If you are drowning in debt, credit card or any other kind, step back and see where you made the mistakes. Some times the answer to a problem, is finding out how you got their in the first place, or what your weaknesses could help you get out of debt and prevent you from falling back in to the pit.
Here are some financial mistakes to avoid:
Balance transfers – this is not a bad thing and could potentially save you money on the interest. A balance transfer from a high interest rate card to a lower one is a step in the right direction, but you have to be discipline and not use the card with the lower balance. However, most people don’t do that, they continue to charge money on the new card instead of paying off the old balance before the introductory rate expires.
Not checking your credit report – You should do this at least once a year. People don’t check for errors and they ruin your credit rating or chances for a better interest rate on loans in the future or for even obtaining a loan. Also someone may steal your identity and you won’t know until you apply for credit or ask for a loan.
Not letting your creditors no about financial hardships could cause you to get harassing phone calls. If you have experienced a job loss or extra medical bills or anything effecting your payment, let them know.
A budget is not a bad thing. Most people look at budgets only for people with low incomes, but it can benefit everyone in the long run if you set amounts for specific items. If you don’t save in advance you may have to charge expenses and then you have added to your credit card debt, when budgeting may save you.
Don’t use department store credit cards or cards specific to a certain store. They may have higher interest rates even though they offer you a discount for using their card. You should only use these if you can pay the balance off at the end of the month.
Not having an account for emergencies is asking for a problem. It only takes one medical emergency, one house repair or a car accident to force you to use your credit cards or get quick loans. These just add to the bottomless pit of debt you are already in, when an emergency account, could be the answer.
Bill paying order may not matter or so you think, but if you pay on all the balances and then fall short and can’t pay the house payment or the rent, you maybe jeopardizing the roof over your head. Prioritize your bills, living expenses first.
Using your credit card instead of paying for a purchase with cash or a debit card when you have the funds will just add to the bottom line of debt. Not only do you wind up paying for the purchase but also the interest that accrues on the purchase.
Making payments on credit cards late not only gets you a late fee, that now you will have to pay interest on, but if the payment is 30 days late, it will affect your credit score, may put you at default or triple your interest rate.
You may think that paying the minimum due every month is better than paying nothing, but if it is not lowering the balance, than all you are doing is paying towards the interest that you are accruing on the balance and you are technically getting no where and those purchases you thought you were saving money on, is costing you more than you actually paid.
Tue, Jun 23, 2009
Getting Out of Debts