Useful Tips To Help You Get Out Of Credit Card Debt
It feels like the walls are closing in when you’re high in credit card debt. The interest rates and late fees can really make the situation insurmountable, especially if it happens on a few different cards. Suddenly, your $10 minimum monthly payment skyrockets to $400 and you’re paying $40 late fees, as well as a 19.92% interest rate to boot! If you were previously a good customer, then you can often negotiate on your own by simply calling your creditor. If you’ve slipped behind and failed on your promises for several months now, it’s a good time to seek credit card debt reduction services.
If you’re brave, then you can usually call and negotiate a repayment plan yourself to fix credit card arrears. Often, the first step toward regaining control is to assess how much money you make versus how much money you spend by listing your income sources, as well as your fixed expenses and variable expenses. Prioritize by unsecured credit card debt, mortgage payments and bills, then tack on food, health care, insurance and education. You may want to buy a computer software program like Quicken to keep track of expenses and bill payments. Next you can try contacting your creditors to work out a credit card debt payment plan.
To prevent credit card debt, you should first only take advantage of offers you actually need. There is no reason to ever have more than two or three credit cards. Having an unsecured credit card you never use is worse than just buying one thing per month and paying it off each month. To build your credit wisely, you may want to use a secured credit card, where you pay the bank your credit limit upfront and then only take out what you have put in, which is sort of like a debit card, only this one gets reported to all three credit bureaus to show your progress.
Speaking of debit, use your credit card as you would a debit card, subtracting each purchase from your savings to be sure you’re not overspending. Ideally, you’ll want to pay on-time and in full because only paying off the minimum balances can take years to pay off the full amount, given the interest. Be sure you don’t max out your credit cards as well. If you’re using over 30% of your available credit limit, then your credit score will go lower.
Some people consider declaring Chapter 13 or Chapter 7 Bankruptcy to get out of credit card debt. To decide if this is an option for you, ask yourself the following questions. Are your debts from unsecured credit card balances and things that a bankruptcy would wipe clean? If you haven’t paid on your cards in a long time and find yourself slipping behind on regular rent/mortgage/utilities/auto loans, then bankruptcy won’t help you. Will your current debt repayment plan take more than four years to pay off? If so, then you may as well take the low credit score hit and declare because the sooner you get help, the better. Do you have $30,000 or more in credit card debt? If your debt starts to approach your annual salary, then it’s out of control. Chapter 7 Bankruptcy involves liquidation of all assets that are not exempt, such as autos, work tools and household furnishings, with a court-appointed trustee selling some of your property. Chapter 13 allows people with a steady income to keep property (homes, cars) and offers a more reasonable 3-5 year repayment plan instead. Ultimately, bankruptcy can prevent foreclosures, repossessions, wage garnishments, utility shut-offs and debt collection harassment, but it will give you a very low credit score and remain on your financial file for 10 years.