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Is Zero Percent for Real?

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The desire to climb out of credit card debt is universal for anyone who is fighting this big problem. And it isn’t an isolated problem. More and more people are having big problems with credit debt especially in these times when you just about have to use credit every day.

There is something a little strange then about credit card companies coming in with offers to help you climb out of credit card debt when its they that are the problem in the first place. It’s almost like a drug pusher pushing a new drug that can get you off drugs but the drug he is pushing is just as addictive as the last one. But when you get offers for new credit cards each month, they often are pushing plans to help you get out of debt by going into debt to them.

Probably the offer that comes in that is most difficult to overlook are the offers to let you do a balance transfer of some of your debt and pay no interest on it. These are often called zero percent offers and they have skilled marketing people write the copy for these offers so you are prone to believe that you really are going to be able to have a loan paying no interest so you can just pay off the principle and that’s that.

Are these zero percent credit card balance transfer offers for real? Well, they are in the sense that they might transfer some of the funds and yes, the interest rate you will see on the first statement will be zero percent. But, like all things, there are catches and things to look out for. You have to remember that the credit card companies are entirely in the business of collecting interest. They don’t do anything else. They offer no value to society, build no roads or hospitals, sell no food or medicine, make no TV shows to make you laugh. They sit there, house your debt, collect interest and try to talk you into running up more debt.

When you get a zero percent offer, they plan on recovering the lost money from the time they support your debt, and you pay no interest. One way they do that is with a transfer fee. They will almost always charge you a 3-5% balance transfer fee with a minimum and sometimes a maximum value. Read the fine print carefully to make sure you understand how much this is going to be and that you agree to it. But be aware that the transfer fee is nothing more than disguised interest. So calculate that against the interest you would have paid leaving the debt where it is sitting now before you cash in on a zero percent balance transfer.

You will rarely see a zero percent balance transfer that is not for a very limited time frame, usually no more than three to six months, sometimes up to 18-months. With the transfer fee factored in, you have to wonder if the effort of moving the money was worth it. And at the end of the introductory period, they are going to raise your interest rate to something that they, the credit card company want it to be. Be absolutely sure you know what that interest rate is going to be and that they live up to that stated level of interest. If you enjoy that zero percent transfer for three months and then face years at 21% interest, you did not win in that transaction, the credit card company won.

Teaching the Kids About Credit

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One of the ways some of us get into credit card debt trouble comes out of nothing more than lack of awareness of how credit cards can sneak up on us.

The first time you maxed out a card and faced the overwhelming task of paying down a credit card and getting yourself back on firm financial footing, it can be a sobering experience. And if you have gone through this experience, the school of hard knocks taught you well that it’s easier to prevent credit card debt than to recover from it.

Maybe the best thing about getting hard won knowledge is that you can pass it along to your kids. So how can you go about helping your children establish a good relationship with credit and learn how to use it responsibly so they don’t have to learn about credit card debt and credit card abuse the hard way? Just like everything else in life, they depend on you to teach them how to function as adults. So we should take this responsibility seriously.

First of all, teaching kids to use credit effectively is not about keeping them from having credit. If anything, the opposite is true. A credit card is as essential a tool for modern living as a car and a cell phone. We would even make the bold statement that to send a child out to fend for himself or for herself without a working credit card in her pocket, a respectable credit rating already building up and the training in how to use credit is nothing less than irresponsible parenting by adults. It is equivalent of sending your child into a battle with no weapons. Credit is essential and smart use of credit is even more essential.

You can help your kids begin to understand the basics of getting good credit by getting them a credit card in high school or college. You can pay the bills but this is a good way for them to pay for what they need and you can keep track of their spending from that monthly bill you get. But make sure that credit card is in your child’s name so as you pay it off each month, they build up the good credit rating from what you are doing. Consider it another one of the many legacies you are passing along to your kids.

But don’t just let your kids go hog wild with their credit card. In fact, you can work with a credit card company to establish a credit limit and not allow it to go up. In that way, you can set a limit on the amount of credit they have each month. And if they go over it and suddenly cannot buy lunch because they abused their credit, that afternoon of going hungry will teach them more than two days of lecture about fiscal responsibility can do.

Make sure your kids are aware that you paying their bills is a privilege and that they are very lucky to be able to start their adult lives with a sponsor like this. Then give them three jobs they must complete to show they are worthy of this privilege.

(1) They must save all receipts of every purchase they make. If they buy something and don’t get a receipt, they must make one.

(2) They must maintain a ledger of spending. This is similar to a check book ledger, but it must be complete with every purchase they made, and a running total and it must be maintained daily. If an expenditure shows up that is not on that ledger, they will be required to pay that back to you or risk losing their credit card.

(3) They must sit you once a week to review the credit card bill and explain item by item what each entry on there is. This will do a lot to keep them from using the credit card frivolously.

These simple habits if done over a period of months will teach your children how to track, monitor and be aware of their spending and their use of credit. In that way, when you cut the apron strings entirely, they will not only have the credit they need to have a good adult life, but they will also be wise in how they use it. And there is no better gift you can give to a child than that.

Avoiding Credit Card Debt Before it Sneaks up on You

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In this modern time where the economy has been such a challenge for everyday people like you and me to keep up, it’s easy to get into credit trouble when your credit bills begin to stack up. So, if you are in the position to just start learning the ropes of the world of credit cards, there are a lot of things you can do to avoid credit card debt before it sneaks up on you and keep your nose clean, as they say.

This is an outstanding goal for you if you are just getting your first credit card. If you know or talk to anyone who is battling tens of thousands of dollars of credit card debt, you know what a jail sentence it can be. Once that credit card debt gets that high, the time it will take even under the best of conditions to bring it down runs into the years if not decades. And for all that time, thousands of dollars of money go down the drain to credit interest that doesn’t buy you any food, tickets to the movies or new clothes. It just goes away with no value to you at all.

If you are new to the world of credit, getting a credit card is a good thing. But once you get one, keeping it under control is job one. You will find it amazingly easy to use a credit card once it comes. In fact, the retail world makes it difficult to conduct transactions any other way. You can pay for gas at the pump that way and even charge your groceries at the grocery store. And while all of these great uses for credit are helpful, you can end up with a whopper of a credit card bill at the end of the month. And if you don’t pay that bill off, that is the first step on a lifelong jail term in credit card debt jail.

There are some guidelines you should follow to both use credit responsibly but also to keep building your credit rating which has a real value to you. Remember that what the credit card companies don’t tell you is that making a charge on a credit card is a loan. Even if you just charge ten bucks to go to the movies, you took out an unsecured loan to finance that movie ticket.

So once you start using a credit card, keep in mind that you will be paying back everything you run up on it. It is NOT free money. A good practice is to save every receipt every month and keep a running tally of what you have spent on credit. Not only can you use that to cross check your credit card, it keeps you honest because each time you add a charge to your credit card, you can update your tally so you know for certain that you will be able to pay it off when the bill comes.

Paying off the credit card each month is the number one best way to keep your credit problems under control. Now it isn’t a bad idea to let a little bit of the debt drift from month to month. This builds your credit history and credit rating which will pay you well down the road when you want to buy a larger purchase. But by staying on top of your credit and what is going onto your card, you will start out with the kind of habits that will lead to a life of good credit use without credit card jail. And that is a wonderful gift to give yourself early in life.

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