Category: Credit

Stress shopping, or the habit of shopping to reduce stress, may, unfortunately, increase your stress more than ever. The situation may become worse if you have a tight budget and most of your paycheck will be drained if you can’t control your spending. The eagerness of shopping may dissolve quickly, and it might be replaced by guilt and anxiety of making big credit card bills.

5 Signs of Stress Shopping

• Impulsive buying – You don’t take too much time to decide what to buy. You are a believer in the “buy first, worry later” theory. You often buy things that you don’t need or didn’t think about.
• Compulsive shopping – You feel a strong urge to visit the stores when you feel stressed. Normally this shopping habit triggers when you are frustrated or anxious.
• Indulgent buying – You might have a thought that you need to buy an item that you’ve planned to buy for a long time. You rationalize your buying and think defensively about your shopping.
• Shopping alone – You like to shop alone. This is because you don’t have to answer or explain your purchases to anyone.
• Positively, high on emotions – Whenever you experience a rush of positive emotions and excitement, you have a strong urge to shop. Practically, shopping makes you feel good.

You won’t be noticing how much your stress and anxiety are increasing your credit card bills. Due to the COVID – 19 you might be spending too much just to be prepared to live at home during the lockdown. So, control your overspending habits and find smart shopping ways through credit cards.

How stress shopping can affect your personal finances

a. Stress buyers shop in large quantities

During the current coronavirus outbreak, people have started shopping due to stress and panic. People are rushing towards the stores to create a stockpile of shelf-stable foods and health-safety products for the coming days. This is the core reason behind the massive crowds in multiple stores and the growing cart sizes. People are shopping due to pandemic stress and picking up toilet paper or cereal boxes in large quantities. This kind of stress shopping may increase the cost of buying commodities compared to a regular grocery bill.

 

However, this has reduced to some extent. With time, this habit will eventually decrease, as people will have enough supplies stocked in their homes.

 

b. Stress shopping increases financial anxieties

Due to stress shopping tendencies, people buy in large quantities and most of the time it was unplanned shopping. People do not estimate how much they are going to spend at a time.

 

As a result, people may overspend due to stress shopping without thinking about their monthly budget. People sometimes purchase groceries that they normally do not use. But those items may cost hundreds of dollars which practically affects their household budget. The situation gets worse when a significant amount of that grocery goes to waste.

 

Overspending due to stress shopping may increase unexpected expenses. This may increase your overall credit card debt and affect your savings for an extended period.

 

Due to such financial situations, you might be facing financial stress, which may cause negative effects on your physical and mental health.

 

c. Stress shopping boosts undesired purchases

During a stressful shopping period, shoppers do not think about what to buy and what to avoid. They often forget about their actual requirements and purchase undesired goods. They normally try to scoop up whatever they find on the store shelves and pick up in large quantities.

 

So, it can be said that stress shopping does not encourage thoughtful buying. It only boosts undesired purchases which eventually increase spending. As a result, people may experience a financial crunch for a month or so.

 

So, what will you do? How will you avoid this?

 

Here are some tips to avoid the effects of stress shopping with credit cards during high-stress times:

 

1. Prepare a shopping list

Before hitting the store and buying everything you notice, prepare a list of things that you need to buy in the first place.

 

People may think shopping using credit cards is an opportunity to earn extra rewards or points. But, this strategy is effective for those credit cards which charge annual fees to their customers. Try to choose a zero-annual-fee card with good reward benefits. Apart from that, you should keep in mind that during such a crisis, you must save as much as possible from your paycheck.

 

Building a huge credit card bill throughout the month and exceeding your monthly budget won’t be helpful for such purposes.

 

Here are a few credit cards to consider for reducing overall credit card bills:

 

2. Buy only what you need

 

You need to be 100% sure what items you already have in your inventory and make sure you do not buy those things again. You might have enough sanitizer bottles to make it go for the next 3 months, so why should you buy it again? You might have stocked up medicines for your parents in your medicine cabinet or a few packets of coffee before creating the shopping list. So, now you should cut off such things from your shopping list. This is one of the smart shopping techniques to prevent stress shopping with credit cards during this crisis. It’s wise to assess what you have before you add things to your shopping cart.

 

You must also consider whether or not to buy some of the most in-demand products, such as hand sanitizers or masks. These are the most needed things right now all over the world and have limited stocks in stores near you. So, why don’t you try to make them at home? There are some DIY methods that you may find on the internet and can make such products all by yourself. Homemade gel and sanitizer recipes include things that you can find in your home, for example – isopropyl alcohol, aloe vera gel, and tea tree oil.

 

It might take a while to make an inventory or prepare sanitizers or masks at home. But, to save money from your credit card shopping, it’s worth it to try such things.

3. Opt for online shopping

If you want to avoid stress shopping with credit cards, you should try shopping online for all types of essential items. Shopping online enables you to compare products and their prices between different sellers and also between different e-commerce websites. There are many differences in the price of sunglasses on eBay and Amazon. So, you must compare and go for the seller which gives you more discount. Some sellers may allow you to pay through installments, mainly for a large number of purchases.

 

Some credit cards are tailored for a few specific online e-stores. If you get such cards you might get big discounts on all the items, compared to using other credit cards. Don’t forget to maintain a budget, track your spending, prepare a shopping list, and tell others how to stop stress shopping by making online purchases. This way you may save money from credit card bills and can get the best products at reasonable prices.

4. Track your spending and credit card balance

During such a critical situation, people may forget what is stressful shopping and may engage in panic buying. As a result, you may end up increasing your credit card balances. You may incur huge credit card debt at the end of the month and may need to pay interest charges if you do not pay the entire amount in full. Interest payments will be an extra cost that’ll make all of your purchases more expensive, and it may put pressure on your next month’s home budget too.

 

Before every shopping session, you must determine what’s your ultimate budget for shopping. You should decide if you want to use your credit card or make payments via cash transactions. In both cases, track how much you are spending on a list of items. Calculate your total credit card balance and decide how much you can afford to pay in that billing cycle.

 

If you notice that your credit card balance is about to jump over your head, stop right there. You should immediately hide your credit cards, and start using cash or debit cards for making payments.

 

If you want to use credit cards but also want to save money, it will be wise to use a low-interest credit card instead of a high-interest reward card. This is one of the smart shopping ways that you may also suggest to others.

5. Beware of the COVID-19 credit card scam calls

During this economic crisis, due to the Pandemic, few cases of scam phone calls and text messages were also noticed. Fraud and scammers have actively created difficulties for credit cardholders. These imposters are calling in credit card users and introducing themselves as bank executives or health/government officials. They are stealing credit card information and other personal details while spreading generic information about the pandemic. If you receive such calls or messages relating to COVID-19, be alert. Just end the call as soon as possible, without revealing your data. To avoid text messages or emails, avoid clicking on any links.

 

They may also contact you, on behalf of your credit card company or online stores, and offer you discounts if you sign up for a reward program. Do not entertain such sign-ups. These are nothing but ways to rob you. If you want to avoid stress shopping with credit cards, then you must become aware of such scams too.

Conclusion

In the shadow of this pandemic, it is quite difficult to shop for essentials. Most things you need might get out of stock. It can all get very stressful. But you must not lose hope and should take it as a day-by-day challenge.

 

Don’t panic and provide information from this content to your family about what stressful shopping is, how stressful shopping can affect us financially, and how to stop stressful shopping habits through credit cards.

If you want to build a strong, healthy credit score, it may require good financial habits, sheer focus, determination, and discipline. You need to do a lot of hard work such as pay your bills on time, reduce the overall debt burden, maintain a low debt-to-credit ratio, and lots of other requirements to maintain a good credit score.

 

The average FICO credit score of U.S. consumers is 695, as per the latest data from the FICO company. About 54.7% of Americans are able to score at least a 700.

 

Apart from following practical steps to boost your credit score, you may also find multiple credit monitoring apps on different app stores. You may use those apps on any mobile device, whether it is Android or iOS. And guess what!! Most of them are even free.

 

So, it only makes sense that people should use such apps to boost their scores at any time. Some apps will help you monitor your credit for improvements.

 

Here are some of the credit monitoring apps that may help you hold a grip on your credit and build your credit score in 2020.

 

1. Credit.com

This is one of the best free credit monitoring apps that you may find. Most others may require you to pay for a subscription. This mobile app helps you to access your entire credit profile and your credit score and gives you an analytical view of your credit profile. You’ll see your current credit status, you may see how your score has changed, and why. By using this app you may use your credit information and a few money-saving tips to boost your credit score.

 

#This app is available for both Apple and Android interface.

 

2. myFICO

The myFICO app is free, but it requires an active myFICO account. It may cost you practically $20 per month or more, considering the subscribed features. With this app, you will be able to monitor your FICO credit score. It is the most widely used credit score and credit report. This app may also give you a FICO Score Simulator, which will give you a synopsis of how your score may be affected if you make wrong financial decisions.

 

#This app is available for both Apple and Android interfaces.

 

3. Experian

The Experian credit monitoring app will allow you to track your Experian credit report and FICO score. You will receive an automatically updated credit report every 30 days. The app also gives you the feature called “Experian Boost”, which will help you to boost your credit score. The app is free, but you need a paid Experian account to get a few special features. The app gives you alerts if your credit report or score changes. Through this app, you may get offers on credit cards based on your FICO score.

 

#This app is available for both Apple and Android interface.

 

4. Lock & Alert from Equifax

Lock & Alert from Equifax EFX, +0.27% gives you access to lock and unlock your Equifax credit report. This way you may protect your credit score from identity theft and fraud attacks. You’ll get an alert any time your account is locked or unlocked. The credit lock is not as secure as a credit freeze, but it may give you a level of protection and is quite easy for you to turn on and off

 

This app works only for your Equifax credit report; so to lock and unlock the other two reports, you’ll have to work with TransUnion TRU, +0.46%, and Experian EXPGY, +1.94% separately.

 

#This app is available for both Apple and Android interfaces.

 

5. TransUnion

The TransUnion app gives you the power to refresh your credit score and credit report daily. It offers instant alerts for any changes and offers a Credit Lock Plus service. This service allows you to lock in your TransUnion credit report, just like Lock & Alert from Equifax.

 

You may calculate your debt-to-income ratio through the Debt Analysis tool. It also allows you to view public records associated with your name. The app is free but credit monitoring service will require a subscribed, active account.

 

#This app is available for both Apple and Android interface.

 

6. Credit Karma

Credit Karma app uses data from TransUnion and Equifax to calculate your FICO score. The app indicates different factors that affect your credit score, such as credit card utilization and your payment history. The app provides an overview of the reports made by TransUnion and Equifax credit agencies.

 

You may also link your credit card account with this app to track your spending.

 

7. Mint

It is one of the best personal finance apps available in the market. Mint is a good choice for monitoring your credit score and staying on top of your finances.

 

Mint doesn’t require your credit card to show your credit score. You just need to verify your identity, and that’s it. Mint will generate a full explanation of your credit report with your score instantly.

 

MInt will break down the basics of your credit score and help you to increase it.

 

#This app is available for both Apple and Android interface.

 

8. Self

The self-app will help you build and track your credit. It is a great app for people who are interested in establishing their credit profile or trying to improve credit. Self offer loans without any upfront payment. The loan tenure may last for 1 or 2 years. The amount will be deposited into a CD.

 

There is no hard inquiry to open the account, but your payments are reported to all three credit bureaus. When you repay your loan entirely, you will have access to free credit monitoring services and your VantageScore. This way you can track your progress.

 

The app is free, but it will require a self loan repayment of at least $25 a month.

 

#This app is available for both Apple and Android interfaces.

 

Are you having credit card debt?

 

If yes, then no matter what, it’s gonna be difficult to pay off! One of the prominent reasons being the incessantly high Annual Percentage Rates (APRs) of credit cards. As you know, credit cards are usually unsecured debts as you don’t need to provide any collateral. And that’s why the credit card companies levy a high-interest rate to compensate for that risk!

 

Eventually, you will see a substantial part of your paycheck deducted every month to pay off your credit card debt. And you might be waiting for the time when you will receive your next paycheck. In short, you might be living paycheck to paycheck!

 

On top of that, the effects of the recession can add to your problem! And thereby it can be more cumbersome to pay off your credit card debt.

 

Yes, you heard it right!

 

A 2019 Bloomberg report says that there is a probability of 26% that recession will hit our country within one year!

 

Whereas, a 2019 Bankrate survey has found that 2 out of 5 people in our country are not ready for the recession!

 

So, if you are one of them, you need to pay off your credit card debt asap. And it can be one of the baby steps to prepare for any economic downturn!

 

Let’s start!

 

Opt for a balance transfer card

 

Exhausted by the high APRs of your credit cards?

 

Well, in that case, you can opt to transfer your outstanding balance amount to a new credit card. It’s always advisable to opt for a balance transfer card that has a comparatively lower interest rate, preferably 0%.

 

But always keep in mind, most of the balance transfer cards come with a 0% balance transfer fee for an introductory period. 

 

On the other hand, many balance transfer cards charge about 3% to 5% of the amount transferred as the balance transfer fee right from day one!

 

So, to avoid mistakes while opting for a balance transfer card, you should always read the terms and conditions carefully!

 

You can save a substantial amount of money on interest payments. Besides, you don’t need to bear the hassle of multiple loans! Thereby, it helps you to pay off your credit card debt with ease!

 

Opt for a consolidation loan

 

You can take out a personal loan to consolidate your multiple credit card debts into a single one. But make sure that the interest rate is lower than your existing debts.

 

Let’s say, you have two credit cards with outstanding balance amounts of $3,000 and $2,500. And both the credit cards have the same APR of 22%.

 

If you take out a consolidation loan of $5,500 with an 18% APR, you can pay off both the credit cards.

 

Besides, your repayment plan becomes simple as you need to make a single payment every month to pay off your debts. And the biggest advantage is, you have to pay a lower interest!

Opt for a debt consolidation program

 

Well, you might be stressed already being up to the neck with your multiple credit card debts. So, what if a company takes away your burden by consolidating credit card debts? And that too at reduced interest rates!

 

Yes, you heard it right! It might seem impossible to you! But actually, it’s possible! To do that, you just have to approach a genuine debt consolidation company.

 

First, they will assess your financial situation. Then they will try to negotiate with your creditors on your behalf to reduce the high APRs of your debts.

 

Once your creditors agree, the consolidation company will chalk out a single monthly payment plan for you, based on your debt amount and financial situation!

 

So, you need to make a single payment to the consolidation company every month to pay off your credit card debts. The consolidation company, in turn, will distribute the amount among your creditors.

 

And guess what?

 

You won’t have any chance to forget the different due dates of your multiple credit card bills. Thereby you don’t have to shell out more to pay late fees and all if you miss the payment deadline!

 

 

As you can see, by opting for any one of the ways I suggest, you can pay off your credit card debt faster and easier. Besides, you can save money too!

 

You can stash this money in your emergency fund. So, if there is an economic downturn, you can use that money during any exigency!

 

So, what are you thinking? Learn how to tackle credit card debt and get rid of your credit card debt asap!

If you only want to get cashback from your credit cards and believe that it is the best reward option for you, then think again!

 

It is all about your preferences. You should opt for the best reward card after verifying all the benefits and as per your choices. This is the most common way to get credit card benefits.

 

To get the most out of your credit card rewards, you need to follow multiple steps. A good credit card will give you rewards for making payments on various things, such as traveling, dining at an expensive restaurant, or shopping. Starting with the cashback, you might be offered discounts, reward points, free travel points, and lots of other benefits from a reward credit card.

 

To make sure that you don’t miss out on the best rewards, here is a list of ways to get the best reward out of your credit cards.

1. Choose the right credit card

Practically, there are no best reward credit cards out there. Every consumer has his/her own choices for benefits. The best cards you may choose after considering your spending habits, your personal preferences, and your credit score.

 

a. Spending habits

If you have a big family and spend a lot each month on gas, phone bills, and groceries, it might be a good idea to grab a reward credit card like the Bank of America® Cash Rewards credit card. This card may offer you bonus rewards on your heavy purchases.

 

On the other hand, you won’t need that card if you are a single person with a low grocery bill, and do not shop much, or don’t have a car.

 

b. Personal preferences

You may need to make big decisions by considering your own preferences. While choosing between travel rewards or cashback rewards, if you select travel rewards, then you’ll again need to decide if you want a general travel card or an airline or hotel card. This is one of the easiest ways to get the best reward out of your credit cards.

 

You’ll also need to decide whether you want flat-rate rewards or the option to earn bonus rewards.

 

c. Credit score

You cannot achieve all credit card rewards in a single card. Different credit cards have different rewards or benefits. You must have a good or excellent credit score to get the most out of your reward credit cards.

 

Normally, a 700 credit score is enough to get most of the rewards credit cards.

 

If possible, you should use two or three rewards credit cards to get the benefits of their different rewards programs.

 

For example, you may select the Chase Sapphire Preferred® Card while making travel purchases, the Discover it® Cash Back card to get the benefit of its cashback program, and the Wells Fargo Cash Wise Visa® Card for other purposes.

2. Use your credit cards for making payments

To get the most out of your credit card rewards, the more you use your credit card, the easier it will be to earn maximum rewards. It’s like a push to use your credit card instead of cash or a debit card whenever it is possible for you.

 

But remember it doesn’t recommend impulse buying or overspending.

 

Look for options in which you can use your credit card instead of using another payment mode. But if your credit card company charges a fee to use the card, calculate to see if you’re paying more in fees than you’d earn enough credit card rewards.

If the fees are higher than the rewards, it’s not worth it.

3. Find out what doesn’t earn you rewards

It’s easy to use your credit card for every purchase you are making. But don’t use your card in such items that don’t give you any rewards at all. For most credit cards, this includes cash advances and balance transfers.

 

Both of these financial activities may require fees. You won’t have any grace period with cash advances, so interest will start accruing immediately.

4. Pay off your due balance in full

Paying interest on your rewards credit card will be the worst thing you can imagine. It will lower the benefit value you get from the card, or even make it nil.

 

If you want to avoid carrying a balance on the best rewards credit cards, you should follow a proper budget, and pay off your credit card bills entirely each month.

5. Redeem your credit card rewards properly

You have the best rewards credit cards in your wallet, but you think that the best redemption option is only cash. This is wrong. For example, the Discover it® Cash Back offers a $5 as a bonus if you use your rewards to get gift cards on over 100 brands.

 

If you earn travel rewards on your credit card, you’ll have the opportunity to maximize the rewards.

 

If it’s a general travel card, you can find the cheapest hotels and flights for your trip. And if it’s a hotel or airline card, you can book your trip when your points or miles may give you the most benefit.

Conclusion

There are multiple ways to get the best rewards out of your credit card. But it will require some hard work and common sense to get the most out of your credit cards. If you do your math and use your credit card rewards properly, you may earn hundreds of dollars or worth of rewards every year.

People with a poor credit score or a zero credit history have very little chance of getting a credit card. In that case, they can apply for a secured credit card so that they can manage their own expenses. A secure credit card may also help them build a credit score.

 

But a secured credit card isn’t available free of cost. A consumer must provide a cash deposit as collateral for the credit card account. Technically, the credit limit of this card is equal to the amount of security deposit. Sounds neat, right?

 

But do you have any idea that credit card companies also may deny your secured credit card application? I guess not.

 

If your secure credit card application gets denied, the first thing that’ll come to mind is – Why was your application denied? You are ready to put a good amount as a deposit, but still, you are not getting approved. What would be the reason? Think wisely.

 

Your application might have been rejected due to several unforeseen circumstances that you didn’t know. So, if you want to make things right, first you have to find those reasons and take steps to change the scenario before you apply for the next card.

The reasons behind secured credit card application rejection

There are a few core reasons why your application for a secured credit card was denied. Here are a few of them:

1. History of default payments

If the credit card company notices that your credit report has a history of missed payments, they might hesitate to allow you even a secured card.

2. Too many outstanding debts

If you have too many outstanding debts, it might be an indication that you are financially unstable to pay off debts, which can be a red flag to a few credit card issuers.

3. Not enough income

Card issuers may check your affordability to pay off bills, even if you are applying for a secured credit card. If you don’t have enough income, they may doubt your ability.

4. Bad employment history

The situation is similar just to the previous issue. If you have a bad employment history, the lender might think that you may lose your job at any point in time. Due to that reason, you may also not be able to pay your bills.

5.Your application was missing something

Complete your credit card application properly if you deliberately skip a few pieces of information. Credit card companies need detailed information about you. So, if you hide anything important from them, your application might get rejected. In this case, you might have to reapply with all the details.

 

Don’t forget to check for minor spelling errors or a wrongly placed phone number. Always make sure all of your submitted data is correct before applying for a secure credit card.

6. Multiple inquiries

If you search for too many secured credit cards, multiple hard inquiries within a short period may hurt your score. This may decrease your credit score or lenders might think that you are depending on credit more than you should.

7. Bankruptcy

If you have filed for bankruptcy previously, credit card providers may consider it a sign that you are unable to pay bills and unable to take that risk.

How to find out why your application was denied

It is your legal right to know why your application was denied. You can know it within 7 to 10 days of your rejection. You will get an adverse action letter from the credit card company, where you have applied for a secured credit card. The letter should explain the reason behind your denial.

 

The next thing you must do is to check your credit reports with Experian, TransUnion, and Equifax. Get your credit report from each bureau every year absolutely free. Check your credit report to find out any errors that may have caused your application to be rejected. As soon as possible, dispute the errors, and solve the issue with each credit agency.

 

It is important to improve your credit before you apply for a secured credit card.

Tips to improve credit before reapplying for a secured credit card

Building and maintaining a good credit score will be a never-ending process. It takes long term commitment, hard work, patience, proper financial planning, and a strong mindset to increase your score and build a decent credit. Here’s how you can get started:

Try to pay your bills on time –

Make on-time payments for all of your bills. This may include secured credit cards, your utility bills, your phone bills, and others. Consumers normally apply for a secured credit card to improve their credit. But their credit score can be harmed if they do not pay the bills on time. If you miss your secured credit card payments, it will reduce your card’s security deposit. On the other hand, positive payment history may help you to increase your credit limit. Secured card lenders may increase a borrower’s credit limit if the borrower is regular on his/her payments.

Maintain a gap while applying for credit cards –

Applying for too many cards within a short time may reduce your credit score. As a result, your application got rejected. So, wait for a few months and then work on your credit score. Soon you’ll be able to apply for a credit card.

Create a budget –

Creating a monthly budget will help you to categorize your money as per your different needs. It may also help you to keep track of your expenses and assist you to pay your bills on time. Budget can also help you to reduce the debt-to-income ratio and decrease your debts.

Pay off your debt burden –

Too much debt can decrease your credit score. You should pay off outstanding loans and other debts as soon as possible. It’ll definitely give a push so that you can build your credit score gradually.

Manage your credit report –

Some credit reporting bureaus will inform you if there’s a change in your report. These services would be helpful to maintain a healthy, error-free credit profile. Apart from that, you must also manually fetch your credit report several times and check all the items listed there.

Conclusion

Once you are rejected for a secured credit card, you should wait for a few months before applying again. Most credit card companies will tell you to wait for six months. So, you must use that time to build your credit. Doing so can increase your chances of getting the most-secured credit card possible.

Debt among seniors has increased significantly in the last decade (83%), as per the data given by the Federal Reserve. Due to this debt burden, seniors may feel a huge financial pressure upon them. That pressure may force them to do more work even after retirement.

 

Despite having a decent income and social security, many senior citizens have to use credit cards to pay their basic daily expenses. The situation is getting worse day by day, as the cost of living is getting higher whereas the income is static. As a result, seniors are getting more inclined to credit card usage. But the harsh truth is, paying off high-interest credit card debts will likely be impossible for them.

What options do seniors have for managing their debt?

When seniors come face-to-face with a huge pile of credit card debt, they may experience severe stress and anxiety. This situation may summon serious medical conditions and their life may be at stake.

 

There is one more small issue. Seniors might also feel embarrassed to talk about their debt problems with their family members and friends. They also hesitate to take help from professionals.

 

So, their problem remains unattended. They start to lose hope in this case and do nothing about it. Finally, they face abusive collection calls or file for bankruptcy.

 

But practically, if they look closely, few solutions are there to help. Let’s look at them closely.

a. Getting help from your close ones

While some seniors may feel embarrassed about discussing their credit card debt problems, many of them may try to share the issue with their family and friends. Often, just talking about the problem may open new ways to solve it, and alleviate stress and anxiety. If you are having a similar situation being a senior citizen, one of your family members, a friend, or any other special person, having good financial knowledge, may guide you to solve your credit card debt problems.

 

Sometimes, just a little help with budgeting and money management can be a big considerable help. Some family members may help you to pay off your debts by providing monetary help or extend loans with 0% interest. Alternatively, they might also negotiate with your creditors or collection agents if accounts have gone into collection.

b. Apply for a reverse mortgage

A reverse mortgage allows seniors (62 and older) to borrow money against the equity in their home. Seniors can opt for monthly installments instead of having a lump sum amount from the bank. The lender receives the money after the borrower sells off the home and pays back the loan. The same thing happens when the borrower moves out to another home or dies.

 

Seniors should own the home entirely, or have a significant part of home equity before opting for a reverse mortgage. The home should be their primary residence. Reverse mortgages can be written on owner-occupied single-family homes, multi-family homes and condos, and manufactured homes that are HUD-approved and meet the requirements of the FHA. The money taken out from a reverse mortgage can be used to pay off debts, especially credit card debts.

 

There are certain criteria to get a loan. The title should be in the name of the borrower. Real estate taxes should be paid timely and at the time of taking out the loan, it should be updated. The house should be in good condition, else the lender or bank may call off the loan.

 

There are several types of reverse mortgages available to seniors, so they should find the right reverse mortgage that fits with the financial requirement of them.

c. Refinance your existing mortgage

Seniors may also refinance their current mortgage with a low-interest loan if they have a good amount of equity and a steady source of income. This way they can encash their ownership a.k.a the home equity when they need urgent money.

 

However, if they have owned the home for a long time and the mortgage is about to be paid off, then refinancing the entire home again with a new loan will be unwise. Considering their current age and life span, logically seniors may not carry a 30-year mortgage for another 30 years.

 

It means they can never become free from the mortgage burden. It may sound harsh but it is true. Apart from that, they may have to pay much more interest over the life of their mortgage.

 

Refinancing your current mortgage and using the money to pay off credit cards may give you a temporary solution. But remember, being a senior it doesn’t give you total relief from debts. Converting your unsecured debt (credit card debt) into secured debt (home mortgage) probably isn’t the best idea to become debt-free.

 

But still, if you are in need of an urgent large amount of money, you may try this option.

d. Take out a home equity line of credit

If being a senior you have owned the home for a long time, or owe much less than the house is worthy of, you may take out a loan against the home’s equity. It is called a home equity line of credit (HELOC). By using this option, a homeowner may use his/her home equity to take out a line of credit when needed. Generally, HELOC comes with a low-interest rate, which is much lesser than a credit card. So, paying off credit card debt with the help of HELOC sounds like a good plan.

 

There’s a catch. Like refinancing mortgages, you are also putting your home equity in danger. Turning unsecured debt into a secure one is not good. This could affect the total liquid assets of the estate in a negative way. If things go wrong, your house may fall into the depths of foreclosure. Losing a home being a senior and due to foreclosure is a devastating situation.

e. Selling your assets

Sometimes, selling off their valuable possessions or assets can help senior citizens to pay off debt. But it should be a last resort to manage their financial problems. Imagine you are selling your house, car, boat, or any other valuable possessions just for making debt payments, how would you feel? Being a senior citizen you might have an emotional bonding with your assets. So when you need to sell them off, the impact on you can be traumatic.

 

So, carefully consider all the probable situations before making any decision. Paying off unsecured debts such as credit cards isn’t always the best choice if it pushes you into a financial black hole. It is always better to consult your situation with a professional financial planner.

f. Taking help from a debt relief company

Seniors can take the help of a debt relief company to tackle credit card debts. Debt relief companies can negotiate with credit card companies and lower the total balance owed. Generally, debt relief companies handle all the communications with credit card companies, which can remove a lot of the stress and anxiety involved.

 

So, there are many options available for seniors to handle the burden of credit card debt. Getting out of debt is not easy. But it is possible to even for seniors who live on a fixed income. Seniors, sometimes with help from family, should consider all possibilities and do their due diligence to find the right solution.