Credit Card Debt - Get Out of the Trap and Stay Out!
Consumer Credit Card Debt
It's easy to get credit cards.
In fact, it’s almost too easy. but what do you do when you get enmired in debt? First of all let's look at what the federal trade commission cautions you not to do.
Have you seen those little ads on the Internet, about getting out of debt? For example, "We can create a new credit identity for you-legally". (No, it's impossible).
Or, "We can remove bankruptcies, judgments, liens from your credit file forever". (I don't think so!).
It can be tempting to take the “easy way” out, but remember that easy is not always best.
You could be prosecuted for mail fraud and other federal crimes if you get an Employer Identification Number (EIN) or a social security card using false information.
Getting out of debt, and rebuilding your credit history can be done, but it takes time and effort.
So what are your rights? You have a right to get a credit report from a company or agency who denied you credit or a job because of you having a bad credit history. You also can get one credit report a year for free if you are unemployed, or a victim of credit card fraud.
In fact, each of the three consumer credit reporting companies have to send you a free credit report if you request it once every year. If there is accurate negative information in your credit report, it is going to take time to rebuild your credit record. You can try to take out loans even at high interest, or credit cards that you repay on time to begin to build a positive credit record.
The best policy with credit cards is to pay off the entire balance every month. You're dealing with cards that charge 13 percent to over 20 percent, when the prime rate is a little over 5-percent.
This is especially true now with the new bankruptcy law of 2005. It makes it harder to write off unsecured credit card debt. To do that you have to pass a means test, that shows that your family income is lower than the median income for your state. In many states that's about $60,000 for a family of four, which with today's expenses is not a high income.
Try to pay off more than the minimum balance of the credit card debt, if you can't pay off the whole thing. You can even call up your credit card company and negotiate a lower interest rate, if you make regular payments. It sometimes works. You could transfer your balance to a card with an introductory rate that is zero or very low. Just don't get into the same debt trap again.
What else do you need to know?
Credit cards, I agree, are almost a necessity in the modern world, but watch out! The temptation to get into debt at 14% and higher interest rates, plus added late penalties is sometimes overwhelming.
There are short term solutions, like getting new credit cards with 12-month introductory interest rates of zero percent and transferring your credit balances to these cards. The only long-term solution is to become what the banks call a "credit card dead-beat". Does that mean ignoring your credit card debt? Nothing of the sort. It means using your credit cards when it is convenient, but then paying off the balance every month.
One less extreme way of dealing with your credit card debt is to gradually pay them off. Go through your credit card bills and see which one is the smallest debt. That month you can pay the minimum balance for your other cards, but pay the whole of the smallest card debt or the largest part of it you can. Do this month after month after month until you are down to only at most two or three cards. It's a good feeling to have your debt under control, and at least it will avoid the feeling of hopelessness you get from being confronted by a huge stack of bills.
Another way of dealing with your credit card debt is to get debt consolidation counseling. They may help you to lower certain interest rates on card by developing a payment plan with the credit card company. They do this with all your credit card companies, and for a small fee, you can make only one payment to the debt consolidation payment.
One way you can pay off your card is with a home equity loan, and you can do this yourself. If you own a home or condominium apartment, you can take out a single digit home equity loan, and use that to pay off your credit card debt. This can be an extreme measure, but it has been successful in a number of cases.
Neither of these approaches will work by magic.
You need to be smart and savvy and exercise a lot of will power if you are going to get your credit card debt paid off.
Learning to live within your means is a big lesson, but you will find that the quality of your life inside those means is greatly improved.