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Dealing with Credit Card Debt in a Rising Rate Environment

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The Federal Reserve raised the fed funds rate a quarter point to 1.5 percent on December 13, 2017, marking it the third increase in 2017 and the fifth increase since the market crashed in 2008-2009. The intention behind the original cuts to the federal funds rate after the market crashed was to increase liquidity, boost employment, and spark inflation. The Federal Reserves has come too close to what they set out to accomplish within the American economy, so now they have begun raising rates.


While the economy hasn’t reached the feds stated target of 2 percent of inflation yet, we are pretty close and it can be too dangerous to wait too long to raise rates because if inflation takes off it is hard to get a handle on it. The Federal Reserves insinuated there will be two to three more rate hikes this year. When the Federal Reserve increases interest rates, your credit card debt becomes more expensive. Since these rate increase real-world effects on consumers and businesses it’s important to stay on top of your finances. However, there are ways to reduce or eliminate credit card interest.

Personal Loans

If you are faced with the burden of credit card debt like so many other Americans, one way to deal with rising rates is personal loans. More and more, I have been seeing people borrowing (personal loans) with lower rates to deal with their credit card debt. In other words, they are using the borrowed money to avoid paying high interest on their credit cards, even though the borrower will still have to pay back the personal loan rate. Dependent upon what credit card rate you have and what personal loan rate you can get and the terms of the loan, this can be an effective way to avoid skyrocket credit card interest. Personal loans come with fixed interest rates, which means if the Federal Reserves does another hike in interest rates, you will not be subjected to paying a higher rate, unlike most credit card contracts.

So, what will be an indicator of how good of a rate you will get on a personal loan? Drum roll, your credit score. Your credit score is essential in determining if you are a trustworthy borrower or not. Since, personal loans are unsecured debt the loan doesn’t require you to use an asset as collateral.

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However don’t be fooled, if you go into default the lender can take legal actions against you. It’s also important to watch out for scams, especially if someone approves you with a bad credit score or someone who approves you without checking your credit history. It also may be easier to get approved for a personal loan from a bank you already have accounts with.

"It’s important to watch out for scams, especially if someone approves you with a bad credit score or someone who approves you without checking your credit history."

Balance Transfers

Balance transfers, if done carefully, can be a successful way to eliminate high-interest rate credit card debt. Overwhelming credit card debt can disgruntle consumers which may lead to people choosing options which may appeal to them at first, but if they didn’t fully research only end up hurting them in the long run. Moving your credit card debt from a high-interest rate to a lower one can be appealing and effective for some but not everyone. Transferring your balance is only worthwhile if you can pay off the debt within the introductory low-interest rate window. Many time people transfer their balances to 0 percent interest rate cards but you have to be extremely dedicated to paying off your debt, with one missed payments some creditors can take away the promotional rate and they can charge you with retroactive interest.

If you decide to do a balance transfer paying down your debt has to be a priority otherwise your financial situation can spiral out of control.

Negotiating For a Lower Rate

Ask and you shall receive; sometimes just calling your credit card company and simply asking for a lower rate can work in your favor. Inform your credit card company that you have been exploring lower interest rate credit cards and are struggling to meet your monthly payments. Sometimes companies can be willing to work with you especially if you have some sort of hardship (illness, sudden loss of a job, etc.) If you are heavily buried in credit card debt, you may be able to negotiate a settlement to a lesser amount than your original balance.

Try to negotiate for new (lower) monthly payments over a longer term; offer to pay some of your bills in cash so they know you are good for the money.

Financial negotiating is a skill everyone should consider learning being that it gives you the potential to save a decent amount of money. If you make timely payments, have been a loyal customer, or have great credit use this as an edge in your negotiation. Keep in mind that you are giving your provider business- you are the customer. This can help when trying to reach a better rate, it can’t hurt to try.

When looking for ways to eliminate interest rates to pay down your debt, be cautious certain get-out-of-debt options could have you paying more. Regardless of the above-mentioned strategies, as rates rise, being in debt will cost more and more so consumers should do their best to adjust their budgets and avoid taking on more debt. Getting out of debt means coming to the realization that you need to make changes.

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Choosing the Right Corporate Structure: Which Business Entity Should You Go With?

Business entities can be defined as the corporate, tax and legal structures which an organization chooses to officially follow at the time of its official registration with the state authorities. In total, there are fifteen different types of business entities, which would be the following.


  • Sole Proprietorship
  • General Partnership
  • Limited Partnership or LP
  • Limited Liability Partnership or LLP
  • Limited Liability Limited Partnership or LLLP
  • Limited Liability Company or LLC
  • Professional LLC
  • Professional Corporation
  • B-Corporation
  • C-Corporation
  • S-Corporation
  • Nonprofit Organization
  • Estate
  • Cooperative Organization
  • Municipality

As estates, municipalities and nonprofits do not concern the main topic here, the following discussions will exclude the three.

Importance of the State: The Same Corporate Structure Will Vary from State to State

All organizations must register themselves as entities at the state level in United States, so the rules and regulations governing them differ quite a bit, based on the state in question.

What this means is that a Texas LLC for example will not operate under the same rules and regulations as an LLC registered in New York. Also, an LLC in Texas can have the same name as another company that is registered in a different state, but it's not advisable given how difficult it could become in the future while filing for patents.

To know more about such quirks and step-by-step instructions on how to start an LLC in Texas, visit howtostartanllc.com, and you could get started with the online process immediately. The information and services on the website are not just limited to Texas LLC organizations either, but they have a dedicated page for guiding fresh entrepreneurs through the corporate tax structures in every state.

Sole Proprietorship: Default for Freelancers and Consultants

There is only one owner or head in a sole proprietorship, and that's what makes it ideal for one-man businesses that deal with freelance work and consulting services. Single man sole proprietorships are automatic in nature, therefore, registration with the state is unnecessary.

Sole proprietorships are also suited to a degree for singular teams such as a small construction crew, a group of handymen, or even miniature establishments in retail. Also, this puts the owner's personal financial status at jeopardy.

Due to the fact that a sole proprietorship entity puts all responsibilities for paying taxes and returning loans, it directly jeopardizes the sole proprietor's personal belongings in case of a lawsuit, or even after a failed loan repayment.

This is the main reason why even the most miniature establishments find LLCs to be a better option, but this is not the only reason either. Sole proprietors also find it hard to start their business credit or even get significant business loans.

General Partnership: Equal Responsibilities

The only significant difference between a General Partnership and a Sole Proprietorship is the fact that two or more owners share responsibilities and liabilities equally in a General Partnership, as opposed to there being only one responsible and liable party in the latter. Other than that, they more or less share the same pros and cons.

Registration with the state is not necessary in most cases, and although it still puts the finances of the business owners at risk here, the partnership divides the liability, making it a slightly better option than sole proprietorship for small teams of skilled workers or even small restaurants and such.

Limited Partnership: Active and Investing Partners

A Limited Partnership (LP) has to be registered with a state and whether it has just two or more partners, there are two different types of partners in all LP establishments.

The active partner or the general partner is the one who is responsible and liable for operating the business in its entirety. The silent or investing partner, on the other hand, is the one who invests funds or other resources into the organization. The latter has very limited liability or control over the company's operations.

It's a perfect way for investors to put their money into a sector that they are personally not experienced with, but have access to people who do. From the perspective of the general partners, they have similar responsibilities and liabilities to those in a general partnership.

It's the default strategy for startups to find funding and as long as the idea is sound, it has made way for multiple successful entrepreneurial ventures in the recent past. However, personal liability still looms as a dangerous prospect for the active partners to consider.

Limited Liability Company and Professional LLC

Small businesses have no better entity structure to follow than the LLC, given that it takes multiple good ideas from various corporate structures, virtually eliminating most cons that are inherent to them. Any and all small businesses that are in a position to or are in requirement of signing up with their respective state, usually choose an LLC entity because of the following reasons:

  • It removes the dangerous aspect of personal liability if the business falls in debt or is sued for reparations
  • The state offers the choice of choosing between corporation and partnership tax slabs
  • The limited legalities and paperwork make it suited for small businesses

While more expensive than a general partnership or a sole proprietorship, a professional LLC is going to be a much safer choice for freelancers and consultants, especially if it involves risk of any kind. This makes it ideal for even single man businesses such a physician's practice or the consultancy services of an accountant.

B, C and S-Corporation

By definition, all corporation entities share most of the same attributes and as the term suggests, they're more suited for larger or at least medium sized businesses in any sector. The differences between the three are vast once you delve into the tax structures which govern each entity.

However, the basic differences can be observed by simply taking a look at each of their definitive descriptions, as stated below.

C-Corporation – This is the default corporate entity for large or medium-large businesses, complete with a board of directors, a CEO/CEOs, other executive officers and shareholders.

The shareholders or owners are not liable for debts or legal dispute settlements in a C-Corporation, and they may qualify for lower tax slabs than is possible in any other corporate structure. On becoming big enough, they also have the option to become a publicly traded company, which is ideal for generating growth investments.

B- Corporation – the same rules apply as a C-Corporation, but due to their registered and certified commitment to social and environmental standards maintenance, B-Corporations will have a more lenient tax structure to deal with.

S-Corporation – Almost identical to a C-Corporation, the difference is in scale, as S-Corporations are only meant for small businesses, general partnerships and even sole proprietors. The main difference here is that due to the creation of a pass-through entity, aka a S-Corporation, the owner/owners do not have liability for business debt and legal disputes. They also are not taxed on the corporate slab.

Cooperative: Limited Application

A cooperation structure in most cases is a voluntary partnership of limited responsibilities that binds people in mutual interest - it is an inefficient structure due to the voluntary nature of its legal bindings, which often makes it unsuitable for traditional business operations. Nevertheless, the limited liability clause exempts all members of a cooperative from having personal liability for paying debts and settling claims.

This should clear up most of the confusion surrounding the core concepts and their suitability. In case you are wondering why the Professional Corporation structure wasn't mentioned, then that's because it has very limited applications. Meant for self-employed, skilled professionals or small organizations founded by them, they have less appeal now in comparison to an LLC or an S-Corporation.