Do You Still Want To Rolling Over Credit Cards?

A pocket full of plastic money gives one a feeling of success and security. Using your credit cards for purchases is so easy, choose what you want to buy and pay for it with a piece of plastic instead of cash: bought, done. That is fine as long as you keep your spending limited within your monthly income and pay the full amount of your accounts by the date due. Unfortunately, in many cases, there is not enough income to cover the payments. This starts many people to begin using two or three or even more credit cards, making payments by rolling money from one of them to another in order to survive.

Credit limits

Use of cards comes with a credit limit that you can buy for. This is set by the bank issuing it and is dependent on monthly income. Each bank has a different limit setting as well as some of the cards having budget payment facilities where as others do not offer this kind of service.

Acquiring a card is usually easy to get as long as you qualify financially. In fact, the banks are only too willing to give them to you so they can make some easy money. The bank charges on overdue card payments are high and it is not difficult for people to end up not meeting their commitment by the due date. Instead of being careful about their spending they run up their cards to the maximum. If you have surplus money rather put it into a savings account and gain interest.

Making minimum payments

If you only pay the minimum amount due on your credit card you are going to end up paying astronomical amounts of interest that compound monthly. Overall, it is far wiser to pay the full amount due as hen all you have to pay extra is the monthly charge for card usage.

Applying a sensible strategy to spending is the best way of making monthly purchases. A credit card is ideal for paying grocery shopping, or, for any other items needed for the household, or any other payments. The problems with plastic purchasing arise if you overstep buying your necessities and spend freely on expensive unnecessary luxury items.

Costs of living today have risen to such an extent that it is difficult to maintain the standards you are used to and which was the normal way of life in the past. Thrift has unfortunately had to enter our existence on a daily basis.

Worldwide there are many people now forced to live far beyond their means. This encourages rolling over of their credit cards in order to continue the existence of a lifestyle in the way they are accustomed to. This eventually is going to prove such a financial strain that many people will find they have to resort to downsizing their homes, cars, schools, and forms of entertainment expenditure in order to be able to survive. Otherwise, they will be without money, credit cards, and bankrupt.

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Some Warning For You – Beware of the Credit Trap

Our eldest daughter recently graduated from college (1 down – 3 to go). She headed West to take an internship that will assist her in obtaining some certifications that she needs. During her college years our mailbox was filled with Student Loan companies making sure that she knew that they were there for her – to lend her what she needed to complete her degree. Now that she has her degree – our mailbox is full of offers from credit card companies offering her the credit that “she needs” to get her life in full gear.

I have been shredding the offers as quick as they come into the house. And I have shared with her the trap that these companies are setting for her and her contemporaries. Last week instead of shredding the offers – I let them accumulate in a pile on my desk. We opened them and the first few sentences of each letter was quite eye-opening.

“You worked hard to achieve your degree and that hard work earned you our respect… “

“Congratulations on achieving your college degree. As you begin your professional life you may need to rely on credit to get you started… “

“Great job. Let us reward you with a great opportunity to assist you to build your credit rating… “

Here is the normal way that this ends up for our young adults. As the offers come in the recent graduate accepts a few of them – feeling great that their hard work has been recognized and with the noble objective to have the cards in case of an emergency. The card companies may tout credit limits in the $1500 to $2000 range – but the reality is that once the applications are submitted – unless the graduate has already achieved excellent earnings – most times they will be given a smaller limit – in the $500 range.

Once they have the cards the temptation to use them becomes almost impossible to overcome. Perhaps it’s a piece of clothing, or a night out with friends, or even the purchase of a gift for a loved one. The intent – as we all know – is always the same. “I will use the card to purchase this… and I will pay the balance off when the bill comes in”. Then when the bill comes in and the minimum payment is only $25 – most will pay the minimum because they have other cash flow needs that seem more important at that time. And this cycle repeats itself month after month.

The credit companies will start to offer increases in credit limits as time moves forward. As they see payments being made on time – that little limit of $500 – moves to $750 – then to $1000 – then to $1500. Move the clock ahead 5 years and these young adults can find themselves in $20,000 plus of credit card debt – paying minimum payments of $500 per month – and in reality making no dent in the principal balances. It is a cycle of financial paralysis.

My suggestion to you is that you share this with any young adults in your circles. Make sure they know what is at stake and why these companies are trying their best to get them into a revolving credit nightmare. Explain to these young adults the concept of “delayed gratification” – instead of what the credit companies are offering – “instant gratification”.

Just Another Option – Business Credit Cards Give Your Business The Advantage It Needs

There are a lot of business owners who want to accelerate the growth of their business, but it’s usually dependent upon having a little bit more ready money. With this, they would be able to advertise more, replace old or buy new equipment, increase their inventory in order to sell more items, etc.

Some business owners take matters into their own hands by funding these expenses from their personal stash. However, using personal credit cards for business ventures is a risky-business since you assume total liability. If your company, God forbid, is ever sued or goes under, you risk losing your personal possessions and the good credit rating that took you years to build.

Now what if there was a way to free up some of that needed money you are currently using to support your business, by matching some of your expenses with items your business is already buying on a regular basis? Well, there is and it is in the form of business credit cards.

In other words, if you dish out $500 cash each week on realty supplies to make repairs on your properties, but now instead you make those same purchases using business credit cards for just one month, that would temporarily free up $2000 cash from your usual operating budget.

Of course, you are responsible to pay the balances on any business credit cards you receive, but that would be over a period of time giving you enough occasion to make a profit from the $2000 utilized on the business credit cards before the first payment is due. Are you seeing how having business credit is to your advantage? Let’s go a little further.

Business credit cards are a pretty darn quick way to get resources for short-term needs and at the same time they can increase your business’s purchasing power. But it has to be used economically and not to go all out on spending sprees just because it is available.

Other advantages include:

• Business owners with a limited credit file or credit history can apply without providing the stringent requirements of traditional banks.

• It is much easier to make purchases online and make cash withdrawals from these credit lines.

• Bookkeeping becomes simplified with the use of monthly statements and year-end statements to track expenses and pay taxes.

• Unlike installment loans, business credit cards offer discounts and rewards that can be used toward air travel and the like.

• Business credit builds credit. By paying on time and paying more than the monthly minimum fee, incentivizes lenders to increase credit limits and lower interest rates.

Like with all credit, business credit does have certain qualifications for approval:

• 720 credit score
• No bankruptcies
• No foreclosures
• No late payments in the past 24 months
• Possession of a credit card with a $5k limit.

Building a good strong business credit report allows you to stop relying on your personal credit to support your business endeavors. It also helps you to qualify for future financing your company may need from traditional lenders.

You Should Know This – Paying Off Your Mortgage

Every homeowners dream is to be able to pay off their mortgage and live in a free and clear home. Many homeowners do not even think about paying off their home loans and think it is almost next to impossible for anyone to have a home without a mortgage. However, there are folks who do have goals and strive very hard to reach that goal of paying off their mortgage. Those homeowners who accomplish the hard task of having their mortgage paid off do deserve the bragging rights and it is an impressive goal and accomplishment. The very few and proud homeowners who do pay off their mortgage loans need to make sure that after making the final mortgage payment of their home, that the lien on the property has been released off the title to the property by their mortgage lender so in the event if they need to sell their property at any given time, there are not going to be any red tape. All FHA Loan programs require escrows for property taxes and homeowner’s insurance so once the mortgage loan has been paid off, the escrow requirements for your property taxes and insurance will be the sole responsibility of the homeowner.

Things You Must Know About Paying Off Your Mortgage Prior to Final Payoff

As you are nearing the finish line of paying off your mortgage, there are several things you must know about paying off your mortgage prior to your final mortgage payment due. One of the things you must do is to ask for a final payoff figure from your mortgage lender about 45 to 60 days before you last and final payment of your mortgage. Homeowners need to understand that mortgage borrowers pay their mortgage loan payments in arrears and because they are paying in arrears, homeowners may actually owe more mortgage balance then they think they owe. For example, if a homeowner has a mortgage payment that is due this month and they pay their payment now for this month, this month’s payment is covering the previous month’s principal and interest payment. The interest clock is always ticking, day or night. Interest is added on every minute of every day. If you are one of those homeowners that have been paying extra housing payments than the minimum monthly due, you will be surprised when it comes out that you owe substantially less than what you have thought you owe on it.

How Do You Pay Off Your Mortgage?

Homeowners with mortgages have a mortgage loan servicer who service their mortgage loan. The loan servicer’s responsibility and scope of their work is to make sure that the borrower’s accounting records, including escrows, are accurate and monthly statements gets sent out on time and record the payments made by borrowers are logged in correctly. When a homeowner asks for a payoff on a mortgage loan, the mortgage loan servicer is the agent processing the payoff statement to the homeowner or to the mortgage lender who is requesting a payoff on behalf of the borrower. Upon a payoff request by the borrower, the loan servicer needs to prepare the correct payoff figures and make sure that the payoff letter gets sent out to the borrower or borrower’s power of attorney within seven days of the payoff request. The loan servicer will state the date that the loan payoff will be good until and if that date passes, there will be additional daily mortgage interest that will accrue. There are fees and costs in paying off a mortgage. Besides the final principal and interest payment, borrowers will need to pay recording fees to the county recorder’s office for releasing the mortgage lien for the title of the property. The mortgage lender may also have additional fees and costs such as processing fees, wire transfer fees, unpaid fees, as well as late fees if applicable

Release of Escrows When You Pay Off Your Mortgage

There are other tasks required by the mortgage loan servicer when you pay off your mortgage. Most borrowers will have an escrow account with their loan servicing company. When you pay off your mortgage, the escrow account also needs to be closed out. One of the roles of the mortgage loan servicer is to escrow your property taxes and homeowner’s insurance and pay them when it was due. Since the loan servicer will no longer be servicing your mortgage loan, they will need to close out your escrow account and refund you any remaining funds that is held in your escrow account within 20 days of your loan payoff and need to zero out and close your escrow account. Make sure that you get confirmation of the closing out of your escrow account and check in with your homeowner’s insurance company and the county’s property tax division to make sure that they have the proper address where to mail you future insurance bills and property tax bills that is due. Get the proper due dates so you are not late and are not assessed a late payment fee or have the risk of your home being uninsured. Automatic online payment setups is a good way of making sure that your bills will get paid timely but make sure that you have sufficient funds in your bank accounts.

When Do You Get Free and Clear Title to Your Home

Many homeowners think that just because the loan servicer shows a statement with a zero balance on your mortgage that you own your home free and clear. This is not the case. You will only have free and clear title to your home when the county recorder’s office records the release request. This can take from a few days to several weeks. You officially own your home free and clear when you physically get a copy of the release that shows the recorded date as well as the identification doc number from the county recorder’s office. There are several ways that you can get possession of this release. You can request it to be mailed to you or you may have an option to pick it up at the county’s recorder’s office.

When you contact your homeowner’s insurance company to tell them that you have paid off your mortgage, make sure you tell the insurance company that the loan servicer is no longer the additional insured and have them remove their name off your homeowner’s insurance policy. Your homeowner’s insurance company may ask for a copy of the recorded release request as well as a copy of your deed.

Something You Should Know About Consumer Credit VS Capital Credit

There’s a BIG difference between CONSUMER CREDIT and CAPITAL CREDIT. And understanding this difference will help readers understand why American income has become so inequitably distributed, especially over the past four decades, and why the wealth gap between the few and the many, threatens to undermine American democracy.

Consumer credit on one hand, is easy to get. Fill out a few online forms and unless you have some real financial problems you’ll receive your very own, personalized, plastic credit card along with all the accompanying literature (lots of fine print) within days.

With consumer credit in hand you can buy anything from gas at the pump, to beer at the ballpark, or a college education (student loans sound familiar to anyone?). A consumer credit card company wants you to buy all kinds of things on credit (often at ridiculously high interest rates – formerly called usury), to pay later, while piling up a mountain of debt that will allow the lending institution to make you work for the rest of your days in order to pay off your debt to them.

In Contrast – Capital Credit…
On the other hand, capital credit allows you to purchase wealth producing capital assets (i.e. land, machinery, buildings, corporate stock), to pay back the loan at a reasonable rate until you own the asset outright, and are reaping the full financial benefits of owning wealth producing capital. Done right, the loan is paid back out of FUTURE EARNINGS (i.e. dividends) instead of the borrower’s own pocket.

Capital credit however, is much harder to get (try buying a house sometime) than consumer credit. Generally speaking, borrowers must be able to prove they don’t need the money (meaning they have ample collateral with which to back the loan) before the lending institution agrees to anything. The result is that most wealth producing capital assets that yield lucrative dividends to their owners are accessible ONLY to a small percentage of people – the 1% to 5% who can prove they don’t need the money.

Almost everyone else is effectively left out in the cold when it comes to accessing capital credit and owning wealth producing capital assets. This is the basic reason for the wealth gap that’s transformed America’s democracy into a 21st century American oligarchy.

Enter Kelso and Adler
Enter a gent named Louis O Kelso, who back in 1958 published a book entitled “The Capitalist Manifesto,” in which he (and co-author Mortimer Adler) suggested that every American citizen should have access to capital credit with which to purchase wealth producing capital assets at reasonable interest rates and in the process actively participate in (instead of being left out of) America’s highly productive free market economy.

Such a strategy according to Kelso and Adler, would democratize a free market economy. Such a strategy would maintain the private ownership essence of the free market while preventing the monopolistic tendencies that have historically undermined political democracy in laissez faire capitalist economies. In other words, it would save the free market from its own historical tendencies to self destruct.

By democratizing the free market (while creating lots of demand via a second “investment income” for every citizen*) and systematically reducing the malignant wealth gap, Kelso and Adler predicted an economic expansion even larger than the one that followed in the wake of Abraham Lincoln’s Homestead act of 1863 which gave every American citizen 160 acres of land (one kind of wealth producing capital asset), if they were willing to take care of it. But where land is finite, business opportunities and corporations (as well as the economic possibilities) are infinite.

Oligarchs Successfully Marginalized Kelso/Adler
The oligarchs however have successfully kept a lid on Kelso and Adler’s revolutionary ideas and to this day most of the public actually thinks there are ONLY 2 choices when it comes to economics. There is the historically right leaning, free market, laissez- faire capitalist approach of the Republicans. And there is the historically left leaning, labor union favoring approach of the Democrats.

The right pushes rugged individualism and personal responsibility while the left pushes enlightened self interest which recognizes that we’re all in this together. According to conventional wisdom, the political pendulum swings between these two poles and in the process the Kelso/Adler prescription has been effectively ignored by the “free press.”

Enter the Capital Homesteading Act
But that does not mean “ownership economics” are dead and gone. On the contrary, over the past half century thousands of employee owned companies (ESOPS) and worker owned co-ops have sprung up around the nation. When done for the right reasons (not to bail out a failing airline) these examples democratize the conventionally despotic corporate plantation.

Professor Rick Wolfe, Dr. Guy Alperovitz, and Dr. Ted Howard are unabashed, vocal proponents of worker owned co-ops based on the Spanish Mandragon model. Off shoots of this can be found in places like Cleveland, Ohio (the Evergreen Co-op) and Jackson Mississippi (championed by now deceased Mayor Chokwe Lamumba).**

And a resilient band of renegades known as the Center for Economic and Social Justice, led by Dr. Norm Kurland has developed and introduced The Capital Homestead Act which exchanges land for capital assets, and in the process gives every American citizen access to capital credit (per Adler/Kelso). The Capital Homestead Act is built on a foundation of PRIVATE OWNERSHIP which those on the right will applaud. Yet it also accounts for the fact that WE’RE ALL IN THIS TOGETHER, which those on the left will applaud. In other words the Capital Homestead Act takes the best of both sides and merges them into a 21st century idea whose time has come.

Capital Credit: an Idea Whose Time Has Come
In any case, the time has arrived for an alternative solution because the arguments on the conventional right and those on the conventional left have fallen short of the mark when it comes to empowering individual citizens, recognizing that we really are all in this together, and when it comes to democratizing a free market economy. Ownership economics is the key to the future for anyone who really wants a political democracy.

*The 2nd income is generated from distributed dividends NOT from taking a 2nd job.

** Rutgers University also offers its annual Louis O Kelso Fellowship which plants academicians around the nation with some background in this unique line of thinking.

Actually people around the world are interested in the concept of Ownership Economics as exemplified by the Global Justice Movement and through presentations by internationally renowned scholars such as Professor Stefano Zamagni.