Here we are today: the most anticipated and talked about shopping day of the year.  The day that marks the unofficial start of the holiday season. Since 2005, Black Friday has become the busiest retail day of the whole year, both in terms of pedestrian traffic at shopping centers and in terms of actual sales volume.

Almost all big retailers participate in such an event with hopes of luring consumers and increasing their sales.  But this concept has also permeated into the financial services industry with ING Direct and Service Credit Union adopting the newly created tradition of special sales promotions on Black Friday.

There are several explanations for the origin of the term "Black Friday", but the one that really stands out for me personally is that it indicates the period during which retailers begin to turn a profit for their fiscal year, or go "in the black."  For anybody with basic accounting training, this means that a debit on their books, becomes a credit somewhere else... where?  that would be on YOUR books, "in the red."

Today, just like David from MoneyNing.com, I'm staying at home enjoying a relaxing day.  But if you are shopping this Black Friday, I wish you much commensuration and conscience when venturing out there for a good sale. Be careful with overspending what you don't have, and getting yourself into more debt that you may lament later.

Happy Shopping Day!

@RobGarciaSJ

Image courtesy of inacentaurdump.

Whenever you get a loan, you have to pay interest and most likely an origination fee (aka application or processing fee). Whether it’s for a home loan, credit card, auto loan or personal loan, you will have to pay for access to cash.  And, because interest is money that goes straight into someone else’s pocket, it is obviously a good idea to shop around so that you get the lowest interest rate possible. Here are some ideas that can help you as you shop around for the best interest rates:

• Know your finances: You should have a good idea of what your financial situation looks like. This includes being up to speed on having a good credit score, and knowing what you debt-to-income ratio looks like. When you know that you have a good financial situation, you have more leverage.
• Understand the market: Take the time to find out what is average for your market. In many cases, you might find that you can get a lower interest rate than the national average if your market supports it.  Sites like BankRate.com, CreditKarma.com and Money-Rates.com are great resources to research the local market and the specific financial institutions available around your area .  Once you decide which financial institution to call, ask for the best rate available, rather than relying on the posted rate.
• Compare apples to apples: Make sure that you are comparing similar loan products and services to each other. Tell different lenders, as you shop around, what you are looking for and compare fees, terms and other loan characteristics that are similar.  Also, consider all fees, compare APRs and get a total cost of borrowing.  This will help you avoid falling in common traps used by advertisers who put a lot of emphasis on the rate only.
• Make banks compete: Once you have engaged into conversations with financial institutions, don't just take the rate they give you.  Make them work for your business.   It helps to have pristine credit history, but independent of your situation, you should always try to make them aware you're talking to several companies, and if possible, share the rates.  You'll be surprise how many of them will adapt their offer based on that knowledge.  Websites like LendingTree.com and MoneyAisle.com make it easier to hit a few banks without having to pick up the phone and spend a lot of time checking in with each one.
• Let them know you are “just shopping around”: Don’t fill out a full application just yet. Be honest about your financial situation, and tell prospective lenders that you are just shopping around. It will give them more of an incentive to offer you a good deal. You can visit three or four lenders, and compare the rates available online, before you make a decision.
• Get it in writing: Ask if the potential lender can write down his or her best offer, and find out what you financial situation will need to show in order for you to get that offer.

You will always have to pay when you borrow money. But if you shop around for the best deal on your interest rate, you may not have to pay as much.

The following is a guest post by Jason Holmes from Debt Consolidation Care who writes about debt related topics including debt settlement, debt consolidation, credit card debt, and loans.

If you have piled up some debt and want to get out of it by the end of 2011, then you can try out debt consolidation by either enrolling in a debt consolidation program or taking out a personal loan to consolidate your debts. Read on to know about these to options to consolidate and pay off your debts by the end of 2011.

Consolidate your debt through consolidation program

One option is to enroll in a consolidation program. There are various debt consolidation companies in the nation that offer effective and honest programs. But your job will be to find out a reputable debt consolidation company that has been in the industry for several years. You can get all the necessary information about the company from the BBB’s (Better Business Bureau) website. You should also get to know about the services of the company from its existing customers. Once, you have gathered all the relevant information about a particular debt consolidation company, contact the company representatives as soon as possible.

Before meeting the representatives/counselors at the company, it is always better to make a complete list of existing debts and calculate the total outstanding balance. You can get detail information about your debts and creditors from the credit reports. So, pull your credit reports as early as possible. It is also necessary to calculate your monthly income and expenses prior to approaching a debt consolidation company.

Since you want to consolidate your debt by the end of 2011, it is better to inform the representatives/counselors of this goal beforehand. The reason is, the counselors will then draw up such a payment plan that can help you pay off the debt in the next 12-14 months. However, make sure you get help from a company that charge minimum fees for their services. This will make it easier for you to pay off the debt. If you find that a particular company is charging an exorbitant fee, then don’t hesitate to move on. Chances are, they're just in it to make a buck off of you.

The counselors at the company will analyze your financial situation (total debt, income, expenses) when you have enrolled in the consolidation program. They will then get in touch with your creditors and inform them that you have enrolled in the consolidation program. The counselors will negotiate with your creditors to waive off the late fees and reduce the interest rates of the loans. Once the creditors agree with the company to cut back the interest rates and you consent to the payment plan offered by the counselors, sign the necessary documents. After signing the documents, you’ll only have to make one monthly payment to the company. The company will forward the money to your creditors after deducting their fees.

Since you want to consolidate your debts within 2011, it is important to make some extra payments. It is not an easy task to consolidate debts within 12-14 months. You have to work hard for it. Making extra payments to the consolidation company may help you get out of debt within the stipulated period. Here are 2 tips that can help you make some extra payments:

1. Stick to a strict budget: Make an effective budget on your own or with the help of online budget planner and stick to it. Track your monthly income and expenses. Curtail all the unnecessary expenses. Find interesting ways to reduce utility bills, water bills, etc.
2. Earn more: Search for the ways to earn more money. Try out alternative investments, stock trading, blogging, writing articles for various websites, freelancing, part-time jobs. You can even ask your family members to try out new ways to earn a substantial amount every month. This will surely help you bring some extra cash in your home.  However, make sure you understand the risks before jumping into any new endeavor, and always have a cap for any potential losses.

Make sure you utilize all the extra cash towards the payment of debts. Otherwise, your aim of consolidating debt by the end of 2011 will only remain a dream.

Consolidate your debt through consolidation loan

Debt consolidation loan can also help you consolidate your debts by the end of 2011. All you need to do is find an economically stable financial institution (bank or credit union) that offers consolidation loan at low interest. Start by researching for interest rates at banks (on sites like BankRate.com) that are located in your area of residence offering personal or collateral-based loans that can be used for debt consolidation.

If your credit history is in good shape, peer-to-peer personal loans are becoming the norm for paying off debt, allowing the borrower to consolidate debt and pay it off at lower rates than typically found at a bank. Peer-to-peer personal loans are also easy to apply and fully online.  A peer-to-peer consolidation loan helps you pay off your debts to your creditors all at once and only deal with one monthly payment.

Usually, the interest rates of these consolidation loans are much lower than that of the credit cards. The debtors only need to make single or one monthly payment to the financial institution. There is no need to manage several or multiple bills anymore. Thereby, debtors can repay the loans easily and sleep peacefully.

However, there are some financial institutions that charge extremely high interest rates on the loans. This specially happens with the debtors with bad credit. So, if you have bad credit, take necessary steps to repair it. However, if they are charging high interest rates in spite of having good credit, then move on. It is also important to not get trapped into easy loan scams. There are financial institutions that offer consolidation loans at very low interest rates. But they stretch out the repayment plan period, which means you end up paying more in the long run.

Before taking out a consolidation loan, make sure you calculate the total cost of the consolidation loan. This should include loan amount, payment plan period, processing fees, late payment fees, documentation charges, pre-payment penalty and interest rates. You can calculate the total cost of the loan with the help of a debt consolidation calculator accurately.

Finally, if you want to repay the loan by the end of 2011, take necessary steps to increase your income so as to pay more than the minimum. Restrict your over spending habits. Never make the mistake of making late payments. If you do so, it will be difficult for you to repay the debt within the next 14 months

Image credits:
Debt Consolidation ad, Circa 1948,  courtesy of Orin Zebest.
Credit cards and cash, courtesy of Anthrocopy.

If you want to effectively manage your credit score, it helps to know your FICO score.  FICO is a measure of your credit habits using a formula from Fair Isaac Corporation. Other entities offer their own versions of a credit scores, including the credit agencies and even your lender. Many others who are interested in discovering your level of fiscal responsibility at a glance use variations of the FICO formula to come up with a score. These subtle differences, plus the differences in information reported by different agencies, accounts for the reason that you may end up with more than one score.

The key to ensuring that your score is generally positive is learning how to manage your FICO score. Understanding some of the basics of the FICO scoring system can help you make better financial decisions, and determine in what areas of your financial picture you need to improve.

Main Elements that Contribute to Your FICO Score

When figuring your FICO score, Fair Isaac relies on information about your credit habits, as reported by the major credit bureaus. Here are the five main elements of a FICO score:

1. Payment History (35%): This is the most important aspect of your score. This is the meat of your credit habits, reflecting whether or not you pay on time. If you miss payments, or pay late regularly, your FICO score will reflect that, and warn lenders that you might be a credit risk.

2. Credit Utilization (30%): The next important factor is how much of your available credit you are using. If your credit card balances are close to the limit, your score will be negatively impacted. You can improve your score by paying down debt so that there is more space between what is available to you and what you owe.

3. Length of History (15%): In order to have a credit score, you have to have used credit. A long history of credit use can be an indication that you understand how to use credit responsibly. This factor is one of the reasons that many financial experts recommend that you keep your oldest credit card account active – it positively influences the history part of your FICO score.

4. Types of Credit You Have (10%): The kind of credit you have does matter. The FICO score formula takes into account your mix of installment and revolving loans. Payday loans count against you, and department store credit cards are not as positive as cards issued by major banks.

5. Credit Inquiries (10%): The final 10% of the formula considers how much credit you are applying for. Applying for a great deal of credit in a short period of time can negatively impact your score.

Once you understand what goes into your FICO score, you can adjust your habits to better manage your credit score.

Keeping Tabs on Your Credit Score

Check your credit score regularly to get an idea of where you are. This is especially important if you plan to apply for a mortgage in the near future, since your FICO score is one of the most important factors in whether or not you qualify, and the terms that you end up with. Here are some ways to keep track of your credit score:

• CreditReport.com: You can monitor and track your credit score from all 3 bureaus (Equifax, TransUnion and Experian) practically real time.  They offer a 7-day free trial, but after that there is a monthly fee.
• MyFICO: You can go to the source and pay for a one-time score and report, or you can sign up for regular access for a monthly fee.
• CreditKarma: This site allows you to keep track of your TransUnion score for free. Realize that it might differ from your official FICO score, though.
• Quizzle: You can see your Experian credit score for free at this site. As with CreditKarma, it will probably differ from your FICO score.
• Credit Bureaus: You can straight to the bureaus, Equifax, TransUnion and Experian, to see the scores from those bureaus. You can pay for your scores separately or as part of a report, or sign up for regular access through a monthly fee.
• Identity Protection Services: These services often include credit score access as part of their monthly fees.

Do you know your score?   Or places to help you track it better?  Drop us a comment below.

The following is a guest post by Tim Chen, CEO of NerdWallet, a website that helps you find the right credit card based on your lifestyle, by filtering nearly 600 credit cards to either maximize rewards or minimize APRs.  Tim writes about credit cards for the Forbes Moneybuilder Blog, Huffington Post, and the Christian Science Monitor.

At the end of the month, you're short $150 to pay the bills.  You need that money immediately to keep the lights on, so what’s your best bet? what do you do?

Here are your most common choices:

• Go to your bank's ATM, and overdraft your checking account once,
• Charge it on your credit card, and eat 14 days of interest. For the sake of argument, assume you are paying “Default” APR rates, which are the highest legally permissible,
• Get a payday loan and risk getting charged usury rates.

Pretty grim options, aren't they?  No matter what you do, you'll be paying.  So what's the cheapest option?

Payday loan centers generally have bad reputations for a reason, but in this situation they actually outperform the overdraft option. We’ve done the math for you below.

The numbers speak for themselves - never use “overdraft protection”.  A payday loan is better, and adding it to a credit card balance is an even better proposition if your credit is good enough to obtain one.

If you ever need to do a similar comparison on your own, try an online payday loan APR calculator.

More Reasons to Avoid Overdraft Protection

If you have a checking account, chances are you’ve been getting harassed by spam and bank tellers begging you to participate in overdraft protection. The reason this is happening is because the Federal Reserve found the practice so appalling that they banned it.

Before August 15, 2010, your bank could opt you in for overdraft protection without your consent. This doesn’t seem like a big deal, but when your account is empty, you get charged $35 each time you use your debit card, until you realize something is wrong. Numerous lawsuits have been filed regarding this matter, especially surrounding the practice of banks reshuffling the order of payments to ding you as many times as possible.

Given how lucrative this practice is for banks, it’s not hard to understand why I’ve received at least 15 letters from Chase over the past few months asking me to opt-in, and I’m sure you are seeing much of the same.

There seems to be a serious lack of awareness regarding the issue. Regional banks like TCF Financial claim that most people actually want this service, yet their average checking account gets hit with over $120 per year in overdraft fees. How they’ve managed to get 85% of their new customers to opt-in is beyond my comprehension, given that 5% of people end up paying over $1600 per year in fees, each, according to an FDIC study on overdraft fees. Lack of education must be part of the issue, along with some pushy sales kung fu.

To really nail the point home, Bank of America recently announced that they have ended overdraft protection at the point of sale, because it’s pissed off so many customers. In October 2010 they reported that 10% of customers were paying 70% of the overdraft fees, and that 10 million checking account customers jumped ship last year, largely because they were peeved about overdraft charges.

So Are Consumer Advocates Wrong to Push People Toward Debit?

Contrary to popular opinion, if you need money in a pinch, you actually come out ahead by running up your credit card rather than overdrawing your checking account. So savvy consumers would actually benefit from keeping an emergency credit card on hand. We recommend you ignore credit card rewards though, and get a low APR credit card with a low interest balance transfer offer. The reason this is a smart move is because rewards credit cards tend to have much higher APRs than those targeted for people carrying balances.

Another longer-term strategy for those with good credit is building an emergency cushion with a P2P personal loan.  Peer-to-peer lending has gained quite a following over the past few years because it offers lower rates.  As an example, if you have excellent credit, you could borrow $1,000 from LendingClub.com over the next three years at an interest rate of 5.42%, and that will give you a cash cushion to avoid ever having to overdraft.  At that interest rate, this loan would cost you about $86 plus a $20 fee, or $106.  That’s basically equivalent to three overdraft fees at $35 apiece, so you will likely come out ahead with P2P, while giving yourself enough time to build a cushion of your own.

Regardless of how you finance the loan, be careful not to fall into the cycle of coming up $100 short each month. The reason there are so many payday loan centers is because this happens to so many people, and it’s very good business.