Posts tagged: credit_card_balance

Can You Do a Balance Transfer From Someone Else’s Credit Card?

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Transferring someone else’s balance onto a card that you carry is possible, but not always wise. It can either be very helpful for the person you are transferring the balance for, or it can be very hurtful to you if you take on the responsibility of someone else’s debt by transferring the balance from their card onto yours. Here are a few pros and cons.

Benefits

Some of the things you can get out of a balance transfer from someone else’s credit card to yours is that they have a much better annual percentage rate. Their credit card interest will go down considerably with a credit card balance transfer. The fact that you have paid your bills on time and have a good credit score and credit history will also be advantageous to them in more ways than one, especially if they have had a bad credit history themselves.

If the person that has recently been added to your credit card has a good credit history and is responsible with their spending, it will be a great benefit for you as well. Their good spending habits will reflect on your credit report as well as theirs, because the card is originally under your name. It is important to know if someone can be of benefit to you in this way before you allow them to transfer the balance of their debt onto your credit card.

Fallbacks

The biggest risk you are taking when you allow someone to transfer their debt onto you credit card is if they spend on your card unwisely and build their debt problem back up to where it was before. A lot of the time, when people get in trouble with interest rates because they have bad spending habits, it is very difficult for them to change those habits in order for it not to happen again. The part that makes the situation even worse than it was before is that it is YOUR credit card, and YOU are going to suffer along with them.

If you have bad spending habits, this will rack up their debt and interest rates as well. Say you just got a brand new credit card with a great APR, but you have had some trouble paying your bills in the past. The people you allow on your credit card are going to want to know about this in order to decide whether or not they will really benefit from joining their balance with yours. Just like they can ruin good interest rates for you, you need to be certain that you will not leave them stuck with higher interest rates than they had on their first credit card.

Tips

You finally decide that it’s safe to do the transfer. Now what? Just like shopping for any other card with low interest rates, you need to be careful of what cards you settle for. Be sure to get one with a low fixed rate, and know how much it may increase, when, and why.

How is Your Credit Card Balance Calculated to Figure Out the Finance Charge?

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You get your credit card bill every month, review it, and see that the interest has changed, yet again. You wonder how on earth they ever decide how the interest rates are figured into your expenses. Is it all a scandal or do they really havea formula for this type of thing?

Believe it or not, they do have some rhyme and reason for the differing amount of interest they charge you each month. It is based on the type of balance that is being figured. Here are a few of the types of balances that are important factors when it comes to calculating the finance charges that are charged by the credit card company you are with.

Average Daily Balance

First, your credit card company takes all the money you spent in one day and averages it out. After that, they average all the days of the month together so that they have the average daily balance for that certain month. Once they have that, it is multiplied by one twelfth of your APR. That is one method of coming up with the finance charges on your credit card balance.

Previous Balance

Some credit card companies will charge you more interest based on how much of a balance you carry over from month to month, rather than paying off your credit card debt completely. The beginning balance and the ending balance are both shown on your bill, and you will see how much you have left that you did not pay last month, or the last time you were billed. This amount of money from the previous month and the amount that billed to you this month combined will be what determines your finance charges for this specific month.

Daily Balance

The company will take the amount that you spent each day within the specified month and, rather than multiplying it by one twelfth of the APR, which fraction represents the months in the year, they multiply it by 1/365th of the APR. This, of course, represents each day in a full year. This method is based on how much you actually spend in a day, and therefore is more precise because it has more detail than an average daily balance, which only takes into account the possible average amount spent in a month.

Two Cycle Balance

This type of calculation of your finance charges is basically the same thing as your average daily balance, but instead of involving one month, it takes into account the last two months or billing periods. This can be difficult to handle if you carry a balance over each time. The interest rates build up and climb with each billing period.

Is Credit Card Interest Ever Tax Deductible

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The end of the year has passed. You have survived the holidays, and now you are ready to move on with another year. After all, time marches on. But there is one thing that you have not yet done for last year that is completely unavoidable. It is your taxes. So you are trying to think of every possible way you could get a tax deduction. Then it hits you. Hey, is it possible that your credit card interest is tax deductible?

Sorry, but no. Unfortunately, unlike the interest you pay on your mortgage, your credit card interest is not tax deductible. But there is a way you can make it tax deductible. Still, there are some risks involved. Whether or not the risk is worth it is completely up to you. For you are the one who knows your circumstances. If you really want your credit card interest to be tax deductible, here is what you do.

Refinance Your Home

Sound ridiculous? If you are doing it just to get a tax deduction on your credit card interest, it probably is. If it is that important to you though, refinancing your home can help. It is possible for you to refinance your home and transfer the balance on your credit card to your home loan. That way, you have basically paid off your credit card and do not have to pay interest on it anymore. Now, instead, you have more interest to pay on your home loan, or your mortgage. That kind of interest is in fact tax deductible. By putting all the money you owe from your credit card onto your home equity line of credit, you allow for the interest on your credit card to change to a different type of interest, making it tax deductible.

Risks

You could lose your home. It is kind of a scary statement, yes, but it is in fact true. Not necessarily just because you refinanced it to get your credit card balance transferred, but because it may take longer for you to pay off your home loan. Because it would take you longer and make your balance bigger, it may be difficult to make monthly payments in full and on time.

Whether refinancing your home to get a little extra money from your taxes is the right thing to do is up to you. In my opinion, it is definitely not the wisest thing to do. Better chances of keeping your home is way more important than getting money back from the interest you paid on your credit card. To me, the risk is just too big to take. Having a home loan is burden enough.