While we all strive to be debt-free, the reality is that most people in modern society have credit card debt. It happens for many reasons, often beginning slowly and insidiously increasing until we feel we are under a mountain of debt. Perhaps we borrowed for ‘good’ reasons, such as to help with school or moving expenses, or perhaps the expenses were justified so long ago or so often that we honestly don’t remember anymore.
Sometimes we feel we can handle it, and congratulate ourselves for paying more than the minimum every month. The truth is, however, that unless you are paying off your credit card debt IN FULL every month, you are racking up debt – putting your hard-earned, after-tax dollars into someone else’s pocket, causing your original purchases or relief to cost you potentially many times over the original amount over the years. Money that could and should be earning interest FOR you is, instead, a lovely and healthy asset for someone else.
At this point in the debt cycle, many people feel overwhelmed and do one of several crazy things: they begin spending MORE, feeling things are hopeless and why bother worrying about it; they stop caring or get in over their heads and begin missing payments; or they consider bankruptcy.
Warning! All of the above options may feel good in the moment, but all have disastrous effects on your credit rating, which, even if you don’t care about it now, will indeed cause you to feel regret and remorse when the consequences hit home some day in the future. Instead, consider the following to stave off disaster while you re-group and form a proper plan to get yourself through, and hopefully to put yourself firmly on the road to financial health and even independence:
TIP #1: Speak to your banking institution/s. Honesty and open communication is the best policy here, as getting to know a friendly face at your bank can make all the difference in how your accounts are handled. Considering debt consolidation? Start with your bank, for a couple of good reasons: your bank is a known, trusted entity (even if you don’t agree with all their service charges), and may offer you lower rates because of your existing customer status. Also, a loan from a bank actually improves your credit rating, whilst a similar loan from a debt consolidation company can actually have the opposite effect in some cases.
TIP #2: Call your credit card companies, again with the goal of keeping open communication. Speak with as many people as you have to in order to negotiate either a lower interest rate, lower minimum payments for a set time, or some other compromise. Remain calm and professional, and remind them that you wish to continue fulfilling your obligation. You may also ask them for any ideas they may have, such as alternate cards with less frills but an accompanying lower interest rate.
TIP #3: Consider credit counselling, but only from reputable providers. Many companies in this line of business actually take shameful advantage of the desperation of their clients and pull some not-so-funny tricks. Try your bank for referrals of above-board credit counselling – they may even offer in-house help in sorting out your difficulties. You are not the first nor the last to be going through tough economic times, and most banking institutions are deeply concerned as well. Many are making efforts to comfort and help their customers and to ensure both the customers – and the banks themselves – will be around and in healthy financial condition for years to come.
Above all, remember that you are not alone and do not panic. People make strange financial decisions when they are afraid or overwhelmed, and once the air clears they may regret actions they cannot undo. Your thoughts are very powerful, and can deeply affect your behaviour and decisions about all things financial. For an enlightening look at how your mindset affects your finances – and how to improve what is called your ‘financial mindset’ – along with bonus material which deals with keeping your peace of mind during these turbulent times, improving your credit rating and more, you may find the popular ’30 Days to Wealth’ program a valuable tool (this is now available in instantly downloadable e-book format for those who do not have access to or time for the course).
Shauna Arthurs is an author and creator of a network of websites and blogs, specializing in helping people define and articulate their dreams – from financial independence to a satisfying career – and take the steps necessary to achieve them. Enjoy more information and resources at BreathingProsperity.com. Shauna also writes about niche topics for her clients and her own sites, such as sleeping pads.
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