Avoiding Credit Card Defaults

Many of us find ourselves caught in a situation where we find it hard to afford the minimum payment of our credit card bill, let alone bringing the outstanding credit balances down. A number of factors including misuse of credit card, sudden unforeseen expenses, sudden layoff and lowering of monthly income are responsible landing us in this ugly situation. What follows is the stage of mental tension as major chunk of your income is dedicated to payment of credit card dues and you find it hard to meet your daily essential expenses from the remainder salary.

Is there a way out of this trap? The answer is a definite yes and the famous proverbial saying fits here that “where there is a will, there is a way”. This requires financial planning based on realistic projections of your future income coupled with restraint on your spending habits.

As a first step, identify the factors that led you to this situation and these factors will vary from individual to individual.

There will be some who are in trouble because they could not resist their temptation and did lavish spending from credit card without realizing the future consequences. For them it advised that first of all they should apply for short term personal loan. Many institutions offer short term personal loan specifically tailored for purpose of paying off bad debts. Such loan is repaid in equal monthly installments and carries much lower interest rate than credit card. You also have the option of choosing payback period depending on what suits your circumstances.

The next step which is even more important is not to repeat the same mistake of overspending again. There is a temptation to again consume the limit of credit card made available after payment of credit card bill through personal loan. Beware that if you repeat the history then the consequences can be disastrous as you will end up under unmanageable debt of having to pay the monthly installment of personal loan plus the payment of credit card bills. In such cases, credit card must be resorted to in case of severe emergency.

There are others who find themselves caught in credit card debt not because they overspent their limits beyond the repayment capacity but because they have either lost job or had to utilize credit card limit in meeting some emergency expense. Such people cannot resort to personal loans after being laid off as personal loans are offered on the basis of their monthly income. The best strategy would be to approach your bank, tell them the true story and request them to reschedule your payment plan. Remember its important that you approach your bank before they approach you. It will enhance your credibility and you will find them more accommodating to your situation. They do have payment plans for such people and they will surely roll out the best plan as per your circumstances. It is not in their interest to waste time and money in initiating legal proceedings against you. Therefore don’t shy from taking this step.

Safe Use of Online Banking

Online banking is always exposed to the dangers of hacking. However following security checks will reduce the risk of the online theft of your account information.

1. Install updated versions of anti-virus and anti-spyware programs and set them to automatically install the updates as and when they are available.
2. Make a habit of changing your pin regularly. It is always advisable to use PIN that is a combination of alphabets and numerical digits. Do not use PIN that gives reference to your personal information such as; date of birth, address, place of birth etc.; since they are easy to guess.
3. You should periodically reconcile your paper based statement received from your branch with your online statement and account balance and immediately notify and reason out the discrepancies, if any, with your bank.
4. It is very risky to use online banking on public computers. Never attempt that as your information may get stored in browser’s temporary memory and become easily accessible to those looking for it with malicious intent.
5. It is always advisable to shop online through credit card rather than debit card as credit cards have stronger personal liability claims than debit card.
6. While shopping online you should shop from websites you are familiar with, with whom you have been shopping online regularly. Avoid shopping from unknown websites as some of them are designed for stealing purpose. This is especially true of the websites that offer unrealistically huge discounts on their products.
7. Never reply to an email that is unsolicited. Do not open the attachments or click a link that is sent with such emails. Many times such emails will claim huge rewards for you so that you are lured into replying it, clicking a link on it or downloading the attachments with it, all can result in leakage of your confidential account information.
8. When you receive email from your bank dealing with your account information, do not reply to it until you confirm from your bank that it is sent through an authorized source. Scammers also try to trap you through sending emails that appear to be received from your own bank.
9. Do not share password or pin with anyone for any reason.
10. In case you feel your confidential information has been leaked on internet you must report it to the following institutions.
• Your Bank
• Federal Trade Commission http://www.ftc.gov/ftc/contact.shtm
• Local Police
• Internet Crime Complaint Center http://www.ic3.gov/default.aspx
• Two major credit bureaus
Equifax http://www.equifax.com/home/en_us
Trans Union http://www.transunion.com/corporate/personal/fraudIdentityTheft/recoveringFraud.page

Advantages & Disadvantages of Online Banking

ADVANTAGES:

• It is cost-saving, time-saving and convenient way of banking.
• It is accessible all the time and operative from anywhere.
• Risks associated with stolen cheques and forged signatures are avoided.
• Makes possible to do online shopping.
• Generally online banks offer higher interest rates on deposits than brick and mortar banks as they save fixed cost associated with the maintenance of buildings and manpower.
• There is less chance of confidentiality of your account status and transactions being compromised as there is minimum human interference with the transactions conducted online.
• Transfer funds between your accounts of different classification so that you gain maximum returns on your deposit.



DISADVANTAGES

• Though online banking portal is secure and user friendly, there are people who are beginners in using internet and therefore are exposed to the dangers of stolen passwords and website phishing. This especially holds true when you are using public computers.
• Many times you face issues conducting day to day banking activities. You feel the need to resolve issues by discussing them with banker. Contacting representative of an online bank can be a hassle as compared contacting banker in a brick and mortar bank who always have customer service desk dedicated for this purpose.
• Many type of online transactions take upto 3 to 4 days to settle, especially when you make deposit by mailing cheques.
• Before making an investment decision you need to gain in-depth knowledge of all the saving/investment products on the offer with pros and cons of each one. Some banking terminologies and concepts can be tricky to laymen and require elaboration. In such situations, you get a satisfying reply from a professional banker by meeting him in personal rather than from faq’s available online.
• When online link goes down, you cannot resort to any alternative system to get your transactions processed.

Online Banking

• The Concept

Online banking is all about viewing account status and conducting transactions over internet. It is distinct from traditional banking in that it saves you from the rigors of visiting branches, filling out lengthy paper based requests, waiting for your turn and interacting with tellers in order to get transactions completed. It just requires an internet connection to freely operate your account 24 hrs a day, 7 days a week from anywhere. Your account moves with you wherever you go. Here you are just a click away from viewing account balance, transaction history, paying bills online, ordering demand drafts, telegraphic tranfers, requesting ATM / Debit Card, Credit Card, Personal Loan, Auto Loan etc.

• Features

Online banking gives you an ID, password and a secure interface to operate your account. You can view the balances and transaction details, submit request for financing and avail subscription of various banking services as well as order the remittances and internal transfers.

1. Balance Information and Transaction History

You no longer have to wait for delivery of account statements through mail. You just log in and view account balance and transaction details / history from a secure website of your bank. Transaction history can be viewed for any period, unlike printed monthly statement you receive in mail that only shows transaction history of past one month

2. Submission of Request for Financing and Services

Many banks offer you to use online banking facility to submit requests to obtain financing such as Personal Loans, Auto Loans, Credit Cards, Running Finance etc. instead of visiting branches to look for the right person to guide you through the whole process. Upon online submission of request, bank will itself appoint its officer to visit you with all the necessary documentation required for processing of the financing requests..

3. Executing Remittances

You can remit money using online banking service by filling the pre-formatted funds transfer application templates available online. Banks will effect TT (Telegraphic Transfers), SWIFT Payments, Issue Pay Order, Demand Drafts etc upon receipt of your online requests.

4. Online Trading (Import and Export)

You can initiate import and export related transactions via online trading services offered by some banks. For issuing letter of credits, fill out LC issuance forms available online containing all the fields for entering date and terms and conditions that are to be incorporated in LC.

5. Paying Bills Online

Banks offer you the services of paying your bills online which is much safer than mailing checks. By paying bills online, you can escape from the risk of frauds associated with cheques