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C)                                   DEVELOP GOOD MONEY HABITS


You need good money management skills to reach your goals of becoming debt-free.  You must quickly develop the habit of always paying your bills on time.  Late fees will cause your balances to remain high.


Balance your payments throughout the month.  Many consumers have their bills due at the same time of the month.  Often, rent or mortgage payments, car payments and some credit card payments are due at the beginning of the month.  A good idea is to move your cycle date on your credit cards so that they become due the middle of the month or in the last third of the month.  This strategy permits you to spread your bill payments throughout the month and helps you to avoid making late payments.  It definitely will help your cash flow.


A simple, yet often ignored, habit is to monitor your bank statement.  Nearly half of all Americans do not reconcile their checkbooks and often ignore checking account statements.


Credit Card Penalties


Many major credit card issuers have recently increased their late payment penalties.  Some late penalties are as high as $35 per occurrence.  Additionally, credit card issuers have reduced or eliminated grace periods.  Ten years ago it was common to be granted a 5 to 15 day grace period if your payment did not arrive on the due date.  However, many creditors have eliminated this grace period.  This gives the consumer less time to get his or her payment in after the bill arrives.  If you are one day late with your payment then the penalty will kick in.  Some issuers even will penalize you if your payment arrives on the due date, but after the posting time.


Many credit card issuers also are levying over-the-limit fees for consumers whose balances exceed the credit line in their agreements.  Creditors have instituted fees on overseas transactions and balance transfers.  Some issuers charge a 1 to 3 percent transaction fee for purchases made out of the United States.  These fees are charged even though the card issuer does not do the conversion itself.  Mastercard or Visa actually charge the fees directly.  Some issuers charge transaction fees of 3 to 5 percent for balance transfers from other credit cards.  These fees often are included in fine print in the balance transfer offers sent to you in the mail.


Credit card issuers have increased their reliance on fees.  Credit card issuers impose these fees now because their income from finance charges has decreased.  Increased competition has driven down interest rates.  Increases in home prices and lower interest rates set by the Federal Reserve have made it easier for consumers to refinance their homes and include credit card balances in the refinanced loans.  Thus, many consumers have paid off their balances.  Additionally, many consumers are more willing to shop around for better interest rates.


Additionally, creditors often raise your interest rate if once you become late on your payments.  Some credit card issuers will raise interest rates to nearly 30%.  Many credit card issuers grant a one time courtesy and remove the late fee if you are a only few days late.  However, some credit card issuers refuse to grant any courtesy and will not remove late payment fees.


Some credit card issuers offer introductory interest rates that are very low.  These issuers, after the introductory period, raise the rates to a manageable percentage, usually under 15%.  However, late payments during the introductory period will cause the interest rates to skyrocket.  Some issuers increase the interest rate for a set period and then will reduce the rate if you pay on time.  However, many will simply increase the interest rate permanently.


Thus, it is important to make your payments on time every time and to carefully review your credit card policy agreements and statements.  You should also use your consumer power and shop around when applying for a card.  You do not have to accept the card issuers initial terms offer.  You can often negotiate a better interest rate for yourself.  You should remember that using a credit card is actually temporarily borrowing money from the credit card issuer.  Shop around for the best rate for this temporary loan.  Do not rely simply on the offers that you get in the mail.







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