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Major Credit Card Mistakes
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can be a boon to consumers, providing many advantages and benefits. Because they’re such a great alternative to cash, they’re great if you need to make purchases when you find yourself in a pinch. Some cards offer perks like rewards like cash back or travel miles, while others give you some added protection for your purchases. If you play your cards right and pay your balances off each month, you’ll never have to pay a dime in interest. Plus, being a conscientious credit card user can help boost your credit rating. However, these little pieces of plastic can also be a curse, especially if you’re already swimming in debt or just don’t know how to keep a handle on your finances.
Thousands of consumers have trouble getting their credit card balances under control. If you’re among these consumers, don’t despair. You’ll make your debt more manageable once you choose to change your spending habits. Take a giant step in this direction by avoidingor stop doingthese;six major;credit card mistakes.
Owing Is Easy Repaying Is Hard
Without careful attention, sinking into overwhelming debt is remarkably easy.
When cardholders start out, their credit card limit is usually low., but over time it typically rises, which makes overcharging tempting. Paying down debt is difficult because as the balance climbs, the interest compounds and payments increase.
With funds promised to past spending, less money is available for current and future expenses.
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Pay More Than The Minimum
The minimum payment on your credit card bill is around 2% of the previous months balance. The problem is, if you pay only the minimum, the majority of that money goes toward the interest , not the principal . Though it would take a long time, you could pay down your debt by paying the minimum, Hannah says, as long as youre not using the credit card as well. A better and far faster strategy is to find some extra every month and apply it to the debt. Be realistic and consistent. Aim for paying an extra $50 dollars per month, $100 per month, Hannah suggests.;
Work With Your Creditors
Reach out to your creditors to explain your situation. A credit card issuer may be willing to negotiate payment terms or offer a hardship program, especially if youre a longtime customer with a good track record of payments.
If your issuer offers a hardship program, it may provide relief when circumstances beyond your control like unemployment or illness impact your ability to manage payments. Whether you negotiate with your issuer or accept the terms of a hardship program, either option could lead to more affordable interest rates or waived fees, depending on the issuer.
These small changes might be just enough to help you get a handle on your debt, and the worst that can happen is they say no.
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Are You A Retiree With Credit Card Debt Here’s How To Pay It Off
by Maurie Backman | Published on Aug. 23, 2021
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can be damaging. When you rack up a balance on a that you pay off over time, you accrue interest on it. That costs you more. And too much credit card debt can damage your credit score, making it more difficult to borrow money affordably when you need to.
It’s easy to think of credit card debt as a younger cardholder’s problem. But plenty of older Americans have credit card balances too. And that seems to have escalated in recent years. In 2001, only 24.2% of senior households held credit card balances, according to the National Council on Aging. By 2016, more than 34.2% of seniors did.
If you’re a retiree with credit card debt, it’s imperative to rid yourself of it as soon as possible. Here’s how.
Develop A Repayment Plan
Even if youre in deep, you can probably climb out of debt with commitment and a plan.
Norman Perlmutter, author of How To Settle Your Debts, suggests going into crisis money management mode:
- Limit spending to basic needs to free up cash to pay down debt.
- Ask creditors if they will reduce your cards;interest rates.
- Prioritize payments by interest rates .
- Suspend charging while in repayment mode.
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Which Credit Card Payoff Strategy Is Best For You
Research aside, its important to note that every debt situation is different, and so is every debtor. You know yourself better than anyone else. So, youre in the best position to decide which credit card payoff strategy is right for you.
If youre having trouble deciding, here are a few questions you might want to ask yourself.
Most of all, keep in mind that theres really no such thing as a bad debt elimination strategy. As long as youre chipping away at your high-interest credit card balances and you avoid new debt, youre taking a step toward a stronger financial future.
Speak With The Right Person
Ask if this is the right department to deal with alternative payment arrangements, says Aneesa Getaneh, owner of the credit restoration company Bloom Credit & Co. The first person you get can usually help, but confirm. If youre met with resistance, then ask to be transferred to a manager or supervisor.
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Help For New York Residents
Account Resolution Plans are providing a vital lifeline for New York residents who are struggling to keep up with minimum payments, those who have fallen behind, or those who are being forced to use credit cards or personal loans to take care of personal or business expenses.
ARPs are available across a wide range of income levels. No credit approval is required.
What Happens If You Dont Pay Your Credit
Lets say a borrower gets a late paycheck or another force majeure and cant make a monthly payment. Depending on the terms of the contract, penalties will begin to accrue within 1-5 days of default.
In addition, the debtor will be charged a penalty for the delay. Then, a bank officer will contact the client to remind him/her about the delinquency and to find out what is going on. The information will be forwarded to the credit bureau.
The impact on the credit history depends on the length of delinquency . The further course of events depends only on the borrower.
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She Qualified For A No
Since Lana had a good credit score, she qualified for the Chase Slate®. This;balance transfer credit card doesn’t have the typical 3% balance transfer fee when the transfer is made within the first 60 days. Being able to avoid this fee saved Lana about $492 right from the start.
The Chase Slate offers 0% APR for the first 15 months. When Lana signed up for the card, she said the variable APR jumped to about 26% after the intro period was over. With such a high variable APR , she was extra motivated to pay off her balance before the 15 months were up.
Should You Close A Credit Card After Paying Off Debt
Even if you manage to tackle your debt swiftly, it can feel like you’re spinning your wheels if you’re adding more to your balances each month. Consider putting a moratorium on your current credit card spending while you focus on eliminating the balances. Instead of canceling the accounts, however, consider keeping them in a safe location where you don’t have convenient access to them.
When you cancel a credit card account, it can potentially hurt your credit scores by reducing your overall credit limit. This can impact your credit utilization, which makes up 30% of your FICO® Score.
If you cancel a card with a high credit limit and have high balances on your remaining cards, even if you pay them in full each month, it could increase your credit utilization and negatively impact your credit scores.
On the flip side, if your card has an annual fee or a security deposit attached and you don’t plan to use it, it may be worth it to cancel and save money or get your deposit back. You can also consider downgrading your credit card to one without an annual fee.
If you decide to hold on to the cards you no longer plan to use, try to use them occasionally to keep the accounts active. Otherwise, your card issuer may choose to close down the account for you, which they can do without notice.
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Negotiate With Credit Card Companies
One option for reducing your debt or making it more manageable is to contact your credit card companies directly and ask them to work with you. They might be willing to remove over-limit or late payment fees or reduce your interest so that you can get caught up on payments. Many top credit card companies are willing to work with cardholders who have run into financial difficulty.
Paying Off $50000 In Credit Card Debt
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year.
Paying that bill? Well, thats not impossible either, though it is considerably less fun.
Some of the best ways to address that much debt include:
- Put your card in the freezer and create a budget that includes a line item for reducing debt
- Get a second job and devote that income to retiring debt
- Downsize everything from house to car to nights out on the town
- Negotiate a deal with the card company for a lump-sum payment to settle the debt
- Automate payments so funding and paying become automatic
Accumulating $50,000 of;;almost always starts innocently and ends badly. You can dig a deep hole of debt by eating at restaurants or getting takeout three or four nights a week, picking up bar tabs a few times, buying new furniture or appliances, taking on an expensive hobby like golf or skydiving or just going on vacation.
All youve got to do is show them the credit card.
The real key to growing debt to unmanageable status is to take on multiple credit cards and make only minimum payments on each one. More than 200 million American adults have at least one credit card and the average consumer with a credit card carries four of them. The average credit limit for cardholders in 2020 was $30,365, according to Experians end-of-the-year U.S. credit assessment. With that much credit available, you dont even have to max out your credit cards to get to $50,000 in credit card debt.
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Find Ways To Make Extra Cash On The Side
There are several different ways you can make money, even from the comfort of your home. Here are some of the more common ways to increase your cash flow:
- Take on more hours at your current job.
- Ask for a raise.
- Look for temporary or odd jobs on job boards.
- Turn something you’re good at into a side business.
- Sell some of your personal belongings that you no longer need.
In addition to these, there are several other ways you can earn a little extra money each month to help pay down your debt. Take time to consider which approach works best for you based on your situation.
Bankruptcy Is A Worst Case Scenario
Bankruptcy;is treated like a disease, but its a financial cure for a lot of people.
Every financial analyst or debt lawyer would agree to aggressively pursue every other possible solution, but if you cant eliminate $50,000 in credit card debt in five years, either through a debt management program or your own do-it-yourself plan, bankruptcy is a legitimate answer.
There will be severe consequences from bankruptcy most pointedly the 7-10 year blot on your credit report and credit score but bankruptcy gives you a chance to start all over again and there is nothing wrong with second chances.
Because credit cards are considered unsecured debt, the obvious choice for bankruptcy is Chapter 7. In;Chapter 7 bankruptcy, you keep what is known as exempt property such as a house, car, equipment you use at work and any retirement savings and liquidate non-exempt property such as second home, second car, bank accounts, stock investments, card collections.
The money gained from selling assets is applied to your debt and whatever is left over is forgiven.
Another option is;Chapter 13 bankruptcy. Instead of liquidating assets, a repayment plan is structured to pay off your creditors in three-to-five years.
If this is your only option, its best to hire a bankruptcy lawyer to take you through the necessary steps to successfully file. Its worth noting that every year, 90% or more of people filing Chapter 7 bankruptcy had their debts discharged.
<H2>Pay off Your Debt: Start Now
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You Don’t Keep A Low Debt
Your debt-to-credit ratio, also known as your , is the ratio that shows how much of available credit you are using compared to the total amount you have available .;
Credit utilization is important when you want to dig out of debt, since maxing out credit cards gives you very little flexibility when it comes to your cash flow. It also means you could be racking up interest charges almost faster than you pay your balance off, especially if you only make the minimum payment.
It also has implications for your credit score: Lenders and creditors generally prefer to see a credit utilization rate of under 30%, and it’s even better to shoot for the lowest percentage possible to get the best credit score. A high credit score qualifies you for the lowest APR on credit products, which will ultimately get you out of debt faster.
Help keep your credit card balance low when financing debt or new purchases with a 0% APR credit card. The Citi Simplicity® Card offers a lengthy 0% APR for the first 18 months on balance transfers and new purchases .
Don’t Pay Your Credit Card Debt
My dad got off the phone and started crying. My mom yelled at him, “He didn’t give it to you!”
My dad had lent $2000 to S. and S. couldn’t pay him back “yet”. This call happened at least once a week.
S. was his best friend for 20 years. My mom would scream at my dad, “I told you not to give him money! What are we going to do now?” And she would start crying.
I was a kid. But we were going broke. My dad needed the money. I was a little kid but I felt scared and didn’t know why.
S. went to jail. Not for the $2000 of course but he was convicted of bribing a company that made him millions of dollars.
All of this is to say: your character creates your future.
My dad was too trusting and too sad and died from the cocktail of both.
My mother’s pessimism gets contorted into anger.
And S. didn’t have integrity and ultimately went to jail.
Your character today is your fate tomorrow.
What does this have to do with credit cart debt?
First, always pay your friends back. This is what integrity is about.
This is what friendship is about. This is what handshakes are for. This is how you build character.
A bank is not your friend. A bank is usually a trillion dollar institution that charges you fees, interest payments, has lots of fine print, and makes you sign lots of contracts.
You have a contract with a bank.
The bank says, “we will lend you up to $X, and you will pay us back all the money plus interest, plus penalties. Or else we will seize your assets.”
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She Transferred A Portion Of Her Balance
Lana was surprised to learn that she could only transfer a portion of her existing balance. She hadn’t anticipated this, even after researching how 0% APR credit cards work.
“Chase only allowed me to transfer over somewhere between $9,000 and $10,000,” Lana explains, even though her total credit limit was around $14,000.
Overall the transaction was simple, but the actual transfer took longer than Lana expected it would.
“It takes a little while for the balance transfer to go through,” she tells Select. “It was close to a month or a month and a half.”
Her advice for people using this debt payoff method is to plan on paying your old credit card bill for at least a month while the transfer is being processed and don’t assume your balance will disappear right away.