It is far too  easy to get credit cards these days.  We get offers in the mail on a weekly basis,  phone calls and in-person solicitations in the malls and even the airport.  While plastic is very convenient, it also encourages spending. When you get one card, it becomes easier to get another, and before you know it, you may have several. If you also have add-on cards for your family members, spending becomes that much effortless.

The problem starts when you can keep on maxing out your credit cards, making minimum payments and not paying attention to the fact that you are sinking deeper and deeper into the abyss of debt.

How Credit Card Debts Increase

Most people don’t pay attention to the fine print when they sign a credit card holder’s agreement. Banks and other institutions which offer credit cards charge huge rates of interest, especially when you make minimum payments.

IF you continue to make minimum payments, you end up paying interest on interest. If you withdraw cash against your credit card, interest payments start immediately and not just when your billing cycle ends. If you make only the minimum payment, then interest just keeps mounting.

What You Can Do

On Your Own:

Negotiate with credit card issuers to reduce your interest. You must be willing to make payments on a scheduled and timely basis.

Move all your credit card debt to one card (called balance transfer) at zero interest payment (often for only six months). There may be a transfer or processing fee, so make sure to account for that and do the math to see if you are actually saving money.

Here are two highly rated books on debt elimination.  Both are American books, but a lot of the material will apply in Canada.  There are rave reviews for both books on Amazon.com … so check them out to see what people had to say about the book and the techniques:

Negotiate and Settle Your Debts: A Debt Settlement Strategy  by Mandy Akridge

BestCredit: How to Win the Credit Game, 2nd Edition by Dana Neal

If these measures don’t work, or you just cannot get a positive response, considering getting professional help.

Debt management companies:

There are many professional debt management companies and financial institutions which will work with you and consolidate all your credit card debts. They sometimes negotiate lower rates of interest with the credit card issuers. Then you make payments to them and they distribute the payments among the card companies. This is done for a flat fee or a percentage of payments.

Once again, you should read the fine print before you sign. There may be ‘hidden’ cost and penalties which actually translate into higher rates of interest and you should have everything on the table, so that you are actually not paying more money than you should.

It may be worthwhile to ‘shop around’ and do comparison shopping for a debt consolidation company, because interest rates and other terms and conditions are extremely variable.

Not for Profit Agencies

There are also government agencies and not-for-profit counseling agencies which will not charge you for their services.

Consolidate Debt Into Your Mortgage

If you have equity in your home, you “may” be able to consolidate some or all of your debt into your mortgage.  The new mortgage rules set out by the government on March 18, 2011  make this a bit more difficult. How much debt you can role into your mortgage depend on your equity and other factors. The goverment changed the rules so that consumers wouldn’t bleed away their equity … but the problem is they didn’t do anything to help people get rid of high credit card debt.

If you want to know whether or not mortgage debt consolidation is an option for you .. . CALL US NOW at  604-736-1855

Your credit score is used to determine how much credit you are eligible for as well as the rate you will be able to obtain.  If you have a great credit score you will be able to get the best rates offered by the financing companies. If you have a poor credit score, you will end up paying tens of thousands more in interest because you are considered a poor credit risk.

If you have ever asked for a loan and were refused, you may wonder why … the institution that refused you will probably not give you the details. The reasons will likely be … not enough income, or a poor credit score.

When credit card companies started out initially there was no rating system so there was no way to gauge the financial risk involved in lending money. Then the Fair, Isaac and Company started using a mathematical formula to determine the borrowers’ credit scores. This analysis provided the lenders with some guidelines as to the credit worthiness of the borrowers.

The Importance Of Your Credit Score

A credit score is an indicator of your credit risk. The institution which gives you credit, whether it via a card or a loan, or a mortgage loan, needs to have some idea of your financial history. The credit score is an indicator of that history.

There are independent agencies which rate you for your credit. The scores usually range between 300 and 900. These credit scores determine what kind of loans you can get, the tenure of the loan and even the rate of interest that you have to pay on that loan. So, if your credit score is on the lower side, you may be denied loans, or you may have to pay higher rates of interest, you may even be refused apartments or office rentals.

How Is Your Credit Score Determined?

Credit card and loan companies keep track of all your financial activities. The credit history is important to determine your financial health. The scores are determined by these factors:

• How long you have been using credit cards/loans
• How regular are your repayments
• What percentage of the credit card debt do you pay
• How much money do you owe in all (credit cards, loans or other credit)
• Have you missed any repayments
• Have you ever declared bankruptcy
• Your tax payments
• How many times your credit score is requested actually has an impact ON your credit score.  This is why working with a mortgage broker (one request) vs shopping around at a dozen banks is a smart move. Each bank you shop at will request your credit score and the accumulation of requests will lower your score.

Just keep in mind that the higher your score, the more loans you can get and at lower rates of interest, so there is less money going out of your pocket. Basically the credit score is an indicator of your credit risk profile. All the above also depend on your income, because if you live way beyond your income, your credit risk is high.

Finding Out Your Credit Score

There are dozens of private agencies which will sell you your credit scores. They will try to enroll you in a monthly program.  You don’t need to pay to get your credit score, because you are entitled to get this information, and you can do it on your own.

Two credit bureaus – Equifax and TransUnion keep track of your credit balances and rate you according to the payments made by you and the lines of credit you have open.

If you want your credit score for free you have to apply by mail. If you are in a hurry and are willing to pay a small fee you can get your credit score almost immediately. When you apply for the score, you will be asked for certain identification documents and these are important to confirm your identity.

It is always safer to go directly to the credit bureaus (vs. the 3rd party services) yourself so that you can protect yourself from possible scams and identity theft.

Here are the links to the FREE applications:

Equifax (this is a PDF document for the free report)   Online Paid Report

TransUnion Free Report TransUnion Paid Report

A lot of personal information is now available online and the incidences of identity theft have increased exponentially. In this post we will outline some of the basic steps you can take to protect yourself.

In Canada, identity theft victims lost more than $10 million in 2009, and the figures keep rising.

Increasing levels of personal and financial details are available online, as people use the internet to buy goods, do financial transactions, do stock market trading, make investments, and pay taxes and bills. By doing so, they also open themselves to being potential victims of identity theft. This can result in financial loss, loss of credit ratings and loss of reputation as well.

What Do Criminals Do With Your Identity?

• Open bank accounts in your name and use them for money laundering or other criminal activities
• Access your bank accounts and withdraw money Access your credit card details and make purchases online
• Apply for loans using your name
• Use your personal information to obtain birth certificates, passports and other official documents
• Apply for social and medical benefits using your identity
• Hack into your bank accounts and transfer money
• Hack into your social networking accounts and carry out various scams, mostly involving money
• In serious cases you can even be framed for crimes

And this is only the tip of the iceberg. Criminals can create such a mess with your identity that you will not only face monetary losses, loss of your good name, poor credit ratings but you will have to go to the major effort of getting rid of the black marks as well as restore your identity. You will have to go to the police, file complaints, follow up, take legal action, try and get your money back. All this entails a great deal of work and time and stress.

Being the victim of a crime has horrifying psychological consequences apart from all the losses that you incur. Unlike a burglar or a mugger, the cyber criminal attacks stealthily and you don’t even know when the crime occurred.

How Can You Protect Yourself?

1. Physical security is important. Make sure that your mailbox is locked and secured against hard copies of information which you receive from credit card companies, banks, utilities and other personal mail. If you are going on a vacation, either notify the post office that you will collect your mail at a later date, or ask a trusted friend or relative to empty out your mailbox at regular intervals. Don’t forget to cancel newspaper and other deliveries which would be the sign of an empty house.

2. Secure your computer transactions. Use complicated passwords, install a good anti-virus or total internet security suite, sweep your computer regularly for malware and Trojans – remember no anti-virus is totally foolproof. When carrying out financial transaction, see the lock sign (https) in the address line. Most banks and financial institutions have now added extra layers of security the you can take advantage of. Credit cards come with holograms and magnetic strips which make them difficult to clone and use.

3. Do not open phishing emails asking for your financial details and click on links on the pages. Even if you receive phone calls asking for personal details, purportedly from the bank, financial institution or even the tax department be very careful and either call them back on the official phone number or refuse to give details on the phone.

4. Never apply for any “too good to be true” offers. Some signs of fake emails or letters are spelling and grammar mistakes. If you do receive any such mails, you can actually check the ip address and see where it originates from.

5. It is important to shred or burn any personal information papers rather than throwing them in the trash. When you have to keep them, store them in a locked place or even a bank locker.

6. Keep a regular watch on financial and credit card transactions which you have carried out. This is extremely important especially when you have add-on cards or joint accounts.  Check your  bank and credit card statements EVERY month.   Phone or inquire about any unknown or unusual activity.

The bottom line is take measures to secure your defense. If you are a victim of theft,  contact the appropriate authorities immediately to report the crime. If your bank account or credit card is compromised, immediately block it. This way you can at least limit your losses.

If You Want To Report a Fraud, Or If You Need More Information

Contact The Canadian Anti- Fraud Centre:

Toll Free: 1-888-495-8501

Toll Free Fax: 1-888-654-9426

Website:  Canadian Anit-Fraud Centre

Email: info@antifraudcentre.ca

The Bank of Canada has been telling us that Canadian consumers are at risk because they are taking on bigger and bigger debt loads.

A report titled Joe Debtor: The Face of Bankruptcy issued by Hoyes Michalos & Associates, a Kitchener-based bankruptcy trustee, indicates that the Bank of Canada is not issuing false alarms.

The report looked at over 8,000 insolvency filings the firm processed  in 2009 and 2010.

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The report  found that the average Canadian filing for bankruptcy:

• owes $59,800 not counting his mortgage
• is 41-years-old
• married
• male
• has four credit cards
• owes about three-and-a-half times more than the average Canadian

“It now takes more of each Canadian’s take-home pay to service the debt that they have accumulated. If anything interrupts the average person’s income, even for as little as a month or two, they find themselves unable to meet their obligations.”

The report said there is a common misconception that most people filing for bankruptcy are unemployed. The study found that this was not necessarily the case.  Though job loss or reduced income was one of the factors, there were other contributing factors:

• job loss
• reduced income
• poor financial management
• separation and divorce
• medical problems

“Most Canadians in financial difficulty are good, hard-working people, but due to divorce, job loss, health crisis and over-use of credit, are forced into bankruptcy.” They do not follow the typical stereotype of the average bankrupt; in fact, they look like the average Canadian.”

“The current economic climate, combined with easy access to credit has increased the risk of insolvency for the average Canadian. Based on our experience, many Canadians are only one or two paycheques away from serious financial problems.”

How close are YOU to potential bankruptcy? The report states …

“If you want to predict whether you will have financial trouble in the future, ask yourself this question: If I lost my job tomorrow, how long would it take before I could no longer pay my bills?”

Here are the warning signs that YOU may be in trouble:

• Do you avoid opening the mail if it is a bill?
• Do you only make minimum payments on your debts or have you missed a payment because of a short term cash crisis?
• Will you need to borrow money in the event of an emergency like a car repair?
• Are you close to your credit card limits? Are you using one card to pay another?
• Are you unable to qualify for further lending at low interest rates?

If you answered yes to any of these questions you may be at risk.  Start taking action to reduce your debt immediately and talk to a debt counselor who can help advise you as to your best course of action.

Read Joe Debtor: The Face of Bankruptcy for more information.

The Women’s Network  is running a new reality show called Burn My Mortage.

The concept sounds great:

Burn My Mortgage shows homeowners that with a little bit of pain, there is a lot to gain when it comes to paying off one of life’s biggest purchases.

The price of real estate has gone sky high, and despite low mortgage rates, families are drowning in mortgage debt. Lead by our financial expert Kelley Keehn and motivator Chad Bisch, Burn My Mortgage helps families shave years and tens of thousands of dollars off their mortgages in an engaging and entertaining format.

Kelley and Chad push families to the extreme to prove that denial and ignorance are the only things preventing them from reaching that mortgage free life. If they follow Kelley’s rules and survive her savings challenges – they will be rewarded with a head start lump sum mortgage payment of $5000. But that’s just a start – find out how these families could take up to 15 years off their mortgage.

As you can see from the  show schedule there are several time slots during which the program airs:  Mondays at 4:00 PM, Tuesdays at 8)) and 11:30 PM and Saturdays at 4:00 PM

You can also watch Episode ONE . . . on your computer at any time.

I plan on watching a few episodes and will give you my feedback.  Feel free to add YOUR comments on the show below.

I know a few people who always have their finances under control. They know where they have spent their money, they don’t get surprised by their yearly car insurance payment, and they are able to actually pay cash for their next car!

I know even more people who experience the exact opposite. They can’t figure out where the $100 in their wallet disappeared to, they are always surprised by their yearly insurance bills, they can hardly make the car payment let alone even dream of paying for a car outright!

The difference is in the way people think, feel and deal with their money.  I know of several people who keep cash in a pile of envelopes.  When their “entertainment” envelope runs out of money, that means dining in and TV for the rest of the month. When the “clothing” envelope is depleted that means no more socks, no matter how many holes are in the old ones.
The envelope system has worked for thousands of people for hundreds of years … but in this world of electronic payments,  credit and debit cards, it gets a bit challenging keeping track.

So … in marches Mvelopes, which is the electronic, online equivalent of the envelope system.

There are raving fans, some of whom have managed to pay off  debt loads of over $30K  in a year. And those that are able to pay cash for their new cars.  And of course, there are loads of fans who have managed to save up for substantial down payments on a new house, or pay off their mortgages is record time!

Mvelopes.com was named one of “The 100 Best Products of the Year” by PC World and one of “The 4 Best Money Managers” by Success Magazine.

If you want control over your finances, be sure to check them out.  Though they are US based, they do support a few Canadian banks. But even if you cannot use all of the “bells and whistles”  you will definitely see a difference in how you handle your finances.

Here is a free book telling how it works.

Click here to get a free trial and see if mvelopes works for you.

And be sure to read all the inspiring testimonials. It is amazing what people can pull off when they are inspired and have a system!