According to a new survey by COUNTRY Financial folks are tapping into their savings rather than taking on new debt which is a good thing. "Nearly two-thirds (62 percent) of black Americans have cut back their spending and 64 percent have put less money into their savings or retirement to cope with the current economy."
However, the majority of savings are held in retirement accounts and withdrawing from your 401k can cost you big time in the form of penalties and taxes. Here are a few smart money moves you can make without helping Uncle Sam pay down the national debt ...
Dirty Credit Card Tricks
Say "Bye-Bye" to Your Grace Period
No grace period means that you'll start accruing interest the moment you charge something and that can cost you a bundle of "extra" interest. Most credit card issuers have already reduced their grace period from 25 days to 20 days. Many others have eliminated the grace period altogether. Now they are coming up with more and more reasons to take away your grace period. Miss a payment? Stop carrying a balance? Bye-bye grace period!
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Punishing You for Being Smart
These fees are the lowest of the low because they penalize you for being a responsible credit card user. Some of the biggest offenders include charging you a fee for:
+ Closing your account
+ Failing to use a card for a period of time (such as six months or a year)
+ Not carrying a balance
+ Every transaction each and every time that you use your card
If your card charges you any of these fees, it's time to look for a new card!
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Lowering Your Minimum Payment
Another way some cards try to jack up their profits and lure you deeper into debt is by lowering the minimum payment due on your balance. It used to be cards required a minimum monthly payment of about 4 of your balance, but many now require as little at 2. Don't fall for it! Going from a $40 payment to a $25 payment on a $2,500 balance means it will take you an extra 19 months to pay off your balance!
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Inviting You to Skip a Payment
Broke this month? In their infinite generosity (ha!), some cards will "invite" you to skip a payment. This "helpful" offer, which sounds great at first blush, often comes after the holidays when your balance is big and your wallet is stretched. DON'T DO IT! Skipping that payment can lead to a host of trouble from a higher interest rate to possibly having to make extra payments in the future. Are you starting to notice a pattern?! You should be skeptical whenever your credit card company does something "nice" for you without you asking for it!
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Tricky Timing
We all know that our payment is due on a certain date or it's late, right? But a new twist being thrown into the mix is having your payment due by a certain time on the due date. If your payment is due at noon, and gets processed at 12:01, you get socked with a late fee AND likely a higher interest rate. Gimme a break! Carefully check your statement so you avoid this trap.
SOURCE: Dirty Credit Card Tricks provided by AOL Money & Finance
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Adjust your current contributions. Many people were able to contribute the maximum to their 401k when gas wasn't almost five dollars a gallon. You can find extra money in your budget by contributing up to the amount of your employer match. Please take advantage of free money.
Contribute to a Roth IRA. If you have paid down debt and still have funds at the end of the year in your budget that you want to save contribute to a Roth IRA if you are eligible. You won't get to take a deduction on your contributions and you don't pay taxes when you start withdrawing in retirement. You can also have access to your principal balance penalty free after five years if you're a first time home buyer.
Loan yourself money. If your budget is really tight and the interest charges are adding up on your debt you can pay yourself the interest by taking a loan from your retirement plan. Many plans allow you to take out a hardship loan which you can then repay over a period. However if you leave your employer the loan has to be repaid immediately or it will be considered a withdrawal.
Withdrawal penalties on retirement accounts carry a 10% penalty and are taxed as ordinary income. A ten thousand dollar withdrawal can add up to four thousand dollars in penalties and income taxes. In other words, don't be penny wise and pound foolish.
What are you doing to pay down your debt during these troubling financial times?
Deborah Owens is author of Nickel and Dime Your Way To Wealth. Read an excerpt on her Web site at deborahowens.com
1. Lawdy have mercy on my Po ass soul! I owe everybody and then some!I have debts up the wazoo and still borrow from my debit card.I am old,in the 9th inning, don't got no future,and trying to maintain the past,today. One foot in the grave,one foot on a sliding bananna peel,going down!But at least I am enjoying the ride. Good thing I was a Soulja Boy in Vietnam at least I don't have to worry about where they will plant my black ass when the music is over,and its lights out bigdrob1!
bigdrob1[pain in the keister + the mouth of the south] at 4:40AM on Jul 24th 2008