Posted on 01/04/2012 7:39:40 AM PST by Kaslin
“Cutting Your Credit Card Debt: How to Get Started”
Cut your credit cards. There is a special slot in most shredders for them.
I was in a similiar spot.
If this woman has a 401K and can borrow against it, I recommend that she take out a loan and pay off the cards. The interest rate charged (on the loan) is significantly lower.
In the case of my loan, the money is automatically deducted from my paycheck.
And lastly, cut up your cards or maybe keep one just in case of an emergency. But don’t use it unless you absolutely positively have to.
My vote goes to the first political party committed to this platform for the U.S. Government:
FIRST: STOP USING YOUR CARDS
SECOND: MAKE A BUDGET
THIRD: DON’T FORGO SAVINGS
FOURTH: DECIDE WHICH CARDS TO PAY OFF FIRST
FIFTH: COMMIT TO A PAYOFF SCHEDULE
This will give you some breathing space....
I put all my cards in a glass jar of water...frozen in the freezer.
RACIST!
;o)
Rotsa ruck with that. As has been said by others, we don’t need a third party, but we could use a second one.
The first thing is to realize that debt (barring catastrophic events) is a product of behavior and not of an inanimate financial instrument. Guns are not to blame for shootings and credit cards are not to blame for debt.
The second thing is realize that not all debt is bad. If it allows one to unsustainably live beyond one’s means it is a problem. If it increases ones productivity (i.e. a mechanic buying a lift for a garage, buying a car to travel further to a better job, building a shop for a woodworking business, etc.) it can be good debt.
I would not borrow 401K money to do that. Most people that
do end up running the cards back up.
Paying down over time diciplines one to actually spend less
which is the heart of the problem.
examine your supermarket and food bills....
buy in bulk...get 2 for 1 offers....cut coupons.....make your own lunch to take to work.....take a pot of coffee with you to work....dig up the lawn and plant potatoes and other veggies (added benefit is the exercise)....enjoy life as those cards get paid down.,....
I keep a big sheet at my desk showing each credit card and mortgage on a monthly basis....keeps the motivation up.
That works with men. Women never learn. ....*ducking for cover*....
I’ve NEVER had a credit card...I was raised by Germans.
I pay for everything in cash.
There are yet other ways to build on this scenario that will help a person extricate from the situation faster. Again, using what was suggested as the starting point.
1) Once you have a plan, consider add-on ways to speed things up. To start with, you may have a family member that if you explain the situation and your plan, might give you a small, floating loan, with little or no interest, that can be used strategically, with their approval, to accelerate your heaviest interest payments, then be repaid to them.
Typically, this might be a few thousand dollars that you could collateralize at 100% to them with something you have of value that you own, you give to them with a contract that they will return it once you give them their money back. For example title to your car at bluebook value.
So you can continue to use your car for the time being, get out of your most high interest debt, and divide your income between minimum payments for your other debt and getting enough income to repay their loan.
By doing this in stages with short term loans, you can increase their confidence that you will, indeed, pay them back.
2) Actually create bookkeeping for your income and expenditures, to help you discover things that cost a lot but provide little value, such as cable TV, subscriptions to entertainment such as Netflix and magazines.
One powerful tool to use is grocery shopping selectively and with coupons. Make a list of common purchases and compare prices on them between 3 or 4 local stores, looking for price trends.
Some stores specialize in bulk purchases, others use loss leader sales, some have house brands of products that are a lot cheaper than name brands, etc. And sometimes there are coupon wars, when competition is strong.
All told, shopping smart can save hundreds of dollars a year. So can avoiding restaurants and fast food. And it adds up.
I've done this before, too. I ended up regretting it.
As someone else pointed out, the typical response is to simply run up the credit card debt again. That's not what happened to me, though.
My money was sitting on the sidelines during one of the biggest growth period in the US Market. As a result, my current balance is significantly lower.
Of course, you may end up taking profits and paying a nominal interest rate (which goes into your own account) while the market tanks, as well. But in the long run, it's usually not a good idea.
Why you! No wonder your name is moehoward! ;)
While I admire your principal, not having any credit cards severely limits your purchase power, as well as possibly your credit score.
Have you ever made reservations at a hotel? Ever bought airline tickets? Ever bought anything online?
I suppose there are ways around those tasks WITHOUT having a credit card, but it makes it very difficult.
“The interest rate charged (on the loan) is significantly lower.”
If the job ends for any reason, the full amount comes due immediately.
Never borrow from family. They go from being a family member to a creditor. You can destroy a relationship like that.
Take one card (usually the smallest) and throw all your money at that card, making minimums on the rest. If you can, get a loan from a bank or credit union to pay them off so you only deal with one payment. Then kill the accounts. Dead.
But first comes the budget. You have to know where your money is going.
If your point is to stop using them until you have paid off the balance and request new cards, I agree.
But, you don't want to close all your credit accounts. That will hurt you later when you apply for new credit (mortgage, car loan, etc.)
Instead, I'd consolidate onto 1 or 2 of your cards -- the oldest accounts and/or no-fee accounts. Don't worry about interest rates... your goal is to pay them all off each month and never pay any interest.
Keeping the oldest accounts boosts the length of your credit history. Keeping the no-fee accounts are free, as long as you use the card about once a month to keep the account from being closed due to inactivity.
Be hard to do for me ... I don’t have ANY debt
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