Credit

Handing the Debt Off

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The credit card business is one of the most competitive industries there is. You can tell that because you no doubt get dozens of invitations for new credit cards every week. That is because the only way a credit card company can continue to grow new business is to steal the business away from another credit card company. It isn’t really a business where there are a lot of new customers coming into the market. The types of accounts the credit card companies want are people who are carrying a lot of debt, who continue to pay on the debt but never pay it off and who have no history of defaulting on their loans. If that describes you, then you are on the A list for a potential customer for a credit card company.

If you have a lot of credit card debt, it really isn’t that flattering that other credit card companies want your business. Even more infuriating is when a credit card company who already has you in debt sends you offers for still more credit cards. But there may be a glimmer of light in this tough situation. You might be able to leverage you’re “A list” position with the credit world to find a way to manage your credit card debt more successfully.

Typically, if you have three or four or more credit accounts, the credit ceiling on those accounts probably have gotten pretty high. That is because, as we just reviewed, if you carry debt but pay on it, that sets a cycle in motion for the credit card companies to offer you as much debt as they think you might use so you can owe them even more money. Again, while this seems cruel and heartless, that is how these folks make their living so they have to find some way of attracting the debt of the A list customers.

But another method they also use is to offer you an attractive rate of interest to either start a new account or transfer debt from an account you have to your existing account. A common “come on” is to offer you zero percent financing which seems wonderful because in theory you could transfer all of most of your debt to the generous company and not pay any interest which would greatly speed your pay off.

Transferring balances has its good side and its negative side and you need to be smart about both. Read every word of the offer, even the small print on the back of the page because you must understand any hidden fees you might face if you accept their generosity. Almost always the zero percent or low percentage rate is for a very limited time of perhaps three or four months. In credit card land, this is a heartbeat. Then once they have your account balance of your debt built up, they can jack your rates up and you are right back where you started.

So be smart about using these kinds of offers. A great tactics is simply to transfer a fairly small amount of your debt to the zero percent offer. Transfer $1000 and then pay it off over the three to four mouth period. You win because you paid no interest and they lose because they can’t sting you with a high interest rate at the end. Also be aware of any transfer fees or membership fees if you are taking out a new card. These fees can amount to additional interest and negate much of the benefit. But if you are smart and use these offers shrewdly, they can be terrific ways for you to drive down your credit card debt surfing “come ons” from the credit cards companies in a clever fashion.

Avoiding Credit Card Debt Before it Sneaks up on You

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In this modern time where the economy has been such a challenge for everyday people like you and me to keep up, it’s easy to get into credit trouble when your credit bills begin to stack up. So, if you are in the position to just start learning the ropes of the world of credit cards, there are a lot of things you can do to avoid credit card debt before it sneaks up on you and keep your nose clean, as they say.

This is an outstanding goal for you if you are just getting your first credit card. If you know or talk to anyone who is battling tens of thousands of dollars of credit card debt, you know what a jail sentence it can be. Once that credit card debt gets that high, the time it will take even under the best of conditions to bring it down runs into the years if not decades. And for all that time, thousands of dollars of money go down the drain to credit interest that doesn’t buy you any food, tickets to the movies or new clothes. It just goes away with no value to you at all.

If you are new to the world of credit, getting a credit card is a good thing. But once you get one, keeping it under control is job one. You will find it amazingly easy to use a credit card once it comes. In fact, the retail world makes it difficult to conduct transactions any other way. You can pay for gas at the pump that way and even charge your groceries at the grocery store. And while all of these great uses for credit are helpful, you can end up with a whopper of a credit card bill at the end of the month. And if you don’t pay that bill off, that is the first step on a lifelong jail term in credit card debt jail.

There are some guidelines you should follow to both use credit responsibly but also to keep building your credit rating which has a real value to you. Remember that what the credit card companies don’t tell you is that making a charge on a credit card is a loan. Even if you just charge ten bucks to go to the movies, you took out an unsecured loan to finance that movie ticket.

So once you start using a credit card, keep in mind that you will be paying back everything you run up on it. It is NOT free money. A good practice is to save every receipt every month and keep a running tally of what you have spent on credit. Not only can you use that to cross check your credit card, it keeps you honest because each time you add a charge to your credit card, you can update your tally so you know for certain that you will be able to pay it off when the bill comes.

Paying off the credit card each month is the number one best way to keep your credit problems under control. Now it isn’t a bad idea to let a little bit of the debt drift from month to month. This builds your credit history and credit rating which will pay you well down the road when you want to buy a larger purchase. But by staying on top of your credit and what is going onto your card, you will start out with the kind of habits that will lead to a life of good credit use without credit card jail. And that is a wonderful gift to give yourself early in life.

7 Effective Ways to Control Your Debt

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  1. Stop Using Your Credit Cards By Hiding Them!
    Put them somewhere where they will not tempt you. You may consider keeping at least one card for emergency purposes. Additionally, with poor credit, you may find it more difficult to get a credit card in the future. If you keep at least one account open, then you won’t have to worry about applying. One tip, put your credit cards in a zip lock bag, put the zip lock in a container of water and place the container in your freezer.  Not only will the cards not be tampered with, you won’t be able to use them on impulse!

 

  1. Take a Look at Yourself in the Mirror and Ask Yourself…
    Are you true to yourself? Taking a good hard look at your financial situation, particularly if it isn’t good, can be very difficult. Yet, to get out debt you have to fully understand what the situation is.

 

  1. Check Your Credit Card Statements for Any Errors
    Believe it or not, up to 40% of all credit reports have errors in them. If you find that your credit report shows something that is not true, you need to write to them with all the details. Be sure to use certified mail so that you can keep track of who you wrote to, when you wrote, and who received the mail on the credit bureau’s end. Then ask the credit bureau to send a corrected report to anyone who has requested a report on you in the last 6 months.

 

  1. Find Omissions
    By law, you are allowed to add information to your report that you believe will help your rating. This might be additional information about a repayment of a loan, good credit you have with companies that do not report to the credit bureau, or salary increases.

 

  1. Devise a Plan
    Whether you determine to pay your bills down little at a time, take a second job, go to credit counseling, or file bankruptcy, you need to make a plan and stick to it. In order for your credit to be improved, you have to have a plan and then take action!

 

  1. Don’t Run From Creditors and Talk with Them
    Creditors want their money. They do not want you to default (quit paying). In fact, most creditors will work with you to get a reduced payment schedule. If you can keep them from reporting you to the credit bureau, then it won’t hurt your credit. The catch here is this: be sure to stick to the new negotiated plan – they won’t renegotiate if you fail to comply.

 

  1. Have Patience
    Have you ever heard the saying ‘time heals all wounds’? It also heals your credit. After 7 years, most items will be dropped. This is good news if you are working to correct your credit. As each year passes, more and more bad items will drop off and more and more good items will be included. Eventually, the disease will be cured.
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