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| Credit Card Debt And Accountable Solutions |
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| Within this article we will analyze how and why does credit card debt accumulates and what are the possible solutions that can help you effectively eliminate it. There is a lot written about the subject but what we pretend to expose in a simple and succinct way is how credit card debt generates and how it can be eliminated with the least sacrifices possible. |
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| Credit card debt accumulates obviously due to the inability or unwillingness of the user to cancel the balance. This happens either because the full payment of the balance would imply leaving other things unpaid or because the user wants to use that money for other purposes. Since credit cards are quite flexible when it comes to repayment, many opt to pay only the minimum payments instead of paying the balance in full or at least a higher portion of them. There is probably no greater mistake than this. |
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The Minimum Payment Issue
Minimum payments are mainly composed of interests. Sometimes there is no principal at all. Thus, if you keep using your credit card while paying only the minimum payments, debt keeps accumulating and the minimum payments will continue to increase till you reach the point when minimum payments are no longer affordable. This can lead to default, penalty fees, negative entries on your credit report and eventually even bankruptcy. |
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| Some may think that the above is an exaggeration but you’d be surprised at how many bankruptcies have these situations as the main source of the debt problems that led to economic failure. Cancelling always only the minimum payments on your credit card balances is financial suicide and that’s what many years on the financial industry have taught us. |
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Debt Consolidation And Money Management
To solve credit card debt accumulation problems you can resort to debt consolidation where an agent will guide you through the whole process, negotiate with your creditors reductions on your debts and modifications on the terms of your repayment programs. |
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| Here is an example of what can be achieved with debt consolidation: |
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| Bills Before Consolidation |
Debt |
Average Monthly Payment |
| Credit Cards Debt |
$11825 |
$401 |
| Store Cards Debt |
$3684 |
$151 |
| Total Consumer Debt |
15509 |
552 |
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| Payments After Consolidation As Low As: |
$84 |
| Monthly Savings Of: |
$468 |
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| Whichever your decision is, as usual, we advice everyone to acquire money management techniques. These techniques include knowledge on budgeting, smart borrowing, negotiations skills, controlled spending habits, etc. We always insist on this advice because that is the only remedy to avoid future debt problems. |
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The Lack Of Budgeting Issue
Credit Cards are wonderful financial tools; there is no doubt about it. However, they are dangerous too. If you don’t have the habit to budget your spending, you’ll soon find yourself buried in debt. It is important for you to understand that when you use your credit card, you are compromising your future income. If you won’t have the money, you won’t be able to repay your card. |
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| Unexpected situations always happen and if you don’t have the savings, you may need to use credit. However, if you also use your credit cards for unnecessary purchases, your credit limit will be exceeded and you’ll incur in debt problems. The key to correctly using your credit cards is to carry a budget and never live above your spending capacity. Moreover, you should always keep at least 10% to 20% of your income in a savings account for unexpected problems. |
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