Plastic money often tempts us to get extravagant and we spend more than we can afford. When our expenses exceed our income then there is chance of financial crisis and we might get into the trap of debt. This article would share few tips in order to get rid of credit card debt.

Ways to get out of credit card debt:
   
1) Negotiate to pay off your debt:
Negotiate with your creditor so that the payment plan is affordable for your pocket so that you can repay your debt. Choose debt negotiation and show a reasonable excuse to the creditor for being a defaulter. While you negotiate make sure that you not only lower the outstanding balance but also the interest rate. You can threaten him of filing bankruptcy if the creditor does not agree on your terms of settlement. The creditor would be aware that if you file bankruptcy then he might not get a penny. So he might agree on your clauses as he would be hopeful of getting back a partial amount of his money.

2) Pay the outstanding balance and not the minimum:
Make a monthly payment of your debt instead of paying the minimum amounts make sure you pay off the owed amount. If you are only paying off the minimum balance then your debt would keep on piling as the outstanding balance is not being paid along with the interest rate. And you might take a long time to get rid of debt if you only pay the minimum amount.

The credit card company has used the minimum payment plan as a trap for the consumers to ensnare into the maze of debt. But the debt settlement company can help you pay off your debt and you would be able to achieve financial freedom.   

3) Relatives can be of some help:
Pay off your credit card debts by taking loans from your relatives or friends. In order to come out from the trap of debt you can take loans from them as the family member won’t charge you interest on the amount. But ensure that you repay the owed amount other wise they might not be willing to help you next time in your financial crisis.    

4) Budgeting is essential:
If you think of paying back the owed amount then you have to prepare a budget so that you do not spend more than you can afford. You need to pay off you debts immediately and then plan a budget. In order to avoid the labyrinth of debt budgeting is a crucial part of it.  But if you constantly dissuade from your budgeting track then you might land up in severe trouble.   
 
5) Financial advisor can be helpful:
You can easily come out from the debt trap with the help of the financial advisor. The credit counseling services are beneficial for you as it would show you a path for a debt free life. The financial advisors would help you to manage your finance and get you out of this financial doldrums.

These are the few tips to fight debt and secure your financial future.   

Citibank is currently offering a $50 credit with their “back-to-school” promotion (ends 9/30/10) for College Students.  Customers receive the $50 credit in addition to standard card features for the Citi Dividend Platinum Select Card, the Citi Forward Card, and the Citi mtvU Platinum Select Card.

The Citi mtvU and Citi Forward cards offers 5x rewards on bookstores (includes Amazon.com), movies, music, and restaurants, which amounts to 3.45% cash back or 5% gift card credit from certain retailers.

The mtvU appears better if you get good grades and are willing to send/fax in a transcript every semester, while the Forward card has a better sign-up bonus and ongoing rewards for simply paying your balances on time.

Card features include:

• $50 statement credit when you make $50 in purchases within 90 days.
• No annual fee.
• No cosigner required.
• 0% intro APR on purchases for 7 months.
• $0 liability on fraudulent charges (as with other credit cards).

Credit cards are easy to abuse, but if used correctly, you can use them to your advantage.  I try to use my credit card for everything possible for cashback and rewards.  Over the years I’ve received thousands of dollars in cashback and free airline tickets.  I never worry about the interest rate, because I always pay off the balance.  So far this year I’ve gotten back almost $1,600 in cashback from American Express thanks to personal and business spending.

However, credit cards are not only a convenient way of paying for things, they can also protect you.  Depending on your credit card, services may include fraud and identity theft protection, purchase protection, travel assistance, rental car insurance and credit protection.  Some of these services maybe free with your credit card or cost a small fee.  Check with your credit card company to determine what type of protection you can receive, especially the free ones.

Credit Card Security
U.S. law limits your liability for unauthorized purchases on your credit card to only $50; however, many credit card companies will waive this amount.

Purchase Protection
According to The federal Fair Credit Billing Act, you are allowed to withhold payment for damaged or low quality goods or services purchased with your credit card, as long as you first try to resolve the problem with the merchant. This is subject to certain limitations; however, many credit card issuers have gone far beyond the legal requirements.

Many credit cards offer extended protection against theft or damage, or may reimburse you the difference if you find the same item for a lower price.  Again, you will have to check with your credit card company to determine if this is offered.

Travel Assistance
Many credit cards also offer many different services for travelers that may include roadside assistance, flight insurance and baggage protection. The major credit card companies may also offer emergency assistance to travelers, via a 24 hours a day, 7 days a week hotline.

Rental Car Insurance
Most credit cards companies offer rental car loss and damage insurance if the rental car is paid for with their card. Even if you have car insurance, your credit card company may cover the deductible.

Credit Protection
If you are concerned about your ability to make card payments when times get hard, most credit card companies offer optional plans that will cancel or suspend your monthly minimum credit card payment during certain protected events. Credit Protection products come with a fee, but can be helpful in case of an emergency.

Debit cards have taken over credit cards.  So when should you use your credit card vs. your debit card.  Like most things in life, it depends.

When to Use a Credit Card
You want to use a credit card when making big ticket purchases such as a HD TV or computer, especially if you are making the purchase online.  If there is a problem with your purchase, you can contact your credit card company to withhold payment. With a debit card, the money is deducted from your checking account immediately and it may take days or weeks to resolve the issue with the merchant.

Credit card companies such as American Express add up to 1 year to the manufacturer’s warranty on products you buy using their credit card.  You may also get additional protection from theft, damage and identity protection.  Many credit card companies also offer 24 hours roadside emergency assistance, travel insurance, car rental loss and damage insurance.

When using a debit card for some hotels, restaurants, car rental companies and gas stations, a hold maybe placed on money in your checking account until the debit transaction is processed.  This may take up to several days for signature-based payments.  The amount that’s held may be much more than the amount of your purchase.  The money held can prevent you from accessing the money in your account and could result in bounced checks, declined transactions or overdraft charges.

Earning Rewards
Very few debit cards offer reward programs and if they do, the reward programs are not as good as credit cards.  Using debit cards will not maximize your cash back or points you can earn.  However, credit card rewards tend to have the highest interest rates, so if you don’t payoff your balance in full each month, don’t use a reward credit card.

Your Liability
Per federal law, liability for fraudulent charges on debit cards can be greater than it is for credit cards.  You are responsible for up to $50 for fraudulent purchases on your credit card, however, for your debit card, you can lose up to $500 if you don’t report the loss or theft of your card or PIN with 2 business days of finding the problem.  Additionally, if you do not report the fraudulent charge within 60 days of the date of the statement that lists them, you maybe held liable for any unauthorized withdrawals after that date.

MasterCard and Visa offer “zero liability” policies that is beyond federal law by exempting debit cardholders from liability in most cases when a bank investigation confirms a transaction is fraudulent.  However, there are loopholes in those policies that may allow people who create fake ATM or debit cards by stealing your PIN and other account data to simply pull cash from your bank account. By using a scheme called “skimming”, they use equipment to capture the magnetic-stripe and keypad information when you enter your PIN at ATMs, gas pumps, restaurants, and retailers.

Betterment.com (a new startup) wants to replace your bank’s saving account, which pays almost nothing; to an investment account that promises to pays more.  

Savings accounts are simple and low risk with low interest rates.  Investment account may promise higher returns, however, they can often be complex and confusing.  Betterment has created a new category that offers the returns of investing with less complexity or hassle.

When customers deposit money in their Betterment account, the money is invested in their chosen blend of diverse stocks or a portfolio of US Treasury bonds.   Customers can allocate funds between these two investment options, setting the level of risk they’re comfortable with. Opening an account takes about 5 minutes, there’s no minimum balance, and transfers are free.

When customers deposit money with Betterment, their money is transferred to Betterment Securities (their broker-dealer), with instructions to buy ETFs (exchange-traded funds, similar to mutual funds) based on their desired allocation between stocks and bonds. Customers own shares in the ETFs, while Betterment recommends and manages buying and selling.

Betterment charges an annual fee of 0.9%, based on a customer’s average balance which is a quarter percent lower than the average mutual fund fee and much less than the average amount banks make off of customer deposits.

Betterment is a Registered Investment Advisor and Betterment Securities is a broker-dealer regulated by FINRA and the SEC. Betterment’s SIPC coverage means that the securities in user accounts are protected up to $500,000 (for more information, visit www.sipc.org).

Since Betterment invests customer’s money in the stock market, they can lose money if the market goes down.  Balances will fluctuate based on market conditions.  Over the long term customers should get a much better return that their savings account.

Betterment currently only operates in the United States.

For more information visit Betterment.com.

Below is a video of a recent news report from ABC KABC-TV in Los Angeles, CA, featuring a Lending Club borrower who took a personal loan to pay off her credit card debt which saved her money in the process.

The news report also featured a Lending Club investor who built a diversified portfolio, lending no more than $100 at a time to more than 200 loans with a return of over 10%.

Related Article: Need a Loan? Get a Low Interest Loan from Lending Club

Do you know your credit card company profile’s you to determine your future credit risk based on your current spending habits?  They called it behavioral modeling.  Using complicated formulas credit card insurers track and study your purchases to determine your credit risk and credit limits.

Purchases that can lower your credit score include:

• Bar tabs – may indicate you enjoy the social scene or drowning your sorrows
• Pawnshop, thrift store – may indicate your are experiencing financial problems
• Casino or racetrack – may indicate you are a gambler and is at risk of missing payments
• Marriage counseling – may indicate you are under domestic stress and possible future financial stress
•  Doctor’s office – may indicate you are not in good health and therefore could be a credit risk

On the flip side purchases can increase your credit score which include:

• Car maintenance and hardware store – may indicate you are responsible in taking care of your assets
• Airplane tickets and hotel – may indicate you have money for extras like vacations
• Doctor’s co-pays – may indicate you are still employed and have health insurance

Due to the recent recession with many people unemployed and/or facing foreclosures, credit card issuers are looking very closely at their customers to determine who is at risk to miss payments.  Residents of states with high foreclosures rates, such as Nevada, California and Texas are considered higher credit risks.

In May 2009 President Obama signed into law Credit Reform.  A part of the legislation directed federal regulators to examine how credit card issuers are using customer information to determine credit limits and credit scores.  Additionally, a report is due next month reporting the affect of credit profiling effect on minority and low-income credit card holders.

Experts believe that cardholders who want to avoid credit score declines should use prepaid debit cards, gift cards or cash.