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How to Get out of Debt - the Ultimate Guide

Take a moment to congratulate yourself - American consumers are finally beginning to win the war against debt. We're paying more attention to our spending, we're learning how to get out of debt, how to pay off more of our bills, and we're borrowing less.

But despite this hopeful news, we still have an uphill battle when it comes to becoming completely debt- free and ultimately changing our spending behavior. Many consumers are still seeking debt solutions to help them get on track financially; maybe you're one of them.

Often it's high credit card balances with astronomical interest charges and fees that lead consumers to seek debt solutions. It's not uncommon for a cardholder to carry a balance of more than $10,000.

Out of 440,000 CareOne Debt Relief clients, the average amount of debt held per client seeking help is approximately $15,000 with an average of 6 creditors each.

Despite how overwhelming debt can seem - there is hope. You can learn how to get out of debt. We put together this guide to help you gain control of your finances, budget your expenses, and fight back against your debt, but if you need help along the way, call CareOne and get connected to a partner that can help you get out of debt once and for all.

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Getting started

Personal Finance 101

How to Make a Budget

Cutting Back on Expenses

Increasing Income - Making More Money

All about Debt

Good Debt vs. Bad Debt - Is There Such a Thing as Good Debt?

Should I Pay Off Debt or Invest in Savings?

What Is a Good Credit to Debt Ratio

Should you pay off credit cards or loans first?

How Does Repossession Work?

All About Credit Cards

Sneaky thing Credit Card Companies are doing to Trick You

Is it time to take action on Your Credit Card Debt?

Does It Matter If I Pay Credit Card Bills as Soon as I Receive Them?

How to Pay off High Interest Credit Cards

How to Consolidate Credit Cards

All about Debt Consolidation

What are the Options for Debt Consolidation?

How Debt Consolidation Works

Is a Debt Management Program Right for You?


Getting started

Review Your Debts

First, you have to know what you are dealing with. We suggest an easy way to get a big picture view of your debts is to write them down. Make a list of your debts by creditor name, amount owed, and interest rate. List them in the order of highest interest rate to lowest interest rate. Your list may look something like this:


Amount Owed

Interest Rate

The Best Department Store






A1 MasterCard



Mom & Dad



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Can you Get out of Debt on Your Own?

Many people stuck in the cycle of debt say they can tackle it on their own. But can you really? Is it just a matter of tightening your belt?

If you do earn enough income to pay your household expenses and debt payments, then you might be able to get out of debt yourself. But if you have already tried to create a realistic budget, put spending limits on yourself, and you have already tried to communicate with your credit card companies and not succeeded, you might need professional help.

A specialized debt relief company can help, especially if you are feeling overwhelmed and unsure about your next step. For example, experienced credit counselors may be able to negotiate with credit card companies to reduce interest rates and fees and create an affordable payment plan for your situation.

Many consumers choose to "go it alone" when it comes to paying off their debts, either because they assume it will be easy, or they're uncomfortable talking to someone about their financial situation.

If you don't have a lot of debt, paying it off yourself may be a good option. Realize that you'll need to create a monthly budget, complete with information on all your creditors and the payment amounts you'll make to each. What's most important is that you stick to that budget.

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What's the difference between Secured and Unsecured Debt?

Most people have a combination of secured and unsecured debt; when faced with financial hardship, understanding the difference is important.

Secured Debt

Secured debt is typically tied to assets such as your home and mortgage, and your car and car loan. In the event you stop making payments, lenders can foreclose on your house or repossess your car.

With secured debts, if you fall behind on payments, the lender has specific legal rights to take ownership of the asset that was used to back the loan or that was used as collateral for the debt. They can then sell it in order to place those funds toward the loan balance. If you default on a loan, the lender is still able to recover all, or most of the loan, through repossession or foreclosure. Additionally, you may be liable for the remaining balance owed on the debt after the asset has been repossessed and sold.

Unsecured Debt

Unsecured debt is not tied to assets and can include credit cards, medical bills and collection accounts.

Unsecured debts include accounts such as:

  • Credit cards

  • Department store cards

  • Medical bills

  • Legal fees

  • Student loans

  • Accounts in collections

If you fall behind on an unsecured debt, lenders can pursue collection activity and may even take legal action against you. Your account will also be charged with penalties, late fees, and possibly even legal fees for collection activities, which increase the total amount owed to the lender. In the event you default on the loan, the lender does not have collateral to recoup their losses. Many times, however, the lender will try to work out reasonable payment arrangements.

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Personal Finance 101

Living paycheck to paycheck is often a difficult way of getting through the month. No matter what your income level is, you may wish to consider the merits of implementing a household budget. In general, a realistic budget will help you control where you are spending your hard-earned dollars and allow you to make informed decisions on how to control your spending habits.

Remember, a successful budget always includes a line item for savings so you can achieve both your short- and long-term goals and attain financial independence.

If you're currently living beyond your means, a detailed budget can help you get back on track. Keep in mind that while you may think you can keep a tally in your head, it's important to have a written budget so you can keep close track of all your expenditures.

Check out our Budget Planner - an easy-to-use tool that enables you to crunch your numbers in a just a few clicks.

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How to Make a Budget

Knowing how to make a budget is the cornerstone of good financial health. It's a step-by-step planning process that puts you in control and allows you to better manage your finances. You'll know exactly where your money goes each month.

If you think budgeting means depriving yourself, think again! A budget is simply an organizational tool that helps you monitor your spending habits and knowing how to make a budget is indispensable for getting out of debt.

How to Start a Budget?

Some people prefer to use pencil and paper to create a budget, but you may find it easier to use our online budget worksheet.

Having your income and expense information handy will make completing the budget faster and easier.

Examining Your Expenses

There's no way to create a budget without first looking at where your money goes each month. This can be a daunting task, so it's a good idea to break it up into manageable pieces. First, examine your expenses over the past two or three months. The best way to do this is to look at your:

  • Checkbook register

  • Receipts

  • Statements

Second, sort your monthly expenses by category. If an expense is not monthly, be sure to convert it to a monthly expense. For example, if you pay insurance quarterly, divide your quarterly bill by three to get the monthly amount. To meet your specific household needs, you may need to add to or delete from the categories suggested below:

  • Cable or satellite

  • Car payment

  • Child care or support

  • Clothing

  • Credit card payments

  • Donations

  • Dining out

  • Education

  • Electric and/or gas

  • Entertainment

  • Gasoline and tolls

  • Groceries

  • Heating oil

  • Household products

  • Insurance

  • Internet service

  • Loan payments

  • Medical

  • Mortgage or rent

  • Pet care

  • Savings

  • Storage

  • Telephone

  • Trash removal

  • Water and sewage

Third, track your current expenses for one month. Use a notebook and write down every penny you spend over the next 30 days. If you buy a cup of coffee on your way to work, write it down. If you buy a candy bar for a late afternoon snack, write it down. This can be somewhat cumbersome, but you'll learn valuable information about where your money goes. You may not even realize how much money you're spending. You'll probably have ideas on how to reduce your spending just from looking at this information.

Understanding Your Income

Budgets not only include monthly expense information, they also include your monthly income. For the purposes of a budget, you should look at your take-home pay (net pay) instead of your actual salary (gross pay). If you get paid every other week, multiply your take home pay by 26 and divide by 12 to get a monthly amount. If you get paid every week, multiply your take home pay by 52 and divide by 12 to get a monthly amount. Sources of income include:

  • Salary and wages

  • Bonuses, tips, and commission

  • Child support and alimony

  • Interest and dividends

  • Social Security

  • Pensions and profit sharing

  • Rental income

  • Public assistance

  • Unemployment and disability

Dividing Up Your Money

While it's true that your budget is specific to your situation, it's useful to review basic guidelines for dividing up or allocating your money. Keep in mind that you should tailor your budget to fit your needs. However, many financial professionals agree that, in an average household budget, you might see income allocated as follows:

  • Housing, including insurance, 30% - 35%

  • Food, 15% - 20%

  • Transportation, including insurance, 10% - 20%

  • Debt, other than mortgage, 10%

  • Savings, 5% - 10%

  • Clothing, 5%

  • Health Care, 5%

  • Utilities, 5%

  • Other, 10% - 15%

Pay Yourself First

When allocating money in your budget, it's a good idea to remember to pay yourself first. This means that the savings portion of your budget should be fulfilled first.

You may want to include an emergency fund as part of your savings. Typically, an emergency fund is a readily accessible, interest-bearing account where you keep at least two or three months' living expenses.

It may not be a good idea to use a checking account for this type of savings, as you may be tempted to use the money for other things. Instead, you could use a savings account or short-term certificate of deposit.

Is It Working?

Keep in mind that the information above serves as a guideline to help you create your budget. Don't worry if you need to make changes. Your budget or personal financial plan should be used as a living document that reflects your current circumstances. If you run into difficulty sticking with your budget, take a look at your:


Did you set realistic, measurable goals? Remember that a goal is realistic if it can be achieved within a certain timeframe and is measurable if it can be quantified.


At the end of the month, are you out of cash? You may want to track your expenses over a 30-day period to see exactly where your money is going. In this way, you'll be able to see exactly where you can make changes. A cup of coffee purchased each day on the way to work, for example, will cost you $260.00 a year. Wouldn't you rather use that money to pay down your debt or start saving for a vacation?


Did you think creating a budget would solve your financial problems? It's true this is an important first step in creating financial health, but it's also important to maintain the budget and make it work for you. It's not a punishment; it's a way to have control and continued financial success.

Don't despair if it's somewhat difficult to set a budget at first. It will get easier with practice. Remember that creating and managing a budget plays a crucial part in your financial health.

What's Next?

You now have the basic information necessary to create your budget.

Add up your monthly income and add up your monthly expenses. If your income is greater than your expenses, you have a surplus that can be used to pay down existing debt or used for savings.

If your income is less than your expenses, you have a deficit and need to either cut expenses or find additional sources of income.

Remember, creating and managing a budget plays a crucial part in ensuring your financial health and seeing that all of your financial goals are met. Why wait any longer? Spend this weekend sorting through your financial records and begin planning how you'll spend your money.

The following is an example of what your budget may look like over a period of three months:






Ending Balance





$ 900.00



$ 600.00


$ 450.00


$ 300.00


$ 3,000.00




$ 1,200.00




$ 600.00



Debt Payments

$ 2,400.00




$ 1,000.00






Total $12,300.00

Total $(9,550.00)


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Cutting Back on Expenses

First, some general advice:

Cut your housing costs

If you're spending more than 28 percent of your gross monthly income on housing, it's a red flag that you're living beyond your means, which could put you at risk for foreclosure. If this sounds familiar, you may want to consider moving to a more affordable home or refinancing your mortgage to a lower fixed rate.

If your home has decreased in value over the past year, have it re-evaluated by a tax assessor. To determine how much house you can really afford, use our Home Financing Calculators.

In addition, look for opportunities to downsize in other areas, such as utilities,personal care, and communications.

Choose cash over credit

Credit cards have become so ubiquitous that it might seem like you can't function in the world without them. But according to several studies, shoppers who rely on plastic rarely know how much they spend until their statement arrives.

On the other hand, those who pay in cash are more aware of their spending and less likely to make impulse purchases.

To start breaking the credit cycle, plan to pay for everything in cash or with checks, and get a pre-paid credit card to use in case of emergencies. For more tips and advice, check out our Guide to Living Without Credit Cards .

Put a stop to emotional spending

Maybe it's a pressure to keep up with the Joneses or the feeling of euphoria you get when you're on a shopping spree, but either way, "retail therapy" adds up-and all too often, it leads to financial disaster.

Are your emotions causing you to spend more than you should? To find out, start paying close attention to the way you feel when you shop.

If you feel that you may be at risk, try to avoid situations that trigger these behaviors, and consider speaking with a therapist or other health professional.

Become a savvy shopper

Oftentimes, people can stop living beyond their means by learning how to bargain hunt, compare prices, and make some simple substitutions.

For example, clipping coupons, choosing generic instead of name brands, and buying in bulk could save you hundreds or even thousands of dollars a year.

Meanwhile, you can also stretch your dollar by taking a brown-bag lunch to work, carpooling, and seeking out free events, rather than taking pricey vacations.

Note: make sure to account for saving

All too often, consumers believe they can afford a certain lifestyle, but they haven't taken into account the amount they need to save.

According to experts, most Americans should be stashing away at least 10 to 15 percent of their income for retirement (to get a more accurate assessment of exactly how much you need to save, check out our Retirement and Estate Planning Guide).

In addition, they should have an emergency savings fund that would cover six to nine months of living expenses in the case of a layoff, medical crisis, or other unforeseen hardship. To find out more about your emergency financial preparedness, take our "Are You Prepared for a Financial Emergency?" Quiz.

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The Basics of Cutting Expenses

Now that you know where your money is (and where it's going), it's time to start making decisions about what matters most. Follow these tips to get going.

  • Prioritize your "wants." This is where you're going to be making the big cuts, so figure out what you care about and what you can live without.

  • Eliminate the unnecessary. Do you have a gym membership you never use, or every single premium cable channel? Cancel whatever you don't use regularly or don't get your money's worth from.

  • Consider lower-cost options for your "needs." Can you get Internet service cheaper from a different provider? Do you really need a cell phone and a home phone? Are the designer jeans really worth it? Assess, evaluate and make changes as necessary.

  • Be realistic. Be careful not to get so idealistic that you create a budget you can't live up to.

  • Be honest with yourself. Identify your spending habits and determine whether or not you need to exercise a little more self control.

  • Start a Spending Diary. Keep track of receipts and monitor cash in-flow and out-flow to make sure you stick to your budget.

Now that you've got the basics down, it's time to look at ways to cut costs elsewhere. Let's start with the obvious.

Cut Home Expenses

Home is where the heart is. It's also where a large percentage of your money goes. Follow these easy tips to reduce your spending.

  • Look at your living situation. If your rent/mortgage is 25% or more of your income, consider moving or getting a roommate.

  • D-I-Y. Whether it's fixing a broken toilet seat or replacing a light bulb, do it yourself. It's not hard, it's much cheaper and you'll have a great sense of accomplishment after the fact. And if you don't, well, at least you still have the money in your pocket!

  • Turn down the thermostat. Turn it off when you're out of the house; use fans instead.

  • Install a programmable thermostat. Set it to turn on about 15-30 minutes before you get home - the place will be comfortable, and so will you, knowing you didn't waste a whole day's worth of power.

  • Power off. Turn off the lights, TV, stereo, etc. when you're out of the house.

  • Put in lower-energy light bulbs. They last substantially longer while consuming much less energy.

  • Install a low-flow showerhead. You can drastically reduce your water expenditure by switching to a low-flow showerhead - helping the environment and your financial situation in one fell swoop.

  • Investigate your insulation. A poorly-insulated house is a huge energy waster. Heating and cooling your own house costs enough, let along the entire neighborhood! Inspect your insulation and weather stripping regularly and keep it well maintained.

  • Bundle up. During colder months, put on sweater and a pair of socks, or get out the electric blanket instead of turning up the thermostat. Avoid turning up the heat unless outside temperatures dip to freezing or below.

  • Adjust your cell phone plan. Do you always go over your minutes? Find yourself paying to call during daylight hours? Either stick to your plan or get one that works for you.

  • Three-for-one. Often times, you can get a package deal on phone, Internet and cable service that comes out significantly less than purchasing the three separately. If all three of these items are on your "needs" list, look into packaging your services.

  • Get to know your fridge. Do a daily check to make sure and eat foods before they go bad.

  • Pass on paper. Use cloth napkins instead of paper to cut down on household spending.

  • Wait to wash. Don't run the washing machine or dishwasher until it's full. Period.

  • Wash in cold water. Washing your clothes in cold water is much more cost-efficient than washing in hot (and is less likely to shrink them or set stains).

  • Embrace the outdoors. On nice days, open a window and let Mother Nature handle your climate control.

  • Get more from your decor. Redecorate - using the things you already own. Reorganizing a room to change things up a bit can make a big difference (and you can't complain about the price).

Caring for your home is very important - so is caring for yourself.

Personal Maintenance

Taking care of yourself can get expensive before you know it. While you shouldn't deny yourself personal care items, it's important to prioritize your spending so you don't break the bank. Here are some simple ways to stretch your personal care budget.

  • Use the recommended amount. If you're like me, you not only like the pricier products, but you tend to over-use them, too. Follow directions for use - you'll typically need less than you think, which means you can last longer between purchases.

  • Cut down on dry cleaning. Hand wash, or use store-bought products for sweaters, etc. - save dry cleaning for the items that can't be cleaned any other way.

  • Pamper yourself. A few dollars will buy everything you need to give yourself a great manicure and pedicure - who said you have to pay to be pampered?

  • Get your hair cut at a teaching salon. These stylists typically are pursuing "hair higher education," so it's a great deal. It's almost laughably less expensive than a salon, and pretty much risk free, since the instructors are on hand to take over if the student doesn't get it right.

  • Prioritize your products. Some items, like facial cleansers, moisturizers and make-up, are worth splurging on (a little). Others - hair spray, soap, cotton swabs - not so much so. Pick and choose, and cut back where you can.

  • Do unto others. Need a massage? Instead of paying $60 plus tip, have a friend come over and trade off giving each other back rubs. It's more fun and the price is definitely right.

  • Body in bulk. Buying bath products (shampoo, conditioner, body wash, lotion, razor blades) in bulk can be a huge money saver. But don't go overboard - it's dangerously easy to overspend when buying in bulk. Sure, it'll last you longer, but it might also break your budget for the month if you're not careful.

Now that your personal care budget is under control, let's move on to a real problem area.

Save When Shopping

A week of good budgeting can easily be blown by a day's worth (or less) of impulse buying. When going shopping, whether for food or clothes or what have you, take a list and stick to it. It will take discipline, but mastering it will be vital to your budgeting success.

  • Plan ahead. Map out your menu for the week and use key ingredients over multiple days.

  • Set a shopping schedule. Treat grocery shopping like a bill. Allocate funds and do it on a specific schedule (like every two weeks). If you run out of something before your designated shopping day, deal with it. Living on cereal for a few days never hurt anybody.

  • Clip coupons. Sure, it's not particularly glamorous, but believe me, the savings add up!

  • Buy in bulk. Wholesale shopping is great for day-to-day items like toothpaste, deodorant, vitamins, etc.

  • Search for the sale. Wait to do your shopping when major sales are happening, or between seasons, for a much better deal.

  • Cut down on subscriptions. Do you really need all the stuff you're signed up for? Probably not. Anything you don't really look forward to getting and actually use, cancel.

  • Don't fall victim to discounts. Just because something is on sale doesn't mean you need it. If it's not on your list don't pick it up.

  • Skip the trends. Stick to classic styles that flatter your figure - they'll always be in style. Skinny jeans and spandex tights? Pass.

  • Think maintenance. Avoid "dry clean only" and other hard-to-care-for items.

  • Don't impulse-buy. When you go shopping, take a list and stick to it. Period.

  • Buy the off brand. It's cheaper and, typically, you can't tell the difference, particularly with things like condiments. C'mon, the off-brand mustard is just as good, I promise.

  • Embrace leftovers. Enough said.

  • Go on a diet. Talk about a great way to curb your food spending! Take advantage of the situation and shed those few extra pounds you've been worrying about since January.

  • Run your errands all at once. It saves time, gas and money. And with a list of things to do, you're less likely to meander through the stores picking up impulse-buy items.

  • Run errands on your lunch break. With less time to spend in the store, you'll be less likely to buy things that aren't on your list.

  • Cut down on day-to-day "on-a-whim" purchases. Do you really need that bottle of water and candy bar while you fill up your gas tank? Probably not. Think about it this way: saving just $2.50 a day adds up to almost $1,000 a year. That's much more appealing than a quick sugar fix, isn't it?

  • Shop around. Think you've found a great deal? Doesn't hurt to double check. Do your homework to make sure you're getting it for the best price.

  • Sleep on it. Before making a major purchase, give yourself 24 hours to think it over (or for your conscience to kick in).

  • Bring your lunch to work. Paying for lunch out everyday adds up more quickly than you'd think. Avoid the temptation by packing yourself a nice lunch, and use the extra time to take a break or run some errands.

  • Keep a Wish List. This is a great way to curb impulse buying. Want something you don't need? Put it on the list. When you've budgeted successfully, you can use the list to decide how best to spend extra cash.

  • Shop resale. You can find great deals on cool clothes at consignment and other resale shops. Check out what your local area has to offer - you may have to dig a little, but the deals you find will be worth the extra effort.

  • Order online. You can often find great deals on the Internet. Do some searching and see if you can't find a better deal buying over the Internet.

  • Don't do delivery. Craving pizza? Save at least $5 (and a good 20 minutes) by going to pick it up instead of having it delivered. Many delivery-focused restaurants will offer additional discounts for take-out orders, so don't just default to delivery next time you decide to order in.

Remember, it's all about moderation. You don't need to deprive yourself; you simply have to be responsible with your spending - especially when you're having fun.

On the Town

It's easy to get carried away when spending money on entertainment. Next time you're in the mood for a celebration, try one of these tricks to ramp up the fun without emptying your wallet.

  • Bring "Girls'/Guys' Night Out" in. Instead of going out to eat, invite friends to come to you - and have them each bring a dessert, appetizer or a bottle of something to share.

  • When you do go out, don't go overboard. Instead of dinner and drinks out, pick one and do the other at home or at a friend's place.

  • Go out for lunch instead of dinner. Most restaurants' menus are notably cheaper at lunch than at dinner, so hit up your favorite spots at lunch time and try to save enough to be able to take home some leftovers. Presto! Two meals in one.

  • Host a dinner party. Eating well is much cheaper when you don't have to pay for ambiance. Next time you want a fancy meal, make it yourself. Invite friends over to enjoy it with you, and maybe even bring dessert.

  • Fill up on water. Skipping a soda or glass of wine in favor of good old H20 when dining out will easily save you a few dollars. Not only is it the healthiest option, it's free!

  • Take leftovers home. You paid for the food (maybe even over-paid) so take it with you. It'll probably taste just as good tomorrow.

  • Going to the theater? Skip the snacks and enjoy the show. Cutting down on overpriced movie-theater snacks makes going to the movies a pretty affordable outing.

  • Don't over-indulge. Limit your drinks, skip dessert.

  • Dining out with a friend? Consider splitting an entrée.

  • Designate a driver. Cabs can get expensive; getting pulled over, even more so. Pick a designated driver and avoid both of these situations.

  • Go low key. Skip the martini bar downtown and hit up a neighborhood pub. You'll probably spend less (and cause less trouble) in a more laid back atmosphere.

  • Save it for a special occasion. Making going out on the town a special-occasion activity will not only protect your wallet, it will help you enjoy the nights you do head out all the more.

  • Get connected. Most communities (especially college towns) have all kinds of free events going on - art festivals, movies in the park, craft fairs - get a hold of a local community organization and find out what fun, free events are going on in your area.

  • Keep track of what you spend. It's easy to get carried away where entertainment spending is concerned. Failing to remember your night out doesn't put the money back in your wallet. It's all about self-control.

  • Opt for low-budget entertainment. Instead of hitting the club scene, get a group together to go bowling - it's dirt cheap and a lot of fun, especially with the right group of people.

  • Host a movie night. Skip the theater (and overpriced popcorn) and invite friends over for a movie marathon.

Remember that having fun is free - all you have to do is find it.

Cutting car expenses

Automotive expenses are easily one of the most costly (and unpredictable) spending areas. You can save money on gas and lessen the risk of unexpected car spending by following these easy steps.

  • Consider carpooling. With gas prices climbing, cutting down on driving can be a big money saver.

  • Rethink your commute. Do you live in an area with reliable public transportation? Examine your daily routine and look for ways to find ways to make it more efficient.

  • Rise and shine. Avoid sitting in traffic by getting to work earlier. Not only will you save time, your boss will be impressed by what he/she perceives to be your dedication to your job.

  • Keep your car well-maintained. Regular check-ups will help you avoid major, unexpected repairs.

  • Check your tire pressure regularly. Under-inflated tires can hurt your gas mileage. Just like the rest of your car, keep your tires well-maintained.

  • Sometimes, spend more the first time. Sounds counter-intuitive, doesn't it? It's not. If you buy the cheapo product to save cash (windshield wipers, for example), you'll likely end up paying more in the end, as you'll have to replace them sooner than you would had you bought the better-quality product to begin with. That's not to say you should buy the most expensive product in the store - the top brand will typically have lower-cost models as well, which is what you're looking for. The quality will be much better than the "discount" option, and the price is generally pretty reasonable.

  • Turn on the cruise control. On long car trips or when driving on the highway, use cruise control to regulate your gas expenditure and, ultimately, save you money.

  • Roll down your windows. When weather permits, turn off the A/C and enjoy the breeze.

  • Get what's coming to you. Call your insurance carrier and make sure you're getting all the discounts you're eligible for: safe driver, good student, etc.

  • Find yourself driving less? Tell your insurance company - you may be eligible for a discounted rate.

  • Become insurance savvy. Shop around and make sure you're aware of all your options. It will take some homework, but you could end up saving, big time.

  • Budget for repairs. We all know that car repair can get expensive, and quick. Start a car repair fund so when problems arise you can deal with them without increasing your debt.

  • Leave the keys at home. Do you live close enough to your job that walking or riding a bike would be a reasonable option? Give it a try! It's healthier, cheaper and less stressful than fighting traffic.

  • Break out the bucket. Skip the car wash and clean your car yourself.

  • Lighten up. Remove any heavy items you've got in the trunk of your car or on a roof rack. The extra weight cuts into your gas mileage - if you don't need it on this trip leave it at home.

  • Get the best deal on gas. Wholesale shopping isn't just for household goods and cleaning products. They typically offer members gas at discounted prices, too.

  • Maintain your speed. Stop-and-go driving is a major gas-guzzler (not to mention the damage it inflicts on your engine). Be patient and follow the flow of traffic. In this case, spending more time in the car will save you money in the long run.

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Saving on Groceries

For most families, the grocery bill is the biggest variable expense in their budget and provides the most opportunity to save money. With a little planning and effort, you can implement strategies that can help significantly trim your grocery bill each month. To maximize savings investigate the best places to shop, plan your shopping trip thoroughly, and utilize strategies to ensure you are paying the lowest possible price.

Where to Shop

In choosing where to shop, don't be lured into the store that offers the most pleasant shopping experience. Some stores will go so far as to install special lighting and pipe in mood music designed to relax you into lingering longer in the aisles in hopes you will purchase more than you intended. If your goal is to save money, you need to:

  • Use circulars - Review the Sunday paper for grocery store circulars to see what's on sale and where the best place is to stock up on items you use regularly. You can also access store's circulars on their websites.

  • Determine which store has the lowest prices - Record the prices of items you buy regularly in a pocketsize notebook to determine who consistently has the lowest prices.

  • Examine coupon policies - Find out which stores double (or triple) the face value of coupons. Most limit the value of coupons they multiply to $.50 or less, but a few will double up to $1.00.

  • Rethink the "Club" stores - Many times by combining coupons with sale prices, you can get better prices on things like paper products at a regular grocery store.

  • Solicit some "help" - There are websites now that can help you identify where the sales are each week. Some are free (www.couponmom.com), and some with more features have a nominal cost which may be offset by your savings ( www.grocerygame.com).

Planning your Shopping Trip

You should have a standard grocery list of staple items that you use on a regular basis. You can customize this list based on your store circular research showing what meat, seafood, or produce is on sale any given week.

  • Have a Menu Plan - Plan the next week's menu around bargains featured in the weekly store circular. Make sure you take an inventory of what you already have on hand when planning.

  • Stock up and Save - Stock up when stores have sales on "loss leaders" (items stores advertise and sell for less than their wholesale cost just to get you in the store). Just make sure they are products you use.

  • Look for Coupons - The Sunday paper usually contains savings of $10 to $20 on everyday products, and many stores double the face value of manufacturers' coupons.

  • Rain Checks - Many times there is no limit on the number of items you can buy with a rain check, so this not only gives you an opportunity to stock up later (and give you time to gather together coupons for the product in the meantime.)

  • Stick to Your List - Impulse purchases can quickly derail your savings plan, because you end up paying full price for the same item that may be 2 for 1 a week later.

  • Plan meals in advance and around sale items - Newspapers regularly print grocery store sale items. The key is to plan your meals and shopping list using the sale items. You'll find your money goes a lot further that way.

  • Shop only with a list - Shopping with a list can keep you from buying items you don't need, so you don't end up spending more money than you planned. You won't have to wonder whether or not you have a certain item at home because you'll know exactly what you need.

  • Buy generic brands - Maybe you've always eaten a certain brand of cereal. Take a look at the price next time you go to the grocery store. Then compare the price to a similar store-brand cereal. The store-brand packaging may not be as fancy as your usual brand, but you'll probably find it costs much less. Test it to make sure it tastes the same and start saving money right away. Most stores carry nearly everything in generics. Try as many generic brands as you can of the products you use. Most of the time, you can't really tell the difference, but your wallet can.

  • Buy in bulk - Take advantage of the bulk section of your grocery store where you can purchase items by the pound without paying for packaging. For example, you can often buy pet food, cereal, and candy this way. If you have sufficient storage in your kitchen and pantry, you might want to shop at one of the warehouse stores where you can purchase larger size items in larger quantities at a discounted price. Make sure you can use the amount you buy or it'll go to waste. Consider forming a shopping club with your friends if you can't use the larger quantities, but you want to benefit from the cheaper prices.

  • Use coupons - You can get coupons out of your local paper or you can search the Internet for coupons. The trick to using coupons is to only use the ones for items you normally buy. Don't pick up an item just because you have a coupon for it. You'll save even more money if you shop at grocery stores that offer double coupon days. Your $1 off coupon will be worth $2. Your friends probably clip coupons, too, and you may be able to trade coupons you don't use for coupons you do use.

  • Save and eat leftovers - Throwing away leftovers is like throwing away money. Why not save them and take them to work for lunch the next day? Or you could reheat them and have them for dinner the next night. It's a good idea to store your leftovers in reusable containers so you're not wasting money on aluminum foil or plastic wrap.

  • Take lunch to work - Eating out costs much more than eating at home. If you have to eat out, plan for it in your budget, and do it sparingly. To help you stick to your plan, take a bag lunch to work. It'll be easier to say no thank you when your co-worker invites you to the fast food restaurant down the street.

  • Avoid vending machines - Using a soda or snack food vending machine is a convenient way to get a snack, but you might want to think about the cost next time you slip those quarters in the slot. Instead of using the machines, you could spend less money purchasing the items ahead of time at the grocery store and taking them with you during the day.

To ensure that you are paying the lowest possible price, you should:

  • Monitor the sales - Many stores run sales for different categories on a 12 or 16 week cycle for paper, meat, frozen foods, etc., so if you understand how the store's cycles work you can stash coupons and use them to stock up on what you need when those items are at the lowest possible price.

  • Try Store Brands - Many store brands are made at the exact same place that the brand name is, just without the fancy label and expensive advertising campaign that drives up the price. Try the store brands, and if you can't tell the difference, why pay more?

  • Utilize coupons - Get a wallet sized coupon organizer that has dividers for different grocery categories. Organize it based on the order of aisles you visit.

  • Take advantage of promotions - sometimes stores will give you cash back at the register if you purchase a certain quantity of a particular item.

  • Look for Discounts - Look for items about to go past their sell by date, for example bananas. Then freeze and save for banana muffins or breads. Meat is another good example; cook it right away and incorporate into casseroles you can freeze for later use.

  • Calculate "per unit" costs - It used to be that choosing the largest package guaranteed getting the lowest price. It pays to check these days, because retailers bank on consumers still buying into this rule. Especially with items like paper goods, retailers often manipulate prices to make a smaller package actually the better buy.

Where to Find Coupons

Clipping coupons for brand name items you regularly use and combining them with sales, offers one of the greatest ways to cut your grocery bill. In fact, this strategy can usually get you prices lower than the store brand. Other than the Sunday paper, some ways to find coupons are:

  • Call 800 numbers - Look on packages of your favorite products for an 800 number to request coupons. Many manufacturers only send coupons to consumers upon request.

  • Check out samples - Try samples offered in the store and you'll often be offered a coupon to take home a package of the newest and greatest products.

  • Coupon sites - The Internet is full of sites where you can print out coupons, or even sites that will sell you coupons for products you know you will use.

  • Manufacturer's web sites - A product manufacturer's web site may offer coupons for brands you love.

  • Swap with friends - Maybe you have a baby and no dog, and your neighbor has a dog and no baby and you can swap coupons for diapers and dog food.

  • Look for deals online - Websites like ShoppingSmart.com and GroceryGuide.com track grocery store ads and match coupons nationwide.

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Increasing Income - Making More Money

Whether you need an additional source of income to make ends meet, would like to build up your savings in case of a job loss or pay cut, or just want to get ahead of the game, moonlighting might be the answer for you.

Taking on the extra responsibilities of a second job and pulling in some extra income isn't just for blue-collar workers juggling hourly jobs. According to a survey conducted by CareerBuilder.com , approximately 10% of the more than 4,400 participants surveyed have taken a second job to make ends meet. Data from the U.S. Department of Labor's Bureau of Labor Statistics indicates that 5.1% of Americans were working multiple jobs, according to BLR.com.

So, whether you're juggling two hourly jobs, or adding freelance or part-time work to your salaried career, make sure to play by the rules.

Taking on a Second Job

Getting a second job can be a chance to explore a new career and earn some extra money. There are plenty of benefits to working for someone else, and plenty of things to consider when you're looking for extra work, including:

  • Look for a part-time job. A part-time job can be a great way to earn extra money and gain experience in a new field if you're considering a career change. You may want to check and make sure your employer doesn't have a policy against moonlighting.

  • Pick up seasonal work. Consider working in retail during the holidays.

  • Take advantage of staff discounts. Your part-time job could offer some extra perks, and might even save you money in surprising ways.

  • Try asking your current employer for extra overtime. You may be able to earn some extra money without taking on another job.

  • If you have a stressful day job, find a low-stress part-time job.

Here are some tips to get you started in your career as a moonlighter:

  1. Know the rules. Understand company policies with your full-time employer on working additional jobs. Some organizations prohibit moonlighting. To learn about the rules and limitations you are required to follow, check your employee handbook or inquire with Human Resources.

  2. Be honest. If necessary, disclose to your manager and Human Resources that you are working an additional job outside of work hours. Make sure to clarify that your full-time job is your top priority. And, follow through with your commitment by meeting your deadlines and maintaining your performance level.

  3. Use your own time. Don't do any work for your second job during the work hours for your full-time job. It's best to establish different hours for anything related to your part-time work, including email correspondence and phone calls.

  4. Avoid conflicts of interest. Remember that non-compete form you signed when you started work? What about the non-disclosure paperwork? These legally-binding documents state that you won't work for a competitor, nor will you share proprietary company information. So, don't accept a job from a competitor, and if you're not sure, err on the side of caution and ask your employer before accepting. Otherwise, you run the risk of not only losing your job, but dealing with legal trouble, as well. Chances are you'll lose any work you had with the competitor as a result, too.

  5. Purchase your own office supplies. While this may seem like a minor infraction once or twice, it's bad practice to use any of your employer's supplies or resources for your personal use, which includes any part-time work. Of course this includes paperclips and staples, but also company-purchased equipment such as fax and copy machines, phones and mobile devices, along with company-provided computers, email accounts, or internet service.

  6. Know your limits. While freelancing, consulting, and picking up additional overtime hours can be a lucrative endeavor, working beyond the hours of your full-time employment can take its toll-especially if your salaried job exceeds 40 hours/week. Whether you set a goal based on how much you can realistically earn each week, or you set a limit to the hours you work, be sure to establish some boundaries. The last thing you want to do is perform both jobs poorly due to lack of sleep and poor concentration.

  7. Pay your taxes. Now that you've avoided any trouble with your employer, be sure you avoid any trouble with the IRS. Consult with a tax advisor about how to document and report your earnings from freelance and consulting work. You'll want to keep a record of your projects, invoices, paychecks, and expenses. Check out this IRS Small Business Owner and Self-Employed Tax Center link for a comprehensive resource filled with information, policies, and forms appropriate for your situation.

  8. Do something you enjoy. After all, you're spending what you'd otherwise consider leisure time to work another job. Why not do something you enjoy and are good at? Here are some websites that professionals can use to find jobs they enjoy in their field:

Keep your priorities straight. While earning some extra cash may be essential for paying your mortgage or other bills, above all, remember what your priorities are. Which job provides you with benefits such as health insurance and retirement savings? Which job provides the opportunity for career advancement? And which job reaps the highest earnings? Make sure that you don't sabotage your established full-time career for the sake of a second job. Chances are, that second job is easier to come by than your day job, so don't take it for granted.

Selling Your Stuff

If you don't have time to take on a second job, consider selling some of your extra stuff. Clean out your garage, attic, closet and basements, then hold a garage sale, take your things to flea markets or consignment shops, or sell your things on auction sites like eBay or Craigslist. Don't want to go it alone? Organize a group sale with some of your neighbors.

How to Use Craigslist

Craigslist is a virtual marketplace where users sell and buy items locally over the Internet. It is a great place to make extra cash selling your "stuff" or to save money by purchasing a used item. Unlike eBay, which allows people from all over the world to bid auction-style on an item until the auction ends, Craigslist acts like an electronic classified billboard that lists items locally at seller-determined prices. The norm is to arrange a pick-up or carry the item home after you've bought it. In some cases, shipping and handling can be arranged, but that's at the discretion of the seller. A post for selling or buying most items is free.

Here's what you need to know to be a successful seller and buyer on Craigslist:

Before posting your item

Prepare your item for sale - Do a thorough examination of your item. Make sure you are not including anything you don't intend to give to the seller. For example, if you're selling a dresser, check all drawers for small items. For electronics, disconnect chords and devices you don't want to include. If selling computer equipment, don't forget to delete files you don't want people to have. Make sure your item matches the description and the picture you include in your post. If you say "clean," make sure it's stain-free. Don't overpromise and underdeliver. The quickest way to kill a sale is to misrepresent your item.

The first impression a seller gets of the item is usually via photos posted on Craigslist. Make sure your photos are well lit. Crop the photo so the item is prominent in the frame. Color-correct your image if it displays a different hue than what's in your description. The available lighting when taking the picture (such as fluorescent bulbs) can give your item a green tinge. For best results, photograph your items outside in natural sunlight when possible. Upload more than one photo if it's important to show both the front and back of your item.

Be advised that there are items that Craigslist prohibits you from listing, such as firearms, alcohol and pets. Visit their prohibited items FAQ page for more information.

Research your item's cost and availability - Use Craigslist and eBay to search for an item similar to the one you are selling. This will give you a snapshot of the item's popularity and what prices are being listed by sellers. If you feel your item is antique or has some intrinsic value, consult an expert to help in pricing the item. How much you discount your price as compared to similar items listed might determine how fast you sell your item.

Write your item's description - There are four parts to your item's description: headline, item description, price, and photo. Potential buyers see your item's headline before seeing the picture or description, so it must be strong, engaging, and telling, especially if many similar items are listed. Go to the category in which your item will be listed. Notice on the page of headlines whether people are uppercasing their headlines. If not, consider uppercasing your headline to help your item stand out on the page.

Buyers use both the Craigslist search engine and Google to find listed items, so descriptive keywords of your item are very important. Think like somebody who might want to buy your item. What would you type into a search engine to find it? If appropriate, in your description, use words such as "like new," "comfortable," or "reconditioned." Make sure you are thorough yet brief. You don't want to overwhelm potential buyers with wordiness, but you don't want them showing up with a ton of questions.

Unlike eBay, Craigslist shoppers typically look at listings in their local area so that they can view the item in person before buying and pick it up without paying shipping and handling charges. Craigslist represents most metropolitan areas of the United States. If your area is not represented, use a location that is closest to where you are selling the item.

Posting your item

Using Craigslist - Once your item is in selling shape, and your headline, description, photo, and price are set, it's time to post the item. This is an easy process but you have a couple of choices to make. First, should you create a Craigslist account? Having an account will make your posting slightly easier to manage, edit and delete, but it is not a requirement to placing ads in the free categories. Craigslist also requires that you provide an email address for potential buyers to contact you, or that you use an anonymous email address that Craigslist will provide, and will then be sent by Craigslist into your email account. This allows more privacy in the beginning portion of your sale. However, you can provide your telephone number in the post if you want to field calls right away. It really is a matter of how comfortable you are displaying your phone number to potentially hundreds of readers.

There are rules that Craigslist wants sellers to follow. They include:

  • Posting the same ad to multiple locations is considered spamming, and is prohibited.

  • In your listing, do not link to offsite auctions like eBay.

  • You may post to one category and in one city, no more often than about every 48 hours.

For more information on Craigslist dos and don'ts, visit their FAQs, located on their website.

Communicating with buyers - Regardless of how you communicate with potential buyers, it is prudent to tell them you accept cash sales only. Never accept wire funds, as according to Craigslist, this is the best way to avoid online scams. In fact, Craigslist suggests that you deal only with people who are local and whom you can meet in person. Also, before you meet with buyers to show your item, try to agree on a price ahead of time to avoid haggling.

Typically, transactions made via Craigslist go smoothly; however, it is always better to be safe than sorry. Craigslist offers this advice to sellers and buyers:

When meeting someone for the first time, and if it's feasible, please remember to:

  • Meet in a public meeting place like a cafe.

  • Tell a friend or family member where you're going.

  • Take your cell phone along if you have one.

  • Consider having a friend accompany you.

  • Trust your instincts.

Finally, after completing your sale, don't forget to remove your item. It will stay active for 30 days, unless you delete it. If your item doesn't sell after 30 days, Craigslist will deactivate the listing and you will have to repost the item for sale.

How to Use eBay

Want to make some extra cash? Consider selling on eBay: the virtual marketplace of virtually everything. A recent random search uncovered the following items for sale:

  • A Bigfoot wall clock

  • A 1972 Ford Pinto

  • A bag of Jolly Ranchers

  • Pretty much ANYTHING

If you're looking to sell, eBay is where you'll find someone looking to buy. But before you jump into the eBay experience, consider these easy tips that will help you get more buck for your bang.

First of all, you'll notice the title of this article is "Getting Ready to Sell on eBay." For the actual selling part, eBay offers plenty of online help about getting an account, using PayPal, shipping, etc. There's some technical stuff, but they've broken it down into simple tips that even the most computer illiterate can follow. Visit http://pages.ebay.com/help/sell/sell-getstarted.html for a step-by-step guide.

For first-time sellers, eBay can seem a little overwhelming-especially if you've ever used the more bare-bones Craigslist to buy or sell. Here's an eBay overview: eBay is an international marketplace, not local. It's an auction (think competing bids), not a sale (although there is a "fixed price" option). Items are generally shipped (it's hard to pick up a purchase if it's 3000 miles away), and buyers and sellers alike have user names (like BobThePlumber or BooksAreBest34).

For a deeper dive into the layout of the eBay universe, go through the process of buying something yourself. Bidding, winning and paying is a great way to get your eBay sea legs by dipping in a toe. Until you're ready to sell, you can register as a guest and wander around. They even let you "watch" something: if you find an item for sale that you're interested in, just ask to watch it-you'll be notified by e-mail shortly before the sale is ending. Don't worry-there's no way to accidentally bid on anything.

One good place to wander is the Categories list on eBay's opening page. It will give you a sense of just how wide-ranging this online marketplace is. Under each topic, click on the "More" arrow to see all the sub-categories (and the sub-sub-categories-one of the biggest categories is "Collectibles" with over 40 sub-categories). The categories may also inspire additional ideas for things to sell.

After wandering, hone in on products similar to what you want to sell. For example, say you want to unload that rug you picked up at a garage sale that didn't fit in your hallway.

Search "Rugs" and note how the topic gets divided: by age, size, background color, price, shape, etc. Read some of the descriptions to see how people write their listings-this is where the real marketing gets done. When it comes to buying a rug, would you rather get a "small floor covering" or a "much-loved colorful antique area rug-think flying carpet"?

You can see that the best descriptions aren't boilerplate, but display a bit of the seller's personality. But above all else, when you're writing your listing, it's important to be absolutely honest. If a corner is frayed or there's a small stain, describe it. People are more willing to purchase from a seller who's up front about what she's selling. (We all know that if it sounds too good to be true, it probably is.)

Speaking of stains: clean up your items. You'll get more bidders and more money with a little TLC. Be sure to mention in your listing that what you're selling has been cleaned.

If you're selling something old/interesting/collectible, do a little research before you list it. Include its history, year, rareness-the more information you can include the better. In fact, information is a key selling point for everything on eBay. Details will go a long way in this market. Even if it's not a collectible, include data like where you bought it, when, whether or not it's been in a smoke-free/pet-free environment, dimensions, etc. Imagine the questions you'd ask and answer them all.

Also keep in mind that this is an online market. People are typing what they're looking for into the eBay search engine: "Ikea." "Turquoise." "1944." The more keywords you include in your listing, the more likely your item will be found.

You should also include in your listing details like whether or not you're willing to negotiate. If the buyer is local, are you willing to deliver? Do you have a "sell-by" date that's looming? These details will pique people's interest.

Most eBay listings feature a photo of the product for sale, so besides your tape measure you'll need a digital camera. Set up your item against a simple backdrop. Aim for natural light if possible to convey realistic color. Take shots from all angles. You'll only use a few in your listing, but interested buyers may request that you email more detailed shots.

Hopefully, after exploring a bit and reading these tips, you're ready to click on "Sell." And off you'll go-the opening "Start Selling" page has a "What's it worth?" field that will give you a better idea of average price, price range and number of listings. Then click on "Getting Started" and eBay will patiently walk you through everything, with plenty of detailed advice about listing and shipping items.

Now, once that rug has sold what about getting rid of that Bigfoot clock?

How to Have a Successful Garage Sale

Garage sales are making a comeback. Forget the stereotype of little old ladies selling dusty silverware and musty coats. These days, garage sales are a fun source of extra cash for you, one-of-a-kind treasures for your customers and environmental brownie points for everyone.

Hosting a successful sale takes a little bit of planning but it (literally) pays off. Here are a few things to keep in mind as you get ready for Garage Sale Day:

Gather the Goods

You can stockpile things to sell year-round. Whenever you find something around the house or under the Christmas tree that you don't need/want/use (or can't re-gift), toss it in your Garage Sale Box. That way it's ready and waiting for your next sale.

Advertising Advice

  • The world has gone digital and sale listings are following suit. You can still advertise in the local paper (especially if you want the attention of old-school customers), but your best bet is craigslist.org for your area.

  • Begin running your ad a few days before the sale to catch customers who plan their route ahead of time. Keep it up through the actual date of the sale for last-minute shoppers.

  • In your listing, include the date, time and place, and a brief description of your wares ("Selling a houseful of furniture including XYZ, plus plenty of smaller, good quality items like ABC. Priced to sell.")

Stellar Signage

  • Buy some brightly colored poster board and pens to make signs for major crossroads. Regular 8.5 by 11 paper will work for neighborhood telephone poles and coffee shop bulletin boards.

  • Don't get too wordy! Your bigger signs need to be read from a passing car, so you won't be able to list everything you're selling. Stick to "sale/date/time/address."

  • If you don't want to be bothered while you're setting up, be sure to include "No Early Birds, Please!" (You'll still get them, especially if you live in die-hard "garage saler" neighborhoods, but at least you'll dissuade a few early customers.)

Table Tally

  • Borrow (or even buy at other sales!) some card tables. Most people are lazy-they may like the thrill of the hunt, but they don't like bending over to find it. Make it easy for them by keeping things off the ground.

Pricing Preparation

  • The best preparation you can do is to price things ahead of time. This will allow you to think through your pricing calmly without 12 people badgering you. Sale day may be hectic, especially in the morning. You don't want to be making up prices on the fly.

  • Put prices on everything, neatly and clearly. (Use removable stickers. You can buy price stickers or just cut up old index cards.) For tablecloths/clothes/blankets/etc., write the price on an index card and attach it to the item with a safety pin (a smaller tag can get lost when people refold things).

  • When pricing, think about how badly you want to get rid of the item. If you don't want to lug it back into the house, make sure it's priced to sell. But if it's worth more, consider pricing it a little high-that way, your customer can make you a lower offer, you can politely haggle, and you'll still end up with what you think the item is worth. (And they'll think they've gotten a bargain.)

  • For smaller items, price in multiples of 25 cents. The same goes for big items-no $17 or $56 price tags. Unless you're Rain Man or really like using calculators, you'll go crazy adding up the figures-make it easy on yourself.

  • Have a clearly marked "Free Box" for items that aren't worth much but are too good to throw away (at least until the sale's over). A Free Box will make people stay awhile (or feel guilty for taking the free stuff so they'll buy something!).

Helping Hands

  • If you can, get your friends and family involved. Having several people setting up helps it go faster.

  • Ask your neighbors, friends, family and co-workers to join you. The bigger the sale, the more customers you'll attract, and the fatter your wallet will be at the end of the day. Plus, a multi-family sale is a great way to meet your neighbors and turn a garage sale into a block party.

Presentation Panache

  • Keep small things at the front of the table and big things at the back. Make sure everything is relatively clean. Set up any tables, beds and dressers-don't just lean them in a corner. Rig up a bar or use a tree to hang clothes neatly. You'll sell more if everything is nicely arranged.

  • Throughout the sale, periodically neaten your wares. Excited garage salers can wreak havoc on your presentation. You'll need to rearrange when they've gone.

Money Matters

Get about $50-$75 worth of change and small bills ahead of time. A money belt is a great way to keep your cash safe and handy. Be prepared: people will buy a 25-cent item with a $20 bill and a $50 item with singles.

To Have on Hand

  • It's a good idea to provide your customers with an extension cord for testing that blender/TV/record player. You may have an honest face, but your customer will be much more likely to seal the deal if they know everything is in working condition.

  • Have some grocery bags and old newspaper handy for wrapping breakables. Sometimes customers will load up if they know there's a way to get it all home.

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All about Debt

Good Debt vs. Bad Debt - Is There Such a Thing as Good Debt?

Your long-term financial profile relies on a mix of both secured and unsecured debt used wisely, so it is in your best interest to have a mix of both.

Good debt. The purchase of your home through a mortgage is an example of good debt. In theory (not necessarily the case in today's real estate market), your home is considered an investment, the opportunity to build wealth, as historically homes increase in value. Therefore, your home would be considered "good" debt.

Bad debt. Bad debts are those that come from items that depreciate in value after you buy them. These debts are often created through the misuse of credit cards. High interest rates, late and over-the-limit fees make many credit card purchases cost 10, 20 or even 30 times more than their original value.

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Should I Pay Off Debt or Invest in Savings?

Take a look at your savings account statements to see how much interest you're earning. Now take a look at your creditor's statements for the debts you have. If you're like most people, you're probably being charged more interest on your debts than you're earning on your savings.

When you're deciding between paying off debt or investing in savings, the best choice depends on the interest rate of each account. For example, if the interest rate on your debt is 13%, you would have to find a savings option with an interest rate equal to or greater than 13% to clearly make investing in savings a better choice. Don't forget that earnings on your savings are taxable, so depending on your tax bracket; your earnings rate is even lower.

So far it may sound as if paying off debt before investing in savings is the best option. Keep in mind, most financial experts recommend budgeting 5% - 10% of your income each month for savings. They also recommend having three to six months worth of living expenses in an emergency fund. So what should you do? Here are the options so far:

  • Pay off debt before investing in savings. This will look good on your credit profile, but you won't have a financial cushion if you need it.

  • Make the minimum payment required on your debt and create a savings account. This will give you a financial cushion, but it will prolong the life of the debt and may cost you more money in the long run.

  • Find a balance between paying off debt and investing in savings. Paying off debt now while working toward building a savings puts you in control of your money. You may want to pay slightly more than the minimum payment required on your debt and put the rest in savings.

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What Is a Good Credit to Debt Ratio?

Your Debt-to-Income Ratio is a crucial personal financial health indicator. Find out how to calculate it and what it means to you.

Debt-to-income ratio is the percentage of your income you use to pay your debts. Most banks and financial professionals agree that you should keep your debt-to-income ratio at less than 36 percent of your gross income. If you want to get a picture of how your situation measures up, there's a simple way to figure it out. Take your monthly gross income let's say two thousand dollars a month and multiply it by 36 percent:

($2000 x .36 = $720)

In this example, your debt payments shouldn't exceed $720 per month. It's a pretty simple formula, and it gives you a quick guideline as to how much of your income is considered a comfortable debt load.

What Does Your Ratio Mean?

Lenders use your debt-to-income ratio as an indicator of your ability to repay debt. If your ratio is low, you have a higher likelihood of repaying your debt. The higher your ratio, the more of a credit risk you become. If your debt-to-income ratio exceeds 36%, you may have trouble finding affordable credit. Keep in mind that many lenders may evaluate other circumstances and may still have loan products that will fit your personal situation.

Determine Your Debt-to-Income Ratio

Take a few minutes to determine your own debt-to-income ratio. You may need several of your recent pay stubs to determine your average monthly gross income. Remember, your gross income is your salary before any deductions or taxes are taken out.

If you are paid every other week, your monthly gross income is your gross income from one paycheck times 2. You will also need several of your recent credit card statements to see what you've been paying on average each month.

Finally, you will need to know what you pay for all of your other long-term recurring debt, like your mortgage payment, car payment, and other loan payments, such as school loans, home equity loans, and personal loans. You should not add in your household expenses, like utilities or grocery bills.

Now that you have the information you need, do the following:

  • Review your credit card statements and determine what amount you usually pay or the average amount you pay each month.

  • To that figure add your rent or mortgage, your car payments, and any other loan payments you are making.

  • Divide that total by your monthly gross income.

Here is an example to assist you:

Monthly debt-to-income ratio =

Monthly Payments


=.254 or 25.4%

Monthly Gross Income


Now You Try It

Here is a simple worksheet you can use to enter your own monthly information. Sum up your expenses, enter your monthly gross income, and then divide the total debt by gross income to arrive at your debt-to-income ratio.

Monthly Rent or Mortgage $ __________
Monthly Car Payments + $ __________
Monthly Other Loan Payments + $ __________
Monthly Credit Card Payments + $ __________
Total Debt = $ __________ (A)
Monthly Gross Income $ __________ (B)
Calculate Ratio (A / B) = __________ %

What Do You Do If Your Ratio Is Too High?

To improve your debt-to-income ratio, you have two options:

  • Increase your income

  • Lower your expenses

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Should you pay off credit cards or loans first?

Revolving vs. Installment Accounts

After you look at the interest rates on your debts, it's a good idea to look at the type of debt you're carrying. Revolving accounts, like credit cards, can be more difficult to manage because you can continue to add more debt while the payments can go on indefinitely. Installment accounts, like most personal loans, have a fixed payment amount for a fixed length of time. Typically, it's a good idea to focus on paying off revolving accounts first.

If there's no added fee for paying off your installment loans early, you may want to focus on them next. If you'll be charged a prepayment penalty, or if you'd prefer to stick with the original payment plan, this is a good time to invest in savings. If you have home equity debt, it may be wise to continue carrying this debt once it's tax deductible.

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How Does Repossession Work?

Are you concerned that your car or other personal property is in danger of being repossessed? For many people, those fears are well-founded. A report from the Better Business Bureau reveals that about 1.7 million vehicles were expected to be repossessed in a year's time. On top of that, a recent New York Daily News article states that over one million homes may face foreclosure in 2010.

If you're having difficulty making payments on your car, home, or other property, it's understandable to be concerned that the lender could come and take possession. But there are ways to prevent this from happening. If you are proactive in communicating with your lender, and you can work out a payment arrangement, you may be successful at keeping the repo man away.

Here are four steps you can take now to help avoid having your property repossessed.

1. Proactively call the lender

As soon as you realize that you will have problems paying your monthly payment, contact your lender, even if you're not behind on payments yet. That way, when your payment is slow to be received, the lender will understand that it's due to a legitimate hardship.

When creditors know that you've been diligent in contacting them, they may be more willing to work out a payment plan instead of repossessing your property.

2. Refinance your loan

If your payments are high, but you've been able to make them in a timely manner, try to refinance your loan. Interest rates are the lowest they've been in a very long time, so refinancing may allow you to have a lower payment.

Refinancing may also give you a chance to extend the length of the loan, which could also lower your monthly payments. You may end up paying more interest overall, but the lower payment requirement may be more manageable, and could help you avoid a repossession.

If the concern is with your mortgage, contact your present lending institution to see if they'd be willing to change the terms of your loan or assist you with refinancing your mortgage. If these are not options with your current lender, contact a credit union or local bank to inquire if they can help you.

If your home is in danger of being foreclosed, check to see if you're eligible for the Home Affordable Modification Program (HAMP). This plan gives borrowers whose mortgage is owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance to a lower interest rate.

3. Ask to skip a payment

In a recent Bankrate article, lenders stated that the most common method of help they offer their borrowers who are having trouble making their monthly payment is to allow them to skip a payment. Then, they simply add the skipped payment to the end of the loan. This can be a win-win situation, because the lenders still receive the total amount owed, while borrowers receive temporary relief as they work through their financial troubles.

Or if you've been able to make partial payments on your loan each month, but you still seem to be a payment or two behind, ask your lender if you can skip your obligation for one month. Be sure to ask your creditor for this assistance well before the payment is due. If the lender agrees to the option of missing a payment, be sure to get this change in writing. Note that the skipped payment may be reported to credit bureaus.

4. Sell your property

When monthly payments are truly a burden, it may be a smart choice to simply sell the property and downsize to an alternative you can comfortably afford.

Whether it's a car, boat or home, if you put the property up for sale yourself, you're likely to get more money for it than if it were repossessed and sold at an auction. And even if it were repossessed and sold, the lender might still come after you and demand payment of the "deficiency balance," which is the difference between the sales price and the remaining debt.

If you're upside down in the property, meaning you owe more for it than it's worth, consider using your savings or obtaining a smaller loan to help pay the difference between the sales price and your original loan balance. This may not be a very desirable option, but it would be better than having the lender repossess the property and then charge you for the deficiency balance after the fact.

If you're in danger of having your property repo'd, take action now. By communicating with your lender early, you may be able to come up with a plan that allows you to keep your property and get back on track with your payments.

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All About Credit Cards

The Dirty Dozen Credit Card Traps

Does the credit card industry profit mostly from interest rates?


But wait, there's more...

Credit cards are the most lucrative segment of banking, and not just because of the interest charges. It's a case of the hook - the low interest rates, the line - the high interest rates, and the sinker - the fees.
Everyone in the industry wants to sell you a credit card. Don't be fooled by the offers. Below we present a dirty dozen traps and tricks used by credit card peddlers to fill their pockets and empty yours. Remember: if you are struggling with credit card debt, there is help.  Contact CareOne to see if credit card consolidation is right for you.  

1. The 0% APR. - Not forever, and maybe not ever

Almost everyone gets credit card offers in the mail. "0% APR" it says in big letters on the envelope and at the top of the offer. It's a loss leader, but the only one who loses is you.

Most of the 0% Annual Percentage Rate (APR) offers are for balance transfers only, meaning that you can transfer the balance you owe on another credit card to the new card. Any new purchases or cash advances will have a much higher interest charge. Even if the 0% introductory offer includes purchases, the special rate expires quickly, usually after a few months.

But the real catch is that you might receive the discounted APR for an even shorter time than advertised, or not at all. Below is a screenshot of the terms for a surveyed bank MasterCard. The introductory APR is 0% for purchases. The time period is 5 months.

Variable APR

First of all, you will only get the 0% if the card issuer decides to give it to you, which you won't know until after you have applied. If your credit rating is favorable to them, you might (or might not) get the 0% APR, but even if you do, watch out for the sand traps.

Below is the small print for the bank card surveyed. Note that if your monthly payment is late one time (once is enough), the 0% APR jumps to 17.99% (or 12.99%, whichever they feel like charging you - do you feel lucky?). If you have two late payments, the APR hits the ceiling and becomes the "penalty" or "default" APR up to 29.99%.

Variable APR explained

2. Default APR

Credit card disclosure statements have something that is innocuously labeled the "default APR." Once upon a time the default APR was for subprime, bad credit boys and girls. But not anymore. Credit card providers are anxious to increase their take, and impose the default APR for minor transgressions. Below is the disclosure statement for a surveyed MasterCard. To date, the highest APR for any credit card is 35%.

Default APR Trap

Note that if your payment is received late twice in six consecutive months, you will be bumped up to the default APR, whose maximum is 35%. If you "default in the performance of any of your obligations in connection with any other account" or "fail to honor any other obligation" you have with the bank, you will pay the default APR. What could that mean? Pretty much anything the bank wants it to. And one more thing: You will stay in the penalty zone default APR for as long as the bank chooses to keep you there.

3. Fixing what ain't broke - Fixed vs. variable APRs

When you see the term "fixed APR" on a credit card offer, you might assume that, like a traditional home mortgage, the interest rate will remain unchanged for the life of the loan. But that is not true. A fixed APR on a credit card simply means that the creditor is legally obliged to notify you if it changes the APR (unless, of course, you are being penalized for violating the terms of the credit agreement - like paying late once). If the creditor changes the APR for reasons of its own, federal law says you must be given 15 days notice.

Variable APRs are interest rates that rise and fall according to the changes in a national index, usually the Wall Street Journal's survey of prime lending rates among U.S. banks.

Below are the terms for the credit cards available from a surveyed credit card. Two cards have fixed APRs and one has a variable rate. Note that the Platinum Visa's variable APR is reviewed and changed quarterly according to the Wall Street Journal prime rate.

Variable APR

Whether your credit card has a fixed or variable rate, the credit card provider can change the rate at its discretion. The terms for a bank Visa card states the facts clearly: "We reserve the right to unilaterally change the rates, fees, costs, and other terms at any time for any reason..."

Unannounced APR Changes

Therefore, be warned. Just because you have shopped around for a low APR, and have received a credit card with that APR, doesn't mean you will still have the same low interest rate three months from now, or even one month from now.

4. Truth or consequences - Will the real APR please stand up?

Below is the disclosure for another surveyed MasterCard. It is an excellent example of the credit industry shell game.

The APR box at the top presents a menu of eight possible rates that your card might have, depending on the lender's "review of your application and credit history." Under that is the balance transfer APR, the cash advance APR, and the delinquency APR.

On the next level down in the maze is the disclosure that APR rates are adjusted monthly. Not yearly, not every six months, not every quarter - every month.

Below that you find that there is an $85 annual fee if you apply for the prime rate + 0% APR; however, cards with the higher APRs do not have an annual fee.

Last but not least, you are informed that if your application for a Platinum Prime card is rejected, the lender may substitute another MasterCard with different rates and fees.

Fees and APR penalties

The general trend in credit card offers is to show multiple rates in such a way as to confuse the applicant and make comparison shopping among credit cards difficult.

5. The Late Fee - Going from carriage to pumpkin at midnight (or 5 p.m.)

As if doubling your APR was not enough punishment for a late payment on your credit card balance, banks have also sharply increased late fees and other penalty fees. Currently the highest fixed late payment fee for credit cards is $39. Below is a screenshot that shows the late fee and over-the-limit fee for the surveyed credit card. Note that the bank has the option of increasing your APR to the default if you are late (once) or over the limit (once).

Late fees and over the limit fees

Another interesting development is the imposing of a late fee based on a percentage of your balance. Below is the late fee disclosure of a common Platinum card. If you were carrying a balance of $5,000, your late fee would be $149.50.

Late fees

What you won't find in the disclosure statements is this: Just because your payment is delivered by the due date does not mean it will be credited to your account on that date. The creditor will post the payment when it gets around to it, and some consumers have complained (on Internet blogs) that their payments were sent and received early, but the card issuer delayed posting for purposes of charging late fees.

Moral to the story: if you can send your payment even before you receive the credit card bill, do so. Better yet, post the payment online so that you have the payment date documented with a confirmation number.

6. Cash will cost you more - Cash advance fees and APRs

Need cash? No problem. You can obtain a cash advance on your credit card. Just remember that you will pay at the front and out the back. Frequently cash advance fees are 3 to 4% of the transaction amount. After searching the Internet, it seems that 5% is the highest fee currently charged for a credit card cash withdrawal. Take a look at the screenshot below of a surveyed bank's MasterCard 5% cash advance fee.

Cash advance fees

One more thing: Because the creditor wants to profit as much as possible from the loan, it will always apply your payments to the lower APR balances first (i.e., purchases and balance transfers will be paid off before cash advances), as noted in the illustration above.

7. Pay to play -- Membership is expensive

High income and low income credit card holders are equal in one way: When it comes to joining the club, it costs you more. The annual fees for premium and subprime credit cards are high. Also, credit cards for people with bad credit ratings have additional setup fees.

The most expensive credit card annual fee belongs to a bank's membership card, whose members belong to a (not so) secret, by-invitation-only group of high rollers who charge on the Black upwards of six figures a year. The annual fee is $2,500.

Annual fees

The screenshot below is an example of annual fees for those residing at the other end of the income scale. This bank's Visa card is for people with "damaged" credit ratings. Fees to open the credit card total $152, and the annual fees are $144.

Other hidden fees

For those in between the two extremes, there are cards that offer some kind of reward for frequent usage, such as airline miles or discounts at restaurants, hotels, or stores. These cards frequently have annual fees in the $50 to $150 range. Whether the annual reward is worth the annual fee should be something that you consider carefully.

8. Playing with your emotions - Charity affinity cards

We want to do something good for the world - cure cancer, save helpless animals from suffering and extinction, build houses for the needy... Enter the charity affinity card. Credit card providers make an agreement with a charity to use the charity's name on the card, in exchange for a donation to the charity. The question is how much is being donated to the charity? For some reason, many providers do not disclose the amount. Also, how soon the foundation gets its money is often not mentioned.

Are charity cards a trap? That's up to you to decide. They are a feel-good marketing technique used by creditors to lure more customers into their net. As long as you know that, and keep in mind that the charity will receive a very small amount of money from you, then charity cards are not a trap. You might consider this: If you can afford to make $12,000 of purchases in a year, you might be able to afford sending your favorite charity an $80 check directly, and cut out the fat and prosperous middle man (the credit card provider).

9. The one-two punch - Two-cycle balance computation

Most credit card providers calculate their finance charges according to the average of your daily balance during one month (adding new purchases and subtracting payments). But a number of card providers are using a two-cycle balance computation. This calculation method determines the interest fee from an average of two months. Your finance charges will be much higher than charges based on the average daily balance calculation if you do not pay off your credit card in full every month.

The screenshots below show the two-cycle balance method of finance charge calculation.

two-cycle balance computation two-cycle balance computation

10. Pay not to play - Inactivity fees

Some credit card providers will charge you if you do not use your card. Below are the fees associated with a surveyed Visa card, including a non-usage fee.

Non-usage fees


11. Other people's money - Foreign transaction fees

If you purchase something outside the United States, or get a foreign currency cash withdrawal from your credit card, the credit card provider charges a transaction fee. This fee is over and above the 1% currency exchange fee that Visa and MasterCard charge you. Banks have invented this fee and added it to the long list of extra charges simply because they can. There is no additional processing work done by the bank. The foreign transaction fee ranges from 1 to 3%, with a few exceptions. Capital One does not apply foreign transaction fees.

Below is the surveyed bank's disclosure for one of its Visa cards, which states the foreign transaction fee is 3% of the purchase amount.

Foreign transaction conversion fee


12. Forever is a very long time - Paying the minimum

The last trap of the dirty dozen is not obvious and you probably won't see it on a credit card disclosure statement. Very small payments on a loan mean you will spend a very long time paying back the loan. More than that, you will ultimately pay several times the amount you spent on purchases or cash advances because of the accumulated interest charges.

Most credit cards require a minimum payment of 2% of the balance, assuming you are not condemned to the default APR corner. The illustration below shows the minimum payment for a surveyed MasterCard.

Minimum payments

If the consumer makes the suggested extremely low minimum payment, it guarantees the creditor increased profits for a long period of time - years, maybe decades. It is to the credit card provider's advantage to keep you
indebted for as long as possible. Creditor wins; you lose.

Is there a happy ending?

First, here is a summary of the dirty dozen credit card traps:

  • The 0% APR is a marketing technique to gain new customers. It is temporary and often part of a bait and switch scheme in which you apply for the 0% APR credit card and are given a card with a much higher interest rate. Even if you do receive the 0% APR, the lender's strict terms and conditions increase the likelihood of you losing the rate before the introductory term expires.
  • The default APR is the lender's highest interest rate. An increasing number of good credit customers are being charged this penalty rate, at the whim of the creditor.
  • A fixed APR is a meaningless term. Credit card providers can change the interest they charge to lend you money at any time, for any reason. The fixed APR simply gives the consumer the right to be notified if the lender changes the interest rate for reasons other than those specified in the contract terms (i.e., any reason at all). A variable APR can also be changed at any time by the provider, but in addition it varies according to a national index, such as the Wall Street Journal's survey of prime interest rates among U.S. banks.
  • Listing several APRs on credit card offers is a technique to confuse customers and prevent them from comparison shopping. It also makes it easier for a credit card provider to defend itself against lawsuits, since its advertising does not make a specific promise or claim to provide a certain interest rate.
  • Late fees are much higher than they used to be (currently around $40 or a percentage of the loan balance), and are imposed much sooner than in the past (payment must be received before close of business on the due date). Late fees are just one of a raft of financial penalties that credit card providers are using to increase their profits
  • Borrowing cash via your credit card is much more expensive than making a purchase, in terms of a higher interest rate and a cash advance fee. The cash advance loan remains on your unpaid credit card balance the longest in order to maximize the creditor's interest rate profits.
  • Credit cards that have added value for the holder have annual fees, some of which are quite expensive. For the wealthy consumer, added value can mean exclusive concierge and personal shopper services; for the consumer with damaged credit it can mean obtaining and rebuilding access to credit. For those in between, added value can mean accumulated rewards such as free airline tickets. In all cases, the consumer should evaluate the annual cost of the card in relation to its value-added reward.
  • Charity affinity cards are frequently a deceptive marketing technique, designed to appeal to the consumer's heart in hopes she will forget to use her head. Suspiciously, many charity credit cards do not disclose the amount that is donated to the charity, and when they do, the percentage is infinitesimal.
  • Two-cycle balance computation is a method of computing finance charges that is more costlyd to the consumer than the average daily balance method. Because there is no specific number (as with an APR or a fee) listed in the credit card offer disclosures, it is easy to overlook this trap, which could be an expensive mistake for those who do not pay their credit card balances in full every month.
  • Some credit card providers charge non-usage or inactivity fees. Although this is not an issue for most credit card holders, since we use our credit cards daily, it is important to be aware of in certain cases. For example, you may be trying to improve your credit score by paying off a credit card and not using it.
  • Foreign transaction fees are another invention of credit card providers to diversify and increase their profit-making activities. Purchases and cash advances from foreign countries are charged a fee that is frequently 3% of the purchase price.
  • Setting the minimum monthly credit card payment at a very low percentage of the loan balance is a practice that seems to be friendly to the consumer. It is not. Making low payments increases the cost of the loan and lengthens the time needed to pay off that loan.

Whether the ending is happy or unhappy is up to you. Because the credit industry is not currently under strict regulation by state and federal laws, it is free to engage in usurious and perhaps unfair business practices. Comparison shopping for the best credit card is less meaningful now, because the majority of credit card providers are using the above-listed traps. The most important criteria to use when looking for a new credit card is to be aware of the pitfalls. Then you can use your knowledge to plan your finances wisely.

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Is it time to take action on Your Credit Card Debt?

Ten tough questions to ask to see if you are ready to make the commitment to getting out of credit card debt once and for all.

1. Am I fed up with the daily hassles of being in credit card debt?

If creditors are constantly calling and you're avoiding the phone or have cancelled it altogether, you can find relief in a legitimate credit card debt relief plan which can help stop creditors from calling as long as you stick to your new plan.

2. Can I afford not to get help with my credit card debt?

If you are constantly making payment arrangements, living from paycheck to paycheck, or on a constant routine of payday advances, your debt-to-income ratio is too high. Getting help paying credit card debt can relieve that financial pressure by introducing a realistic payment plan which takes into account all your expenses including paying off credit card debt.

3. Are my credit card debts ruining my relationships?

If you lie to family members about your payments and what you owe or have constant daily arguments about money, especially on payday, your family relationships are in jeopardy. Getting help with your credit card debt can alleviate these stressors by initiating a workable, realistic budget. Your family can become involved in earning additional income, budgeting, and learning how to avoid and eliminate credit card debt, too. Completing your program successfully can even bring you closer together.

4. Am I worried about my future because of my credit card debt now?

If you are under stress that you are not saving for your family's future, that you have no emergency cushion, or that you are setting a poor financial example for your family, getting credit card debt help can reverse that damage. Debt counselors evaluate your income and budget and put you on the right path to managing your money now for a more secure future.

5. Has my standard of living decreased because of my credit card debt?

We're not talking about reducing excessive shopping - we're talking about giving up kids' activities, delaying important utility bills to the point of disconnection, or ignoring or delaying necessary repairs to your house or car because of your credit card debt expenses. A credit card debt help plan, with your new budget and reasonable monthly payment, will improve your standard of living almost immediately.

6. Am I having emotional problems because I need help with credit card debt?

You may feel nervous, anxious, angry, and resentful with the never-ending cycle of payments and daily demands for money you don't have. But once you get help with credit card debt, you will be relieved at being able to afford your monthly payments and that your creditors support your plan for paying them off. You will feel empowered once you start to see balances go down quickly as you continue to make your monthly payment.

7. Am I willing to make a commitment to getting out of credit card debt?

Among those seeking help with credit card debt, average household credit debt balances tip $15,000 with six creditors each. Credit card debt help doesn't happen overnight and successfully completing a credit card debt help plan takes an average of five years for balances higher than $7,000. You'll need to work hard, adhere to timely monthly payments, and forgo extra shopping and entertainment. It is also highly recommended that you stop using credit cards during the entire duration of being on your plan.

8. Do I have the support of my family to get out of credit card debt?

If your spouse and family continue to spend or refuse to help in any way to increase income to get out of credit card debt, your success will be hampered significantly. Every member of your family needs to support you in sticking to the new household budget, increasing income if possible and making timely payments. Family meetings to discuss these changes can help ease the transition.

9. Am I so desperate for credit card debt help that I am considering bankruptcy?

There are a variety of alternative credit card debt help plans that can help you avoid bankruptcy. Look for a legitimate company with experience, which offers multiple solutions and no upfront fees before they objectively evaluate your budget, income, and credit card debt situation.

10. Am I willing to finally admit I need help with credit card debt?

Debt can spiral out of control, especially if you ignore it and keep spending. Don't let embarrassment or pride stop you from getting help. Legitimate credit card debt relief companies will assist you to better budget your money and will work with creditors to reduce or settle your debt.

Did you answer "yes" to any of these questions? Take a step in the right direction by looking into your options. This will allow you to make the best decision based on your specific circumstances and start you on the path to getting the help you need with credit card debt.

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Does It Matter If I Pay Credit Card Bills as Soon as I Receive Them, or Wait until the Due Date?

Pay early and pay less! You can save on monthly finance charges if you pay your bill before the grace period begins.

How quickly you can send in your credit card payment will affect your monthly interest charges. In some cases, sending a payment close to the due date almost doubles the monthly finance charge on your balance.

A Look at Finance Charges

Finance charges are the price you pay for using borrowed (the credit grantor's) money. The timing of when your payment reaches the credit card company can have a significant impact on the amount you pay in monthly finance charges.

Your credit card statement indicates the date your account closes each month and reflects any activity on the account as of that date. The greater the balance on the closing date, the more interest is charged on your account. In the period between the closing date and the due date, any credits (payments) and debits (charges) to the account are calculated, and the closing balance is adjusted. Finance charges are added to the balance, along with any fees you may have incurred, such as ATM fees or cash advance fees.

The time between the bill closing date and the due date on the account is referred to as the grace period. The standard grace period is 20 to 25 days. For example, if the bill closing date on your card is the 10th of the month and your payment is due on the 30th of the same month, the grace period is the 20 days between the 10th and the 30th. If you pay the entire balance by the due date, you won't have to pay additional interest for the charges you made during the month. But if you carry a balance on your credit card, there is no grace period and a finance charge is added as soon as the purchase is made.

Let's look at different examples to see how paying early in the credit card billing cycle reduces the amount of interest charged. The examples below use the Average Daily Balance method of balance computation. This calculation adds together each day's balance (with new charges added and payments subtracted on the day the transactions are posted) and divides the sum by the number of days in the billing period. Many credit card issuers use the average daily balance calculation. It is not the cheapest for the cardholder, but it's not the most expensive either.

Example 1. Payment made later in the billing cycle – Assume the previous balance is $500, with an Annual Percentage Rate (APR) of 18%, a monthly interest rate of 1.5%, and a daily periodic rate of .05%. The calendar shows the transactions and when they occur. Notice that the monthly payment ($400) is posted on the 29th and purchases are charged on the account on the 17th($30) and 25th ($300).








Previous Balance $500









Bill Closing Date

Grace Period






$30 Purchase Charged








$300 Purchase Charged




$400 Payment Posted

Due Date






When using the average daily balance computation, the total balance for the month equals the sum of the balances for each day of the billing cycle. Then the total balance is divided by the number of days in the billing cycle ((in this case, 30 days).

Note that the daily balances are calculated based on the series of days a balance is the same (in example 1, the balance is $500 from the 1st through the 16th). As a payment is received, or if another charge is incurred, a new calculation is performed to determine the subtotal balance for that series of days. In Example 1, the average daily balance calculations are:

Day Period

# of Days

Current Balance

Total Balance in Period
(b) ´ (c) = (d)




16 ´ $500 = $8,000



$500 + $30 = $530

8 ´ $530 = $4,240



$530 + $300 = $830

4 ´ $830 = $3,320



$830 + $400 = $430

2 ´ $430 = $860

Total Balance = $16,420      

Average Daily Balance

= Total of daily balances ¸ # of days in billing cycle
= $16,420 ¸ 30
= $547.33

Daily Periodic Rate
Interest Charge

               $547.33 x .0005* = .27

Monthly Interest

               .27 x 30 = $8.21

* To calculate the daily periodic rate, divide the Annual Percentage Rate by 365.

Example 2. Payment made early in the billing cycle – As in the example above, assume the previous balance is $500, with an APR of 18%, a monthly interest rate of 1.5%, and a daily periodic rate of .05%. Purchases are charged on the 17th ($30) and 25th ($300). Notice that the monthly payment ($400) is posted on the 9th, instead of on the 29th. By sending the payment early so it is posted prior to the bill closing date, the interest charged to the account is half that in Example 1.








Previous Balance $500








$400 Payment Posted

Bill Closing Date

Grace Period






$30 Purchase Charged








$300 Purchase Charged





Due Date






As explained in the previous example, the average daily balance is calculated as follows:

Day Period

# of Days

Current Balance

Total Balance in Period
(b) ´ (c) = (d)




8 ´ $500 = $4,000



$500 - $400 = $100

8 ´ $100 = $800



$100 + $30 = $130

8 ´ $130 = $1,040



$130 + $300 = $430

6 ´ $430 = $2,580

Total Balance = $8,420      

Average Daily Balance

= Total of daily balances ¸ # of days in billing cycle
= $8,420 ¸ 30
= $280.67

Daily Periodic Rate
Interest Charge

               $280.67 x .0005* = .14

Monthly Interest

               .14 x 30 = $4.21

* To calculate the daily periodic rate, divide the Annual Percentage Rate by 365.

Example 2 demonstrates the positive impact an early payment can have on the daily balances. The only difference between Example 1 and Example 2 is that Example 1's payment is made later in the billing cycle, leaving the opening balance of $500 on the account for a much longer period of time. When the daily balances are calculated, Example 1 has an average daily balance of $547.33, instead of only $280.67 for Example 2.

The sooner you can send in your payment, the lower your monthly finance charge will be. Keep in mind that you do not receive your credit card statement until after the closing date. In order to lower your monthly finance charge on purchases made within the billing period, you must send your payment before the bill closing date (and it must be posted before the closing date), which is before you receive the credit card bill.

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How to Pay off High Interest Credit Cards

The One Big Thing to Get Out of Credit Card Debt

The important part of all of these tactics is that you must pay more than the minimum payment. That is what helps you cut down debt much faster. Just paying the minimum monthly payment may keep you from accumulating late fees, but the debt you are carrying on the card is racking up interest daily, which can make it virtually impossible to eliminate the debt over time.

Even though your interest rate may be given as an annual percentage rate (APR), it is being charged daily at 1/365th of APR. So, that means that by the end of the month, your total debt will have grown by 1/12 of your APR. So, if you have 24% APR, your debt will grow by 2% each month.

Some cards have monthly minimums that are only 1 or 2%, so If you only make the minimum payment, your debt will never go down!

Now that you see the importance of paying more than the minimum payment, let's look at a few different strategies and find out the best way for you to get out of credit card debt.

Snowball, Avalanche or Shovel: Methods for Paying off Debt

So, you have multiple credit cards and each one has a different balance, interest rate and credit limit. While you'll need to pay at least the minimum on all your cards to avoid late fees, you'll want to concentrate on paying more than the minimum on one card at a time. Which credit card should you pay off first? There are three options, each with their own pros and cons.

Snowball- If you want to snowball paying off your debts, you'll start with whichever credit card has the lowest balance.

With feelings of anxiety and fear that accompany being in debt, it can be very important to keep a positive outlook as you go through digging yourself out. The snowball method allows you to completely eliminate one card's debt relatively quickly and give you a feeling of accomplishment.

However, paying off your debts from least to greatest could cause you to pay more in the long run. If your largest debt also has the largest interest rate, you'll end up paying a lot more over time in interest because that debt will get paid off last. For some people, though, being able to cross credit card debts off completely allows them to keep psychological momentum throughout the debt paying process.

Avalanche- To address one of the downfalls of the snowball method, you could avalanche your debt by paying off the card with the highest interest rate first.

By paying down a debt with a high interest rate, you can save a substantial amount of money in the long run. Interest is one of the primary reasons that debts take so long to pay off, so why not start with the debt that has the highest interest rate?

The only real downside to the avalanche method is that you have to be disciplined since you may not pay off this debt very quickly. It can be tempting to try to tackle a card with larger debt after paying down a portion of your high-interest credit card. But if you stop paying down the high-interest card, the debt will creep back up and undo all of the hard work you put in. So, if you decide to go this route, you'll want to set up a system to track your progress and let you see the accomplishments you are making since you may not have the quick gratification of the snowball method.

Shovel- If you have concerns about your credit score, you may consider the shovel method.

This method involves paying down credit cards with the lowest credit left. As you get closer and closer to carrying a balance that maxes out your credit card, it can hurt your credit score. Keeping cards from carrying a balance that is close to the maximum credit can help you avoid taking hits to your credit score.

This method is different than the other two because you may switch to paying down another card once you reduce the debt on one card but haven't fully paid it off. That's because your goal with this method is to try to back the balances on your credit cards away from the max credit line. Once you have reduced it to around half on one card, you could consider working the debt down on another card that is almost maxed out. This juggling act can be very difficult and you are still getting charged interest on the debts you haven't paid off completely, so it is even more important to carefully track your progress with this method.

Top things to remember

  • Putting the card away so you don't put additional charges on it

  • Paying more than the minimum amount due each month

  • Transferring the balance to one of your lower interest rate cards

  • Enrolling in a credit assistance program

  • Borrowing money from family or friends

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How to Consolidate Credit Cards

Debt Consolidation Loans and Debt Management Plans are two ways you can become debt-free even if you have already tried budgeting and paying down your cards on your own. If you need extra help, these options might work for you.

How to Consolidate Credit Cards with a Debt Consolidation Loan

Consolidating your debt is useful when you have several high-interest credit cards open. In a nutshell, you take out a loan in order to pay off the high-interest rate cards.

But isn't that kind of like borrowing from Peter to pay Paul? Remember, the point is to stop the high-interest rate cards from growing out of control. So in order to make a Debt Consolidation Loan effective, you would need to find a loan with a low interest rate.

Most of the time, those low-interest rate loans are only available to people who have good credit. If you've accumulated a lot of debt that you aren't able to pay off on your own, then it is likely that you don't have perfect credit and may not be qualified for a loan at all.

You can still get a loan with a reasonable interest rate, but you will likely have to secure it with property, such as your home. Secured loans of this kind are very risky - if you don't end up being able to pay off the new loan, the bank could seize your house. While you may be able to find an unsecured loan with bad credit, the bank or organization you get the loan from will have to charge you a lot of interest because you'll look like a risky investment.

One more thing to consider is whether you will be able to resist the urge to put more purchases on your credit cards once the new loan frees up their limits. It might be a good idea to cut the cards up so that you aren't tempted to do so.

Consolidating Credit Card Debt Through Balance Transfers

A credit card balance transfer may be a useful tool in conquering your credit card debt, especially if you can find a card with no transfer fees and an initial low interest rate. Many cards offer an introductory period of 0% interest, allowing you to pay down your balance without incurring a monthly finance charge.

With a balance transfer, you're usually able to combine all of your revolving debt - from both traditional credit cards to retail store cards - onto a new card. Visit one of the major credit bureau's websites (www.equifax.com, www.experian.com, www.transunion.com) to learn more about how opening a new credit card account may affect your credit, or Ask the CareOne Expert.

Again, be sure to read the fine print. While you can consolidate your credit card debt through a balance transfer, remember the credit card company's primary goal is to make money. If the card company is offering a 0% introductory interest rate, it's possible you'll be assessed other fees or that the interest rate will skyrocket once the trial period ends - which could put you even further into debt. Consumers who are most successful with consolidating their credit card debt through balance transfers determine how much they'll need to pay each month during the interest-free period in order to pay down as much of their balance as possible.

Everyone has different circumstances, so what do you do if a Debt Consolidation Loan or Budget Transfer is not the best choice for you? Debt Management Plans are another option that will work for a lot of people trying to consolidate their credit cards in order to get out of debt. Keep reading to learn more about Debt Management Plans.

How to Consolidate Credit Cards with a Debt Management Plan

An alternative to a Debt Consolidation Loan is a Debt Management Plan. Debt Management Plans may give you the same benefits of a Debt Consolidation Loan through a bank - one monthly payment and reduced interest rates - but work regardless of your current credit score.

Debt Management Plans works like this:

  1. You get in touch with a trusted debt relief agency. Always verify their BBB rating before signing up.

  2. You then talk to a debt relief organization who will guide you through the process

  3. The agency will negotiate on your behalf with your creditors for lower interest rates and waived late fees

  4. Remember, there are no upfront fees so you don't pay until they have finalized negotiations on your behalf. You will then make one payment each month through the debt relief agency and they will take care of disbursing the funds.

  5. The credit counselors will help you prepare to make your monthly payments and make sure the schedule for going debt-free is feasible for you

  6. Once you complete the Debt Management Program, you should be debt-free!

With a Debt Consolidation Loan, you are on your own, with Debt Management, you have a partner to help you achieve your goals and make sure that you get out of debt and stay out of debt.

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All about Debt Consolidation

What are the Options for Debt Consolidation?

Debt relief comes in many forms - credit counseling, debt consolidation loans, settlement and even bankruptcy. Each solution will help you get out of debt, but the long term impacts and fees can vary greatly. Understand the myth and reality behind your debt relief options.

Credit Counseling

Myth: All credit counseling programs are the same.

Reality: Unfortunately, there are people and companies out there that make a living taking advantage of people in financial trouble. Please be careful. Please do your homework - check around; ask questions. Beware of hidden fees. If a company requires you to make a payment to them (a payment that they'll keep) before they will make payment to your creditors - find another company. For more information, read the U.S. Federal Trade Commission article Fiscal Fitness: Choosing a Credit Counselor.

Myth: If I check with multiple Credit Counseling Agencies (CCAs), I may find one with a lower creditor payment than another.

Reality: The creditor benefits you will receive on a debt management program are standardized within the industry. Agencies providing the CareOne service, as industry leaders, work with thousands of creditors on your behalf, allowing efficient and accurate processing of your payments and benefits.

Myth: If a CCA is non-profit it must be reputable.

Reality: There are more than a thousand credit counseling agencies in the United States, having very different service levels, fee structures, and reputations. Find out if the service has member access by phone and online, electronic debt repayment processing, and 24/7 customer service. Also, check out your local Better Business Bureau (www.bbb.org) for complaints.

Debt Consolidation Loan

Myth: A debt consolidation loan is the best way for a homeowner to get out of debt.

Reality: For some homeowners the answer can be yes. But it will depend on several factors, such as the amount of equity in your home, the current interest rate on the mortgage, and the value of your property. However, if you are having trouble paying your credit card debt as it is, rolling it all together in with the security of your home could be a risk not worth taking.

Debt Settlement

Myth: Debt settlement is a good, new alternative to get out of debt.

Reality: If you still can't afford your reduced monthly payment with credit counseling then debt settlement may be an option. Like bankruptcy, debt settlement may have a lasting impact on your credit report, which will affect your ability to get credit at favorable interest rates. Fees for this service vary significantly from company to company, so do your homework. For the differences between debt consolidation and debt settlement, see the Wikipedia entry about debt settlement and the article Debt Consolidation Company vs. Debt Settlement Company .


Myth: Bankruptcy isn't such a bad alternative.

Reality: If you still can't afford your reduced monthly payment with credit counseling then bankruptcy may be an option. Bankruptcy will have a lasting impact on your credit report (10 years). Filing bankruptcy may also be the most expensive alternative - if you decide to buy a car or a house your interest rates could dramatically increase (more than double). Also, the 2005 bankruptcy reform law has made it more difficult to file for bankruptcy and there are stricter rules in the bankruptcy process. For more information about bankruptcy, see the U.S. Courts Bankruptcy Basics webpage and the American Bankruptcy Institute Overview of Bankruptcy.

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How Debt Consolidation Works

Debt consolidation works by combining your payments on unsecured debts owed to creditors into one monthly payment, with other benefits such as lower interest rates or a reduced overall debt, depending on the type of plan you choose. Different plans work in different ways, but the aim is to help you get out of debt as fast as possible. If you are thinking about debt consolidation, you don't have to wait to get help. Call CareOne today and get started.

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Why Should I Consider Debt Consolidation?

If you're at the point of wondering how debt consolidation works and whether it's an option for you, you're probably already struggling to meet payments on credit cards, personal loans, medical bills or other debts. You might be living paycheck to paycheck with no savings to draw on, borrowing from one source to pay off another, and possibly concealing your level of debt and expenditure from family and friends. You might even feel embarrassed, ashamed, or angry about finding yourself in debt. While it's understandable to feel a wide range of emotions; emotions don't get people out of financial difficulties, and neither does avoiding the problem. Taking action as soon as it's clear there's a problem saves stress in the long term, and makes it easier to find a solution to relieve debt before it gets further out of hand. Debt consolidation works for many people as a practical step toward that solution.

Some people can get out of debt on their own with careful budgeting and by using free money management tools such as these offered by CareOne. For others, it's time to seek professional help.

How Does Debt Consolidation Work for Someone Like Me?

There are two types of debt consolidation plans depending on your circumstances: a Debt Management Plan (DMP) or a Debt Settlement Plan (DSP). Both are designed to help you make affordable payments and reduce debts as quickly as possible, but each has its own pros and cons. Nobody can wave a magic wand and make your debts disappear overnight, and the process for either type of debt consolidation requires effort and commitment to your plan in order to emerge debt-free. However, avoiding the debt doesn't make it go away, and embarking on a proven strategy to tackle debt often leaves people feeling more empowered and relieved from the very first step.

Who qualifies for debt consolidation? To qualify a person must have at least $2,500 in unsecured debt, two or more accounts, and a source of income. Note that when we talk about debt consolidation, we don't mean a home equity loan or any other type of loan. That may be an option for some people, but we're referring to debt consolidation programs like a Debt Management Plan or Debt Settlement Plan, which do not require taking out a loan.

How Does Debt Consolidation Work with a Debt Management Plan?

A Debt Management Plan (or DMP) manages the amount of unsecured debt you owe to various creditors by rolling the debt into one monthly payment, according to an affordable amount you agree to pay.

The debt relief provider works with your creditors to obtain benefits on your behalf such as lower interest rates, lower monthly payments, and reduce or eliminate late fees or over the limit fees. You make one single payment each month to the DMP provider, and they distribute it to creditors. This option is the first choice for many people as it has less negative effect on credit ratings than a Debt Settlement Plan.

How Does Debt Consolidation Work with a Debt Settlement Plan?

A Debt Settlement Plan (or DSP) aims to settle your debts by negotiating a lower amount to pay back on the total sum you owe. For those who can't afford the payments on a Debt Management Plan, a DSP is a way to settle at least a percentage of the outstanding debt, and is an alternative to the drastic step of choosing bankruptcy.

With a DSP, you make monthly payments that you can afford to your debt settlement provider for deposit into an escrow account. Meanwhile, the provider negotiates with creditors for a lower settlement on the outstanding sums you owe. Once an agreement is reached, the deposited funds are paid to the creditors. This option has a negative impact on your credit rating, but helps you avoid bankruptcy.

Which Method of Debt Consolidation Works Best for Me?

These CareOne fact sheets on Debt Management Plans and Debt Settlement Plans provide more details on the pros and cons of each plan. Buyer beware: Debt relief companies that offer only one type of plan are naturally keen to promote that as a solution to anyone enquiring about how debt consolidation works, even though it may not be the best option for every person.

Therefore it's important to do your homework to explore which type of debt consolidation works most effectively for you and your family's circumstances. Or consult a company like CareOne that offers multiple plan options and can discuss and evaluate without bias which approach to debt consolidation works best for your personal situation.

To help you decide which option is right for you, read this blog outlining Questions You Should Ask Before Signing Up for a Debt Relief Plan .

What Support Can I Expect to Ensure Debt Consolidation Works for Me?

A reputable debt consolidation provider will provide advice and counseling without judgment, and their program may include money management tools and other resources to help you take control of your financial future. Community forums are helpful to receive practical and moral support from others who have overcome the challenge of debt, or who are currently tackling the same problems. Just knowing that others have been in the same boat and they're working through their debt or have a success story to tell makes a big difference. Experienced forum members also share tips, stories, and encouragement.

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Is a Debt Management Program Right for You?

Feeling overwhelmed by your debts? Having trouble making ends meet? Unable to get ahead of your credit card debts? A Debt Relief plan may be your solution to getting control of your finances.

Debt relief is referred to in many ways. For example, credit counseling, debt management and credit assistance are terms that are commonly used to refer to a repayment plan that helps you pay off unsecured debts. Unsecured debts include accounts such as:

  • Credit cards

  • Department store cards

  • Medical bills

  • Legal fees

  • Student loans

  • Accounts in collections

Find a Company You Trust

If you're struggling to meet the minimum payments on your unsecured debts, a debt relief plan may be for you. There are many companies that provide debt relief services so make sure you do business with a company you trust. You can check out different providers through the Better Business Bureau to see if there are any consumer complaints against the company with which you're considering doing business. It's also a good idea to comparison shop the debt relief programs offered by several companies. You want to make sure you are getting the best possible deal for your situation. See the Better Business Bureau's tipsheet on Choosing a Credit Counseling Agency.


Debt relief plans a debt help tool you if you're delinquent or having difficulty making your regular minimum payments and are designed to offer a good alternative to filing bankruptcy. Since creditors have a financial interest in recovering the money they've loaned, many are willing to provide benefits and make contributions to help fund the plans. These benefits typically take effect after you've made three timely and consecutive payments on the plan.

In working with debt relief plans, creditors may offer the following adjusted terms to help you get out of debt:

  • Lower interest rates

    • This is one of the most important benefits to help you get a handle on your debts. With a lower interest rate, more of your payment is applied to the principal of your debt, and your debt decreases faster.

  • Lower monthly payment

    • If you're having trouble meeting your regular minimum payments, this benefit helps you get a handle on your debts as you make consistent monthly payments. A consistent payment history, reflected on your credit report, is crucial in maintaining good credit.

  • Eliminate late and over limit fees

  • One monthly payment

    • This benefit makes it easier for you to keep on a regular payment schedule. Some plans automatically debit your bank account once a month and make payments to your creditors. You don't even have to write the checks for your bills.

In addition, the debt relief plan may include education on personal financial management. Topics usually covered range from being a smart consumer of credit products, wise budgeting, smart savings practices, and how to handle debt problems. The purpose is to provide information that helps you learn more about financial principles, how they apply to your situation, and ultimately how that might translate into your being able to manage your finances more successfully.


Debt relief plans are not intended as an easy way to get out of debt. Creditors will approve your participation in a debt relief plan if you are in need of assistance. It's important to understand that in exchange for the benefits they provide, your creditors:

  • Will have you place all your unsecured accounts on the plan

    • Creditors generally require this to ensure your commitment to reducing your debt to a manageable level.

  • Will not allow you to incur additional unsecured debt while on the plan

    • Creditors close your accounts to keep you from charging additional purchases or cash advances. If you feel you can't live without a credit card, you might consider getting a secured credit card or a debit card to use while you're on the plan. See the related articles about secured credit cards and debit cards in the CareOne Credit Knowledge Center Library. You may be able to obtain a secured loan for a home or car while you are on the plan. Lenders appear increasingly understanding about credit problems, and many have established loan programs that you can qualify for after you have been on a debt relief plan for a minimum required amount of time.

The Enrollment Process

The CareOne Credit Debt Relief Plan is one you may want to explore. The first step in the process is to provide personal information and complete a budget analysis to ensure this is the right program for you. Your creditor information is then entered, and a new monthly payment amount is calculated. If the payment plan works for your situation, all you do is sign a set of agreements that contain the detailed plan information. As soon as you sign your agreement, you'll be enrolled. Your creditors will receive a proposal asking them to confirm which benefits will be offered to you. Your creditors have the right to change the requested payment amount or decline participation in the program, but this doesn't happen very often. Remember, it may take three consecutive payments on the plan before your creditors apply benefits to your accounts.

When you're on the program, you'll receive monthly statements breaking down how your payments were disbursed to your creditors. You may also continue to receive statements from your creditors. It's important to review these every month to ensure your payments are credited appropriately, and you're reducing your debt as planned. As you pay off individual creditors, the money being paid to them is reallocated to your other creditors. Your monthly payment remains the same, and you'll be completely debt free in about five years.

Is it Right For You?

A Debt Relief plan is a good option if:

  • You can't pay more than the minimum amount due on your debts

  • Your account balances are increasing due to interest and other fees

  • You feel like you're falling further and further behind

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