What You Really Need To Know About Credit Card Debt

What do an increasing number of people consider to be their biggest financial problem? The answer would be the large amount of credit card debt that each family is carrying. We’ve used them to carry us through the current recession but the end may take longer than we think. So here are six things you should know about while we’re waiting for the turnaround.

1. Keep paying the credit cards. Missing a payment on one account can cause the others to raise their interest rate also, even if you’ve paid them promptly for years. Sounds unfair, doesn’t it? It’s called universal default and it’s very real. A missed payment can stay on your credit report for years.

2. To make matters worse, if you miss a payment to one card all of your other cards may raise their interest rate in what they call a “universal default”. So even if you’ve paid on a card religiously, you may get hit with an increase for missing a payment on an unrelated card.

3. We need to teach our young people how to manage credit. They are graduating from college with this kind of debt. It’s not very helpful in starting a new life with an old debt hanging over your head. They really do listen to what you say and you’ll be surprised when you see that your advice really did sink in.

4. Credit cards aren’t bad. It’s just our unrestrained use of them that gets us into trouble. We should only charge what we know can be paid off at the end of the month.

5. Don’t wait until you’re really over your head to take action to reduce this debt. Use an online interest calculator to figure your payoff date.

6. Once you have debt under control you will need to make a commitment to keep it that way. Review your expenses and how they relate to your income. Then make plans to save for those things that pop up when you aren’t prepared and which make you reach for the credit card.

If, after reviewing your standing with your credit cards, you find that you are dangerously close to default, please ask for help. There are businesses out there who are ready to work on your side to get your financial ship back on an even keel. Then follow through with the plan. It won’t be easy to trim your spending or work more hours or whatever it takes to but your budget in balance. It will be worth it, however, to silence the harassing phone calls and the nasty letters. Just think of the day when you can use your debit card freely because there is plenty of money in your account to go around.

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