Credit Card Debt Management

Credit card payments can strap your budget and have you financially imprisoned in no time. The more you use them, the higher your payments increase, which means most people have to use the cards more when their money runs short. The 18- to 34-year-old demographic is the hardest-hit right now. With social pressures for this most coveted advertising demographic to buy everything under the sun, the group is becoming known as “Generation Broke,” as the Intelligent Ignorance blog humorously points out. Set aside all psychological analyses as to why they feel the need to dig themselves deeper into debt to maintain a certain lifestyle, let’s look at the ABC’s of digging Generation X and Y out of debt.

It boils down to savings — you know, that little account that bails you out of emergency situations when you don’t want to rely on your credit cards? The other thing is to define an emergency situation that requires you to dip into your savings account (it’s not when the Jimmy Choos are on sale). The following four tips can help you stretch your dollars, so money can go into your all-important savings account and ultimately, toward paying off your credit card balances.

Find an inexpensive hobby. You can certainly find other uses for your time than shopping, dining out, visiting the movie theater, etc. What about things that cost little or no money, like exercising, blogging, reading, making art or music, volunteering, or going on a picnic? All you’re out is the gas money to get there, which come to think of it, could be quite a lot. You could go really thrifty and invite friends over to your house for a game night or bonfire and let them spend their gas money instead.

Rediscover your kitchen. Far too many people spend far too much money on dining out. It is so much less expensive to cook — and you have leftovers for lunch or dinner the following day! I once calculated that my family was spending a shocking $600 per month on restaurants. If you must eat out, try the dollar menu. There’s some good stuff on that list!

Plan in advance for gift-giving. You may see a wedding, new baby, birthday, or holiday in your near future. Start setting money aside now for those seasons. You can even go ahead and buy the gifts while you’re out and about, when you see nice things on sale. That way, you’re not scrambling at the last minute and overpaying for convenience. This is particularly true during Christmas, the season when most people tend to overspend dramatically.

Buy clothes secondhand. We’ve all known the person who must keep their closet filled with only the latest fashions. They toss out old clothes that are “so last summer.” Maybe your track record shows that you in fact are one of these people. Word to the wise: Stop being one of those people and start benefiting from their generosity. That’s right, these are the people who are filling secondhand stores like Plato’s Closet and Goodwill with beautiful, fashionable, name-brand clothing at low, low prices. How generous! Another shopping strategy is to pick well-made, durable, but versatile pieces that work well with a variety of other clothing items, so you’re splurging only on a few special items instead of on everything. Happy saving!

You are Mr. (or Ms.) Popularity. All the credit card companies want to be your friend. You get at least one credit card mailing every day, but in this age of mailbox tampering and identity theft, is this really a good thing? How does one approach the problem of credit card offer overload?

1. Don’t use it as a basis for assumptions about your credit score.

Some people with bad credit believe that more credit card mailings equal a credit score that is on the mend. This is not true. If anything, it indicates that the credit card companies smell an easy buck, someone who may not pay on time or will take out cash advances or any number of other things that would allow the lender to jack up the interest rate.

2. Opt out.

Even if you do have good credit and your offers are targeted more at things like low-interest balance transfers, you shouldn’t be flattered. This mass of mailings is still posing a risk to the safety of your identity and your financial future. You can opt out of receiving these mail offers by calling 1-888-OPT-OUT or by visiting OptOutPrescreen.com. For more information, visit the Direct Marketing Association’s tips for “How To Get Off A Mailing List.” Of course, the Federal Trade Commission has similar detailed information on its site.

When it comes to credit cards — and all marketing materials for that matter — it pays to know your rights. Make it as difficult as possible for strangers to obtain your information or gain an opportunity to apply for credit under your name. If you do receive credit card offers in the mail, remember to use a shredder as a precaution. You might just be stopping yourself or someone else from becoming the victim of identity theft, the fastest growing crime in America.

Most of us know all about credit card rewards, introductory APR deals, and all the other obvious, highly-touted reasons to own a credit card. However, how many of us know about one of the most valuable “hidden” credit card perks?

Rental car companies always try to sell you collision insurance to set your mind at ease during the time you’re driving their property. With a look of well-practiced grave concern, the employee assisting you will ask whether you’ll be buying the insurance, which can run up to an additional $30 per day. Smart credit card holders will decline. A little research will likely show that your credit card, when used to pay for your entire car rental, provides all the protection you need.

The bottom line is, it’s good to have a general auto insurance policy that will cover any personal liability and/or personal injury. However, the supplemental insurance from credit card companies can prove quite valuable in the event of an unfortunate accident.

According to Two Pennies Earned blog, the following is a brief summary of each credit card company’s rental collision insurance terms:

DISCOVER TRAVEL PROTECTION

-$25,000 worth of coverage for damage to rental car only.

-Car cannot be rented for more than 31 consecutive days.

-Entire rental must be paid for with credit card.

-Rental company’s insurance offer must be declined.

-Legal renter of the car must be the driver at time of accident.

-Driver must not be intoxicated in any way at time of accident.

-Deductible from primary insurance company is covered.

MasterCard MasterRental

-Car cannot be rented for more than 15 consecutive days.

-Rental vehicle must have MSRP of less than $50,000.

-Rental vehicle must not be a truck, pickup, sport utility truck, full size van on a truck chassis, camper, antique, offroad vehicle, or other recreational vehicle.

-Covers theft, collision damage, post-collision towing.

-Will act as primary insurance if renter is otherwise uninsured.

-Deductible from primary insurance company is covered.

-Rental company’s insurance offer must be declined.

-Credit card must be used to pay for entire rental.

VISA

-Car rental cannot exceed 15 consecutive days in country of primary residence, or 31 consecutive days in foreign country.

-Covers physical damage, theft, post-collision towing to nearest mechanic.

-Covers up to value of original MSRP

-Does not cover exotic or antique vehicles (20 years or older or retired for more than 10 years).

-Does not cover: expensive luxury vehicles; certain vans; vehicles that have an open cargo bed; trucks; motorcycles, mopeds, and motorbikes; limousines; and recreational vehicles.

-Entire rental must be paid for with credit card.

-Rental company’s insurance offer must be declined.

-Accident must be reported immediately.

As for American Express, their terms vary based on what type of card the cardholder owns. The options may be further explored here. It is wise to check the rental vehicle before leaving the lot to identify and point out any pre-existing bodily damage. That way, you won’t be held accountable later for something you didn’t do. It is also smart to check your own credit card company’s terms and conditions yourself before renting a car, to see if anything has changed. Most credit cards offer a wide variety of other travel perks, from roadside assistance to emergency check-in and even international cell phone rental. This is yet another area where it pays to read the fine print.