Unique Service Helps Reduce Credit Card Debt

By Michael Killian, CardRatings.com Reporter

Editor's Note: This article is part of a popular Q & A format series in which we interview experts and industry professionals that have made significant contributions to the credit card industry.

Scott Crawford is the CEO of DebtGoal.com. From the beginning of his career in economics, he watched Americans' savings go down and debt-load go up and was fascinated by this trend. Eventually, Scott went to work for a large credit card issuing agency and was charged with doing research to learn customer needs. The results of this research were used to design new products.

One consumer theme heard repeatedly was the request for help to get out of debt. Obviously the idea could not be sold to the credit card company, so he decided to do it on his own. Scott joined forces with technology and business-development experts to create a new company that would focus on helping consumers attain their financial goals. The end result was GoalSpring and its flagship product DebtGoal.com. He explained how Debtgoal.com can help those with debt troubles.

Mike: It looks like your site offers a debt acceleration plan. Can you describe how this works?

Scott: Debt acceleration plans are pretty simple conceptually. Ideally, you start with a constant amount you want to apply to debt each month. You make minimum payments on all accounts except the highest interest account, which gets the remainder. As you make progress paying down other credit cards, the minimums on these accounts come down and you free up more to apply to the highest-interest account. Using this technique, users can pay off credit card debt in approximately 2.5 years versus 14 or more years if they were to make minimum payments only.

Although it sounds easy, this can be daunting for a lot of people. To make it work, you need to start with a committed amount each month and adjust for any credit card spending. For many people with multiple debt accounts, the ongoing organization requirements are more than they are comfortable with. GoalSpring has created a system which manages it for them, putting their information in one place and simplifying the management process.

Mike: Do you offer ideas on determining the accelerated amount and do you have a suggested amount to apply to acceleration?

Scott: We believe that our users are more likely to have long-term success reducing their debt if they find a monthly commitment amount that works for them. So rather than push them to set a really aggressive initial target that will prove unsustainable after a few months, we start with the sum of the user's current minimum payments and let them go up from there. Remember that by starting with minimum payments and holding this amount constant, most users can pay off credit card debt in 3 years versus 14 years. So the important thing is to find an amount greater than minimum payments and stick with it. Adding in mortgage or student debt will leverage this payment acceleration to pay these debts off efficiently as well.

Throughout the process, we show users opportunities to evaluate their spending structure and determine if they want to free up cash that they can apply to debt by increasing their monthly commitment. For instance, we encourage users to evaluate whether they can reduce their mobile phone or cable bills and how much that would save them in interest expenses over the life of their debt. If they want to take that action, they can log the action in the tool and increase their monthly commitment amount. To help users quickly evaluate the potential impact of these actions, we show how other users have rated the actions and how much it saved them in interest.

Mike: Do you offer alternative debt solutions?

Scott: We're in the process of building out this capability now. Since we have good insight into users' debt structure, we can show them the impact of having a different debt structure. We are working to build out a catalog of products that we can present to users that will show them the impact on their debt-free date and total interest expense. Using our tool, users can take advantage of these offers to realize the savings and reflect them in their plan. Even though they lower their interest costs, we'll encourage them to keep their payments the same so that more money can be channeled toward debt repayment.

Mike: Can you describe some of the tools you incorporate at your site?

• Our Debt-Health estimator helps users understand their debt health and actions they can take to improve it.


• The Rate-Negotiator helps users negotiate lower rates with credit card issuers by showing them the average reduction that other users have been able to get for each of the major credit card issuers.


• Our community allows users to interact and share debt tips that will help to get out of debt quicker.


• Our debt reduction tools help users analyze different debt-reduction strategies: Should you take out a 401(k) loan to pay off credit card debt? Should you apply savings to debt? Should you take out a home equity line of credit to pay off credit card debt?

Mike: Is there anything else you would like to add?

Scott: Paying off debt is the number one New Year's resolution for 2009. According to Franklin Covey, 56 percent of Americans set a goal to reduce debt this year. Of this number of people, 65 percent will never actually create any sort of a concrete plan to attain their goal. DebtGoal is there to help. We make planning easy.

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This article was written by Mike Killian, Founder of Learning Credit and Debt Management. Mike has been writing about credit and debt management issues that are of importance to consumers for over 8 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

The Responsible Choice Plan: A "Win-Win" for Lenders and Borrowers with Excessive Credit Card Debt

By Curtis Arnold, Founder of CardRatings.com


Dr. Robert Manning is perhaps best known as the author of Credit Card Nation, the book that clearly lays out the consequences of our “addiction” to credit and the role that card issuers have played in creating the problems that we face. Or perhaps you saw him in the documentaries, “In Debt We Trust” or “What Would Jesus Buy?”

While detailing and exposing the problems are certainly important contributions, what Dr. Manning is working on now has the potential to dramatically change the way people with substantial debts can get back on their feet. His timing couldn’t be better, given how universal default, the subprime mortgage mess, the credit crunch, the resetting of adjustable mortgage rates, and the recession are wreaking havoc with so many of our wallets.

Far too many hard-working families are in very serious financial trouble. Although most want to do the responsible thing and pay all their bills, many are $20,000 to $60,000 in credit card debt and can no longer make ends meet. If Dr. Manning has his way, far fewer of these folks will go into bankruptcy, and many more will be able to keep their homes.

Math Like You Wouldn’t Believe

Manning has developed an algorithm, a very complex formula, known as the “Responsible Debt Relief Grading System (RDR)” that calculates how much of their outstanding debts people can realistically afford to pay back – depending on:

· What their total household income is.
· Whether they rent or own, live alone, have dependents, etc.
· Where they live and what their local tax liabilities are.
· What their employment status is.
· What they’re left with after taxes, based on how many dependents they have and whether they itemize their taxes or not.
· What the US Bankruptcy Court mandates for household budgets/cost of living expenses in their specific locality.
· How the current bankruptcy rules and regulations would apply to them.
· What they owe – and more!

(If you’re wondering how Manning could possibly figure all of this out, he’s a professor at the Rochester Institute of Technology (RIT) and Director of its Center for Consumer Financial Services.)

Now, he’s in the process of applying this grading system across the country to help both borrowers and creditors move forward realistically, by identifying who will benefit from consumer credit counseling services, who can only repay a small fraction of what they owe and unfortunately, will be best off filing for bankruptcy – and who is “near bankrupt,” only able to pay back between 20% and 60% of what they owe.

As Manning puts it, people can “get a free assessment and they don’t have to worry about rip-offs.” More technically, he explains:

“Based on the score and their cash flow/debt situation, consumers are referred to: (1) our national CCCS partner InCharge (over 80% net repayment), (2) our Hope Financial “Responsible Choice” program (if consumers can repay 20% to 60% of their unsecured debt), and (3) our Debtor Attorney Network (if they cannot repay at least 20% of their unsecured debts). As a result, anyone with a debt problem will be able to find a debt management/resolution program that best suits their situation.”

While CCCS programs typically take five years to complete, the Responsible Choice program is expected to last for three years, with Hope Financial managing the payments to creditors at a 40% to 80% discount. Manning adds:

“This is a win-win situation for all – people strapped financially can avoid bankruptcy; creditors will receive regular payments to offset their losses, and thousands of households will retain their homes.”

In a Nutshell

Here’s the way the Hope Financial site explains how the program works:

1. We objectively figure out what you can pay.
2. We fairly document why that is all you can pay.
3. We assist you through your payment plan over 36 months.

Sure sounds good to me! As of now, Hope Financial is taking on clients in Ohio and also in Texas, Florida, New York, Utah, and California, with other states soon to follow. Check it out and let us know what you think.

By the way, in the interest of full transparency, I am proud to say that I serve on the Advisory Board for RIT's Center for Consumer Financial Services. The center is truly one-of-a-kind and is really helping to facilitate positive change for consumers.

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. His new book, How YOU Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line will be available soon! Pre-order online and receive a 37% discount.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Variable Rate Credit Cards Expected to Fall in Light of Recent Fed Rate Cuts

By Jessica Austin, CardRatings.com Public Relations Associate


The Federal Open Market Committee cut short term interest rates again today by one half of a percentage point to 3.0%. The Fed's rate cut was in response to the economy's current financial state.

According to the Fed,

"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."

The good news for cardholders is that this means that the Prime Rate will fall by half of a point as well to 6%. Over the coming weeks and months, interest rates will fall .50% on variable rate credit cards. About 90% of all cards issued today have variable rates that typically move up and down in response to the Prime Rate.

Curtis Arnold, Founder of CardRatings.com, notes:

Given the recent rate cuts, if you are paying over 10% on your current credit card and you have a credit score above 700, then I would strongly suggest that you search our listings of low rate credit card offers. Simmons Bank, for example, offers a 7.25% fixed rate card.

The rate cut should have an immediate impact on consumers that are revolving credit card debt. The current average rate based on all the cards listed in our comprehensive database is 12.82%. Those applying for a credit card with a variable rate should benefit as well.

Finally, it is also worth noting that the Federal Open Market Committee also cut rates unexpectedly earlier this month by .75% or 75 basis points. Bottom line is that we've had two rate cuts this month that total 1.25%. Can't wait from my own card to reflect these cuts! :-)

This article was written by Jessica Austin, Jessica joined our staff on a part-time basis recently, but has previous work experience in the credit industry where she served in a managerial capacity. She has met the equivalent hours requirement for a bachelor's degree in sociology/media relations from Southern Arkansas University in Magnolia, Arkansas and is currently pursuing a master's degree from the International School of Divinity.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Discover Card Consumer Survey Shows we're Upbeat about our Personal Finances, but…

By Curtis Arnold, Founder of CardRatings.com


In May, Discover launched a new research program, the “Spending Confidence Monitor,” with Rasmussen Reports, a well-known, independent survey research firm. Together, they’re planning to survey lots of us every month – they interviewed 500 consumers daily (15,000 total) in August alone – to find out what we think we’ll spend in the future, what shape our finances are in now, and what our opinions are on the economy.

Granted, our expectations certainly can change unexpectedly for various reasons. However, as time goes on, I think Discover’s monthly surveys will become very insightful for what they tell us about people’s current situation – and what the trends may be. Right now, here’s how I read Discover’s key findings from the May, June and July surveys:

1. No money. The number of families that had no money left over after paying their monthly bills rose from 38% in May … to 50% in July. (There’s only a 1% margin of error.) About 45% of younger adults (18-29) in July reported having money left over after paying their monthly bills.

2. No cushion. Two-thirds in June said they could support their current lifestyle for a month if they were faced with an unexpected loss of income. But 29% in July said they wouldn’t be able to do even that, which is up from a quarter in May.

3. No hope. With credit tight, the housing market soft, gas prices high, and a war going on, it’s no surprise that about 63% in July told Discover that they rated the economy as fair or poor.

If “no money, no cushion, and no hope” is how you’d describe your current situation, as Discover shows, you’re not alone! About half of us – or more – seem to be in the same boat. So don’t beat yourself up about it. Instead, tell us what’s up and we’ll try to steer you to people who can help.

Please note that the August survey was just released (click for details) a few days ago and I haven’t had time to completely digest the numbers yet. However, after a cursory glance, I did find it very interesting that the August survey reveals that consumer confidence in the U.S. economy rose and fell week-to-week. This rise and fall seems to reflect fluctuating concerns about the economy, housing market and sub-prime mortgage challenges.

More importantly, though, despite such fluctuations, consumers were relatively upbeat about their personal finances in August, rating them much higher than they rated the economy. With that, I will end this article on a positive note!

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. Curtis is currently working on publishing a book about credit card usage with Pearson/Prentice Hall- more details forthcoming!

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

Credit Card Debt? Think Twice Before Jumping on the Debt Settlement Bandwagon!

By Curtis Arnold, Founder of CardRatings.com


If the credit card bills are piling up and you want a way out, you have got to be tempted by those ads that say:

• “Our debt settlement plan can reduce your debt 55%-70%!”


• “Reduce Your Debt by 60% Debt Settlement Guaranteed!”


• “Settle your debts & save up to 75% of what you owe.”

Sounds great! Where should you sign up?! Not so fast, advises Jim Young, the CEO of Accelerated Debt Consolidation. According to Jim, debt settlement, or debt negotiation as it is sometimes called, is never a good option for cardholders who are current on their accounts and want to maintain their good credit.

“The only time that a settlement makes sense for a consumer is when they need an account settled in order to obtain a new line of credit. For example, if a consumer that had good credit was attempting to obtain a mortgage but they had an old charged off account on their credit report, settling the charged off account could be what the new lender needed before approving the mortgage.”

What They Don’t Say

One of the many things those enticing ads don’t point out is that debt settlement can only occur after the accounts are charged off. And if you do choose the settlement option, it will actually prolong the time the charge-off remains on your credit report.

For example, say you initially owed $10,000, and a card issuer charged it off. Four years later, a debt settlement firm negotiates a reduced payoff amount of $5,000. Not only will that get the clock ticking on your credit report for another seven years, but as Jim Young puts it,

“You will pay income taxes on the amount that the creditors let you off the hook on. In other words if a creditor settles a $10,000 debt for $5000, the $5000 is reported as income and you will be taxed on it.”

Ouch! In fact, according to law, you would be taxed on any amount forgiven over $600.

Ka-Ching!

These debt settlement firms are often nothing more than telemarketing scam outfits, except that their operators’ scripts talk about credit as opposed to some widget. Once someone falls for their sales pitch, they start making money right away, first by collecting a “retainer.” They pocket the first few months’ payments a consumer is required to send in - which of course only gets the consumer further into hock and credit trouble … faster.

Then these debt settlement outfits make a percent of what they save the cardholder. Here’s an example Jim Young likes to use:

“If the client owes $100,000 and the settlement firm is promising to save them 50% of what they owe, that is a savings of $50,000 and they usually want a commission of 12%. So 12% of $50,000 is $6000.”

And you thought the MasterCard or Visa in your pocket had high fees! Seriously, though, as I hope I’ve made clear, debt settlement has serious pitfalls. If you are having trouble paying your bills, I urge you to visit Jim Young’s Accelerated Debt Consolidation Web site, and take a look at some of the options that might actually help you out of credit trouble.

Got any debt settlement horror stories? Please share them to help alert others to their dangers!

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. Curtis is currently working on publishing a book about credit card usage with Pearson/Prentice Hall- more details forthcoming!

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

New Discover Card Offer Rewards On-Time Payments

By Nancy Castleman, CardRatings.com Senior Reporter



Motiva, a unique new credit card from Discover, is designed for people who carry a balance and can use some extra motivation to pay their bills on time. Here's how it works: When cardholders make six on-time payments in a row, they receive the seventh month's interest as a "Pay-On-Time Bonus." Send in that seventh payment promptly, and it counts toward the next set of six timely payments, so there can be two bonuses a year.

You can use the Pay-On-Time Bonuses, along with other Discover cash-back bonuses, to pay down your credit card bill, which could be helpful in getting that balance paid off. If you prefer, Discover will send you a check or direct deposit the amount into your bank account. All you have to do is call or go online to let Discover know how you want to redeem them.

Motiva is a no annual fee card with a teaser rate of 3.9%, good for 10 months on purchases, which then goes up to anywhere between 10.99% and 17.99%, depending on the cardholder's credit picture. That 3.9% rate is also offered on balance transfers made by July 1, 2007 - and it's good through April, 2010.

When you sign up for Motiva, you can choose the due date, and pay by phone or online, even on the due date. (Discover will also take checks and money orders, as well as automatic direct payments from your checking account.) If you want, Discover will even send you email reminders to help you avoid fees and pay on-time.

Does Motiva Motivate People to Stay in Debt or Get Out of It?

Personal finance writers and consumer advocates recommend that folks with balances pay them off as fast as they can, using a "no frills" card with the lowest interest rate they can get. That rate could be less than Motiva's teaser or long-term rates.

One viewpoint is that Motiva encourages people to spend more money, to carry bigger balances, and to remain in debt longer. After all, there's no "Pay-On-Time Bonus" if you don't owe anything, and the more you owe, the bigger your bonus will be.

I asked Margo Georgiadis, Executive Vice President and Chief Marketing Officer at Discover, for her response to these points of view. Here's what she said:

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"Some people are always going to carry a balance. We feel that our cardmembers should be rewarded for using our card, no matter how they use it. Motiva is part of our commitment to make sure we offer a range of smart products designed for the different ways people choose to use credit. We're giving people more options to make the most of their money."

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My own view? If you usually carry a balance, have higher rate cards, and think the bonus might motivate you to get out from under, Motiva is well worth considering.

Here are my tips for using Motiva to get out of debt:

1. Transfer balances from higher rate cards.

2. Limit your card use to emergencies, only. Resist the temptation to spend!

3. Pay off as much of your credit card bill as you can ... every month ... especially while you have the teaser rate.

4. Apply every single bonus against your outstanding balance.

5. Don't be late! If you're late making a payment on your Motiva card, your rate will go up - to as high as 28.99%.

Click here for more information on Motiva including application details.

We welcome your comments about credit and money issues in our popular credit forum!

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Nancy Castleman has spent 20+ years helping people get out of debt, save money, and live better on less. Along with her partner, consumer advocate Marc Eisenson, Nancy is known for her work on mortgage pre-payment, and for first explaining "credit card math" in her often acclaimed free e-letter, The Pocket Change Investor. Find it, along with many articles from back issues, special reports, link picks, and book reviews, on her Good Advice Press Web site. You can also see pictures of her 10,000 square foot organic garden and her nine grandchildren.

But what she'd most like you to do is read about her book, Invest in Yourself (Wiley, 1998, 2001), which she wrote with Marc Eisenson and Gerri Detweiler. Nancy considers this book, which discusses how to invest your time, energy, and money to create the life you want, to be her life's work. Nancy's books have received rave reviews in leading national publications, including USA Today and Money Magazine.

CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

New Discover Card Offer Rewards On-Time Payments

By Nancy Castleman, CardRatings.com Senior Reporter



Motiva, a unique new credit card from Discover, is designed for people who carry a balance and can use some extra motivation to pay their bills on time. Here's how it works: When cardholders make six on-time payments in a row, they receive the seventh month's interest as a "Pay-On-Time Bonus." Send in that seventh payment promptly, and it counts toward the next set of six timely payments, so there can be two bonuses a year.

You can use the Pay-On-Time Bonuses, along with other Discover cash-back bonuses, to pay down your credit card bill, which could be helpful in getting that balance paid off. If you prefer, Discover will send you a check or direct deposit the amount into your bank account. All you have to do is call or go online to let Discover know how you want to redeem them.

Motiva is a no annual fee card with a teaser rate of 3.9%, good for 10 months on purchases, which then goes up to anywhere between 10.99% and 17.99%, depending on the cardholder's credit picture. That 3.9% rate is also offered on balance transfers made by July 1, 2007 - and it's good through April, 2010.

When you sign up for Motiva, you can choose the due date, and pay by phone or online, even on the due date. (Discover will also take checks and money orders, as well as automatic direct payments from your checking account.) If you want, Discover will even send you email reminders to help you avoid fees and pay on-time.

Does Motiva Motivate People to Stay in Debt or Get Out of It?

Personal finance writers and consumer advocates recommend that folks with balances pay them off as fast as they can, using a "no frills" card with the lowest interest rate they can get. That rate could be less than Motiva's teaser or long-term rates.

One viewpoint is that Motiva encourages people to spend more money, to carry bigger balances, and to remain in debt longer. After all, there's no "Pay-On-Time Bonus" if you don't owe anything, and the more you owe, the bigger your bonus will be.

I asked Margo Georgiadis, Executive Vice President and Chief Marketing Officer at Discover, for her response to these points of view. Here's what she said:

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"Some people are always going to carry a balance. We feel that our cardmembers should be rewarded for using our card, no matter how they use it. Motiva is part of our commitment to make sure we offer a range of smart products designed for the different ways people choose to use credit. We're giving people more options to make the most of their money."

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My own view? If you usually carry a balance, have higher rate cards, and think the bonus might motivate you to get out from under, Motiva is well worth considering.

Here are my tips for using Motiva to get out of debt:

1. Transfer balances from higher rate cards.

2. Limit your card use to emergencies, only. Resist the temptation to spend!

3. Pay off as much of your credit card bill as you can ... every month ... especially while you have the teaser rate.

4. Apply every single bonus against your outstanding balance.

5. Don't be late! If you're late making a payment on your Motiva card, your rate will go up - to as high as 28.99%.

We welcome your comments about credit and money issues in our popular credit forum!

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Nancy Castleman has spent 20+ years helping people get out of debt, save money, and live better on less. Along with her partner, consumer advocate Marc Eisenson, Nancy is known for her work on mortgage pre-payment, and for first explaining "credit card math" in her often acclaimed free e-letter, The Pocket Change Investor. Find it, along with many articles from back issues, special reports, link picks, and book reviews, on her Good Advice Press Web site. You can also see pictures of her 10,000 square foot organic garden and her nine grandchildren.

But what she'd most like you to do is read about her book, Invest in Yourself (Wiley, 1998, 2001), which she wrote with Marc Eisenson and Gerri Detweiler. Nancy considers this book, which discusses how to invest your time, energy, and money to create the life you want, to be her life's work. Nancy's books have received rave reviews in leading national publications, including USA Today and Money Magazine.

CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!