Credit Card Debt
Summary of topics:
Credit Card Debt
How To Prevent Credit Card Debt
1.Don’t Get A Credit Card
2.Pay As You Go
3.Get A Card With Strict Limits
4.Pay What You Really Can Afford
Credit Card Debt
This one subject is on millions of peoples’ minds these days. Credit card is the single most notorious form of credit debt that haunts people for years. Credit card debt is infamous because the interest rates are generally higher and the companies are generally less forgiving than any other type of loans and lenders. These days you can consider yourself lucky if you have under $10,000 in credit card debt, blessed if you have less than $5,000 and people with no credit card debt at all are a dying breed!
Credit card debt is extremely stressful and it can take over your life but it’s not insurmountable. Before you get consumed by the seemingly endless torrent of bill collector calls and fruitless interest payments, consider some of the many options that you have to take care of credit card debt. It’s important to tackle credit card debt with the right order of operations. Start with simple tactics like snowflake payments and then move onto risker ones like loans. Bankruptcy should be your last-ditch effort when all else has failed but it is certainly the best and sometimes the only option for some people. The Bankruptcy Facts chapter is entirely dedicated to bankruptcy information.
How To Prevent Credit Card Debt
Let’s start with the preventative measures. This may be a moot point to you since you purchased this book but you can keep these in mind for the future and make sure your family and friends are aware as well.
1.Don’t Get A Credit Card
This is pretty simple and straight forward. If you don’t think you can handle the responsibility of a credit card then just don’t get one! There are other ways to attain credit without having a credit card. You can focus on paying your standard bills on time or paying off a car loan. As an alternative to owning a card you could get a joint credit card with someone else and let them manage the card.
2.Pay As You Go
Don’t use your credit card to buy things that you can’t afford so you can slowly pay them off later. This is pointless because you end up paying way more for the item anyway. Only use your credit card to build credit: buy things you can afford and pay off the balance immediately. If you can’t afford something you want, make yourself a “payment” to your savings account every paycheck until you have the money and pay for it outright.
3.Get A Card With Strict Limits
If you’re absolutely worried that you will just “need” a credit card for an emergency, find one that has a very small credit limit and a very low interest rate. Often times your bank will offer a card through their company; these are sometimes (but not always) better than going through a major company like Visa or Mastercard. A good place to start would be a credit card with a $300 limit; that’s a reasonable amount of money for an emergency. More important than the limit is the interest rate; don’t even bother getting a card with a high interest rate, regardless of the credit limit.
4.Pay What You Really Can Afford
If you are making payments on a credit card debt, do not pay the minimum payment unless that is truly all you can afford. Pay as much as you possibly can every time so that you can get rid of the debt as soon as possible. The minimum payment usually only covers your interest so these payments are COMPLETELY USELESS. You could pay the minimum payment for 500 years and if it never touches the principle balance, your debt is never gone. Sometimes this might mean sacrificing to save enough money to pay the debt. If you can handle eating peanut-butter sandwiches and riding your bike to work for a week so that you can pay off a credit card debt, you will ultimately not regret it. Better to live far below your means for a week than to have your entire financial situation ripped apart by the ever-hungry credit card debt storm. Sell your appliances, shine some shoes, work overtime, whatever it takes. Do not let your credit card balance sit for any longer than 6 months (Don’t even let it get that far if you can help it).