in money management. We tend to look for quick fixes – consolidation loans, second mortgages, payday loans.
Neither works for the masses. Why? They do nothing to address the underlying problem – taking in more calories than you burn / spending more monthly dollars than you make.
But alas, there is a magic solution to gain control of your finances! – AWARENESS. Pay attention to the details.
1. Track where your money goes and make decisions to change your habits.
2. Seek expert advice/guidance when needed.
3. Commit to a plan of action.
That’s it. That’s the secret. 
…but at what cost?
I’ve been struggling holding off buying my kids a DS. My daughter is 7 and my son is 5. All their friends have one. I have a momentary flask back, “But Mum, I plead, all my friends have jeans”. (I was in Grade 6 and still wearing polyester pants). That was 1978. Oh how far we’ve come. Hmmm. Really. Today’s pleas would be “But Mum, all my friends have a DS, computer, ipod, cell phone, (fill in the blank).”
But alas, there’s something we have today that we didn’t have in 1978. Endless sources of credit. If the bank says no, don’t worry, there’s Finance Companies. If they refuse you, no problem, just about any store can give you some type of credit from a credit card to a no-payment no-interest deal. You can give your kids everything you never had. But at what cost?
Well, first there is the interest cost. The more difficult it is for you to get credit, the more interest you will pay. Then there’s the cost of having to upgrade the DS to the latest model when their friends do so. And let’s not ignore the costs of teaching your kids that they “should” have everything they want. No worries, our credit system will be there by their side as they get older and struggle to maintain their lifestyle on a meager wage and potentially high student loan debt.
Maybe its time to stop keeping up with the Joneses and evaluate our own family values. Me?! I’ve decided the hand-me-down Gameboys can last a bit longer and told my kids they can get a DS when they save up enough money. By then, two more versions will have come out and we should get a pretty sweet deal on Kijij, or, better yet, a hand-me-down from a more progressive friend.
And who knows, they just might learn a valuable financial lesson in the meantime.
Thanks Mum – for teaching me a “valuable lesson”, even though I whined and complained the whole time.
I will often tell my clients, or anyone who will listen for that matter, that we are all one or two events away from bankruptcy. What do I mean by that? I mean that all it takes is one or two major events, such as an illness, a layoff or a divorce, to turn our financial world upside down. The reason is simple. We live too close to, or above, our means. As a result our credit is maxed out, our savings minimal, or worse, non-existent, and we have absolutely no breathing room. When a major event happens you quickly get behind to the point where catching up is a challenge. And that’s IF your situation improves. If it does not, you dig a deeper, darker hole.
The solution is so simple. Ok, I say that recognizing that once you are in trouble financially, it takes time, patience and hard work to get back on track. Generally speaking though, you need either savings or available credit to get you through the tough times. Obviously savings is best. But having unused credit can help bridge the gap if savings are unavailable. I do offer a word of caution – “if you are going to use credit, you need to be very, very organized and have a well thought out plan”. Otherwise, the risk is great that you will get in over your head.
If your credit is maxed and you have no savings, you need to start a debt reduction strategy immediately. Beginning a savings account while reducing your debt makes the most sense, as this will eliminate or reduce your dependency on your credit to get through those expenses that pop up both expectedly and unexpectedly. There are many options for reducing your debt, from establishing a budgeting plan, to refinancing, to offering creditors a settlement on the amount you owe. The following link will provide you with some information on specific services designed to help you reduce or eliminate your debt. http://www.haleytrustee.ca/solutions.php