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Cash and Carry
so you are not one of those people who make purchases with credit. do you feel you are better off? whoa nellie! let me tell you how it?s really not what it seems and frankly doesn?t make a difference in the scheme of things.
let?s first look at what we should consider the root cause of this situation. we have become a debt nation. we want what we want and we want it now. the day of saving and sacrificing for something we want appears to be a thing of the past and we have an entire overcharged nation to prove it. keeping up with the jones? has become getting it before the jones?. we feel we will always have time on our side to pay for our decisions and so what i have to make monthly payments 20%-30% more for an item over time, i?ve got what i want.
practically 95% of all businesses accept some type of credit or debt cards. visa, mastercard, discover and american express are not complaining. i know you?ve seen some business that stress cash or checks only, no credit or debit. there is a reason and you will soon learn why.
did you know that the credit card companies (visa, mastercard, discover, and american express) get a percentage of every transaction made with their card? every time a card is swiped, for the privilege of using a card with their logo those companies are compensated. now apart from that the bank that issued the card is hoping to make their money off your revolving (monthly payment) charges. they charge interest on the purchases you make, thus profits. i?m getting ahead of myself.
let us for the sake of this explanation assume you are purchasing a common item, a pair shoes. nothing fancy, just a normal pair of ?brand x? cross trainers. the estimate cost $50.00. the business owner of course did not purchase the shoes for $50.00; the price they set is based on what they want to receive in profit for selling the shoes. for this example let?s say it?s 10%. so now the price should be $45.00. so the business owner has determined for every pair of these shoes he needs to make $5.00 (profit) to pay for employees, insurance, rent, utilities, etc. thus the $50.00 price. the price is also determined to take into account the fact the merchant services or the company responsible for processing credit card payment receives a percentage of every transaction. that can be 1%-3%. now the price based on 3% is $52.00. now, a person who purchased the shoes with credit or debit actually is paying $50.44, all the other money is going for processing fees. here is the kicker. it doesn?t matter of you are paying with cash or credit the price is the same.
so here you are a person who doesn?t use credit and you are paying for those who do. does that seem fair? why don?t stores have prices based on how you are going to pay for the item? for instance, if you are purchasing the shoes with cash you pay $45.00 and if you are buying with credit or debit the price is $52.00. this may sound strange but it?s easy to do. when you go in a store there are prices marked but the prices are adjusted based on the profit the business expect to make. in fact, it?s done in some latin american countries. cash is less and credit is more. why? because the store owner can make the same profit from you paying in cash versus having to pay the merchant services company a percentage for processing the payment. you won?t get wal-mart or any other major corporation to admit this fact. the next time you frequent a sole-proprietor small business ask them and they will tell you.
is paying cash really an advantage? in fact, some business owners are upset that the merchant services are continually increasing their prices they charge for processing credit cards annually or semi-annually and the businesses have to increase the bottom-line prices of their items to make up the difference to both cash and credit customers. if you are one of those individuals who pay in cash there is one way to circumvent this growing trend. find a credit card that offers points or rewards based on purchases. assuming you will pay off the balance in full when the bill comes this can be very advantageous. you make your purchases as normal, pay off the balances and reap the benefits of the points or rewards. since it doesn?t make a difference in the price if you are paying with cash or credit, you may as well benefit.
kevin l. mallory, mba/a is creator/founder of the payers club.com. it is a webservice dedicated to support members and pay their personal debt. http://www.freeroller.net/mbs.cgi/mb169958
article source: http://ezinearticles.com/?expert=kevin_mallory
Credit Card Minimums Not Doubling, But Increase Might Still Hurt
in an effort to curb the nations growing credit card debt problem, federal banking regulators are now requiring credit card companies to raise the amount of their cardholders minimum monthly payment.
executives at debt shield, inc., a maryland-based debt settlement firm, say that the increased minimum monthly payments on credit card balances will most likely not double, as it is widely reported, but that the increase might push financially struggling cardholders into bankruptcy or bankruptcy alternatives, like debt settlement.
?while credit industry experts and the media claim that credit card companies are doubling their minimum monthly payments from 2% of the outstanding balance to 4%, the actual minimum payment increase is more complicated and less drastic for most cardholders,? explains mark baylis, president of debt shield. ?the new rules require credit card banks to set their minimum payments to cover all interest and fees plus 1% of the outstanding balance, which will result in significant increases for high-interest accounts.?
baylis said that a cardholder with $10,000 on a credit card at 18% annual percentage rate (1.5% monthly) pays $200 under the 2% minimum requirement. out of that $200 payment, $150 (1.5%) goes towards interest and only $50 (0.5%) goes towards the outstanding balance. under the new rule, the minimum payment will increase so that the amount applied to the outstanding balance in this example is at least $100 (1%), so the minimum monthly payment must increase by $50 (0.5%) to $250 (2.5%).
the average apr is currently just under 14% (1.17% monthly), but credit card companies increase the apr to 27% or higher if the cardholder makes one late payment. this means that the reality of the new rule will punish low- to medium-income families struggling with credit card debt more than high-income families who are able to avoid paying late. baylis said that even a small increase can have drastic consequences for families struggling to make the existing payments and manage inflation combined with stagnating income.
the mmp on a credit card debt with the above-average 18% apr will increase by $50 while the same $10,000 debt with a 27% penalty apr will increase by $75. also, the 27% apr charges $75 more in monthly interest than the 18% apr. baylis said that this clearly demonstrates the financially destructive power of high interest rates.
?the increased minimums will be good in the long term because it should encourage less debt,? baylis continued. ?but if the credit card companies want to help consumers, they need to stop punishing cardholders with outrageously high interest rates.?
john janney is president of the national financial awareness network, inc., a financial literacy company based in columbia, maryland, that offers educational products and services to debt relief agencies, their clients and the general public.
debt shield, inc: http://www.freeroller.net/mbs.cgi/mb998961
article source: http://ezinearticles.com/?expert=john_janney
Three Steps to Starting Your New Business With a Clean Credit Score
for many people, starting their own business is a personal dream. before fulfilling your personal dream, its necessary to get your personal finances in order. at this early stage youll be using your own personal finances to start your business and if you want to succeed you must approach your personal finances with a professional eye.
avoid funding start-up expenses via credit and running up huge credit card debt. instead you should apply for a business loan, which has the benefit of being a one-time loan with typically lower interest rates than a credit card. however, in order to get good terms on your loan, you will have to have your credit card debt in order first.
without an established business credit history, lenders will have to look to your personal credit to negotiate your terms. you dont want personal credit problems starting your business credit off on a bad foot.
three steps to starting your new business with a clean credit score
a clean credit score will help you get the low interest rates you need to start your business on solid financial ground.
step one. pay off your credit card debt.
once you know where your credit weaknesses lie, zero in on them to start improving your standing. your goal will be to completely eliminate all credit card debt. it may seem like an insurmountable task, but in reality, paying it off as fast as you can is actually easier and less expensive than paying it off over a period of many years.
first, start paying double the monthly minimum on the balance with the highest interest rate, while paying the minimum monthly due on everything else. by paying down that highest-interest balance, you will save yourself from potentially spending thousands extra in interest - and youll be done in half the time. once you have paid off that balance, move on to the one with the next highest interest, and so on down the line. eventually you will enjoy the freedom of zero credit card debt. in fact, if you find yourself having a hard time staying away from credit card purchases ? take them out of your wallet and bury them in your closet until you have improved your financial situation.
step two. check your credit report.
have you seen your credit report? you can get a copy of yours by visiting http://www.freecreditreport.com. look over it carefully to make sure there are no mistakes that could have negative effects on your credit and your interest rate.
if you find any mistakes, you may dispute them through the credit-reporting agency. the creditor then has 30 days in which to respond to your dispute. if they fail to respond within 30 days, the disputed information is expunged. if it is a particularly old debt, creditors may not even bother to respond. disputing credit report mistakes is definitely worth a try since you have nothing to lose but bad credit.
step three. pay bills on time.
your credit is not based solely on your ability to pay off your credit card debt. you must also demonstrate that you are responsible when paying your bills: utility bills, car payments, and rent for example. try to pay all of these on time and in full and it will reflect well on your credit report. if you have trouble remembering to pay your bills on time, try to keep them all in a highly visible place so you will have a constant reminder to pay them.
many utility bills may be paid online these days, so you can simply check with your utility companies to set up automatic payments. not only do you maintain good credit by paying on time, but you also avoid paying late fees, and saving money is always a wise financial move!
before you establish your own business, it is imperative that you begin with a clean slate: no debt, healthy credit, and responsible financial habits. when you have a good credit score to begin with, your business will have a stronger start and will be easier to run. good finances mean success. best of luck with your new business venture!
? 2005-2006 debtguru.com?. this article may be freely distributed as long as the signature file and active link are included.
michael g. peterson is the vice president of american credit foundation, an irs 501 (c)(3) non-profit consumer credit counseling organization that has assisted thousands of individuals and families with their financial situations through seminars, education, counseling services, and, debt management plans. for more information, and free consumer resources visit http://www.freeroller.net/mbs.cgi/mb899782
article source: http://ezinearticles.com/?expert=mike_peterson
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