Credit Card Debt
U.S. Consumer Debt Outlook
The average American household carries about $16,000 in credit card debt. The total outstanding U.S. Consumer credit card debt was $938 billion in 2016 and growing. Most certainly what most consumers think of when faced with dire financial circumstances and mountains of credit card debt is bankruptcy. The word itself can make one shudder, as it should, because while bankruptcy can offer a clean slate (to a limited extent), it brings with it a vast array of extremely negative and long-lasting consequences.
The consequences of declaring a bankruptcy include a virtual destruction of the filer's credit record, and the inability to obtain future credit and loans, since the bankruptcy filing will remain on the filer's credit for up to 10 years. That being said, bankruptcy does have a place in the realm of debt relief. However, it clearly is the option of last resort and needs to be thoroughly explored in depth with one's family and attorney before deciding on it as the option that makes the most sense.
There are, however, other programs and forms of debt relief which offer immediate benefits and relief for those struggling with credit card debt. A newer program which does not involve bankruptcy or standing before a bankruptcy judge is known as debt settlement. A relatively new program compared to bankruptcy, debt settlement is a program which can achieve spectacular results in the reduction and elimination of credit card debt.
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Credit Card Debt Help - Golden Rules for Using Credit Cards and How to Get Rid of Card Debts
Credit cards make spending money fairly easy. The process is one step removed and makes us far less careful about it than if we were handing over our hard earned money. The combination of this with the fact that they are so easy to obtain for most people can be a recipe for disaster.
The use of credit cards has increased enormously over the last decade. Like we’ve seen with the sub-prime mortgage crisis, creditors and lenders are not always cautious to whom they issue the credit cards, this clearly is an invitation for an overspending disaster.
If you are one of those people who got caught in the credit card net, you should familiarize yourself with the fundamental rules which will help you put the debt behind you once and for all. First and foremost, you should not consider borrowing more money to pay off your debt, or take out more credit cards for spending. Debt is rarely improved by borrowing more money, and your situation is much more likely to become worse than it was before.
It’s Not Always Oversight
Getting into credit card debt cannot always be blamed on a consumer’s reckless spending. There are times when people must incur this debt; it could be for medical bills, family emergencies, delayed paychecks, or simply groceries to feed the family.
Balance Transfer Your Way Out Of Debt
Some people look for cards with the best interest rates for 'balance transfers'. It doesn't matter what the rate is for purchases because you aren't going to be making any either way. This is a very important rule - when you undertake a balance transfer, you must forget that card for any spending habits. You will rarely find a card that has a special deal on both balance transfers and purchases, so chances are you will soon lose anything you gain on the balance transfer deal if you start spending on the same card.
Granted that your credit score is 750 or above, you may qualify for a low APR balance transfer. Credit limit is another factor. The probability of a credit card issuer approving for large enough credit line for you to transfer your balance is very unlikely.
If you need a longer term to pay off your balance, then you can either find the lowest rate possible for the 'life of the balance' (you are guaranteed that rate until the debt is all paid off). If you are organized and disciplined, you can keep transferring your balance to the next special 0% offer deal and avoid paying any interest at all. We stress that if you are not organized, this will not work and you will end up paying significant interest and other charges. Be honest with yourself and decide whether this is a suitable option for you.
Understanding Credit Cards
The way you deal with credit cards will be improved by first facing some basic truths about them. The first thing to remember is that every single credit card is designed to earn revenue for the card company; they would not exist otherwise. This does not mean that there are no ways to take advantage of the benefits of credit cards, but you need to understand where the traps are and how to avoid them.
Credit card companies turn a profit by making it very easy for you to spend money which you don't have and charging you on what you have borrowed until you pay it back. The big difference between cards and loans is that with a loan your repayments are fixed, so you pay interest, whereas with a credit card you can avoid paying any interest altogether, if you pay off everything you spend every month.
The card companies have a vested interest in you being unable to clear your balance each month. They hope that you will not repay everything you owe so that they can charge you interest on the money you have spent and borrowed. Credit card companies are also good at incorporating additional charges for things such as late payments or going over your credit limit, so there are lots of ways of getting more money out of you if you do not understand and follow the rules carefully.
In the U.S., you will see the term APR used in all credit card advertisements. APR stands for Annual Percentage Rate and is the rate of interest that you would need to pay on any debt using the card over the course of a year. Putting the APR on literature about credit cards is a requirement of the Consumer Credit Act 1974, and is intended to allow people to understand the longer term impact of the interest rates. It also enables fair comparisons between different cards. You could imagine how difficult it would be to compare the deals offered by several cards if one used monthly interest rates, one annual, etc.
In the U.S., you will see the term APR used in all credit card advertisements. APR stands for Annual Percentage Rate and is the rate of interest that you would need to pay on any debt using the card over the course of a year. Putting the APR on information about credit cards is a requirement of the Consumer Credit Act 1974, and is intended to allow people to understand the longer term impact of the interest rates, and to enable fair comparisons between different cards. You could imagine how difficult it would be to compare the deals offered by several cards if one used monthly interest rates, one annual, etc.
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The Minimum Payments Trap
All credit cards have a minimum payment amount which is the least amount you must pay each month, and this is somewhere in the range of 2 - 5% of the total balance. As this is such a small proportion of the debt, it will take an awfully long time to pay it off as long as you only make the minimum payments. Remember, the longer you take to pay back the debt, the more the card company will get from you in interest charges.
Credit card companies dream of customers who promptly pay the minimum payment each month. This gives the companies the reliability of someone who pays them regularly but allows them to charge a great deal of interest since they take forever to pay it back. Preferably, you should try to pay off the full balance every month, but even if you cannot, you ought to arrange a fixed payment for the most you can afford. Always avoid the trap of just paying the minimum payment.
The Cash Advance Rule
Credit cards have their uses, but getting cash advances is not one of them. The majority of the time, using a cash advance option will cost you considerably more, so the best approach is to act as if it is not available, and use other means of obtaining cash.
Let the Professionals Help You
If you truly want to get out of your debt problems, then you should consult with an expert. We encourage you to speak with us so that we can assist you in planning your way out of your financial crisis. Strategic Debt Relief specializes in debt settlement and we can help you achieve a reduced payment plan that could have you completely debt-free in just 24 to 48 months.
We’re here to help you stay debt and stress free. Call us NOW 877-297-4477.
Not all debts are eligible for enrollment due to our underwriting guidelines. Clients who make all their monthly program payments pay approximately 42% of their enrolled debt balance before fees or 67% to 71% including fees, over a term of 1 to 60 months. Our service fee is approximately 20% to 25% of the enrolled debt amount enrolled. Not all clients complete our debt relief program for various reasons, including their ability to save sufficient funds while in our program. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Not available in all states. Please contact a tax professional to discuss tax consequences of debt settlement. Please read and understand all program materials prior to enrollment, including potential adverse impact on credit rating. We look forward to assisting your shortly in settling your debts at Strategic Debt Relief 1711 Kings Highway, 2nd Floor, Brooklyn, NY 11229.