Wednesday, April 25, 2007

Five Uses For Survivorship Life Insurance

Survivorship life insurance is a life insurance policy that insures two people and pays at the second death. Also referred to as second-to-die life insurance, common abbreviations are SWL for survivor whole life and SUL for survivor universal life.

Advantages

Since the insurance company does not have to pay until the second person dies, the premium is lower.

The insurance company could issue a standard policy, even if one person has health issues. In extreme cases where one person is entirely uninsurable, a policy with an acceptable premium is possible.

There are many uses for a survivorship life insurance policy. Let’s look at five.

Estate Taxes

Life insurance is the least expensive method of providing cash for the payment of estate taxes. Since 1981, the law allows one spouse to transfer all their property to the other spouse at death tax free. This is the “unlimited marital deduction.” If there is an estate tax due, it is not due until the second spouse dies.

In response, life insurance companies designed the survivorship life insurance contract. Since the premium is lower, it is even a better solution than a policy insuring only one person.

Replacing an Asset Given Away

Charitable remainder trusts (CRTs) allow a person to sell a highly appreciated asset (stock, land, a business etc.) without paying a capital gain tax, receive an income tax deduction and convert the asset to an income. At their death, the asset passes to the charity, not to their heirs.

An easy way to circumvent the children’s disinheritance is to insure mom and dad with a survivorship life insurance policy for the value of the asset given to charity. Sometimes premiums can be entirely paid from the income from the charitable remainder trust, which is often found money if the original asset was illiquid. The income tax deduction can be spread over six years if the asset contributed to the CRT is large enough. This is another premium source.

Even Out an Inheritance

A couple has three children and a family business. One of the children is active in the business and the other two have careers of their own. If the bulk of the estate is the business and the plan is to leave the business to the active child, the other two children come up short.

A second-to-die policy on mom and dad can even things out. For example, let’s say the total estate is 6 million and the business represents 4 million. If the parents leave the business to the active child and the remaining 2 million to the other two children and name these children the beneficiary of a 6 million dollar survivorship life policy, everything is equal.

The child active in the business gets the business worth 4 million. The other two children inherit 1 million apiece from the balance of the estate and 3 million apiece from the survivorship life insurance policy.

Post Phone a Buy Sell

If Joe and Bill were equal partners in a business, good planning would have them meet with their attorney and accountant, put a value on the business that each are happy with and have a buy-sell agreement drawn. Fund the agreement with life insurance and the funds are assured for the buy-out.

However, what if Joe’s wife, Ann, is also active in the business? If Joe dies, Ann would inherit Joe’s interest and continue to work in the business as usual. In this case, it would make sense to use a survivorship life insurance policy to insure both Joe and Ann. The buy-sell agreement would be worded to trigger the buy-out at the second of their deaths.

To Pay the Income Tax on an Inherited Qualified Plan

This is the day of mega 401(k) plans. When a 401(k), IRA or other qualified plan is passed, for example, to the children, income tax is required upon a distribution.

Most people do not realize the large potential tax on what may be their largest asset. Let’s look at the worst case. If the qualified plan money is subject to the top estate tax bracket, which is currently 45% and the child is also in the top income tax bracket, currently 35%, the amount left to the child is only a fraction of the total amount. Note there is a deduction against income for estate taxes paid. A good estimate of the net total percentage paid in taxes at the top brackets is 70%.

Use a survivorship life insurance policy to offset the income tax on the distributions, the estate tax or both.

There are many other uses of survivorship life insurance policies. If your situation includes any of these examples, I would recommend looking at the use of a second-to-die policy.
Survivorship life insurance is a life insurance policy that insures two people and pays at the second death. Also referred to as second-to-die life insurance, common abbreviations are SWL for survivor whole life and SUL for survivor universal life.

Advantages

Since the insurance company does not have to pay until the second person dies, the premium is lower.

The insurance company could issue a standard policy, even if one person has health issues. In extreme cases where one person is entirely uninsurable, a policy with an acceptable premium is possible.

There are many uses for a survivorship life insurance policy. Let’s look at five.

Estate Taxes

Life insurance is the least expensive method of providing cash for the payment of estate taxes. Since 1981, the law allows one spouse to transfer all their property to the other spouse at death tax free. This is the “unlimited marital deduction.” If there is an estate tax due, it is not due until the second spouse dies.

In response, life insurance companies designed the survivorship life insurance contract. Since the premium is lower, it is even a better solution than a policy insuring only one person.

Replacing an Asset Given Away

Charitable remainder trusts (CRTs) allow a person to sell a highly appreciated asset (stock, land, a business etc.) without paying a capital gain tax, receive an income tax deduction and convert the asset to an income. At their death, the asset passes to the charity, not to their heirs.

An easy way to circumvent the children’s disinheritance is to insure mom and dad with a survivorship life insurance policy for the value of the asset given to charity. Sometimes premiums can be entirely paid from the income from the charitable remainder trust, which is often found money if the original asset was illiquid. The income tax deduction can be spread over six years if the asset contributed to the CRT is large enough. This is another premium source.

Even Out an Inheritance

A couple has three children and a family business. One of the children is active in the business and the other two have careers of their own. If the bulk of the estate is the business and the plan is to leave the business to the active child, the other two children come up short.

A second-to-die policy on mom and dad can even things out. For example, let’s say the total estate is 6 million and the business represents 4 million. If the parents leave the business to the active child and the remaining 2 million to the other two children and name these children the beneficiary of a 6 million dollar survivorship life policy, everything is equal.

The child active in the business gets the business worth 4 million. The other two children inherit 1 million apiece from the balance of the estate and 3 million apiece from the survivorship life insurance policy.

Post Phone a Buy Sell

If Joe and Bill were equal partners in a business, good planning would have them meet with their attorney and accountant, put a value on the business that each are happy with and have a buy-sell agreement drawn. Fund the agreement with life insurance and the funds are assured for the buy-out.

However, what if Joe’s wife, Ann, is also active in the business? If Joe dies, Ann would inherit Joe’s interest and continue to work in the business as usual. In this case, it would make sense to use a survivorship life insurance policy to insure both Joe and Ann. The buy-sell agreement would be worded to trigger the buy-out at the second of their deaths.

To Pay the Income Tax on an Inherited Qualified Plan

This is the day of mega 401(k) plans. When a 401(k), IRA or other qualified plan is passed, for example, to the children, income tax is required upon a distribution.

Most people do not realize the large potential tax on what may be their largest asset. Let’s look at the worst case. If the qualified plan money is subject to the top estate tax bracket, which is currently 45% and the child is also in the top income tax bracket, currently 35%, the amount left to the child is only a fraction of the total amount. Note there is a deduction against income for estate taxes paid. A good estimate of the net total percentage paid in taxes at the top brackets is 70%.

Use a survivorship life insurance policy to offset the income tax on the distributions, the estate tax or both.

There are many other uses of survivorship life insurance policies. If your situation includes any of these examples, I would recommend looking at the use of a second-to-die policy.

posted by zzzzzzzzzzz at 4:35 AM

Some Credit Repair And Control Tips

The following suggestions won’t fix your credit on their own. You need to provide some aid by keeping a sound financial life, avoiding overusing your credit cards and financial credit lines or overspending when there is no particular need. Though you can keep it to a minimum, some sacrifice will be needed if you want to enjoy a good credit score again.

Exercise Control and Discipline over Yourself

If you know yourself to be impulsive and a consuming addict, you need to do something about it cause it can easily ruin your finances. A good start is to build some discipline. Before going to the supermarket write down a list and stick to it precisely. Chances are that there is no particular thing in that lists that you can’t live without; thus, if you forget to write something down, just don’t buy it. Instead, write it down on the new list and wait till the next time you go to the supermarket to buy it.

It may sound stupid, but you can’t imagine how discipline can improve your life and spending. Another important issue is the use of your credit cards. Avoid them as far as possible and try to pay as much as you can in cash. Unless there is a special offer or discount, try to pay with cash or debit from your bank account. Using your own money has other effects than using your credit card.

And if you get accustomed to using your credit cards and lines of credit only when strictly necessary, you will then be able to add expenses to your credit card balance slowly while paying the whole balance every month which is the best way to use such financial products in order to avoid excessive interests from generating due to unpaid balances.

Plan Ahead To Avoid Surprises

The habit of budgeting your income and expenses is something you need to acquire. It will let you prevent bills from mounting up and let you have a record so you can later analyze how you spend today and how you can improve your spending habits tomorrow. Don’t despair however if you don’t feel comfortable doing this by yourself. There are companies willing to help you in the process.

If you need aid from a third party, you can contact a credit counseling agency. These companies will help you plan your expenses and control them so as to make the most out of your income. Moreover, you’ll be able to put some money aside into a savings account to cope with unexpected expenditures that always arise and are the main cause of accumulated debt. Some of these companies do not even charge for their services as they are non-profit. Thus, there is no excuse for letting that opportunity pass you by.
The following suggestions won’t fix your credit on their own. You need to provide some aid by keeping a sound financial life, avoiding overusing your credit cards and financial credit lines or overspending when there is no particular need. Though you can keep it to a minimum, some sacrifice will be needed if you want to enjoy a good credit score again.

Exercise Control and Discipline over Yourself

If you know yourself to be impulsive and a consuming addict, you need to do something about it cause it can easily ruin your finances. A good start is to build some discipline. Before going to the supermarket write down a list and stick to it precisely. Chances are that there is no particular thing in that lists that you can’t live without; thus, if you forget to write something down, just don’t buy it. Instead, write it down on the new list and wait till the next time you go to the supermarket to buy it.

It may sound stupid, but you can’t imagine how discipline can improve your life and spending. Another important issue is the use of your credit cards. Avoid them as far as possible and try to pay as much as you can in cash. Unless there is a special offer or discount, try to pay with cash or debit from your bank account. Using your own money has other effects than using your credit card.

And if you get accustomed to using your credit cards and lines of credit only when strictly necessary, you will then be able to add expenses to your credit card balance slowly while paying the whole balance every month which is the best way to use such financial products in order to avoid excessive interests from generating due to unpaid balances.

Plan Ahead To Avoid Surprises

The habit of budgeting your income and expenses is something you need to acquire. It will let you prevent bills from mounting up and let you have a record so you can later analyze how you spend today and how you can improve your spending habits tomorrow. Don’t despair however if you don’t feel comfortable doing this by yourself. There are companies willing to help you in the process.

If you need aid from a third party, you can contact a credit counseling agency. These companies will help you plan your expenses and control them so as to make the most out of your income. Moreover, you’ll be able to put some money aside into a savings account to cope with unexpected expenditures that always arise and are the main cause of accumulated debt. Some of these companies do not even charge for their services as they are non-profit. Thus, there is no excuse for letting that opportunity pass you by.

posted by zzzzzzzzzzz at 4:35 AM

Beat The Road Tax Blues With Cheaper Car Insurance

Gordon Brown's 2007 budget looks to have hit some drivers hard. If your car was registered after the 23rd March 2006 and emits more than 225g/km of CO2 it will fall into the new Band G bracket. If you car falls into this category your road tax will be increasing from £210 to £300 in 2007 and to £400 in 2008. Most family saloons, MPVs, 4x4s and sports cars are likely to fall into this new high tax band.

If your have a Band G car you do of course have the choice of changing to a lower band model; the road tax on a Vauxhall Corsa for example will decrease from £50 to £35 as it falls into Band B. For many people however this may not be an option. If you have a large family or run a small business driving an MPV or 4x4 may well be a necessity.

This being the case it makes good sense to offset the extra cost with savings in other areas. One area with the potential for good savings is car insurance. There are many actions you can take to lower your car insurance premium and any savings you make can help to pay your increased road tax bill:

• Increase your voluntary excess - increasing the amount you are prepared to cover yourself in the event of a claim can help to lower your car insurance premium. When considering this it is important to remember the potential cost if you need to claim on your policy.

• Downgrade your policy - if your car is relatively cheap it may be beneficial to take out cover for third-party, fire and theft rather than fully comprehensive cover.

• Park securely - parking your car on a secure drive or in a locked garage can help you obtain a lower motor insurance premium than if your car were parked in the street.

• Shop online - make use of the internet to search the market quickly to find cheap car insurance. A full online search could unearth policies that traditional methods may not and some car insurance companies offer discounts for policies purchased online.
• Mileage - calculating and limiting the number of miles you drive each year can help to lower your car insurance when you are looking for a quote. If your circumstances change (i.e. a shorter work commute) then limiting your mileage could prevent you paying for miles you are not covering.

• Limit modifications - heavily customising or modifying your car can lead to higher premiums as it promotes a 'boy-racer' image in the eyes of insurance companies.

• Fit an immobiliser - installing an approved immobiliser has the dual benefit of making you car more secure and could help to lower the cost of your car insurance.

• Pass Plus - if you have recently passed your driving test completing the Pass Plus training programme can help you qualify for car insurance discounts from a range of participating companies; the Pass Plus certificate can only be obtained within 12 months of passing your practical test.
Gordon Brown's 2007 budget looks to have hit some drivers hard. If your car was registered after the 23rd March 2006 and emits more than 225g/km of CO2 it will fall into the new Band G bracket. If you car falls into this category your road tax will be increasing from £210 to £300 in 2007 and to £400 in 2008. Most family saloons, MPVs, 4x4s and sports cars are likely to fall into this new high tax band.

If your have a Band G car you do of course have the choice of changing to a lower band model; the road tax on a Vauxhall Corsa for example will decrease from £50 to £35 as it falls into Band B. For many people however this may not be an option. If you have a large family or run a small business driving an MPV or 4x4 may well be a necessity.

This being the case it makes good sense to offset the extra cost with savings in other areas. One area with the potential for good savings is car insurance. There are many actions you can take to lower your car insurance premium and any savings you make can help to pay your increased road tax bill:

• Increase your voluntary excess - increasing the amount you are prepared to cover yourself in the event of a claim can help to lower your car insurance premium. When considering this it is important to remember the potential cost if you need to claim on your policy.

• Downgrade your policy - if your car is relatively cheap it may be beneficial to take out cover for third-party, fire and theft rather than fully comprehensive cover.

• Park securely - parking your car on a secure drive or in a locked garage can help you obtain a lower motor insurance premium than if your car were parked in the street.

• Shop online - make use of the internet to search the market quickly to find cheap car insurance. A full online search could unearth policies that traditional methods may not and some car insurance companies offer discounts for policies purchased online.
• Mileage - calculating and limiting the number of miles you drive each year can help to lower your car insurance when you are looking for a quote. If your circumstances change (i.e. a shorter work commute) then limiting your mileage could prevent you paying for miles you are not covering.

• Limit modifications - heavily customising or modifying your car can lead to higher premiums as it promotes a 'boy-racer' image in the eyes of insurance companies.

• Fit an immobiliser - installing an approved immobiliser has the dual benefit of making you car more secure and could help to lower the cost of your car insurance.

• Pass Plus - if you have recently passed your driving test completing the Pass Plus training programme can help you qualify for car insurance discounts from a range of participating companies; the Pass Plus certificate can only be obtained within 12 months of passing your practical test.

posted by zzzzzzzzzzz at 4:34 AM

Credit Card Debt Is At Record levels

A recent study done by the credit bureau, Experian, shows U.S. consumers are relying on their credit cards more than ever. According to their latest National Score Index, compiled from a random sampling of 3 million consumers in the credit bureau's database, 51 percent of the U.S. population has at least two credit cards and 14 percent have 10 or more cards.

The results "tend to suggest, on average, people in the last couple of years are accumulating more debt and are utilizing credit cards more than in the past," said Pete Bolin, manager of analytics for Experian. The study also shows that consumers are using their credit cards as an "overall financial vehicle" rather than just an emergency tool, he said.

Dave Capra “The Debtonator” says the Experian study seems pretty accurate. "The people that I interview average eight cards," Capra said. “People seem to be using their available credit to help with their everyday cost of living and are even using one card to pay down others. Credit card debt is quickly becoming a modern day epidemic, threatening our society.” The study also shows that people aren't saving, Capra said. “Saving is what you have to do so you don't turn to your credit cards.”

The Debtonator is a weekly radio show that is returning to Chicago airways in April whose prime focus is Credit and Debt Education. Capra is petitioning Illinois legislators to include courses in debt management and credit cards as required curriculum for graduating high school students and is of the opinion that children as young as grammar school age need to be taught about finances. He is planning to walk his petition 184 miles, from Chicago to Springfield this coming fall and has made it his cause to change financial illiteracy among future credit card holders.

Credit cards can be a very useful tool if you use them responsibly. IF you pay off your balance in full each month. Credit cards can also be used for emergency purposes that can cover a temporary financial shortfall. But make sure you pay off the balance as quickly as possible to avoid escalating interest charges. Using credit cards in a disciplined fashion is the key.

According to the Federal Reserve, U.S. credit-card debt totaled $876.2 billion as of December2006. The figures show that the consumer debt burden continues to grow, and credit cards represent a lot of that additional debt. Credit card debt represents a very high cost debt for many households. Interest rates are in the double digits with fees and punitive interest rates lurking should you slip up. Consumers need to be as disciplined about using their credit cards and paying their bills on time as they are with their mortgages or car payments. If you miss a payment or two on your credit card, exceed your limit or even miss a payment with another creditor, your interest rate can climb as high as 27 or 28 percent, or even higher.

Bolin, with Experian, says that to keep your credit history healthy, you need to pay your bills on time, try to keep your debt to income ratio as low as possible and apply for credit only when you need it.
A recent study done by the credit bureau, Experian, shows U.S. consumers are relying on their credit cards more than ever. According to their latest National Score Index, compiled from a random sampling of 3 million consumers in the credit bureau's database, 51 percent of the U.S. population has at least two credit cards and 14 percent have 10 or more cards.

The results "tend to suggest, on average, people in the last couple of years are accumulating more debt and are utilizing credit cards more than in the past," said Pete Bolin, manager of analytics for Experian. The study also shows that consumers are using their credit cards as an "overall financial vehicle" rather than just an emergency tool, he said.

Dave Capra “The Debtonator” says the Experian study seems pretty accurate. "The people that I interview average eight cards," Capra said. “People seem to be using their available credit to help with their everyday cost of living and are even using one card to pay down others. Credit card debt is quickly becoming a modern day epidemic, threatening our society.” The study also shows that people aren't saving, Capra said. “Saving is what you have to do so you don't turn to your credit cards.”

The Debtonator is a weekly radio show that is returning to Chicago airways in April whose prime focus is Credit and Debt Education. Capra is petitioning Illinois legislators to include courses in debt management and credit cards as required curriculum for graduating high school students and is of the opinion that children as young as grammar school age need to be taught about finances. He is planning to walk his petition 184 miles, from Chicago to Springfield this coming fall and has made it his cause to change financial illiteracy among future credit card holders.

Credit cards can be a very useful tool if you use them responsibly. IF you pay off your balance in full each month. Credit cards can also be used for emergency purposes that can cover a temporary financial shortfall. But make sure you pay off the balance as quickly as possible to avoid escalating interest charges. Using credit cards in a disciplined fashion is the key.

According to the Federal Reserve, U.S. credit-card debt totaled $876.2 billion as of December2006. The figures show that the consumer debt burden continues to grow, and credit cards represent a lot of that additional debt. Credit card debt represents a very high cost debt for many households. Interest rates are in the double digits with fees and punitive interest rates lurking should you slip up. Consumers need to be as disciplined about using their credit cards and paying their bills on time as they are with their mortgages or car payments. If you miss a payment or two on your credit card, exceed your limit or even miss a payment with another creditor, your interest rate can climb as high as 27 or 28 percent, or even higher.

Bolin, with Experian, says that to keep your credit history healthy, you need to pay your bills on time, try to keep your debt to income ratio as low as possible and apply for credit only when you need it.

posted by zzzzzzzzzzz at 4:34 AM

Free Online Debt Consolidation Quote – Get Free Estimates For Debt Solutions

Popularity of free debt consolidation services and growing demands for free online debt consolidation quote indicate that more and more people are reeling under the pressure of mounting debts. Easy accessibility to debt consolidation companies on the Internet has to a great extent eased the pressure of people looking for debt consolidation help.

Is Free Debt Consolidation Really Free?

One more factor which needs to be mentioned while discussing the ever increasing demand and need for debt consolidation - a much talked about topic is the prefix Free added to many of these services. After all, we all are enticed by the term ‘free’ when it is attached to a very useful service, such as debt consolidation. In this regard, consumers must be aware of the fact that like everything else, a non profit debt consolidation industry offering free debt consolidation help has its share of flaws. Therefore, users should be familiar to the nature of these debt consolidation companies, services offered by these debt consolidation companies and also the services included and excluded from the list of free debt consolidation and the free online debt consolidation quote.

When Do You Need Free Debt Consolidation Help?

When your debt level is on the rise and has also exceeded the limit of your affordability, would you opt for anything that may charge you with high fees? Certainly not! Right? But, you can instantly plunge into the same services when offered ‘free’. Won’t you? This is the reason, people who step back from for- profit company providing debt consolidation loan or services; do not think twice for signing in with a non-profit company.

Companies that offer free online debt consolidation quote are generally funded by local and national level companies. There are also those non-profit entities that have been sponsored by Federal or State Funding Associations. With the advent of Internet, now you can access as many of online debt consolidation companies and select the right company as per your needs and debt situation. Most of the online debt consolidation services offer quick and online application for a loan or other debt reduction, debt management, debt negotiation or debt consolidation programs. Tell them your income, total accumulated debt amounts, monthly expenses etc., to get a tailor-made and free online debt consolidation quote for you.

When you have located such company, you can take help for spotting a suitable loan to clear all the dues with a free online debt consolidation quote. With a debt consolidation loan, you only take responsibility of a single debt account. Well, there are more benefits you will have for using these services. If you are hesitating to confront your creditors, let these professionals to do it on your behalf and reduce your debt to an easily payable amount. Most of the non profit organizations will do it for free. They require you to sign up and deposit them an amount that will be used to pay back your creditors. Yes, now you can pay an amount one time and transfer your headaches and duty of payments to these companies. Some would also help you to get an affordable debt consolidation loan on easy terms if you cannot make a bullet payment.
Popularity of free debt consolidation services and growing demands for free online debt consolidation quote indicate that more and more people are reeling under the pressure of mounting debts. Easy accessibility to debt consolidation companies on the Internet has to a great extent eased the pressure of people looking for debt consolidation help.

Is Free Debt Consolidation Really Free?

One more factor which needs to be mentioned while discussing the ever increasing demand and need for debt consolidation - a much talked about topic is the prefix Free added to many of these services. After all, we all are enticed by the term ‘free’ when it is attached to a very useful service, such as debt consolidation. In this regard, consumers must be aware of the fact that like everything else, a non profit debt consolidation industry offering free debt consolidation help has its share of flaws. Therefore, users should be familiar to the nature of these debt consolidation companies, services offered by these debt consolidation companies and also the services included and excluded from the list of free debt consolidation and the free online debt consolidation quote.

When Do You Need Free Debt Consolidation Help?

When your debt level is on the rise and has also exceeded the limit of your affordability, would you opt for anything that may charge you with high fees? Certainly not! Right? But, you can instantly plunge into the same services when offered ‘free’. Won’t you? This is the reason, people who step back from for- profit company providing debt consolidation loan or services; do not think twice for signing in with a non-profit company.

Companies that offer free online debt consolidation quote are generally funded by local and national level companies. There are also those non-profit entities that have been sponsored by Federal or State Funding Associations. With the advent of Internet, now you can access as many of online debt consolidation companies and select the right company as per your needs and debt situation. Most of the online debt consolidation services offer quick and online application for a loan or other debt reduction, debt management, debt negotiation or debt consolidation programs. Tell them your income, total accumulated debt amounts, monthly expenses etc., to get a tailor-made and free online debt consolidation quote for you.

When you have located such company, you can take help for spotting a suitable loan to clear all the dues with a free online debt consolidation quote. With a debt consolidation loan, you only take responsibility of a single debt account. Well, there are more benefits you will have for using these services. If you are hesitating to confront your creditors, let these professionals to do it on your behalf and reduce your debt to an easily payable amount. Most of the non profit organizations will do it for free. They require you to sign up and deposit them an amount that will be used to pay back your creditors. Yes, now you can pay an amount one time and transfer your headaches and duty of payments to these companies. Some would also help you to get an affordable debt consolidation loan on easy terms if you cannot make a bullet payment.

posted by zzzzzzzzzzz at 4:33 AM

Monday, April 23, 2007

Some Credit Repair And Control Tips

The following suggestions won’t fix your credit on their own. You need to provide some aid by keeping a sound financial life, avoiding overusing your credit cards and financial credit lines or overspending when there is no particular need. Though you can keep it to a minimum, some sacrifice will be needed if you want to enjoy a good credit score again.

Exercise Control and Discipline over Yourself

If you know yourself to be impulsive and a consuming addict, you need to do something about it cause it can easily ruin your finances. A good start is to build some discipline. Before going to the supermarket write down a list and stick to it precisely. Chances are that there is no particular thing in that lists that you can’t live without; thus, if you forget to write something down, just don’t buy it. Instead, write it down on the new list and wait till the next time you go to the supermarket to buy it.

It may sound stupid, but you can’t imagine how discipline can improve your life and spending. Another important issue is the use of your credit cards. Avoid them as far as possible and try to pay as much as you can in cash. Unless there is a special offer or discount, try to pay with cash or debit from your bank account. Using your own money has other effects than using your credit card.

And if you get accustomed to using your credit cards and lines of credit only when strictly necessary, you will then be able to add expenses to your credit card balance slowly while paying the whole balance every month which is the best way to use such financial products in order to avoid excessive interests from generating due to unpaid balances.

Plan Ahead To Avoid Surprises

The habit of budgeting your income and expenses is something you need to acquire. It will let you prevent bills from mounting up and let you have a record so you can later analyze how you spend today and how you can improve your spending habits tomorrow. Don’t despair however if you don’t feel comfortable doing this by yourself. There are companies willing to help you in the process.

If you need aid from a third party, you can contact a credit counseling agency. These companies will help you plan your expenses and control them so as to make the most out of your income. Moreover, you’ll be able to put some money aside into a savings account to cope with unexpected expenditures that always arise and are the main cause of accumulated debt. Some of these companies do not even charge for their services as they are non-profit. Thus, there is no excuse for letting that opportunity pass you by.
The following suggestions won’t fix your credit on their own. You need to provide some aid by keeping a sound financial life, avoiding overusing your credit cards and financial credit lines or overspending when there is no particular need. Though you can keep it to a minimum, some sacrifice will be needed if you want to enjoy a good credit score again.

Exercise Control and Discipline over Yourself

If you know yourself to be impulsive and a consuming addict, you need to do something about it cause it can easily ruin your finances. A good start is to build some discipline. Before going to the supermarket write down a list and stick to it precisely. Chances are that there is no particular thing in that lists that you can’t live without; thus, if you forget to write something down, just don’t buy it. Instead, write it down on the new list and wait till the next time you go to the supermarket to buy it.

It may sound stupid, but you can’t imagine how discipline can improve your life and spending. Another important issue is the use of your credit cards. Avoid them as far as possible and try to pay as much as you can in cash. Unless there is a special offer or discount, try to pay with cash or debit from your bank account. Using your own money has other effects than using your credit card.

And if you get accustomed to using your credit cards and lines of credit only when strictly necessary, you will then be able to add expenses to your credit card balance slowly while paying the whole balance every month which is the best way to use such financial products in order to avoid excessive interests from generating due to unpaid balances.

Plan Ahead To Avoid Surprises

The habit of budgeting your income and expenses is something you need to acquire. It will let you prevent bills from mounting up and let you have a record so you can later analyze how you spend today and how you can improve your spending habits tomorrow. Don’t despair however if you don’t feel comfortable doing this by yourself. There are companies willing to help you in the process.

If you need aid from a third party, you can contact a credit counseling agency. These companies will help you plan your expenses and control them so as to make the most out of your income. Moreover, you’ll be able to put some money aside into a savings account to cope with unexpected expenditures that always arise and are the main cause of accumulated debt. Some of these companies do not even charge for their services as they are non-profit. Thus, there is no excuse for letting that opportunity pass you by.

posted by zzzzzzzzzzz at 10:49 PM

Beat The Road Tax Blues With Cheaper Car Insurance

Gordon Brown's 2007 budget looks to have hit some drivers hard. If your car was registered after the 23rd March 2006 and emits more than 225g/km of CO2 it will fall into the new Band G bracket. If you car falls into this category your road tax will be increasing from £210 to £300 in 2007 and to £400 in 2008. Most family saloons, MPVs, 4x4s and sports cars are likely to fall into this new high tax band.

If your have a Band G car you do of course have the choice of changing to a lower band model; the road tax on a Vauxhall Corsa for example will decrease from £50 to £35 as it falls into Band B. For many people however this may not be an option. If you have a large family or run a small business driving an MPV or 4x4 may well be a necessity.

This being the case it makes good sense to offset the extra cost with savings in other areas. One area with the potential for good savings is car insurance. There are many actions you can take to lower your car insurance premium and any savings you make can help to pay your increased road tax bill:

• Increase your voluntary excess - increasing the amount you are prepared to cover yourself in the event of a claim can help to lower your car insurance premium. When considering this it is important to remember the potential cost if you need to claim on your policy.

• Downgrade your policy - if your car is relatively cheap it may be beneficial to take out cover for third-party, fire and theft rather than fully comprehensive cover.

• Park securely - parking your car on a secure drive or in a locked garage can help you obtain a lower motor insurance premium than if your car were parked in the street.

• Shop online - make use of the internet to search the market quickly to find cheap car insurance. A full online search could unearth policies that traditional methods may not and some car insurance companies offer discounts for policies purchased online.
• Mileage - calculating and limiting the number of miles you drive each year can help to lower your car insurance when you are looking for a quote. If your circumstances change (i.e. a shorter work commute) then limiting your mileage could prevent you paying for miles you are not covering.

• Limit modifications - heavily customising or modifying your car can lead to higher premiums as it promotes a 'boy-racer' image in the eyes of insurance companies.

• Fit an immobiliser - installing an approved immobiliser has the dual benefit of making you car more secure and could help to lower the cost of your car insurance.

• Pass Plus - if you have recently passed your driving test completing the Pass Plus training programme can help you qualify for car insurance discounts from a range of participating companies; the Pass Plus certificate can only be obtained within 12 months of passing your practical test.

If the car you drive means you are likely to face expensive road tax increases look to offset the cost by seeking out a lower car insurance premium. As with many other drivers there are numerous ways you can lower your premiums and following these steps may help you free up some cash to meet the increased financial demands of being a motorist.
Gordon Brown's 2007 budget looks to have hit some drivers hard. If your car was registered after the 23rd March 2006 and emits more than 225g/km of CO2 it will fall into the new Band G bracket. If you car falls into this category your road tax will be increasing from £210 to £300 in 2007 and to £400 in 2008. Most family saloons, MPVs, 4x4s and sports cars are likely to fall into this new high tax band.

If your have a Band G car you do of course have the choice of changing to a lower band model; the road tax on a Vauxhall Corsa for example will decrease from £50 to £35 as it falls into Band B. For many people however this may not be an option. If you have a large family or run a small business driving an MPV or 4x4 may well be a necessity.

This being the case it makes good sense to offset the extra cost with savings in other areas. One area with the potential for good savings is car insurance. There are many actions you can take to lower your car insurance premium and any savings you make can help to pay your increased road tax bill:

• Increase your voluntary excess - increasing the amount you are prepared to cover yourself in the event of a claim can help to lower your car insurance premium. When considering this it is important to remember the potential cost if you need to claim on your policy.

• Downgrade your policy - if your car is relatively cheap it may be beneficial to take out cover for third-party, fire and theft rather than fully comprehensive cover.

• Park securely - parking your car on a secure drive or in a locked garage can help you obtain a lower motor insurance premium than if your car were parked in the street.

• Shop online - make use of the internet to search the market quickly to find cheap car insurance. A full online search could unearth policies that traditional methods may not and some car insurance companies offer discounts for policies purchased online.
• Mileage - calculating and limiting the number of miles you drive each year can help to lower your car insurance when you are looking for a quote. If your circumstances change (i.e. a shorter work commute) then limiting your mileage could prevent you paying for miles you are not covering.

• Limit modifications - heavily customising or modifying your car can lead to higher premiums as it promotes a 'boy-racer' image in the eyes of insurance companies.

• Fit an immobiliser - installing an approved immobiliser has the dual benefit of making you car more secure and could help to lower the cost of your car insurance.

• Pass Plus - if you have recently passed your driving test completing the Pass Plus training programme can help you qualify for car insurance discounts from a range of participating companies; the Pass Plus certificate can only be obtained within 12 months of passing your practical test.

If the car you drive means you are likely to face expensive road tax increases look to offset the cost by seeking out a lower car insurance premium. As with many other drivers there are numerous ways you can lower your premiums and following these steps may help you free up some cash to meet the increased financial demands of being a motorist.

posted by zzzzzzzzzzz at 10:48 PM

Credit Card Debt Is At Record levels

A recent study done by the credit bureau, Experian, shows U.S. consumers are relying on their credit cards more than ever. According to their latest National Score Index, compiled from a random sampling of 3 million consumers in the credit bureau's database, 51 percent of the U.S. population has at least two credit cards and 14 percent have 10 or more cards.

The results "tend to suggest, on average, people in the last couple of years are accumulating more debt and are utilizing credit cards more than in the past," said Pete Bolin, manager of analytics for Experian. The study also shows that consumers are using their credit cards as an "overall financial vehicle" rather than just an emergency tool, he said.

Dave Capra “The Debtonator” says the Experian study seems pretty accurate. "The people that I interview average eight cards," Capra said. “People seem to be using their available credit to help with their everyday cost of living and are even using one card to pay down others. Credit card debt is quickly becoming a modern day epidemic, threatening our society.” The study also shows that people aren't saving, Capra said. “Saving is what you have to do so you don't turn to your credit cards.”

The Debtonator is a weekly radio show that is returning to Chicago airways in April whose prime focus is Credit and Debt Education. Capra is petitioning Illinois legislators to include courses in debt management and credit cards as required curriculum for graduating high school students and is of the opinion that children as young as grammar school age need to be taught about finances. He is planning to walk his petition 184 miles, from Chicago to Springfield this coming fall and has made it his cause to change financial illiteracy among future credit card holders.

Credit cards can be a very useful tool if you use them responsibly. IF you pay off your balance in full each month. Credit cards can also be used for emergency purposes that can cover a temporary financial shortfall. But make sure you pay off the balance as quickly as possible to avoid escalating interest charges. Using credit cards in a disciplined fashion is the key.

According to the Federal Reserve, U.S. credit-card debt totaled $876.2 billion as of December2006. The figures show that the consumer debt burden continues to grow, and credit cards represent a lot of that additional debt. Credit card debt represents a very high cost debt for many households. Interest rates are in the double digits with fees and punitive interest rates lurking should you slip up. Consumers need to be as disciplined about using their credit cards and paying their bills on time as they are with their mortgages or car payments. If you miss a payment or two on your credit card, exceed your limit or even miss a payment with another creditor, your interest rate can climb as high as 27 or 28 percent, or even higher.

Bolin, with Experian, says that to keep your credit history healthy, you need to pay your bills on time, try to keep your debt to income ratio as low as possible and apply for credit only when you need it.

Dave Capra is author of “Your Guide to Perfect Credit” and his radio show “The Debtonator” can be heard in Chicago on WJJG-AM 1530 every Saturday starting in mid April.
A recent study done by the credit bureau, Experian, shows U.S. consumers are relying on their credit cards more than ever. According to their latest National Score Index, compiled from a random sampling of 3 million consumers in the credit bureau's database, 51 percent of the U.S. population has at least two credit cards and 14 percent have 10 or more cards.

The results "tend to suggest, on average, people in the last couple of years are accumulating more debt and are utilizing credit cards more than in the past," said Pete Bolin, manager of analytics for Experian. The study also shows that consumers are using their credit cards as an "overall financial vehicle" rather than just an emergency tool, he said.

Dave Capra “The Debtonator” says the Experian study seems pretty accurate. "The people that I interview average eight cards," Capra said. “People seem to be using their available credit to help with their everyday cost of living and are even using one card to pay down others. Credit card debt is quickly becoming a modern day epidemic, threatening our society.” The study also shows that people aren't saving, Capra said. “Saving is what you have to do so you don't turn to your credit cards.”

The Debtonator is a weekly radio show that is returning to Chicago airways in April whose prime focus is Credit and Debt Education. Capra is petitioning Illinois legislators to include courses in debt management and credit cards as required curriculum for graduating high school students and is of the opinion that children as young as grammar school age need to be taught about finances. He is planning to walk his petition 184 miles, from Chicago to Springfield this coming fall and has made it his cause to change financial illiteracy among future credit card holders.

Credit cards can be a very useful tool if you use them responsibly. IF you pay off your balance in full each month. Credit cards can also be used for emergency purposes that can cover a temporary financial shortfall. But make sure you pay off the balance as quickly as possible to avoid escalating interest charges. Using credit cards in a disciplined fashion is the key.

According to the Federal Reserve, U.S. credit-card debt totaled $876.2 billion as of December2006. The figures show that the consumer debt burden continues to grow, and credit cards represent a lot of that additional debt. Credit card debt represents a very high cost debt for many households. Interest rates are in the double digits with fees and punitive interest rates lurking should you slip up. Consumers need to be as disciplined about using their credit cards and paying their bills on time as they are with their mortgages or car payments. If you miss a payment or two on your credit card, exceed your limit or even miss a payment with another creditor, your interest rate can climb as high as 27 or 28 percent, or even higher.

Bolin, with Experian, says that to keep your credit history healthy, you need to pay your bills on time, try to keep your debt to income ratio as low as possible and apply for credit only when you need it.

Dave Capra is author of “Your Guide to Perfect Credit” and his radio show “The Debtonator” can be heard in Chicago on WJJG-AM 1530 every Saturday starting in mid April.

posted by zzzzzzzzzzz at 10:48 PM

Free Online Debt Consolidation Quote – Get Free Estimates For Debt Solutions

Popularity of free debt consolidation services and growing demands for free online debt consolidation quote indicate that more and more people are reeling under the pressure of mounting debts. Easy accessibility to debt consolidation companies on the Internet has to a great extent eased the pressure of people looking for debt consolidation help.

Is Free Debt Consolidation Really Free?

One more factor which needs to be mentioned while discussing the ever increasing demand and need for debt consolidation - a much talked about topic is the prefix Free added to many of these services. After all, we all are enticed by the term ‘free’ when it is attached to a very useful service, such as debt consolidation. In this regard, consumers must be aware of the fact that like everything else, a non profit debt consolidation industry offering free debt consolidation help has its share of flaws. Therefore, users should be familiar to the nature of these debt consolidation companies, services offered by these debt consolidation companies and also the services included and excluded from the list of free debt consolidation and the free online debt consolidation quote.

When Do You Need Free Debt Consolidation Help?

When your debt level is on the rise and has also exceeded the limit of your affordability, would you opt for anything that may charge you with high fees? Certainly not! Right? But, you can instantly plunge into the same services when offered ‘free’. Won’t you? This is the reason, people who step back from for- profit company providing debt consolidation loan or services; do not think twice for signing in with a non-profit company.

Companies that offer free online debt consolidation quote are generally funded by local and national level companies. There are also those non-profit entities that have been sponsored by Federal or State Funding Associations. With the advent of Internet, now you can access as many of online debt consolidation companies and select the right company as per your needs and debt situation. Most of the online debt consolidation services offer quick and online application for a loan or other debt reduction, debt management, debt negotiation or debt consolidation programs. Tell them your income, total accumulated debt amounts, monthly expenses etc., to get a tailor-made and free online debt consolidation quote for you.

When you have located such company, you can take help for spotting a suitable loan to clear all the dues with a free online debt consolidation quote. With a debt consolidation loan, you only take responsibility of a single debt account. Well, there are more benefits you will have for using these services. If you are hesitating to confront your creditors, let these professionals to do it on your behalf and reduce your debt to an easily payable amount. Most of the non profit organizations will do it for free. They require you to sign up and deposit them an amount that will be used to pay back your creditors. Yes, now you can pay an amount one time and transfer your headaches and duty of payments to these companies. Some would also help you to get an affordable debt consolidation loan on easy terms if you cannot make a bullet payment.
Popularity of free debt consolidation services and growing demands for free online debt consolidation quote indicate that more and more people are reeling under the pressure of mounting debts. Easy accessibility to debt consolidation companies on the Internet has to a great extent eased the pressure of people looking for debt consolidation help.

Is Free Debt Consolidation Really Free?

One more factor which needs to be mentioned while discussing the ever increasing demand and need for debt consolidation - a much talked about topic is the prefix Free added to many of these services. After all, we all are enticed by the term ‘free’ when it is attached to a very useful service, such as debt consolidation. In this regard, consumers must be aware of the fact that like everything else, a non profit debt consolidation industry offering free debt consolidation help has its share of flaws. Therefore, users should be familiar to the nature of these debt consolidation companies, services offered by these debt consolidation companies and also the services included and excluded from the list of free debt consolidation and the free online debt consolidation quote.

When Do You Need Free Debt Consolidation Help?

When your debt level is on the rise and has also exceeded the limit of your affordability, would you opt for anything that may charge you with high fees? Certainly not! Right? But, you can instantly plunge into the same services when offered ‘free’. Won’t you? This is the reason, people who step back from for- profit company providing debt consolidation loan or services; do not think twice for signing in with a non-profit company.

Companies that offer free online debt consolidation quote are generally funded by local and national level companies. There are also those non-profit entities that have been sponsored by Federal or State Funding Associations. With the advent of Internet, now you can access as many of online debt consolidation companies and select the right company as per your needs and debt situation. Most of the online debt consolidation services offer quick and online application for a loan or other debt reduction, debt management, debt negotiation or debt consolidation programs. Tell them your income, total accumulated debt amounts, monthly expenses etc., to get a tailor-made and free online debt consolidation quote for you.

When you have located such company, you can take help for spotting a suitable loan to clear all the dues with a free online debt consolidation quote. With a debt consolidation loan, you only take responsibility of a single debt account. Well, there are more benefits you will have for using these services. If you are hesitating to confront your creditors, let these professionals to do it on your behalf and reduce your debt to an easily payable amount. Most of the non profit organizations will do it for free. They require you to sign up and deposit them an amount that will be used to pay back your creditors. Yes, now you can pay an amount one time and transfer your headaches and duty of payments to these companies. Some would also help you to get an affordable debt consolidation loan on easy terms if you cannot make a bullet payment.

posted by zzzzzzzzzzz at 10:47 PM

How To Make Credit Cards Work For You

Interest rates have risen and fallen dramatically over the last few years. But credit cards have seen comparatively tiny reductions in their rates. The good news? You can save heaps on your credit card bill just by being smart about using your card.

People pay literally billions of dollars a year in interest from their plastic - making a credit card one of the most expensive forms of borrowing around. But it doesn't have to be that way. The reason they pay so much interest on their cards is because they use them incorrectly.

Interest rates are irrelevant when compared to how a credit card is used and whether the credit card utilised suits an individual's patterns of use.

There are basically two types of cards.

The normal credit card
The first is generally the most often used it has no annual fee and has an interest free period of up to 55 days after a credit card purchase has been made. After that period, however, interest charges are extremely high, normally around 19%. This is the card you will be most familiar with, it has a credit limit preset and you normally only have to repay 5% of the balance owing each month. The remaining balance sits there charging you interest.

What most people don't know is that when you withdraw cash, instead of receiving a period of interest free days, interest is charged from day one.

Furthermore, cash withdrawals are the last debt to be paid off so if there are other debts on the card and you think you have paid off your cash advance a day later and escaped the expensive interest charges you will find you are just paying off another debt on the card, leaving the cash advance there to accumulate interest. In most cases, the entire card must be paid off to avoid such charges.

The Charge Card
This leads me onto the second type of card. It's called a Charge card and although they look very similar to a credit card they are very different.

Firstly, everything you spend over the course of the month is charged in the normal way but at the end of the month you must pay the balance off in full. In this way you are getting full use of the banks money for up to 55days. Then you pay it off in full and the process starts again. Now often this type of card will have an annual fee. The most famous of the cards are the American Express and Diners.

Personally I use an American Express and a Natwest Premier Charge. Now the reason I use two cards is a concept called "factoring". Factoring is all about cashflow and you should be getting to know by now how highly I regard cashflow.

Now before we move on you need to understand this 55 days interest free period and its relation to statement dates.

Important dates in the credit card cycle
Once you receive your card there are two vitally important dates to remember. They are so important I actually alarm them in my phone each month. The first is the statement date and the other is your direct debit or payment due date.

Statement date is simply the date your statement is issued. All transactions up to that date will be due on the next payment due date and all after will be on the following month.

Now your payment due date in the case of a 55 day card will normally be 24 days after the statement date. 31days in the month plus 24 days till payment. A 45 day interest free card will be 31 days plus 14 days.

OK -- so why do I have a charge card. It comes down to factoring.

The concept of factoring
Factoring is most often used in business to create immediate cashflow. A business will invoice a client but not receive the payment for say 30 days. So the business will go to a factoring company who will pay the invoice immediately minus around 7-9% commission. So basically for this fee you get to use the factoring company's money for the 30 days.

Now with a credit card you spend the money but don't pay for it until the payment due date. So effectively you get to use the finance company's money for however many days that is. It keeps the cash in your account but doesn't cost you anything to do so.

Now the only thing left to consider is the annual fee on the charge card, because they can be hefty. I have the Amex Platinum which costs me £275 and the Natwest which is £195. So that's £475 per year or £40 per month. So I need to make a judgement call on whether I think it is worth £40 per month to use this facility. For me it is because I also use my Natwest Charge to buy houses and I get Air Miles points for it and it also comes with a £10,000 overdraft, the Amex I use for all my travel booking. Both of these come with other features which I use such as the travel insurance and purchase insurance.

Now the other option is to take the first type of Credit card and use it in the same way as a charge, set up the direct debit for the full amount each month. If you do this you effectively will be using the banks money for nothing. It feels so good to get something over the banks for once.

Now let's look at why I have two charge cards rather than one.

My statement date on the Natwest Charge is the 17th of the month and it is direct debited on the 6th of each month. The Amex is the 29th and the direct debit is the 10th of the month. So I use the Natwest between the 17th and the 28th and the Amex between the 29th and the 16th of the month. This means I am maximising my interest free days from each card.

Now on the whole this formula works fine but sometimes the Amex is not accepted so I then use the Natwest but I accept this as part of doing business.

Cashless society
I use my credit cards for every purchase imaginable, another feature about cards is that when you purchase something using your card, if say the Merchant doesn't provide you with the service or product you ordered then you can charge the amount back and then it is on the merchants back to prove they gave you the service. Try doing that with cash. They are a lot less likely to care about what you think about their service once you have paid cash. It is also a much safer way to shop online.

Spend your money twice.
Credit cards also allow you to spend you money twice, firstly if you buy something using the card (that's the first time) and then when you get your statement (that's the second time). So once the statement comes in it allows you to track all your expenditures but it also reminds you of those stupid purchases you make. This is a great thing if you are trying to develop better spending patterns.

Psychology of a charge card
I prefer using Charge cards because every time I make a purchase I must remember that I have to pay for it at the end of the cycle. No excuses I must come up with the cold hard cash. This means that discretionary spending becomes harder because I cannot just say I will pay it back next month. It creates a simple discipline that supports my lifestyle goals.

Floor Limit on your Spending
The only other thing I do is that I place a limit on what I think about. What I mean by this is that I don't think twice if the purchase is under £300. I can make as many purchases as I want up to £300. Anything above £300 I will sleep on before I buy. Now maybe you are not at £300, I actually used to do it back in Australia at $50. So this meant that things like food shopping and restaurants I didn't have to worry about. Obviously as your portfolio gets bigger and you can afford more you can raise the spending limit.

Now I still sometimes regret the purchases I make when I get the credit card statement for the purchases under £300 but I don't stress about the adverse affect it may have on my lifestyle goals.

Finally, I look at it this way, every wealthy person I know has a charge card so their must be something about the charge card that works for them. Likewise every financially struggling person I speak to has multiple credit cards, it must be something they are doing that doesn't work for them.
Interest rates have risen and fallen dramatically over the last few years. But credit cards have seen comparatively tiny reductions in their rates. The good news? You can save heaps on your credit card bill just by being smart about using your card.

People pay literally billions of dollars a year in interest from their plastic - making a credit card one of the most expensive forms of borrowing around. But it doesn't have to be that way. The reason they pay so much interest on their cards is because they use them incorrectly.

Interest rates are irrelevant when compared to how a credit card is used and whether the credit card utilised suits an individual's patterns of use.

There are basically two types of cards.

The normal credit card
The first is generally the most often used it has no annual fee and has an interest free period of up to 55 days after a credit card purchase has been made. After that period, however, interest charges are extremely high, normally around 19%. This is the card you will be most familiar with, it has a credit limit preset and you normally only have to repay 5% of the balance owing each month. The remaining balance sits there charging you interest.

What most people don't know is that when you withdraw cash, instead of receiving a period of interest free days, interest is charged from day one.

Furthermore, cash withdrawals are the last debt to be paid off so if there are other debts on the card and you think you have paid off your cash advance a day later and escaped the expensive interest charges you will find you are just paying off another debt on the card, leaving the cash advance there to accumulate interest. In most cases, the entire card must be paid off to avoid such charges.

The Charge Card
This leads me onto the second type of card. It's called a Charge card and although they look very similar to a credit card they are very different.

Firstly, everything you spend over the course of the month is charged in the normal way but at the end of the month you must pay the balance off in full. In this way you are getting full use of the banks money for up to 55days. Then you pay it off in full and the process starts again. Now often this type of card will have an annual fee. The most famous of the cards are the American Express and Diners.

Personally I use an American Express and a Natwest Premier Charge. Now the reason I use two cards is a concept called "factoring". Factoring is all about cashflow and you should be getting to know by now how highly I regard cashflow.

Now before we move on you need to understand this 55 days interest free period and its relation to statement dates.

Important dates in the credit card cycle
Once you receive your card there are two vitally important dates to remember. They are so important I actually alarm them in my phone each month. The first is the statement date and the other is your direct debit or payment due date.

Statement date is simply the date your statement is issued. All transactions up to that date will be due on the next payment due date and all after will be on the following month.

Now your payment due date in the case of a 55 day card will normally be 24 days after the statement date. 31days in the month plus 24 days till payment. A 45 day interest free card will be 31 days plus 14 days.

OK -- so why do I have a charge card. It comes down to factoring.

The concept of factoring
Factoring is most often used in business to create immediate cashflow. A business will invoice a client but not receive the payment for say 30 days. So the business will go to a factoring company who will pay the invoice immediately minus around 7-9% commission. So basically for this fee you get to use the factoring company's money for the 30 days.

Now with a credit card you spend the money but don't pay for it until the payment due date. So effectively you get to use the finance company's money for however many days that is. It keeps the cash in your account but doesn't cost you anything to do so.

Now the only thing left to consider is the annual fee on the charge card, because they can be hefty. I have the Amex Platinum which costs me £275 and the Natwest which is £195. So that's £475 per year or £40 per month. So I need to make a judgement call on whether I think it is worth £40 per month to use this facility. For me it is because I also use my Natwest Charge to buy houses and I get Air Miles points for it and it also comes with a £10,000 overdraft, the Amex I use for all my travel booking. Both of these come with other features which I use such as the travel insurance and purchase insurance.

Now the other option is to take the first type of Credit card and use it in the same way as a charge, set up the direct debit for the full amount each month. If you do this you effectively will be using the banks money for nothing. It feels so good to get something over the banks for once.

Now let's look at why I have two charge cards rather than one.

My statement date on the Natwest Charge is the 17th of the month and it is direct debited on the 6th of each month. The Amex is the 29th and the direct debit is the 10th of the month. So I use the Natwest between the 17th and the 28th and the Amex between the 29th and the 16th of the month. This means I am maximising my interest free days from each card.

Now on the whole this formula works fine but sometimes the Amex is not accepted so I then use the Natwest but I accept this as part of doing business.

Cashless society
I use my credit cards for every purchase imaginable, another feature about cards is that when you purchase something using your card, if say the Merchant doesn't provide you with the service or product you ordered then you can charge the amount back and then it is on the merchants back to prove they gave you the service. Try doing that with cash. They are a lot less likely to care about what you think about their service once you have paid cash. It is also a much safer way to shop online.

Spend your money twice.
Credit cards also allow you to spend you money twice, firstly if you buy something using the card (that's the first time) and then when you get your statement (that's the second time). So once the statement comes in it allows you to track all your expenditures but it also reminds you of those stupid purchases you make. This is a great thing if you are trying to develop better spending patterns.

Psychology of a charge card
I prefer using Charge cards because every time I make a purchase I must remember that I have to pay for it at the end of the cycle. No excuses I must come up with the cold hard cash. This means that discretionary spending becomes harder because I cannot just say I will pay it back next month. It creates a simple discipline that supports my lifestyle goals.

Floor Limit on your Spending
The only other thing I do is that I place a limit on what I think about. What I mean by this is that I don't think twice if the purchase is under £300. I can make as many purchases as I want up to £300. Anything above £300 I will sleep on before I buy. Now maybe you are not at £300, I actually used to do it back in Australia at $50. So this meant that things like food shopping and restaurants I didn't have to worry about. Obviously as your portfolio gets bigger and you can afford more you can raise the spending limit.

Now I still sometimes regret the purchases I make when I get the credit card statement for the purchases under £300 but I don't stress about the adverse affect it may have on my lifestyle goals.

Finally, I look at it this way, every wealthy person I know has a charge card so their must be something about the charge card that works for them. Likewise every financially struggling person I speak to has multiple credit cards, it must be something they are doing that doesn't work for them.

posted by zzzzzzzzzzz at 10:47 PM