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Debt Management and Credit Cards Credit Card Debt Management
Many times people will look at a credit card and see only the ease and convenience with which they can painlessly get the things that they want. When asked to list their debts, people will list their mortgage payments, their car payments, and other installment loans, and not list their credit cards.
The fact is that the balance on a credit card is the amount of the debt (NOT THE MINIMUM MONTHLY PAYMENT)...and that debt only increases each time an interest charge or a late charge is added. Paying only the minimum on a credit card balance will mean that it will be many years before that debt is paid off.
It is astounding, but a great many people have no idea what the interest rate that is charged by their credit card companies or whether that interest rate is simple or compound interest. (It's compound...and it is well above the national interest rate.)
Too many households in America carry far too much credit card debt. Seventy-five percent of households, in a recent study of American spending habits, are carrying a substantial amount of credit card debt. (Only 41% of American households have saving accounts.)
Now, don't misunderstand me...I am not knocking credit cards. I have a few of my own and I use them almost every month. Credit cards are practically as essential as an automobile in today's world, and if one does business or shops on the Internet, a credit card is indispensable. I also pay the balance before the credit card companies can charge a penny of interest.
Paying interest means that everything that you buy on a credit card cost you more than it would have cost if you had simply paid cash or written a check for it.
The best rule is to pay as you go. Use your credit cards, but pay balances before interest is added.
See Also:
Debt Consolidation and Debt Negotiation Services - Clear Debt Results
| Debt Management-The Controls Debt Management by Negotiation
Negotiation is an ancient art, but that art is not the kind of negotiation that we are talking about here. You have very likely seen the advertisements by companies claiming that through negotiation they can eliminate you credit card debt by getting the issuing companies to settle for mere pennies on the dollar or what you actually owe them.
These debt negotiation advertisements will sometimes claim that this will not negatively affect your credit score and that you can continue to secure additional credit even while this negotiation process is going on.
Well...not quite. While it is true that debt negotiation is an alternative to declaring bankruptcy, both are last-ditch efforts to resolve financial problems.
If you are considering using a debt negotiation company to help with your own financial difficulties, you would be very wise to do three things before you sign on the dotted line.
1. Check with the Better Business Bureau (BBB) about the company you are considering signing on with. If there have been complaints by other clients, the BBB will have a record of them.
2. Check with the Attorney General of the state in which you reside. You can find out if debt negotiation companies are required to be licensed in your state and if the company you are considering does in fact have a license.
3. Read the fine print. Before you sign an agreement, you need to fully understand what you are agreeing to and what services you will be paying for. FREE in big letters in the advertisement is not necessarily what is written in the fine print on the actual contract that you sign.
Yes, heavy debt is a burden that you want some relief from. But be sure that the relief is the real thing and not something that is only going to cause you more problems in the future. |
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Before credit cards came into existence (and, yes, there was a world without credit cards at one time) it was a lot more difficult for people to get in over their heads financially. It happened, of course, but not with nearly the frequency that it happens in the credit card laden world of today.
People really didn't have the ability in the form of a credit card to get so deeply in debt that they couldnt get out. Loans had to be approved by other living people. Credit histories were checked and employment was verified before credit was extended.
Credit cards have made getting credit very, very easy, and that easy credit is getting a lot of people into serious financial difficulty. If a person has a social security number, they can get a credit card. In fact, I'm not certain that even a social security number is necessary -- maybe just a mailing address works. A man in California got a credit card for his dog and used nine zeros as a social security number.
Having a credit card is not a badge of honor. It doesn't assure the world that a person is financially responsible and that they pay their debts on time and in full each month.
Managing debt means being financially responsible. We live in a world where instant gratification is the expected norm. See it, want it, buy it...with a credit card. The problem is that it wasn't bought; it was charged, and the bill will come due. Buy it now, worry about paying for it later seems to be the mantra of the nation today.
Credit cards are the vehicle that is used to drive into deep and unrelenting debt. That easy credit is the root cause of second, third, and final notices filling mailboxes, and it provides jobs for debt collectors who will be calling day and night. |
Related Topics: Debt Management-The Controls,
Debt Management Correcting the Course, Online Debt Consolidation and Debt Management Services
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