How to dig yourself out of credit card debt
I tell many of my friends, to get a couple of credit cards in place. Even if I had to experience,
that your can sink into the credit card black hole quickly.
I like using credit cards for several reasons:
• Most of the top-of-the-line cards will send year-end summaries of your spending, which is
good for those clients who do not keep up to date financial statements.
• Credit cards are good for travel and other expenses and pay only one bill every month.
• It is good to have credit card debt available for those times when cash is hard to find.
The major drawback to using credit cards is that too many people overextend and find
themselves in the black hole of high interest credit card debt. Current credit card debt totals
about $360 billion. As consumers, we are more in debt than the government; not a flattering
comparison. Credit card debt is easy to get into and sometimes very difficult to dig yourself
out of.
Here are some suggestions to help you stay out of the black hole:
• Do everything you can to pay off the credit card balance every month. Most credit cards
have interest rates between 13.5 percent and 21 percent. Paying that kind of interest, except in
extreme cases, is just not smart.
• If you can't pay off the entire balance, at least make a payment that is in excess of the
minimum due. The minimum payment amount is simply the interest amount due on the
principal. If you only pay the minimum you will never pay off the card. Depending on the
balance outstanding, add $50 to several hundred dollars to the minimum in order to eat away
at the principal balance. While you're doing this, try and stay away from using the card.
• If you find yourself knee deep in credit card debt, find some solutions that will help with the
burden. Call your credit card company and ask them for a lower interest rate. Believe it or not,
this actually works sometimes. They would rather see you pay off the debt than see you in
their bad debt write-offs.
• Find one of those credit cards with an introductory rate of between 5.9 percent and 6.9
percent and transfer your balance to get a better interest rate that will make it easier to get the
principal paid down. While the interest rate is low, get the balance paid off.
• If that does not work, find a way to consolidate your debts into a regular-term note. These
will have a lower interest rate and you will only make one payment every month. When you
find yourself in this situation, lay off the credit cards until you have your consolidation loan
paid off. Learn from your mistake, don't compound it by incurring even more debt.
• Take out a home-equity loan and, if necessary, lend it to your company to pay off debts. The
interest is deductible for you personally, lower than the credit card interest rate and the
company can set up a payment schedule to pay you back.
If your plan is to pay off the balance every month, use a trick my father taught me. Enter each
credit card purchase into your checkbook as if you had written a check. When the bill comes
in, you have already accounted for the payment required in your checkbook and can then
write the check without wondering where the cash will come from.
If you have savings that you do not want to dip into to pay off the credit cards, look at what
you are earning on your savings and what you are paying on the debt. One is always higher
than the other and it is not your savings interest rate. Use your savings to get out of debt and
know that you can always charge an emergency on your credit card. Take the interest charges
you are not incurring every month and save that instead.
If while you are working yourself out of debt, you feel like you are having to do without, do
two things. Remember that you got yourself into debt because you spent more than you had to
spend. To get yourself out of debt, you will need to reverse that scenario. Look at your credit
card statements over that past few years and add up the finance and interest charges incurred.
You will be stunned at what you could have purchased if you had not paid it to the credit card
companies as interest.
That’s the end of my report. If you are at the point that you need professional help, I suggest
that you get additional help online. There are professionals who can help at your specific
situation at the Dept Quote Advisor people for example. If I can do it, I don’t see why you
can’t.
Thanks to Mr. Tom Levin
