Credit Card Debt

Definition: Credit Card Debt – Easy Money That’s Hard to Pay Back

On the television, on the radio, in the mail, and all over the internet – Credit Card companies want everyone’s business. And from the looks of their corporate profit statements, they’re getting it.

Put the Plastic Down and Step Away

Of course it’s easily said but hardly done. Don’t use credit to pay for things … pay cash. But the fact is our culture and our cash flow don’t necessarily allow for cash whenever we need it. We turn to credit cards and in an ever-faster process, charge up debt like it’s some kind of contest. Credit card companies have engineered ever-faster methods for consumers to rack up credit card debt. In today’s world, a credit cardholder has to merely touch the card to an electronic reader and the deal is done. It’s almost mesmerizing, until you realize that easier is not necessarily better.

When Matters Go From Good to Bad

Bad credit can happen as the result of a number of conditions. Divorces, job terminations, high medical bills, and out-of-control spending all contribute to the condition. A consumer can have excellent credit one day and just a few months later be receiving collection calls and payment “reminders”. Whatever the cause, the result is the same … a poor credit score and credit card accounts that need credit repair.

Step One … Budget

When the credit cards are filled to the max and the interest charges and credit card payments are squashing the cash flow, the smart consumer knows it is time to go on the offensive. A budget is the first step in that process. Understanding how much is coming in and how much can then go out starts the process of repairing credit. In most cases, more is required than is available. This is where a savvy consumer starts analyzing what costs can be reduced or eliminated and which costs can’t be. When the credit cards are at 14.99% – 29.99% it’s time to negotiate debt.

Start at the Source

Contact the credit card companies and let them know what the situation is as soon as possible. Don’t wait 60 or 90 days, hoping something will improve. By then, you might be so far down the road the available options are severely limited. Credit providers don’t want charge-offs (consumer debt which is un-collectible and therefore eliminated from the books to make the balance sheet look better). In truth, consumers shouldn’t want their debt charged off because the impact on their credit rating is significant.

This is Fixable

Most credit card providers have special repayment programs for cardholders with financial problems. Some of those programs last 90 days and others can run for years. Frequently, the special repayment program will stop the additional fees charged for late payments, or underpayments, as well as put the account onto a much lower interest rate during the term of the plan.

When Matters Go From Bad to Worse

When all else fails and financial disaster surrounds you like a gathering hurricane, there’s still hope. NO, it’s not bankruptcy. Bankruptcy doesn’t work like it used to. Not all debts are discharged and even when they are discharged, the bankrupt party has to pay taxes on the charge-offs because the IRS considers them income. Talk about adding insult to injury! It’s also not employing a credit counseling agency. Not to say these are bad, they’re actually quite good for some people, but they charge fees (adding to the cost of resolution) and the deals they negotiate, consumers can negotiate themselves. No, the last line of defense is a negotiated settlement. That’s where the consumer let’s the creditor know they aren’t going to be able to pay them for an extended period of time and asks for an amount that could be paid to settle the account. It hurts the credit, but it’s better than a bankruptcy. Few people are in a position to do this, but if they’re selling their home because they can’t afford it, or their cars or whatever, they may be able to take some of the cash proceeds and settle some other debts at the same time.

Remember … Everyone Suffers In a Bad Economy, Even Creditors

Credit card companies don’t want late payments. They don’t want consumers in over their heads and they definitely don’t want to eat a bunch of expenses because their customers got caught in a recession. But the fact is that is exactly what has happened and the credit card companies know it. They understand how easy they’ve made it for consumers to get into trouble. Don’t hesitate to communicate. Be honest about budgets and what can be done. Don’t over-extend after it’s already happened once. Credit card providers can handle it if you give them the opportunity. But the key is discipline and budgeting … that’s the best solution to any credit problem.

Credit Card Debt is a Major Problem in America. According to the American Bankers’ Association, the Average Family Carries Over $8,000 in Debt.

If you’re struggling with credit card debt, I recommend filling out the form below for a free consultation with a trusted debt specialist in your area.

With the help of a trusted expert, you may be able to reduce your debt by up to 60%, become debt free in only 12-36 months, and get your financial life back on track.

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The Time is NOW

If you have a serious problem with credit card debt the time to do something about it is right now. The first thing you need do is take a look at your spending habits. Then, you need to come up with a plan to eliminate your debt. You can also try to negotiate with your creditors or ask them if they have a repayment plan for people facing financial hardship. Some companies may be willing to work with you.

Debt Settlement

There are also many organizations that will help you eliminate credit card debt, however you must be careful when chosing a debt settlement company. Some are downright scams and others can really ruin your credit.

Credit Counseling

A legitimate credit counseling service will charge a set up fee of around $30-$50 and will not turn you away if you cannot afford it. Setting up a debt management plan usually takes an hour or so.

Debt Elimination

For do-it-yourselfers, I highly recommend Dave Ramsey’s Financial Peace. For professional debt elimination, check out Curadebt – their service is 100% FREE!