Gone are those days when one had to take either cash or traveler’s checks to spend money while on a vacation. Carrying a lot of cash abroad is not the safest thing to do. It’s also not a good idea to rely on traveler’s checks as using them can prove to be quite a hassle. It’s now a lot safer and simpler to spend money while on a vacation using your debit cards.

What are the benefits of using debit cards while on vacation?

Debit cards offer you a number of benefits, no matter whether you are in your home country or traveling on a foreign land. Given below are some of the benefits of using debit cards abroad:

Debit cards allow you the option of withdrawing local currency from an ATM.If your debit card is part of a network like Plus or Cirrus, it can be used in several countries.Debit cards cannot be stolen easily.Unlike credit cards, they help you keep track of your expenses and stay within budget. When you use debit cards, you’re using money from your own checking account. So, once you’ve spent all the money in your checking account, you cannot spend any further or go over the limit.

What should you remember while using debit cards abroad?

It’s quite simple and convenient to withdraw money from your local ATMs. But while you’re on a foreign land, you’ll be charged the following fees when you withdraw money from an ATM:

ATM Fees: When you are on a foreign land and use a foreign ATM to withdraw your money, you will be charged a fee, which can vary with location. Apart from this, your home bank will also charge you a fee for using a foreign ATM to withdraw money from your account.Currency conversion fees: When you withdraw money from a foreign ATM, you are getting the cash in local currency. Your bank will charge you a currency conversion fee for this type of transaction.

How do you protect your debit card while traveling abroad?

Using debit cards while traveling is a good option. But given the risk of theft and loss, you need to be careful while using them. Given below are some of the tips that can ensure safe usage of your debit cards while you’re on vacation:

Keep your PIN a secret: When it comes to safeguarding your debit card, the first thing that comes to mind is protecting the PIN. Do not ever share the PIN with anybody and be extra careful while using it at the ATM.Monitor your card activity: It’s important to keep an eye on your card activity even if it is not stolen. Check your balance regularly. Take advantage of online banking for this purpose. If you find anything unusual, inform your bank immediately.Keep your card in safe place: When you’re not using your debit card, keep it in safe place. When you go out of the hotel and you don’t wish to use the card for the that day, make sure you keep it your room safe. If there’s no such room safe, you can use the hotel’s safe and keep the card locked in there.Keep limited balance in account: It is advisable that you keep a limited amount of money in your checking account. Keeping a lot of balance is not safe as you may lose all the money if the card is stolen. You can keep most of your money in a savings account. When you need money in your checking account, you can always transfer the balance from savings account into the checking account.Don’t take out a lot of cash: When you’re traveling abroad, it’s easy to take out money using a debit card. You may think of withdrawing a lot money all at once so as to minimize the ATM and other fees. But, you shouldn’t withdraw too much of cash all at once; rather you should take out just as much money as you immediately need. It is safer to keep the money in your account, rather than carrying it with you all over the place.

A vacation can be fun, provided you take precaution to protect your money while traveling. Use your debit cards safely and wisely to make your trip a memorable one. Otherwise, your vacation may easily turn into a nightmare that’ll haunt you for the rest of your life.

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According to a recent study, credit card debt dropped nationwide by $93 billion in 2009. Though this is good news enough, one should know a hard fact. The industry experts are of the opinion that the charge-offs reached at its highest rate in the later part of the year.

The use of credit cards has been under scrutiny since the recession set in. After scrutiny it was found that 90% of the decrease in credit card debt was because of bad debt being charged-off. This write-down reached a record level in February, 2009. It reached to a level of 8.82%, which is 300 points higher than that of 2008. Thus, in reality the total decrease in debt is only $10 billion.

On an average, each American household has about $10,700 in credit card debt and 9 credit cards in total. According to the Federal Reserve Bank of Boston, about 56% of the consumers have been carrying unpaid balance on their credit cards in the last 12 months. Even the delinquency rate has increased. It had already crossed the 6% mark in February last year.

How to keep credit card debt under control

Customers can keep their credit card debt under control, provided they change their way of thinking and spending habits. Most of the people using their credit cards think that they are using their own money. However, this is not the fact. Credit cards are simply borrowed money, which one needs to return to the creditor. People should first learn to handle their credit cards responsibly. In addition, one should also be aware of the New Credit Card Act, 2010.

According to the New Credit Card Act, a creditor is required to serve a 45 days’ notice before any increase in interest rate or change in certain fees or terms of the card. Moreover, creditors cannot increase the interest rate within 12 months of having offered the card. However, there is no limit on the increase in interest rate. That is, the Rule does not mention by how much can the interest rate increase. Thus, it is better to avoid defaulting on payments.

Another thing that can considerably bring down U.S. credit card debt is rise in employment. People mostly default on their credit card payments due to unemployment. Only if people can get proper employment, they will have the required money to pay down their debt. Other than this, each and every person needs to save more money and spend less. It is advisable to build savings which can be used at the time of emergencies. A person should make a list of all the credit card accounts he has. One should not go for impulse buys.

Rather than using unsecured credit cards, it is better to use secured credit card or debit cards. Unlike credit cards, in secured credit cards and debit cards one has to deposit a specific amount of money before using it. Even if one fails to make payments on a secured credit card used for purchases, creditors can get back their money by withdrawing the amount deposited. So, if you have a secured card and you’re already in financial hardship, you’ll not have to shell out extra money to pay back your creditors.

If you have a bunch of high interest debt but have equity in your house, you might be able to create a do-it-yourself debt consolidation loan to refinance. Refinancing your house is a process of getting a new mortgage to replace the old one. If your house is worth substantially more than what you all on it, you may be able to get the second mortgage for significantly more than the first mortgage is paying off. Let’s say you own $100,000 on your house. If your house is worth $150,000, you could reasonably expect to get a loan for $120,000 to pay off the $100,000 mortgage. This would leave you with $20,000 in cash. Assuming your mortgage rate is 5% or 6%, $20,000 to pay off credit card debt at 29% might be a very wise financial move.

However, if you have substantial credit card debt you may have a difficult time qualifying for refinancing the first place. Still, it might not be a bad avenue to explore given the potential gains. When looking at a refinance you must consider mortgage insurance or PMI. mortgage insurance is an additional fee you pay on top of your mortgage payment that allows the bank to buy insurance in case you default. Mortgage insurance is usually only required when the bank feels a default would leave them in a poor financial situation with regards to the value of your house. So if the amount you owe on your house is close to its value, the bank will require mortgage insurance. That way if you stop paying and destroyed the house when they evict you, they are protected from a loss due to a lower selling price.

Normally mortgage insurance is required when you have less than 20% equity in your home. This means if you buy a home for $100,000, borrowing any more than $80,000 will result in a need to pay mortgage insurance. The mortgage insurance requirement may negate any benefit of consolidating high interest debt into your mortgage.

The refinance process is very similar to the process of getting a mortgage in the first place. It requires an appraisal, a credit check and approval by underwriting. Since the recent financial debacle there are a host of new rules related to refinancing. In general they are designed to prevent people from borrowing more against the house than it is actually worth. For example, you must own your house for at least six months before doing a refinance that involves taking cash out or valuing your house at a price higher than the original appraisal or the price you paid (whichever is lower). If you paid cash for your house, the waiting period is 12 months.

Another recent change is the need for multiple appraisals. If the appraisal for refinance shows that the value of the house has increased more than 10% of the original price, a secondary appraisal is usually required. This is done to lower the bank’s risk that an individual appraisal might come in higher than the actual value of the house. As mentioned before, if you have substantial credit card debt you may find it difficult to qualify for refinancing the first place. Banks will look at the amount of your monthly payment on your credit card and subtract that from the amount that they say you could afford to pay on your mortgage. Your credit report will also be impacted by the ratio of credit card debt to possible credit card debt. For example, if your credit card has a $10,000 limit and you owed $9500 this would probably hurt your credit rating. If you had a $100,000 limit, it is likely to make very little impact.

Debt consolidation through refinancing your mortgage can be very useful strategy to lower the amount of money you pay in interest on credit card and other expensive debt. It may not work for everyone, but is worth checking into particularly because interest rates are so low on mortgages right now. A word of caution. All mortgages are not equal. Some require significant expense in the form of closing fees. Make sure you understand the entire cost of a mortgage before attempting a refinance.

We’ve had a number of people asking how to decrease their credit limit. Obviously this isn’t what most people are trying to do. It took us awhile to understand why someone would want to do that. After all, most people want to increase their credit. If you have a low self control threshold, it may make sense to trim back your credit  just so you can’t spend more than you can afford to pay back. Another reason you might want to trim back your credit limit is because of the way it will affect your credit score. Lenders may view a tremendous amount of available credit as potential debt and may worry that you might max out your spending and get in over your head. For example, a mortgage lender may be hesitant to loan you money for a house if they see you have 10 credit cards with a total of $150,000 of credit available.

You may be better off in the long term by canceling a few of the credit cards with the worse terms in order to bring your credit limit down to a more manageable level. You can also call up your credit card company and ask them to lower the limit. They may try to talk you out of it, but most companies should be able to give you a lower limit if you ask. Generally it is better not to make these types of moves right before trying to get a mortgage or qualify for some other major loan. Credit scores can be lowered when you cancel several credit cards and a sudden change in your credit limit may also look suspicious or count against you in the credit score calculations. Decreasing your credit limit can be a very good strategy, but you must be careful not to generate any negative side effects–especially if you are expecting to buy a house or car on credit in the very near future.

Tags: credit card, credit limit, credit score

Modern life involves credit in many different shapes sizes and forms. There are credit cards, store charge cards, deferred payment plans for furniture, automobile payments, school loans and many other different forms of credit. Many of these different forms of credit charge absorber and we high interest rates. Unsecured loans have to charge high interest rates in order to make money. The lender has very few options if you stop paying. They charge a high interest rate to make up for the people who do stop paying.

A credit consolidation loan involves grouping a number of these high interest credit payments together and paying them off with a single low interest loan. To get the low interest rate usually requires some form of collateral. Usually this collateral ends up being your house. If you have equity in your home this is one of the easiest ways to do a credit consolidation loan. With a lower interest rate, your credit consolidation loan will allow you to make much higher payments on the principle. The more money you pay to principal each month, the faster you can get out of debt.

The danger with credit consolidation has to do with your financial restraint. If you do not change your spending habits, it won’t be long before you’re back in the same situation again, but even worse because you’re unlikely to be able to get another consolidation loan. If you can’t find another credit consolidation opportunity it’s likely to be at a much higher interest rate. Credit consolidation is a viable financial strategy, but only after you’ve solved your spending problem. Consolidation implemented before developing financial restraint is a recipe for disaster.