Credit Card Debt can be easier to get out of than you think
As of July 2008, US credit card debt totaled $962 billion! It is estimated that 1 in 20 American households owe more than $8,000 in bad credit debt. There are many ways to get rid of this debt. You may try to go it alone or you may enlist a debt reduction or credit counseling specialist. Some people take out home equity loans as a quick fix, while others declare bankruptcy to wipe the slate clean. It all just depends on your personal financial situation.
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Often, you can get rid of credit card debt through credit card debt reduction services. If you’re not disciplined enough to stick to a budget, then keep track of your bills and adhere to a repayment schedule with your creditors, as you will need a credit card reduction company’s help. Many of these companies, such as Consumer Credit Counseling Services, are non-profit organizations with low fees. However, beware of companies requesting giant upfront fees, and who claim they can repair your credit overnight and who aren’t listed with the Better Business Bureau. You may be able to find reputable companies in your area through universities, military bases, credit unions, housing authorities, banks and branches of the U.S. Cooperative Extension Service. Educational workshops are a great way to minimize bad credit debt and create a solid plan for the future.
To keep out of credit card debt, you should first only take advantage of offers you actually need. There is no reason to ever have more than 2 or 3 credit cards. Having an unsecured credit card you never use is worse than just buying one thing per month and paying it off each month. To build your credit wisely, you may want to use a secured credit card, where you pay the bank your credit limit upfront and then only take out what you have put in, which is sort of like a debit card, only this one gets reported to all three credit bureaus to show your progress. Speaking of debit, use your credit card as you would a debit card, subtracting each purchase from your savings to be sure you’re not overspending. Ideally, you’ll want to pay on time and in full because only paying off the minimum balances can take years to pay off the full amount, given the interest. Make sure you do not max out your credit cards. If you’re using over 30% of your available credit limit, then your credit scores will go lower.
There are several credit card myths that lead to credit card debt. Myth #1 is that “credit card companies wouldn’t send me offers in the mail if I couldn’t afford it.” In fact, they will offer risky clients more credit in hopes of increasing your limit and interest rates to suck more money out of you. Myth # 2 is “The more cards I have the more financial security I’ll have.” In reality, the temptation will be greater and the more available credit you have, the more likely you’ll be turned down for a mortgage or other loan. Myth # 3 is “It’s ok if I take advantage of the cash advance feature to keep me ahead.” Interest is super high for cash advances, so you should avoid using that function at all costs. Myth # 4 is that “As long as I make the minimum payment each month, I’ll be fine.” But did you know that you will end up paying $2,300 in interest if you pay the minimum monthly payments on a balance of $2,500 over five years? Bad credit debt is sometimes a matter of lying to ourselves. The sooner people realize this, the faster they can get back on track.
At an early age people are given the opportunity to begin building their credit. They can acquire credit cards, loans for vehicles and homes and even money for school. But what happens when this credit is maxed out and there is no way to repay it all? It is all too easy to find yourself in over your head in debt. But you do not have to stay that way. There are many resources on the internet that can help you eliminate those bills and get back on your feet.
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