Your Options in Managing Your Credit Card Debt

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When dealing with your debt issues, it's in your best interest to research all your options thoroughly and decide which option is right for you. The table here summarizes some of the differences between your options.

Do Nothing

If your debts have become overwhelming, this is no longer an option. Making minimum monthly payments month in and month out will only produce the same exasperating result and essentially get you no closer to financial freedom from debt. Paying the minimum payment with interest over 20% will typically take you over 50 years to pay your debts off. Click here to go to a financial calculator at www.bankrate.com to assess your current situation. As you will see, it is time to choose a new path to get out of debt!

Bankruptcy

Bankruptcy may seem to be the quickest solution to removing your outstanding debt, and bankruptcy attorneys will tell you it will only remain on your credit report for 7-10 years. However, almost all credit applications today ask the question, "Have you EVER filed for bankruptcy?" Even if the bankruptcy has fallen off your credit report, to answer this question untruthfully in considered a federal offense. Bankruptcy is a permanent decision that will follow you for the rest of your like; therefore, it should only be considered as an absolute last resort to solving financial matters.

There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. The filing fees run about $185 for Chapter 13 and $200 for Chapter 7. Attorney fees are additional and can vary.

Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they otherwise might lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off a default during a three-to-five year period, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.

Known as straight bankruptcy, Chapter 7 involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official - a trustee - or turned over to your creditors. You can receive a discharge through Chapter 7 only once every six years.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. And unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or lien on it.

Credit Counseling

Prior to the introduction of the Consumer Credit Counseling companies, Americans had very few options to deal with debt reduction, other than filing bankruptcy. Consumer Credit Counseling organizations were originally set up by a major credit cards company in the early 1980s as a means of recovering money from thousands of people that were starting to fall behind on their payments. The main attraction of consumer credit counseling is creditors may reduce the interest rates and potentially reduce existing late and over-limit fees. However, this is never guaranteed.

Additionally, in a credit counseling or debt consolidation program, the debtor makes a single monthly payment to a credit counseling agency that is, in turn, responsible for disbursing these payments to the creditors. Many times, the new monthly payment consumers make to the credit counseling or debt consolidation agency is more than their regular monthly minimums made directly to the credit card companies. While a consumer counseling plan may be a good option for someone who is not struggling in making minimum monthly payments, this is in no way provides consumers with the monthly cash relief that is desperately needed. Because of this, nearly half of consumers who enroll in a consumer credit counseling or debt consolidation program end up falling out before they ever pay off their debt.

For many Americans, simply reducing the interest rate, on already high balances, does not have a significant impact on their overall credit card debt. Most consumers who are in need of debt assistance need immediate monthly cash flow relief, however, Consumer Credit Counseling or Debt Consolidation programs do not automatically provide consumers with this much needed monthly assistance. Consequently, the 4-6 year plan they were originally promised by these agencies turns out to be considerably longer.

As mentioned earlier, consumer credit counseling or debt consolidation programs basically work for the creditors - not you. Because of this, they may not have your best interest in mind.

Debt Consolidation

There is no true way to borrow your way out of debt, which is the premise behind debt consolidation programs. Debt consolidation in itself is the process of combining all or some of your unsecured debt into a single loan for the purpose of lowering your overall interest rate and therefore your total monthly expenses. The term debt consolidation is often confused with many popular Consumer Credit Counseling, Debt Consolidation or Debt Management companies. Credit card debt consolidation can also be achieved through personal loans or home equity loans.

Personal loans or home equity loans used for credit card debt consolidation can be a very dangerous pitfall for many Americans who do not understand the full economic impact of using such loans. These credit lines are usually back to their limits soon afterwards, thus directly compounding the continuing problem. While debt consolidation programs often offer consumers a lower overall interest rate and a larger tax break, the sad realization is that many consumers who take out consolidation loans often find themselves in a much worse financial situation than before; only now the consumer faces the very real possibility of losing one of their most valued possessions - their home.

Debt Settlement

Debt settlement through debt negotiation is quickly becoming the preferred method for many consumers with severe credit card problems and those considering and alternative to bankruptcy. Debt settlement offers you an intelligent solution to becoming free from credit card debt within a realistic time frame. People can begin to realize the only alternative to regaining control of personal finances is by negotiating the total balances to a lesser amount, rather then just reducing interest.

Creditors will usually settle for less than owed when the debtor is under serious financial strain because if the debtor chooses to file bankruptcy, then the creditor gets nothing. Creditors want to get as much money back as they can.

On average, unsecured debt settlement can be achieved in 36 months or less. Because your debt is settled for an amount less than you currently owe, settlement negotiations are now becoming the only practical debt solution for countless consumers to help rid themselves of bothersome unsecured credit balances.

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Erase Credit Card Debt Legally

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Problems are a normal part of people's lives and when problems get too much you will need some help. Solving a problem all by yourself can be difficult especially when you have no idea about how to solve it. Today, the most common problem people face is all about debt. Many people are buried neck-deep in debts and these are the ones who need assistance to erase credit card debt legally.

Heavy credit card users that are in need of help often made a mistake of taking the wrong steps. The reason is because they lack knowledge on how to get out of debt. There are several options to get rid of debt and if you are not familiar with these options you may ask for assistance about debt relief.

The two most common debt relief options are bankruptcy and debt settlement. There are certain circumstances that you will have no choice but to file bankruptcy. However, it should never be your first option in mind. Bankruptcy procedures may be a little too stressful that in the end you might regret it. There are several disadvantages that are tagged along with filing bankruptcy. One of these disadvantages is that you will have difficulty in getting new loans or credit in the future and is not the best method to erase credit card debt legally.

Many people prefer debt settlement due to its advantages. However, debt settlement does not give you total freedom from your debt. You still have to pay your debt but in a new and lighter payment schedule and at a reduced amount. Moreover, you will get back your credit score after full payment of the reduced balance of your debt. This is different from bankruptcy where your low credit score stays on your credit history for 7 to 10 years. Once this happens you will not get any credit or loans and this includes car loans and will prevent you renting as landlords check your credit score.

The key to overcome your debt problems is information and you will get this information when you seek help or assistance. Debt settlement assistance can be found online and you can inquire anytime. Facing a serious debt problem requires professional assistance and there are plenty of debt settlement companies that can help you evaluate and improve your financial situation by erasing credit card debt legally. If you are in debt getting help as quickly as possible is important if you want to get rid of debt for good.

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Do-It-Yourself Credit Card Debt Management

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This article explains an incredibly simple debt relief or debt management program that will allow those buried in debt to crawl out of debt in a fast and simple "do it yourself" way.

Things you'll need:

• Budget worksheet or perhaps just some scratch paper
• Credit card account information and balance
• A desire to live a life without credit card debt 

Instructions:

Step 1:
Gather your monthly financial information. You will need to determine the monthly income you are earning as well as the credit card debt figures such as interest rate, balance, and current minimum payments.

Step 2:
Organize and analyze the key information. You need to itemize the credit card interest rates from high to low. Then you need to do this again except use the balance information as the determining variable. Then determine the minimum payments and add them up.


Step 3:
Time to see if you can even handle the minimum payments. If you can afford all the minimum payments then you are in business. If you can not then you may want to strategically consider giving one of the poor lenders the cold shoulder, or you may want to try some sort of debt settlement program. The next step assumes that you can make the minimum payments.



Step 4:
Grasp how this plan will work. Here is the deal. The figure you calculated by adding up the minimum payments is the amount you are going to pay until all the debt is paid off. Even though you are only paying the minimum monthly payment now you will be paying over the minimum payment with in two or three months. This is the beauty  of the program. Mentally you are able to pay the minimums but in actuality you will be paying increasingly more and more of the principle proportionally to the interest.

Step 5:
Strategically tweak the debt management plan to optimize the results. You have ordered the debt obligations by both balance and interest rate. If you can afford it you may want to add 10% to the total minimum payment and apply the entire ten percent to the debt you can pay off the fastest. This will most likely be the debt with either the lowest interest rate or the lowest balance or a close combination. Once this debt is paid off apply the entire amount that you were paying on that particular account to the ugliest looking debt which is most likely the highest interest account. Rinse and repeat.

Tips and Warnings:

• Stick to the plan!
• If you are good at negotiations or at least not terrified of the phone call your lenders and see if you can't get a lower interest rate.
• Do not turn unsecured debt into secured debt. The risk is not worth it in most cases. This means that even if you can get a lower interest rate it is most likely not a good idea to consolidate the credit card debt with a Home Equity Loan. Because if something goes wrong your home will be at risk.

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Handling Credit Card Debt

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Too many credit cards can result in overspending and getting into debt over one's head. Limit the number of cards, setting a limit on each to control spending and avoid excessive debt. Keep just one or two and return the rest. Or, get rid of the high interest cards and benefit from credit card consolidation loans to lower monthly payment; keeping just one card for emergencies.

What Is Your Objective?

Your objective may be to reduce interest rates, lowering monthly payments, avoiding bankruptcy, consolidating bills for one monthly payment or merely getting out of debt at the earliest. Credit card debt consolidation is the answer to achieving these goals and saving thousands of dollars. There are three options for lowering credit card debt.

Pay Down Your Highest Interest Debts

Highest interest debts should be paid first. Don't make more credit purchases while doing this. Try to pay the maximum to your highest interest debt and not the highest balance. This helps to pay down debts at the lowest cost. When the lower initial rate is nearing increase, switch to another lower rate card if it has been offered. This is one method of credit card debt consolidation but can prove trickier requiring better knowledge of interest rates.

Use Lower Interest Rate Cards

Use low interest rate cards to reduce credit card balances systematically to escape debt. Certain situations require transferring balances from high interest cards to new credit cards offering low introductory rates, known as card surfing. Go for a lower interest rate for the opportunity to transfer balances from high interest cards. Start paying down the new consolidated balances, doubling the minimum payment on the old balances. It's vital to take advantage of the lower interest rate to pay more each month to reduce total debt. Low interest rate cards can be used as a tool to reduce credit card balances systematically to get out of debt. In certain situations it is wise to transfer balances from high interest cards to new credit cards with low introductory rates, this is known as card surfing. Apply for a lower interest rate card with an opportunity to transfer your balances from current high interest cards.

Start paying down your new consolidated balances, doubling the minimum payment you were paying on the old balances. It is crucial that you take advantage of the lower interest rate to pay more each month to reduce your total debt.

Talk to Your Own Bank

To get or retain business, banks may offer a balance transfer. This involves taking existing credit card balance to transfer to their credit card. They may often offer lower rates as incentive. However make sure the credit card from which the balance was transferred is closed out.

The interest rate needs to be less than the current one on your credit cards. But you may well succeed in negotiating an interest rate even lower if all your financial banking is in the same place that you are applying for a credit card consolidation loan from.

In conclusion, reduce the number of credit cards to one or two, change buying habits, consolidate debt to a lower interest rate and pay more, even if only a little than the minimum monthly payment to pay off the credit card faster to become debt free. Reducing the number of credit cards helps control spending and avoid excessive debt. Use lower interest rate credit cards and acquire a debt consolidation loan to pay off all debts.

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Have you made your first baby steps to freeing yourself from your credit card debt? If you haven't, read and understand the contents of Credit Card Debt Management; learn from the experts and get yourself out of your credit card debt.

Confessions of a Shopaholic

Have you seen this movie which stars Isla Fischer as the shopaholic Rebecca Bloomwood. She is an addicted consumer that can't resist shopping fashionable clothes and outfits in fancy shops and has incurred several credit card debts. For her, credit cards are like magic cards. Then ironically, she got accepted as a writer for a savings magazine.

When a debt collector started calling her and paying her a visit, she started lying to her boss, trying to avoid the debt collector. She has lied to the man she loves, hurt her best friend, fought with a girl over a pair of Gucci boots and buried under credit card debts.

If you haven't seen this movie yet, you should watch it and learn from her experiences.

Signs of Having Financial Problems (Part 2)

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Let us continue our discussion on the seven (7) signs that tells you that you are having financial problems.

On my last post, we have discussed the first of the seven signs which is having a zero savings. We now understood the importance of having a savings account. We keep a portion of our salary or income each month and save it for the rainy days.

Now, we will tackle the rest of the signs.

2. You Need Your Credit Card To Pay For Your Basic Consumption

You know that you are experiencing financial problems when you use your credit card to pay for your basic needs. I have seen this many times, buying an item that doesn't cost that much and yet there are people who use their credit card to pay for them.

When we say basic consumption, it means your basic needs like groceries, toiletries, gasoline, utility bills like mortgage, water and electricity bills. These basic needs are part of your monthly budget, they should have been allocated a portion from your salary already.

Why pay them using a credit card when you can pay them in cash? Unless you are having trouble keeping your cash.

This is my advice to you, after receiving your salary, set aside first the 10% for your savings. Do not list your savings at the last part of your monthly budget because you will end up spending those. So after setting aside 10% for your savings, try to compute your monthly consumption like groceries, toiletries, gasoline or bus fare, mortgage, credit card bills other utility bills. When you have a deficit, omit those that are not a necessity meaning you won't die without having them. If in case you have extra left from your salary, you can use that for your recreational "needs" like going out with friends. If you have none left, then you can postpone your dates with your friends. Certain sacrifices have to be made to insure your freedom out of your financial problems, especially with your credit card debt.

3. You Have Used Your Maximum Credit Limit Of Your Credit Card

Here is another sign that you are having financial problems. Using your credit card to its maximum limit will really cause problems to your finances. How will you be able to pay your credit card debt when you have used it to its maximum limit? When you're only paying the minimum due payment per month, how will you pull yourself out of your credit card debt?

To avoid this catastrophe, again, purchase what you only need. And if you can't help but splurge, make sure that you will pay the exact amount that you used, not the minimum amount due so to avoid interest.

4. You Only Pay The Minimum Monthly Payment Dues Of Your Credit Card

As mentioned in the third sign, because you are spending way to much than what you can pay, when the credit card bill arrives, you opt to pay for the minimum amount due because you don't have enough money to pay the exact amount. By doing this, you are only paying the interest and not the principal amount. Therefore, it will take you an even longer time to pay the whole amount of your credit card debt. If you have observed, the more you pay for the minimum amount due, in the next bill, your payment doesn't make that much difference.

My advice, if your company gives you bonuses (those are considered "extra" income), payment all of it to your credit card debt. As soon as possible, settle your credit card debt so to avoid being eaten by interest and to be free from your credit card debt.

5. You Use Your Other Credit Card Cash Advances To Pay Your Other Credit Cards.

This is very common to those who owned more than one credit card. When its time to pay the other credit card that is due this week, you use your other credit card's cash advance to pay what is due. Don't you know that cash advances has a higher interest? By doing this, you are putting yourself in too much danger of financial problems. Do not use other credit card's cash advances to pay for your due credit card bill. It will only worsen the situation instead of helping you.

6. Your Frequent Callers Are Debt Collection Officers

This is what happens when you no longer have enough to pay for your credit card debts. Every day, Debt Collection Officer will hound you. They will call you at home and if you are not home, they will call you in the office. They will not stop until you settle your credit card debt. This will cause you too much stress, believe me.

Solution? Talk to the these debt collection officers. Tell them the truth that you no longer have the capacity to pay for your credit card debt. Negotiate with them new terms of payment and if possible have the interest stop. They will probably offer you a fixed monthly amount due payable for 12 months. If you are offered with this, please be vigilant to pay every month.

7. Your Issued Checks Bounced.

When you are under financial problems, it would only mean that you are tight on money. If you are, do not dare issue checks especially when you are sure that it will bounce. When issuing a check, make sure that your checking account has money otherwise, a bouncing check will sure cause trouble for you, including legal trouble.

Now that you now the seven signs of having financial problems, if you have not experience those yet, then try to avoid them. Control your spending habits. Purchase only what is necessary. And Learn to save for the rainy day.

Signs of having Financial Problems

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Here are Seven (7) signs that will tell you if you are having financial problems:

1. You have ZERO (0) savings.
2. You need your credit card to pay for your basic consumption.
3. You have used the maximum credit limit of your credit card.
4. You only pay the minimum monthly payment dues of your credit card.
5. You use your other credit card cash advances to pay your other credit card payments.
6. Your frequent callers are debt collectors officer.
7. Your issued checks bounced.

We will discuss each of the seven signs so that you will be able to manage your credit card debt problems. The first of the seven signs is You Have Zero Savings.

1. You Have Zero (0) Savings.

Zero. None. Nil. Nada. Zilch.

“We have become ninety-nine percent money mad. The method of living at home modestly and within our income, laying a little by systematically for the proverbial rainy day which is due to come, can almost be listed among the lost arts.” - George Washington Carver

Sadly, the quote above is very true. People nowadays rarely save because they have not seen the value of saving. Saving is really important. You may never know when you are in need of money. Savings come in many forms, at least get yourself your own savings account and start saving up for the rainy day. You ask me, how much do you save per month? Well, I set aside 10% of my salary for my savings account and another 5% for my emergency savings account. I consider my savings account as my lifeline account. Meaning, when I'm out of job, when I decide to retire from my job, I have my savings to put food on my table or start up a business. My emergency account is for emergencies like if I get sick, if a member of my family gets sick. If you're experiencing credit card debt problems, your savings could have saved you from all trouble.

If you still haven't got your own savings account, do start saving now.

On my next post, we will tackle the rest of the seven signs that you are undergoing financial problems.