Managing your credit cards(07/14/2008) 
11:31
Ronette King, T-P: 
Good morning and welcome to this online chat about credit cards. Personal finance columnist Ronette King will be answering your questions about managing credit and using your credit cards. Feel free to go ahead and begin posting questions. Ronette is online and will begin answering your questions at noon.
Monday July 14, 2008 11:31 Ronette King, T-P
12:03
Ronette King, T-P: 

Today I'm  taking questions about credit card debt, how to get out from under the burden and changes to look for in the credit cards you already hold. First remember, you're not alone. The average US household has about $8,300 in credit card debt and is paying an average of 19 percent interest. Think of it this way, if you don't pay off the balance each month, every dollar you swipe costs you another 19 cents.

 
Monday July 14, 2008 12:03 Ronette King, T-P
12:03
[Comment From KellyKelly: ] 
I've managed to accumulate enough credit card debt that I can't pay it all off at once. I got an offer for another credit card that offers a low introductory rate. Should I consider transferring my debt to a newer lower-interest rate card?
Monday July 14, 2008 12:03 Kelly
12:03
What do you use your credit cards for?
Use it for food, gas and other daily necessities.
 ( 17% )
Use it every once in a while for a large purchase.
 ( 67% )
Use it only in emergencies
 ( 17% )

Monday July 14, 2008 12:03 
12:06
Ronette King, T-P: 

This is usually referred to as a "balance transfer" offer. Switching to another card that offers a lower, more attractive interest rate can be appealing. But you need to know how long that introductory rate will last. Credit card companies can raise that low rate the instant you make a late payment. Also, those transfers often come with "balance transfer fees" that must be paid. That is in effect an advance interest payment to the new credit card company.
 .

Monday July 14, 2008 12:06 Ronette King, T-P
12:07
Ronette King, T-P: 
The biggest risk is that you will make new purchases and run up another balance.      
Monday July 14, 2008 12:07 Ronette King, T-P
12:07
[Comment From smurfmansmurfman: ] 
I've heard about how a lot of the credit card companies are raising their interest rates. I've had my credit card for a while. How can I find out if my interest rate is going up?
Monday July 14, 2008 12:07 smurfman
12:09
Ronette King, T-P: 
You know all that annoying stuff that looks like "junk mail" or just another offer? Pay attention to the ones that come from your own credit card company. The card issuers are required to notify cardholders of any changes in the credit agreement, including the interest rate, grace period and any fees. I couldn't tell if my rate had increased and was anxious to know, so I called the number on the bank of my card and asked the current rate and whether it had changed recently.
Monday July 14, 2008 12:09 Ronette King, T-P
12:11
Ronette King, T-P: 
While you're at it, ask about any fee changes as well, for things like late fees, over limit charges, or the new breed of what I call  "just because charges"  as credit    companies  devise new ways to make money.
Monday July 14, 2008 12:11 Ronette King, T-P
12:11
[Comment From DanswanDanswan: ] 
I'm going to just go ahead and admit it. I've got a whole load of credit card debt, much of it incurred after Katrina. Any guidance on how best to get out from under it?
Monday July 14, 2008 12:11 Danswan
12:14
Ronette King, T-P: 
Danswan, you are not alone. Plenty of your neighbors, relatives and friends are in the same position. Many people had relied on home equity loans in the past but with the storm, that equity was seriously reduced. You might look into the rate on a personal loan from a bank or credit union (there are several in town with generous membership guidelines). If you can get a lower rate on such a loan and consolidate those bills, then more of your payments would go toward the principal. (more)
Monday July 14, 2008 12:14 Ronette King, T-P
12:15
How many credit cards do you currently have?
None
 ( 0% )
One
 ( 50% )
Two
 ( 25% )
Three
 ( 25% )

Monday July 14, 2008 12:15 
12:17
Ronette King, T-P: 
It is also worth it to contact each credit card company and see if you can negotiate a lower interest rate. That way more of your monthly payment will to toward   getting the balance paid. As a result of the missed credit card and loan payments after Katrina,    many people got dings on their credit rating.  Check your credit report and see if any of your creditors reported late payments in the past couple of years. Again, contact  the credit reporting agencies and find out the procedure for adding an  explanation for such late payments.  
Monday July 14, 2008 12:17 Ronette King, T-P
12:18
[Comment From MollyRMollyR: ] 
any tips on how to evaluate which of the credit offers i get in the mail are the most worthy?
Monday July 14, 2008 12:18 MollyR
12:22
Ronette King, T-P: 

Comparing credit card offers is tricky because you have to line up apples-to-apples, MollyR. Start with the interest rate and see how long the rate will remain low. Find out what the rate will be thereafter.  Credit card offers thta allow you to earn reward points or airline miles often come with  annual membership fees and such fees can increase from year to year. Find out the grace period, or how much time is allowed in the billing period. Look for the box called the Schumer Box where the credit card company is required to spell out the terms and conditions of the offer. That eliminates all the "free toaster" selling by the card issuer and breaks down the actual cost to consumer.

Monday July 14, 2008 12:22 Ronette King, T-P
12:24
Ronette King, T-P: 
If you're thinking that a fixed rate interest card is better than a variable one, think again. The new language to look for is "any time for any reason" changes. Most card contracts include this vague phrase and it means the company can increase your rate when it chooses to.  
Monday July 14, 2008 12:24 Ronette King, T-P
12:25
[Comment From MollyRMollyR: ] 
Is it worth hanging onto a credit card...or getting a credit card...just because of the air miles?
Monday July 14, 2008 12:25 MollyR
12:29
Have you ever opened a credit card simply to receive a discount on a purchase or a gift?
Yes
 ( 60% )
No
 ( 40% )

Monday July 14, 2008 12:29 
12:29
Ronette King, T-P: 

Molly, my first thought is if it is an airline that you're sure to use then it makes sense to get some additional benefit from having a credit card  affiliated with that  airline's frequent flier program.  On the other hand, those miles aren't free since the membership comes with an annual fee.  I know of one program that costs $85 a year. My thinking is if your charges outpace that fee and you use that airline regularly, then its worth it. I actually have such a card, it is affiliated with the airline I use atleast twice a year, so I'll find out if it really works.

Monday July 14, 2008 12:29 Ronette King, T-P
12:31
Ronette King, T-P: 

One final thought Molly. I think you'll also need to speak with a representative at the airline's customer service to find out if miles earned from actual travel are treated differently from miles earned from credit card purchases. Just as the snacks are different on each airline, the rules are different for each airline's mileage program.

Monday July 14, 2008 12:31 Ronette King, T-P
12:32
[Comment From Brandy LBrandy L: ] 
I'm refinacing my home. I have 2 cards with a total of $5500. One is at 10.9%, the other at 12.9. Does it make since to roll it into the refi w/ a 6.375% rate on the home loan?
Monday July 14, 2008 12:32 Brandy L
12:37
Ronette King, T-P: 
Home equity has been the refuge for Americans in recent years. The lower rate will allow you to pay off the debt faster and save a good deal on the rates the credit card company is charging.
The biggest danger is that you're putting your home at risk - an asset that appreciates in value -to payoff  a debt. The interest rate is better on the home equity loan, and sometimes the interest is deductible. But remember that there are limits on the income tax deductibility of home equity loan interest, so check with your accountant if that is part of your consideration. But Brandy, if you use the home equity loan, keep thinking of it as credit card debt and don't make new credit card debt until you pay off the old charges.
Monday July 14, 2008 12:37 Ronette King, T-P
12:37
[Comment From JEFFLYNJEFFLYN: ] 
I have gotten 3 months behind on my car note. My car note company iwill not accept my payment. Do you suggest bankruptcy or contacting credit counsler.
Monday July 14, 2008 12:37 JEFFLYN
12:41
Ronette King, T-P: 
Jefflyn,   bankruptcy isn't a simple undertaking and will have ramifications on your credit history and therefore the rest of your life. So don't take that lightly. You should contact a non-profit consumer credit counseling service for help. They can contact the lenders and negotiate a new arrangement and help you figure out how to keep your expenses in check. You might have to use the car to get to a second - or dare  I say it - third job until you get caught up on your debts. But it won't last forever.  A credit counselor will  map out a plan to get you there.  
Monday July 14, 2008 12:41 Ronette King, T-P
12:42
[Comment From ChrisChris: ] 
I've heard two things about paying down credit cards - one is to pay off the lowest interest rate first, the other is to pay off the lowest balance first. Which do you think is better?
Monday July 14, 2008 12:42 Chris
12:44
How much credit card debt do you have outstanding?
Less than $500
 ( 20% )
$500 - $1,499
 ( 20% )
$1,500 - $7,499
 ( 20% )
$7,500 or more
 ( 40% )

Monday July 14, 2008 12:44 
12:45
Ronette King, T-P: 
The traditional thinking has always been to pay off the credit card with the highest interest rate. You don't get anything out of interest so why  pay so much of  it, right? Some advisors take the view that paying off the lowest balance gives a sense of accomplishment and gives the confidence that "I can do it" and motivates you to keep going. I prefer concentrating on the interest rate since paying high interest is like throwing paper out the window of a movie car.   You're littering your own effort at getting out of debt.
Monday July 14, 2008 12:45 Ronette King, T-P
12:46
[Comment From AndyAndy: ] 
I also have a problem with credit cards. I contacted the local CCCS office but was unable to get any help. In considering bankruptcy, would I do better filing Chapter 7 or Chapter 13.
Monday July 14, 2008 12:46 Andy
12:52
Ronette King, T-P: 
Andy, new rules for filing bankruptcy  took effect this year and they include mandatory credit counseling for several months before you're allowed to file. So if CCCS   (Consumer Credit Counseling Service) was not able to help, you'll need to move fast. Chapter 7 is liquidation and Chapter 13 allows you to keep your property and voide foreclosure and create a plan to repay your debts over time. In future years creditors may regard your credit history  differently because of the amount of your prior  debts were  repaid.
Monday July 14, 2008 12:52 Ronette King, T-P
12:52
[Comment From Brandy LBrandy L: ] 
it's actually a refi - getting out of an ARM before it resets in 10/09, and there's predictions that rates will go back up. Does that make a difference in a refi-vsd home equity?
Monday July 14, 2008 12:52 Brandy L
12:55
Ronette King, T-P: 
Good move Brandy. These days I think that the Resetting ARM is the new terror ride at the theme park of our lives in the current economic climate.
If the refi will allow you to escape the danger of a resetting  interest rate that will only go higher - as often as every six months - do it. I'm certain there are costs involved, but they are worth it to avoid a  mortgage payment that could quickly grow beyond what you can pay.
Monday July 14, 2008 12:55 Ronette King, T-P
12:56
[Comment From MichelleVMichelleV: ] 
I'm in a mess. I've cut up all my credit cards and only buy what I have cash for now. I've already paid off one card and "settled" another, but I have one more that I probably owe about 8000 or more on. It's so bad now.... I haven't paid anything in over a year (new baby, job loss, move). I know this is really hurting my credit, but how do I get out of this???
Monday July 14, 2008 12:56 MichelleV
1:00
Ronette King, T-P: 
You have a lot going on Michelle. A year is along time for creditors not to have heard from you. Contact a consumer credit counseling service  FAST and see if they can help  you. I understand you have a new  baby at home, so I'm not sure of your work situation. But if finding a babysitter or affordable childcare has been a hindrance to work, why don't you turn that into your job. There are other Moms in the same position and possibly in your neighborhood and they could be a good market for you to keep their babies while you're home with yours. Then you've solf your own childcare dilema and started making some money to pay your creditors.
Monday July 14, 2008 1:00 Ronette King, T-P
1:04
Ronette King, T-P: 
Looking at the results of the poll,  40 percent of you have outstanding credit card debt of more than $7,500. That puts us in the unfortunate company of most other Americans. As for the majority of poll participants who opened a store credit card accoung to get a discount (60 percent), think twice before accepting the next offer from the kind clerk. That additional available credit will impact your credit score. The interest rate on store credit cards is usually higher than that on the general purpose credit card you're probably holding already. If you've already  taken the deal, best to pay that one off asap so you reap the benefits of that one day discount.
Monday July 14, 2008 1:04 Ronette King, T-P
1:04
Kim Quillen, T-P: 
This concludes Ronette King's online chat. Stay tuned for future chats with Ronette. And if you'd like to contact Ronette directly, with questions about credit cards or any other personal finance issue, you can reach her at (504) 826-3308 or at rking@timespicayune.com
Monday July 14, 2008 1:04 Kim Quillen, T-P
1:05



 
 
 
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