The Checkbook System | Credit Card Debt Relief Secrets

The "Checkbook" Payment System

Some credit counselors happily promote the use of what's called the checkbook system. They have their clients record each paycheck they deposit into their account. Then he has them enter each credit card payment into their check register and deduct each one from the balance just as they would with a regular check. What's left is what the client has to live on for the month.

Didn't use a card for any purchases over the past year? Don't be shocked if the issuer suddenly charges you an annual membership fee. (even if the original application said "no annual fee")

Gold and platinum cards may have annual fees where a basic card doesn't. This is common practice as people are willing to pay for the prestige of carrying around an elite card.

If you don't need the benefits the fancier cards offer (and most people don't), stick with the plain old basic card. Also, forget those stupid sports team cards. They tend to charge very high fees and carry equally high interest rates. Ignore them.

If you hate annual fees, you could call customer service and tell them you intend to terminate the card due to their excessive annual fee - tell them you know that most new cards don't have annual fees and why should you pay one? If your payment history is good, they will most likely back down and cancel the fee.

Credit Card Interest Rate Calculations

There are three different schemes the issuers use to calculate your interest charges. The oldest and by far the best is ADJUSTED BALANCE. The most common one in use today is AVERAGE DAILY BALANCE and the one you want to steer clear of as it's the most expensive is the PREVIOUS BALANCE system.

Chances are you'll only be offered credit cards that use the average daily balance system but nonetheless you should keep an eye open for the others.

Credit counselors will sometimes arrange for their clients to be issued Visa or MasterCard debit cards that allow instant purchases using funds withdrawn from their checking accounts in much the same way a check is processed.

Since each purchase is immediately deducted from their checking account balance, it offers the convenience of a credit card with the limit equal to only what's in their checking account.

Two decades ago credit card issuers stayed away from consumers with less than perfect payment histories. But all that has changed. Today this is one of the hottest markets for card issuers. One friend went through a bankruptcy only to get several credit card offers a few weeks later.

Of course they weren't very good cards that had interest rates in excess of 22%. Two months later he bought a new house complete with a mortgage (at three points above the normal rates) Today it seems there is credit for everyone if they're willing to pay the higher rates.

Ever get a credit card statement that includes a flyer offering some desirable consumer item? As a general rule these offers aren't a good deal. They may offer a nice price but the shipping and handling charges (which are buried in the fine print) are often excessive. Credit card issuers love these offers.

How? They charge the catalog company that is actually selling the item a hefty charge just for including their flyer in your statement. The same is true of special free gifts "to reward your loyalty". Watch those shipping charges before you order.

Carefully avoid those new cards that charge a small transaction fee for each and every purchase you make whether or not you carry a balance. It's a new trend the industry is very excited about but one you should carefully steer clear of.

If you are forced to call a credit card bank to report that you cannot make the minimum payment that month, be very careful to ask one question. Most issuers will be flexible (at least for a while) but you must ask them exactly how they will be reporting your new arrangement to the credit bureaus.

If you can, try to negotiate an arrangement that will keep the new deal private at least for a few months. If your present financial mess is the result of a medical problem - say so as there are new laws in some states that may bar the issuer from disclosing your problems to any third party, including credit reporting agencies.

Stay away from credit repair outfits. Their ads promise the moon but deliver only bills. They might be of some service (if you're lucky enough to find an honest one) but if their promises sound too good to be true and they usually want a hefty fee up front, run - don't walk.

The more credit cards you have, the greater is the chance your credit record will contain a significant error so check it every six months if you have more than four or five cards.

If you've been denied credit, employment or insurance during the last sixty days, you can get a free copy of your credit record from the big three credit bureaus. Under the law the refusing corporation is required to send you a letter specifying which credit reporting bureau they got their information from. Keep that letter.