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The Right Answer for Debt Management 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:
Manage Your Debts Successfully | Karla Van Huysen .com
| Debt Management and Home Equity Loans Debt Management and Credit Scores
There is so much information (and misinformation) out on the net about credit scores.
Some people are under the impression that a credit score and a credit report are one and the same thing. That is wrong. They are two entirely different things.
The credit SCORE is based upon the credit REPORT. Credit scoring is just a simplified method of identifying good credit risks from poor credit risks. You can bet that lenders will get a credit SCORE before they proceed with the loan process but before a loan process goes very far, the lender will get full credit reports and from all three of the credit reporting agencies.
The credit score is based only upon credit history. The things that determine a credit score are whether payments were made on time and in full as well as on other things that are contained in a full credit report like employment history and income level. Points are awarded for each of these things as well as many others.
You might say that the credit score is a snapshot of a credit report -- a summation, if you will, that gives lenders a good idea of whether an applicant is a good or bad credit risk.
Some people believe that if they stay out of debt and pay in cash as they go, they will have a good credit score and a good credit report, but that is just wrong. They will have no credit history, no credit score, and no credit report. All of these things are based upon credit -- payments of loans and debts. You must have been granted loans by banks, or you must have a credit card payment history, in order to have a credit score or a credit report.
The fastest (and least expensive way) of building credit history is to get a credit card, make charges, and then pay them off before any interest is added. |
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| American Version of Debt Management Debt Management: Getting the Picture
We all have albums (or shoeboxes) filled with photographs. They collectively make up the story of our lives. Photographs are little moments frozen in time that we can look at and recall whole days, weeks, or months of the good times of our lives.
I say good times because we don't take pictures of the bad times. We all enjoy going through those photographs and revisiting happy times of the past.
If we could take snapshots of our financial lives in the same way that we take snapshots of friends, relatives, and the happy moments in our lives, maybe it would help us to remember financial good times as well. It would be nice to remember what we did that was right so that we could avoid making mistakes today and tomorrow, wouldn't it?
If you could look at a photograph of your checkbook that was taken BCC (Before Credit Cards), you would see a balance that you felt so good about. Maybe it wasn't a really big balance, but it was a balance, nevertheless, and it was there after you had paid every debt that you owed. You had money left over...remember that?
It would be nice to see a picture of your savings account, too.
You can make new memories of positive checking account balances and savings account balances once you get control of your out-of-control debts. The way to do that is to just bite the bullet, so to speak, and seek professional help.
Choose a consumer credit counselor and let him or her help you to get your financial life back on the right track so that you can again experience the good financial times that you once had. There isn't a shortcut, and the trip back may not be painless, but it can be accomplished. |
Related Topics: Budgeting for Debt Management,
Free Programs for Debt Management, Debt Management and Consumer Counseling
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