A Guide On How To Cancel A Credit Card When The Need Arises

December 12, 2018 by  
Filed under Credit card

How to cancel a credit card the right way means more than grabbing a pair of scissors or dashing toward a document shredder. Yes, destroying your credit card is one step of many involved in the how to cancel a credit card process. Following this process is simple, but necessary, to ensure that you are working toward a better credit score.

Here we will discuss the benefits of having good credit, what credit is used for, how credit cards affect your credit score, and how to cancel a credit card properly.

The Benefits of Good Credit

Understanding how credit works is more than just knowing how to cancel a credit card. Having good credit provides a lot of benefits that might not be obvious at first. Good credit impacts how easy it is for you to partake in the normal activities of life. Anytime that the exchange of money is happening over time, you can be sure that your credit will somehow become involved.

Having good credit can be the deciding factor on whether you are allowed to:

  • Buy a car
  • Rent an apartment
  • Get a loan
  • Buy a house
  • Get a job

All of these factors are paramount to adult life. Bad credit works like a downward spiral effect. Bad credit can prevent you from getting a car to drive to work. It can prevent an employer from seeing you as a responsible worker, thus passing over you for a job. Building good credit is a safe and assured way to make sure you can live a functional life as an adult in the modern world.

How Credit Cards Affect Your Credit Score

how credit cards affect your credit score

When used responsibly, credit cards can be a good way to build credit. Responsible use of a credit card is using a one when you already have the money to pay back the balance. By putting charges on one credit card and immediately paying the balance back, you can build credit safely. The longer you have the credit card, the better. Long-standing accounts positively influence your credit score.

HOW TO USE A CREDIT CARD

Credit cards are good to have for emergencies. Some places don’t even accept cash anymore, so having a credit card is a good backup plan when you don’t have any other options. Anyone who struggles with living beyond their means is best off not having a credit card or sticking with one credit card with a very low limit. This helps keep spending in check so there aren’t regrets and financial hardships later.

Having a single credit card is one way to establish credit when you don’t have credit. Having a credit card you can use to build credit can work for your credit score in remarkable ways.

SECURED CARDS

Secured credit cards are one example of credit cards you can use to build credit. They work in the same way as any other credit card but are backed by a deposit provided by the user. This deposit is collateral for any debt incurred on the card. Once the card is canceled, and all debt is paid, the deposit is safely returned to the user.

AVOID DEBT

Having too high of a credit card balance is not good for credit. This is especially true if you have missed any payments. Carrying a lot of credit card debt and missing credit card payments both individually bring your credit score down.

Having a lot of credit card debt does not bode well for your credit score. It doesn’t matter if the debt is on one card, two cards, or a thousand cards. Credit card debt will take a chunk out of your credit score.

HOW MANY ACCOUNTS ARE TOO MANY?

What you may not know is having too many credit card accounts can negatively affect your credit score. This is true whether you are carrying a large balance or if you regularly make payments. The credit card threshold that will bring your credit score down is not cut and dry. For people who don’t already have a long and established credit history, it is best to keep credit card accounts to the minimum.

If you have already opened many credit card accounts thinking it would help your score but now realize it hasn’t, it’s a good idea to learn how to cancel a credit card or ten.

Learning how to cancel a credit card can begin to repair your credit score. Bringing your credit score up won’t happen overnight, but canceling excessive credit cards can start the process.

How to Cancel a Credit Card

how to cancel a credit card

Now that you know having too many credit cards might be negatively impacting your credit score, you might have the inclination to grab a pair of scissors and begin hacking away at plastic. Stop. Before you cut up your cards, learn how to cancel a credit card the right way. Hint: the fun part of cutting up the card is the last step.

How to cancel a credit card is a process that should be repeated for each card individually. Keep that in mind when reviewing the steps for how to cancel a credit card.

CHECK YOUR CREDIT SCORE

Before going hog wild with closing accounts, check your credit score. It’s a good idea to know your credit score as a reference point. Keep an eye on your credit throughout the process of card cancelations to see how your personal credit changes.

CLOSE ONE ACCOUNT AT A TIME

We recommend closing only one card at a time instead of closing all accounts at once. Even if you intend to close multiple accounts, cancel them over a span of a month or a year. Closing too many accounts at once can also negatively affect your credit score.

CHECK INTEREST RATES

If you have many accounts, the best method for deciding which credit cards to cancel is to assess which accounts have the highest interest rates. Higher interest rates end up costing you more money in the long run. These cards should be the first to go.

CHECK FOR ANNUAL FEES

If any of your credit cards charge an annual fee, consider closing them and opting for free credit card options. If the pros outweigh the cons, there isn’t any reason to get rid of the card, but this is another factor to take into consideration when deciding which credit card accounts to close.

CLEAR OR TRANSFER YOUR BALANCE

Before you can cancel a credit card, it must have a zero balance on the account. This means that you have paid all charges from the card off. Check your account for any charges. If you have an outstanding balance, pay off the balance or transfer the balance to another card.

CLEAR OR TRANSFER YOUR BALANCE

To cancel your credit card you will need to contact the credit card company that is providing the credit card service. Depending on your credit card provider you may be able to close a credit card online. Canceling your credit card online is a quick and easy way to cancel your credit card service.

If you do not have the option to cancel your card online or if this method doesn’t suit you, call the credit card customer service phone number directly. This number is often printed on the back of your card near where you sign your name.

Speaking with a customer service agent can provide the comfort of knowing for certain that your card is canceled. That said, sometimes the customer service representatives working for the credit card company will try to get you to keep the card. They may offer you better rates, new card options, or new cards altogether. Use your willpower to resist the alluring temptations presented by these credit card agents.

CONFIRM CREDIT CARD CANCELLATION

Confirming you have successfully canceled your credit card is a wise idea when trying to build better credit. Usually, a confirmation of this type is made in writing to the credit card company. Ask the company to respond in written form to confirm that your account has indeed been canceled. You don’t want to have a latent account dragging your credit score down unbeknownst to you.

GO WILD WITH THE SCISSORS

After you have received confirmation from the credit card company that your account is indefinitely closed, feel free to break out the scissors to cut up your card. Always handle scissors with care and do not cut up your written confirmation from the credit card company.

KEEP IN MIND

When you first cancel a credit card, it might make your credit score dip temporarily. This is because credit works with an availability ratio. Over time, your credit score will recover, especially if you keep high-value accounts with low or no balances for a long period.

Conclusion

Building good credit is a fundamental part of growing up in contemporary society. Having a good credit score can open a lot of doors for your personal and professional life. Using a credit card is one of the best ways for you to build good credit.

Having too many credit cards can take a serious toll on your credit score. By responsibly using credit cards to build credit and by learning how to cancel a credit card, you are on the right track to building an excellent credit score. Learning how to cancel a credit card is a simple process. Using the steps provided above can help you build credit and improve your credit score.

How To Get Out Of Debt And Other Essential Things To Know

December 4, 2018 by  
Filed under Finance, Resources

Unfortunately, one of the most common financial questions asked in our modern consumer society is how to get out of debt. It's an important question and the correct answers can be found in different places for different people. Before we get into some creative yet logical ideas for how to get out of debt, it's beneficial to know about how debt works and if it's ever a good thing.

How Debt Works

First of all, there's no debt without credit, and while these two things are closely related, they are not synonymous. Credit is something that is given and debt is something that is owed. In any given loan, there are two parties: the creditor and the debtor. The debtor (or the borrower) is the person who receives the credit, while the creditor (or the lender) is the person who gives the credit.

With any loan, there's almost always a contract in which the terms of the repayment are specified. The contract will clarify how much money is owed by the debtor, how much time the debtor has to repay the creditor, and what the interest rate will be. Interest is a percentage of the principal (original amount loaned) that is expressed as an interest rate and is calculated monthly or annually.

For example, a loan might have an annual interest rate of ten percent, meaning that the debtor has to pay back the creditor the original amount of the loan (the principal) plus ten percent of that loan per year. The interest fee is what gives the creditor incentive to loan the money in the first place. To the creditor, it's as if your money is making you more money over time.

DEBT CLASSIFICATIONS

There are consumer debts and public debts. The most popular types of consumer debts are credit card debts, home mortgage, car loans, home equity loans, and student loans. These types of debts are held by the common individual. Public debt, on the other hand, is money owned by governments.

Other debt classifications are secured and unsecured debts. Secured debts are backed by something of real value, or collateral. Mortgage debts are a great example of a secured debt because the debt is backed by the value of the house itself. The same goes for that of a car loan, there's something of physical value backing the debt.

Unsecured debts, conversely, are like credit card loans. There's nothing of real value backing the loan, so if a person can't make good on a loan payment, they often have to borrow even more money, thus starting down a slippery slope; this is why these types of debts are the most dangerous types of debt to accumulate.

GOOD DEBT VS. BAD DEBT

good debt vs. bad debt

Yes, good debt exists. While it's possible to live life completely debt-free, it might not be the smartest thing to do. Unless you have enough money to buy a house up front with cash, for example, taking out a loan for some of life's big purchases can be a good thing.

Good debt is an investment that will grow in value or generate long-term income. Like a mortgage loan, student loans are also a good example of a good debt. While student loans generally have low interest rates compared to other types of loans, they provide future value. With an education, a person is more valuable in the working field and has the opportunity to make more money in the future than they would have without the education.

The same is true for a mortgage loan. While mortgage loans are generally lengthy (around 30 years), they also have relatively low interest rates. That, coupled with the fact that (hopefully) your home will increase in value over time, makes a mortgage loan considered a good loan. In the best-case scenario, your home's value will increase enough during the thirty-year loan to offset any interest payments, essentially making your loan a free one.

Bad debt, on the other hand, is debt incurred to purchase things that quickly lose their value and do not generate long-term income. Bad debt, like credit card debt, also carries a high interest rate. The general rule to avoid bad debt is: If you can't afford it and you don't need it, don't buy it.

Some other types of bad debts are payday loans or cash advance loans. In fact, these are some of the worst kinds of debt. Interest rates for payday loans are incredibly high, starting at 300% annually, and if you don't pay back the loan by your next payday, you incur more fees to "roll-over" the loan, and the cycle continues.

Reasons Debt May Be Bad

reasons debt may be bad

Debt often starts with a little and turns into a lot. The emotional high of buying things with a credit card can be very addicting. You may feel like you are walking away with new things but not having to part with your money. However, you will have to part with that money eventually, and more often than not, it ends up being more money than it should have been.

DEBT BORROWS FROM YOUR FUTURE INCOME

Any time you take out a loan or swipe your credit card, you are taking away from money you hope to earn in the future. Most of time, it feels terrible spending your money to pay for something you've already used up or don't get value from anymore.

INTEREST RATES CAUSE YOU TO PAY MORE

Interest rates pile up over time and those $200 shoes you bought might end up costing you over $250 or more by the time you pay them off.

DEBT CAN KEEP YOU FROM OWNING A HOME

This is ironic because as was mentioned above, most of the time if you buy a home, it comes with a mortgage (which is debt.) You have to have a good credit history to be able to take out a mortgage, so it's crucial to pay back your debts of all kinds.

FINANCIAL AND MENTAL HEALTH MAY BE AFFECTED

When you have unpaid bad debts, it's hard not to stress about them. The stress from debt and worrying about how to pay back your creditors without going further into debt can lead to mental health problems including ulcers, migraines, depression, and even heart attacks. Not to mention monthly debt payments limit the amount of money you have to spend on other things, like retirement, or that vacation you could really use, or Christmas presents for your family.

How to Get out of Debt

she's computing her debt

Often, if you're in some sort of debt, you just want to know how to get out of debt. Here we have created a list of creative, logical, and fairly easy ways for how to get out of debt.

COUPONS

Yes, coupons can help you save money at the register over time. Looking through coupon books can be tedious, but worth it in the long run.

CUT YOUR CABLE BILL

If you haven't done this yet, it's time. Most of your favorite shows can be found online, and this $100 per month will go a long way if you're wondering how to get out of debt. There's also the library for renting books and movies for free.

EAT IN

Going out to eat too often doesn't help the debt situation. While it's easy to justify going out to eat because we are humans and we need food, coupon shopping and making your own food at home is far more logical.

MAKE YOUR OWN COFFEE

Similar to the note above about eating in, make your coffee at home instead of stopping by the coffee shop every morning. If you're a coffee drinker and wondering how to get out of debt, this single thing might be the most effective daily lifestyle change.

CUT UP YOUR CREDIT CARDS

Throw them away! How to get out of debt includes one major step: stop going further into debt. It will be very hard ever getting out of debt if you continue to make ill-advised credit card purchases. So do away with the temptation and don't carry the credit card around.

AVOID EXPENSIVE HOBBIES OR MEMBERSHIPS

This can include cutting down on your golf rounds or even ditching the gym membership. You can always run outside for free and do push-ups and sit-ups on your own. Getting out of debt is really about cutting down on all the non-essentials and getting creative.

MAKE A BUDGET

If you treat this like a game and follow through rigorously, the process of getting out of debt can actually be fun. Track your progress along the way and feel good about yourself while cutting expenses and climbing out of debt.

Conclusion

How to get out of debt? There's no one answer, no magic wand, and no secret formula. You really just have to cut down on your spending in any way you can and realize that it's not a sprint. Steady progress is the way to do it. Be conscious of where all your money is going and make paying off your debts a priority. Best of luck, you can do it!

How To Buy A Foreclosure And Other Things You Should Know

December 1, 2018 by  
Filed under Foreclosure

Buying real estate can be as exciting as it is tedious and intimidating. Deciding what property is best for you is a major decision. With such an expensive and life-changing purchase, you want to make sure you are making the best choice and avoiding as many mistakes and pitfalls as possible. One of the biggest questions a buyer should ask is how to buy a foreclosure and should you consider a foreclosure property?

When reviewing your options on homes to buy, foreclosures may be on the list. They can seem like the obvious choice, especially when the price and size of the property seem like a steal. Foreclosures can be a great deal to consider, but it’s imperative to know as much as you can about them before making your decision. Knowing how to buy a foreclosure will help you make the best financial decision.

How Foreclosures Work

Foreclosure typically happens when the owner of a property cannot pay the loan associated with the property. Ultimately, it leads to the lender taking ownership of the property and selling it to settle the balance of the debt. Once the property is in foreclosure, the original owner no longer has any rights to the property or the money they may have invested, which can lead to tensions running high during the process. Determining how to buy a foreclosure includes understanding the process of foreclosure.

STAGES OF FORECLOSURE

As a buyer, learning how to buy a foreclosure includes understanding the different stages of the process. Purchasing a foreclosure property is based on the stage the property is in. The stages of the process include:

  • Pre-Foreclosure
  • Auction
  • Real Estate Owned or REO

PRE-FORECLOSURE

pre-foreclosure

After three or more months of missed payments, a property enters pre-foreclosure. At this time, property owners receive a legal notice from their lender,   known as a Notice of Default, to advise them that the foreclosure will begin if the loan is not paid or arrangements are not made. The pre-foreclosure process usually allows for a buyer to work directly with the property owner to negotiate a purchase directly through them. If an agreement can be reached, the buyer will get the property for a great price, and the seller might save their credit from the further damage of an actual foreclosure.

AUCTION

auction

If the owner cannot come up with a resolution during pre-foreclosure, the lender will typically put a property up to be sold at a foreclosure auction, also known as a Trustee Sale. At this time, a property owner will receive a Notice of Sale, which will include the date and time of the property sale.

For buyers, auctions can be appealing, but it’s important to remember that you are responsible for all aspects of the property including repairs, unclear title and any other issues associated with the home. However, if the property does not receive a bid higher than the opening bid to cover the loan balance, it is usually purchased by the representative of the lender, making the property an REO or Real Estate Owned.

REAL ESTATE OWNED OR REO

real estate owned or reo

Once a property becomes REO, a lender will usually hire a real estate agent to list the property for sale. During this time, the lender normally completes the updates and repairs and works to clear the property title. For a buyer, this process can be time-consuming but can be a good fit for the right buyer. Having an attorney or real estate agent that represents you during this process would be best to ensure you receive the best deal.

Advantages and Disadvantages of Buying a Foreclosed Property

A major step in learning how to buy a foreclosure is understanding the pros and cons of purchasing one. Lenders have done a great job of renovating properties to make them more appealing to buyers so that they can minimize their loss as much as possible. As appealing as a foreclosure may be, buyers should ensure they understand the advantages and disadvantages before jumping into a purchase to avoid mistakes and make a smart decision.

THE PRE-CLOSURE STAGE

ADVANTAGES

  • Sellers may cover the costs for the renovations and repairs
  • Buyer may obtain normal mortgage funding
  • Sellers typically move fast during this stage to avoid further damage to their credit and to control the sale of their property
  • Sellers are legally obligated to provide buyers with all details of the home including any known issues or previous repairs

DISADVANTAGES

  • Seller may not agree to a price less than their property debt
  • Buyer's purchase price must cover the full debt, and closing costs or lender’s approval will be necessary
  • A lender can decline the negotiated price agreed to between the buyer and seller


DURING AUCTION STAGE

ADVANTAGES

  • The purchase price for the property will be the balance owed, making it a deal for the buyer
  • Cash payments are a requirement, and those without cash are usually eliminated as buyers

DISADVANTAGES

  • Purchases are same day, cash only with no financing allowed
  • The property could have back taxes, liens and there may be damage to the property by previous owners that are the responsibility of the buyer
  • Buyers make blind purchases because they are not allowed to inspect properties


 ADVANTAGES DURING REO STAGE

  • Buyer will have no liens, back taxes, and mortgages on the property and will have a clear title
  • Bank/lender will negotiate the aspects of the sale
  • Buyer can have the property inspected
  • Buyer can have mortgage financing to cover the property costs
  • The property will be clean and vacant from previous owners

How to Buy a Foreclosure

Once you learn what foreclosure is, the stages of foreclosure and the advantages and disadvantages of the process, buyers' next question usually is how to buy a foreclosure? As you’ve read, the steps to buying a foreclosed property are not typical of a normal real estate purchase because you are not purchasing a regularly listed property.

HIRE A REAL ESTATE AGENT OR BROKER

hire a real estate agent or broker

Purchasing a foreclosed property can be difficult to navigate most times. As a buyer, you need to ensure you have someone on your side that can guide you through the process and answer the tough questions. Hiring a real estate agent or broker familiar with the foreclosure process and that has your best interest will help you choose the best fit for you and your budget. They have the experience necessary to negotiate while finding the best properties in your price range.

RESEARCH LENDERS

Many buyers have the cash to purchase a foreclosure property, but those that don't will need to have financing from a mortgage lender. Buyers should research lenders to determine who has the best interest rates and promotions for financing.

GET PRE-APPROVED

If you need mortgage financing to purchase a foreclosure, you will need to provide a pre-approval letter from a lender. The letter should include the amount you are borrowing and the dates the preapproval is good for. Your pre-approval will be based on your income, credit history, employment history, and other mitigating factors. Having a pre-approval gives the seller or lender the security they need to ensure the property can be financed.

BUDGET FOR REPAIRS AND RENOVATIONS

Repairs and renovations of a foreclosure may be at the expense of the buyer. When applying for financing for the foreclosure or budgeting for a cash transaction, a buyer should budget for repairs and renovations. If you’re handy and can complete repairs yourself, you may save yourself more money. If you need significant renovations and need to hire a contractor, having the budget for it ahead of time will make your process easier, and you can get the repairs done sooner.

TIMELINE FOR REPAIRS AND RENOVATIONS

When purchasing a foreclosed property that needs repairs and renovations, a buyer should be sure they not only have the money but have the time to invest in fixing the property. Whether the buyer is handling the repairs or hiring a contractor, time will be of the essence. Be prepared if renovations take longer than expected and make room for it in your timeline.

WHERE TO FIND FORECLOSED PROPERTIES

Another step in learning how to buy a foreclosure property is to find one. So, where do you find foreclosure properties? Foreclosures can be found in a variety of ways including:

  • Online real estate websites
  • Real estate agents, especially those that specialize in foreclosures
  • Government agencies

Conclusion

Many foreclosed properties have significant value and could be a great buy for the right person. The better the deal, the better it is for the buyer, but it’s also important to remember that not all foreclosures are good deals. A buyer needs to research the real estate market and lenders, the budget for renovations and repairs and prepare for what could be a long process. Learning and understanding how to buy a foreclosure will ease your mind early on and help you make the best investment. We hope we have adequately explained how to buy a foreclosure and helped you decide if it is a good decision for you.

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