How to Eliminate Credit Card Debt

How can you Borrow Money with Bad Credit?

2011-11-11T17:23:00.000-08:00

You know, so many of us go through ups and downs over our life with our finances and it is not unusual that we may need to borrow money when we have bad credit. The choices can be very difficult, but in order to keep up with bills for a home repair or other expense, it may be necessary to borrow money. Unfortunately bad credit means that your interest rates will typically be higher than average. Banks and other lending institutions increase the credit rates with the risk of the loan.

If you do have bad credit and are looking to borrow money one of the first things to consider is what you might have that could be used as collateral. Do you own property that you have developed equity in, or perhaps a car that is paid off and may be worth more than the loan amount. Other possessions such as a share in a business, or other assets such as jewelry, stocks and even retirement accounts might be used as a loan guarantee.

Now, if you do have property to be used as collateral then that will be a secured loan and you should be able to obtain a better interest rate than if you do not have anything to secure the loan with. An unsecured loan is only guaranteed by your promise to pay it, not by the possibility of the lender claiming your property in exchange for the loan.

You need to be very careful with unsecured loans because the interest rates many times can be extremely high. Unfortunately these include payday loans and such borrowing money with bad credit can get you into even worse credit trouble. I think if it were possible I would look to borrow money from a close friend or family member rather than get tangled into a high interest obligation.

So, you can borrow money with bad credit a number of ways, but you need to be cautious in how you do it that you do not make your situation worse when next month comes. I'm sorry to say that you will find many loans for people with bad credit, but they are typically among the more expensive loans available.

North Carolina Debt Consolidation

2011-10-23T21:53:00.000-07:00

North Carolina Debt Consolidation

As in most states, North Carolina Debt Consolidation companies will help you to limit the amount of debt you have. Usually the North Carolina debt consolidation company will begin by contacting creditors on your behalf and instructing you to stop making payments. At this point they begin negotiating on your behalf to see how low a balance the creditors will settle for.

The next step with North Carolina debt consolidation companies would be to set up a payment plan for you on your new consolidated and lower loan. Among other things you may even be able to choose the day of the month your payments will be on your consolidated credit.

As you can see the end result of this is a combination of both debt consolidation and debt settlement. Where the North Carolina Debt consolidation company settles with the credit card companies for less than your current outstanding balance. This is one way that you will save money in this transaction. Of course, the other way that this can save you money is by consolidation at a lower interest rate. The interest rate of many credit cards is above 20%. in some cases 28% or more is what is expected from credit card rates.

They can be quite effective in eliminated your credit card, reducing the amount you're paying on your loans and greatly reducing the amount of time it takes to pay back those loans.

WesternSky.Com Scam Revisited

2011-04-30T19:16:00.000-07:00

I wrote about the westernsky.com scam back in September and that is still the most popular post on this site. I really hope that people will stop and think before entering into loan agreements at obscene interest and fee rates. These kinds of loans are never going to really help you fix your financial situation, they are predatory and typically put the loan customer at a severe disadvantage.

I have seen some people start receiving calls from a place called cashcall looking to solicit loans after applying with westernsky. It's always a bad sign to me when an application to one company prompts several inquiries from other companies. It sounds to me like they're making some big money SELLING YOUR INFORMATION.

I've seen some people comment on sites that the only reason some people have a problem with it is that it's claimed to be a Native American owned organization.... I really don't care who owns it, when I see people hawking loans with between 139% APR and 194% (as of 4-14-11 for North Carolina Loans)... **** AT A MINIMUM according to their site... **** plus a fee of $75 for the $2600 loan and fee of $500 for a $1500 loan *which seems to be an avenue to say.... well you only want $1500, but the fee for that is very high. If you wanted the $2600 loan you could have it for a much lower fee".... and then your trapped for longer

Interestingly they apparently can't lend in California....

any question why I this westernsky.com is a scam?

I saw one person observe they're relationship with cashcall and point out the bad reputation cashcall has on complaintsboard.com.

Somebody at topix did some quick math on the westernsky interest rates:

Barow $2,600 minus a loan fee of $75.00 =$2,525
Payback on 36 months,$10.761.84
Interest rate, 139.34%

Barrow $1500.00 minus loan fee of $500.00 =$1000.00
Payback on 36 months,$7134.88
Interest rate, 199.98%

and put out a warning to people to be careful. Strangely some people defended westernsky saying to not blame them, there are other payday lenders. These other high interest rate lenders are just as bad a scam as westernsky.com

Okay - WATCH OUT FOR SUCH STEEP INTEREST RATES NO MATTER WHO IT IS. These are obscene! Some of these places charge up to 400% interest. That's even more than Western Sky Financial!!!

I would declare bankruptcy before getting into a loan with rates that high.

We're working our way out of credit card debt and the 20% of a credit card seems like a trap I can't imagine how much the debt would pile up if it were over 100%.

Once upon a time I thought there were usury laws that put limits on the percentage interest rate that could be charged on loans. I thought this was in the 25%-30% range. Unfortunately there isn't such a broad law and some companies would get around it by adding "fees".... Ugh - what a scam!

Please be careful out there and don't make a bad situation worse by getting into such a predatory loan deal as these. Avoid this westernsky.com as well as any other payday loan scams with such outrageous interest rates.

Seriously, if you don't have the money today, do you really think you'll have it one week, or 4? Think about it and you will likely agree that it is fair to call this westernsky.com a scam.

Another thought is to read the ftc's warning on payday loans...

Or take a look at this youtube video of their commercial:

Money Mutual Scam

2011-04-14T18:45:00.000-07:00

Well it looks like the folks over at Westernsky.com aren't the only predatory lenders around. (As if we thought there weren't other predatory lenders.) Today we turn our attention to money mutual. Many wonder if this is a scam. Money Mutual is being hocked quite heavily these days by Montel Williams. He encourages people to apply that most everyone will be approved, however I've seen people apply via the website (with social security number) and be told within 2 seconds that they are not approved. I personally think this is a bait and switch because it appears the information is passed along to "other lenders" to see if you qualify for THEIR loans. The front company Money Mutual probably gets a commission from the "other companies". That way they probably don't have to spend anything but advertising money and a website.... they don't have to loan a thing. (Partly why I think Money Mutual is a scam.)

Bad Credit - no problem is what they say... but here is another example of one persons experience...

One person has complained that they applied for a money mutual payday loan and then started receiving all sorts of loan offers in email (up to 50 a day....) Also the text messages and phone calls started coming.... more loan offers from all sorts of places. The text and voice calls put this person over their limit for their data plan and gave extra charges and then the story get's stranger. They received prepaid credit cards that apparently drew fees of between 49 and 99 from their bank account. (Which caused an overdraft and they were ultimately out over 300 dollars.) It's unclear how much of that money mutual was responsible and how much the other companies may have been responsible for. I think this helps show it as the money mutual scam!

Another person claimed that after applying through Money Mutual for a loan for the holidays they had just under $40 withdrawn from their bank account. I feel like this helps seal the case that it is a scam!

In reading about all of these horror stories with the Money Mutual scam I saw one person that had worked at a bank with the following story about a customer that had applied for a loan with one of these places and had $120 deducted from their bank account every month. They expected that the loan was paid off and then were surprised the next month when the same $120 was taken out of the account. Upon inquiring.... the $120 was a "fee for renewing the loan".... in order for it to count against the loan and actually pay it off, the person was required to call in advance each month to let them know it should be counted as a payment.

The bottom line with all of these stories is that you need to be very careful with who you deal with and the terms you have to deal with. Many of these charge high interest rates and truly are not worth it even if you are in dire financial situation.

Just because they advertise on tv with a well known spokesperson does not mean they are an up front and above board business. Does not mean they will avoid hiding information in the fine print that they'll sell ALL of your information to who knows who.... so they can try to sell you stuff/push a loan/rip you off....

You've got to be careful.

Here's another account of a scam like experience with money mutual...

This person suggests that they will loan 1000 and then the following week will withdraw a fee of $195 from your bank account as an interest charge. I suspect they're doing it weekly - so in four weeks that's close to $800. It is a trap.

There ought to be a law.... there are many laws that some of these companies may run afoul of, but in order to be stopped, the law has to be broken first. If they're working within grey areas of the law AND YOU AGREE TO A CONTRACT it is YOUR responsibility.

In reading the details on their site. They claim that you can get up to $1000 and you can repay when you're ready to. They will only take the minimum monthly payment/fees from your account, then when you're ready to pay you call your agent and tell them you're ready to pay in full and they take the full payment plus fees from your bank account. The real catch is their fees are not listed on the website (they VARY BASED on your QUALIFICATIONS...) Nice wiggle room there.

It's also funny to note that they have a warning about imposter sites that sell your information to other lenders and claim that they do not sell your information "outside of their network". (We don't sell information to any lender that we don't sell to....)

Here is the disclaimer at the footer of their pages...

THE OPERATOR OF THIS WEBSITE IS NOT A LENDER, does not broker loans to lenders and does not make short term cash loans or credit decisions. This Website does not constitute an offer or solicitation to lend. This site will submit the information you provide to a lender. Providing your information on this Website does not guarantee that you will be approved for a short term cash loan. The operator of this Website is not an agent, representative or broker of any lender and does not endorse or charge you for any service or product. Not all lenders can provide up to $1,000. Cash transfer times may vary between lenders and may depend on your individual financial institution. In some circumstances faxing may be required. This service is not available in all states, and the states serviced by this Website may change from time to time and without notice. For details, questions or concerns regarding your short term cash loan, please contact your lender directly. Short term cash loans are meant to provide you with short term financing to solve immediate cash needs and should not be considered a long term solution. Residents of some states may not be eligible for a short term cash loan based upon lender requirements.

Be careful out there and watch out for scams like these.... they are going to be more pain and agony than they're worth. Build up a cash reserve of your own for emergencies gradually and keep paying your way out of debt. "Deals" like this will only make your debt situation worse and take longer to clean up. Watch out for money mutual it looks like a scam!

Taxing Yourself to Pay Down your Credit Card Debt

2010-12-05T17:02:00.000-08:00

Here's an idea that you may wish to try to help you save up money to pay down your credit card debt. It's based on the idea of the flat tax or fair tax. Have you heard of the "fair tax"? Basically it's a consumption tax and proponents would impose a national sales tax of 23% on most items while taking away the federal income tax. The theory would be that essential food and certain minimum amounts of housing costs would be exempt so that the poor would not be overburdened, but then any other items - big screen tvs, luxury items, etc. would have a big sales tax associated.

In a lot of ways it can make sense if it's done well. (Personally I'd want to make sure it was tied to the end of the income tax outright and that there were good provisions so that a minimum of necessities could be exempt.) Why not impose a consumption tax on yourself to help in your savings?

For example let's make the math simple and say we'll tax ourselves 25%. All right - how will it work? Well if we go and get groceries that's something that should be exempt as should gasoline to get to work and car payments, house payments. But if we go out to dinner..... Let's say we spend $40 out on dinner. Then we make a note that $10 needs to be moved out of our checking account into savings (or whatever account you use to save up money to make big credit payments.)

Christmas presents I would think would qualify for the 25% self tax and really anything other than the essentials. By moving this "tax money" into another bank account away from the usual check writing process it makes it harder to spend on other things and then you can on a regular schedule see how much you've accumulated in your "self tax" account and use that to make a big credit card payment.

Now it doesn't have to be high maintenance. Just make notes as you go through the week and then each week as you're working on your bills you can transfer the total to the "other account".

If the 25% rate is too steep you could always lower it to 20% or less. I think I would start with a higher rate though and plan to move down if it bites too deeply. If you start off with 1% I doubt you will increase the rate over time. You'd be surprised how much you can save up to use to pay down debts this way. It will add up quickly.

Take Care on Black Friday so that you aren't Paying for it all Next Year

2010-11-24T14:54:00.001-08:00

Thanksgiving is a holiday that is sometimes overlooked for the day after. Black Friday it's now known as. First off, if you're working out from under debt as we are... really truly give thanks this thanksgiving for the progress you have made and for the things you have learned in your efforts to eliminate debt. We are making progress and that is something to be thankful for. But beyond that, having a home, warmth, clothes and all the basic needs are worth being thankful for no matter what the season. It's a good reminder.

The pilgrims weren't necessarily celebrating great prosperity, but survival and improving harvests. They had really turned a corner from starvation to being able to bring in a good harvest to prepare for the winter. Nothing fancy, but the basics were covered.

Today though, the day after Thanksgiving gets so much news coverage due to the economic hopes that many retailers pin on it. I know sometimes it makes you feel as though you're just not a good American if you stay home on black Friday. Doesn't everyone know that we all need to shop to help the economy? I've never really got into the big Black Friday hype myself, but have overspent on Christmas many years.

Here is some good advice to you to help keep things under control. First off, remember that first credit card bill you get after Christmas in years past? There's a ghost of Christmas past for you that may help remind you to reign in the spending. (Put a copy of it on the bathroom mirror to look at before you go out. Or keep a copy in your wallet or purse to look at as a reminder.

Next, try to be creative. We're doing a completely different approach on gifts this year. For many friends and family I'm giving house plants instead of traditional gifts. I've been knee deep in reading some of the many studies proving out house plants ability to clean the indoor air of many things from volatile organic compounds (benzene, formaldehyde/etc) to microbes and they are also shown to lower airborne dust and mold levels (even airborne fecal matter (yuck!)). I've also got a book for some that gives a good thumbnail sketch on the research and recommends some easy to care for plants. I've bought many of the plants for a very cheap rate on ebay (using money in my paypal account as opposed to credit.) I've bought pots and plants that way, I've bought potting soil at the local hardware store using cash and frankly have put a good amount of time into it.

I know someone else that brews beer at home and gives this as gifts (or a homemade trail mix.) There are lots of ways like this to be creative. The way I see it plants are a good choice in the depth of winter as they can help lift the spirits and help get people through the dark winter. Try to pick plants that are relatively pet/child safe and easy to take care of if you go this route. I've never really considered pets to be a good/appropriate gift unless the recipient has approved and will be able to care for the animal.

I do know that for some of you, it just has to be something from a store. Okay, here's how to keep things under control. 1) Just use cash. This makes it easier to see how much you're spending and helps control your limit. 2) Set a limit. Pull that amount of cash out of the bank and don't go back for more. Period! 3) Use layaway instead of credit. We've actually put some toys on layaway this year and there is an extra $5 charge from the store (some places will vary) but you will pay cash or check each week until the account is paid off and at that time you can pick up the items. Think of it as the reverse of a credit account where you bring it home today and pay later. In many ways paying now and bringing home later makes things seem a bit more hard won to me. (Plus you've already reserved the items you're looking for.)

The same rules hold true if you venture out to the Black Friday sales, but remember to set limits, use cash so you can keep good track of how much you've spent and remind yourself of the spending hangover that could ensue if you break out the credit card. Cold weather is not the only reason January can be a gloomy month. It's also the month for credit card statements that remind us of the lack of control we had during the Christmas shopping season! Work now to avoid that regret in January!

Beware of Exhorbitant Interest Rate Loans westernsky.com

2010-09-16T19:52:00.000-07:00

Wow! The last week I've seen quite a few ads from westernsky.com. They are an LLC that is native-american owned and operating in the sovereign nation of the Cheyenne River Sioux Reservation. (Within the borders of the US, but federal jurisdiction is on iffy ground there.

They are advertising their loans as being more affordable than many payday loans and this evening I decided to take a look at their site.

WOW....

Loan Product Borrower Proceeds Loan Fee APR Number of Payments Payment Amount
$2,600 Loan $2,525 $75 139.34% 36 $298.94
$1,500 Loan $1,000 $500 194.70% 24 $166.95

So.... for a 1500 loan you only get $1000 because of the $500 loan fee!!!! But over the life of that 1500 loan for the use of $1000 you pay back $4006.8

But what if you go for the $2600 loan? The loan fee is much less at $75 (so you get the use of $2525.... but over the life of the loan you wind up paying $10761.84

You would be better off defaulting on whatever you need the 2525 or 1000 for, because you are going to regret getting a loan like this. Please do not consider something like this or other payday loans to cut your credit card balances down to size.

The moral of the story is to be VERY careful for any kind of loan (including credit cards). For all of your loans and credit lines it is a good practice to be familiar with your interest rates (I like having them all in a spreadsheet.) This way you can know which of your card balances to "attack" first. (Highest interest rate first!)

Read the details, read the fine print, read the interest rate information and be aware that rates may increase if there is a missed payment. Try to avoid finding yourself WASTING 10,000+ dollars over the next few years just to have 2500 today.

By the way, it's not clear to me if the terms at westernsky.com require monthly payments or weekly payments. Some other notes though are the following quote:

"Please be aware that not all applicants will qualify for every loan product or the lowest interest rate for a particular loan product. Some applicants will not qualify for any of the products. "

SO, you may not be lucky enough to get the LOW (?) rate advertised on their site. (I'd be really surprised if they turn any applicants away.)

Desperation loans like this only put off the inevitable crunch and will more often than not make your financial and credit situation MUCH worse than it already is.

Also available at westernsky.com - Beware Shocking Interest Rates

What if i don't pay my credit cards?

2009-11-06T12:59:00.000-08:00

I'm sure this question has popped into your mind at least once if you have credit card debt. I know I have spent many sleepless nights in the terrible what if.... train of thought. What if they decide to close my credit card account? What if I don't pay my credit cards? What if they demand payment of my credit cards immediately? What will happen.

Well, if you stop paying your credit cards here are some things that will happen.

You will start getting collection calls. You will have the credit card company report this to the credit rating boards. Your interest rates on other loans (or prospective loans) will likely go up. The interest rate on the credit card that you are not paying will suddenly go to their highest level. They MAY pursue other action such as garnishment of wages, as well as liens against other assets you may have.

Here are some things you should try to do before it get's this bad.

1) Try to consolidate your credit card debt onto one loan so that you don't have various payments to make each month. Simplify to just one payment per month.

2) Try to negotiate a better rate with your credit card company.

3) If you simply can't pay. Try to offer the credit card company a portion of the amount you owe. This is what many debt consolidation companies do. It will probably affect your credit rating, but on the plus side you may be able to settle the debt by paying a smaller percentage of the total. (Make sure to get things in writing before sending them any amount to guarantee that upon receipt they will consider the debt resolved.)

4) If you simply can't pay and have no other options bankruptcy is something you may consider. The disadvantages of bankruptcy are many, but the advantage is to finally be out from under the load of debt. Disadvantages? Credit rating will show it for 7 years. Some jobs will not hire someone who has declared bankruptcy. Other loans will be difficult to acquire. They may look for you to sell off other assets to pay a portion of the amount owed. Chapter 13 bankruptcy can protect assets not normally considered exempt from collection and can offer the consumer protection from harassment from collection calls.

Committed to Escaping the Stress of Credit Card Debt

2009-10-11T19:24:00.000-07:00

I know I've talked about the stress caused by credit card debt before. I revisit it mainly because I think it is one of the most serious problems that credit card debt brings us. In fact it's the main motivating reason I can come up with to eliminate your credit card debt. Let me tell you some of the reasons credit card debt can be so stressful.

Fear of losing property. What if we have to declare bankruptcy? Will we lose the house, land, cars?

Fear of losing reputation. What will people think if we declare bankruptcy? Some jobs even are unavailable to individuals with a checkered credit history. If your job is affected THEN WHAT?

Fear of future finances. If everything is going now to pay credit cards will we have anything for college for the children or our retirement? Fortunately for college there are great scholarship, grant and loan options. Everyone would like to be able to pay for their childrens college education, but retirement is much more important and there are fewer choices... seen your social security or 401k statements lately?

Irrational fears.... I have always had this irrational fear that the card company may suddenly decide to not extend or renew our credit account and demand the balance be paid. Where would the money come from, what could we do then? Fortunately this is really not very likely, but certainly a fear that has motivated me.

Finances can be a leading cause of marital problems and disagreements. It adds undue stress on a marriage and can force a family into difficult situations.

There are SO MANY reasons why you should resolve today to dedicate every energy you have to eliminating credit card debt and never returning to debt. Print up reminders for yourself for every day so that you can turn all of your attention to the reduction and elimination of your debt and reduce your stress along with your debt!

Saving Money for Emergencies While Paying Off Credit Card Debt

2009-09-25T11:21:00.001-07:00

I don't know about you, but being in credit card debt is really a catch 22 you really need to eliminate your credit card debt that's certainly clear. However, life has a way of serving up surprises that if you're not careful can push you deeper and deeper into debt. Sometimes they're not really even surprises, but expected routine expenses.

For instance, our car insurance ran around $600 every six months. Invariably it would catch us short and we'd have to scrounge to make the payment. Certainly that's an important item to keep up otherwise we would be out walking 10+ miles to work. Property Tax is another of these things that rears it's head once per year. In our case it's a $1000+ payment and just like the quarterly income tax payments it's taken some time to come up with a good way to deal with these.

After yet another year where filing our taxes came with a surprise of needing to pay 4 figures I started realizing why we kept getting stuck. We feel like every cent we have has to go to pay down our debt and we hadn't been planning for the expected expenses (much less the unexpected ones such as a car repair or appliance replacement.) Taking the income taxes as a model I started looking at what was causing us to have to pay so much.

In our case it wasn't really "income tax" it was "self employment tax" that was coming around to bite us year in and year out. So, while we weren't making enough to pay a tax on a percentage of income, the equivalent of what an employee has withheld from their paycheck (plus their employers share) is what we owed. This amounted to around 14.some % of my gross adjusted income if I recall correctly. Since I'm self employed my income varies (sometimes quite wildly) between 1500 in a month and 6000 in a month for example. With that range it had been impractical for us to say we would store away $300 a month for savings because some months that would cut too much into what we needed to pay down debts, buy food, etc.

So, we decided to make it a percentage of my deposits. For example: We opened an account (Money Market which pays higher interest than either our Savings or Checking) and decided that 15% of each deposit from my self employment would be transfered into this account. That way we should more than cover our 14% FICA/Self Employment obligations and earn interest on it to boot. Plus that money comes out immediately when we deposit so that we don't see it as being available to pay on the credit cards. Since my adjusted gross income will be less than the actual gross due to expenses, etc. Then we should have some money left over when taxes are paid. So, that surplus get's to be dumped towards the credit card of our choice. (Usually the highest interest card, although sometimes we may choose one that's closer to being paid off entirely.)

Additionally we've taken a look at our property taxes and figured out how much a week that comes to. Since we are making deposits almost every single week this amount get's transfered over to our savings each week and I should note since this is a fixed amount we will owe we opted for a flat amount to move out of checking each week to save for this.

I've really come to LOVE using the percentages to save up and we have made use of that same principle to save up a bit of a reserve fund in our checking account so that we have not only a cushion against overdraft, but a fund in case we have a surprise expense of an appliance needing replacement, vehicle repair, etc. It has really helped us to feel a lot better about our financial situation because we have actually put some things more under our control than under the control of what's left after we pay on our debts.

It may be that it puts off the date that we can eliminate our credit card debt, but it has given us less stress and more flexibility in the meantime.

I have seen many debt advisors say that you should not try to save until you have paid off all of your credit card debt and frankly I disagree strongly. I think you need to accumulate a reserve fund for emergencies. Around $1500 is a good target to start with and if it takes paying just the minimum on your credit cards for a couple months first, or using a percentage savings approach, either way you get there is a good way!

Strive to Pay for Everything with Cash Only

2009-08-04T09:14:00.000-07:00

One way to work on eliminating your credit card debt of course is to do as I suggested last time and stop spending on your credit cards cold turkey. That's right, tear them up or put them away and don't carry them with you. Credit cards make it so easy to spend money without thinking about whether the money is really there or not. It can be awfully tempting to look at an $800 product and think that even though the money is not there now, you can have it paid off in just four months.

Well, I have a suggestion for you. If it's something that you need or want that bad, then set aside $200 a month into a special savings account (or even a sock!) and go pay cash when the time comes. We have become very used to the idea of borrowing from tomorrow so we can finance today that waiting four months to buy something REALLY seems like a revolutionary concept doesn't it? But, that's the kind of change of thinking you need to acquire to really get rid of your credit card debt.

Cash and Check purchases are really all you should let yourself make as you try to climb out of debt. This way, you know exactly how much you have to spend and you know you aren't going to go over budget. So, for groceries go to the store with $80 cash in your pocket AND a LIST of what you NEED. Odds are if you are running a bit higher than $80 you'll put some things back, maybe compare prices with the generic brands and find a way to come in at $80. But if you go with a credit card as your planned payment, then your bill is what it is and you pay that amount $120 - wow did I really get that much? I will just about guarantee that if you picked two people at random to go through a grocery and one had a credit card to pay with and the other had cash, the person with cash would average out to spend less.

Why do you think so many companies prefer consumers to use credit cards? Because studies show that they spend more on average when they use credit as opposed to cash. Checks can be a bit tricker when you use that same checking account for all your groceries, your bill paying and what not. It's easy to see the balance there and know that you have a bit of a cushion and work your way down to zero. I think one of the best choices we've made in our efforts to get out of credit card debt has been to set aside, with each deposit a certain amount of money into other accounts, savings, money market, whatever accounts you have available. We've also made a practice of adding somewhat of a cushion to our checking account. An extra couple hundred dollars that isn't reflected in our running balance, but is there "just in case" we get to the due date for xyz bill and had already been to the grocery. We haven't used this safety net, instead treating that "new zero" as our limit. This has taken a good deal of stress out of our situation though.

When you go out to eat, use cash. When you shop for clothes, use cash. When you go grocery shopping, use cash. Now, I know there are those times where cash or check is not an option. I do work online with businesses that don't accept cash directly instead preferring credit card, or paypal. If paypal is an option, USE it. No, I don't mean some paypal credit card. Actually have a balance of dollars in your paypal account and you can use that directly for online purchases. Of course, sometimes you just HAVE to use a credit card for a purchase. When you do, first set aside the cash to pay off the amount before you purchase the item. Go ahead and earmark some actual cash so that either when the statement comes (or once the credit transaction clears) you can send your payment to the card company and not pay any interest on the item. I mentioned paying once the credit transaction clears. Most credit card companies will allow online payments, in many cases several a month. So, go ahead and get set up to pay from your checking account directly to the card and when you have to make a purchase on the plastic, go ahead and get ready to make a payment for the same amount when it clears.

The bottom line to this is to be FIRM with yourself and don't sucker yourself in to, "just this once" thinking. Hold the line, take control and start working to eliminate your credit card debt TODAY!

Stop Spending on the Credit Cards Cold Turkey to Eliminate Your Credit Card Debt

2009-07-31T14:15:00.000-07:00

This bit of advice is probably something I should have started this site off with. In fact it is the number one suggestion most financial planners will tell you when asked how to eliminate credit card debt. The suggestion?

Quit spending. Tear up your credit cards (well, cut them up). Don't buy anything else on your credit cards until you get them paid off and you have elminated your debt. This is really good advice, but it does miss the point of how most people get into credit card debt to begin with. That's partly why I didn't put this one up first.

Our situation when we first started out was that we had a very meager income which was enough to cover the phone, lights, rent and car payments. (One of our cars died when we were first married and it needed lot's of money to repair it.) Notice that I haven't mentioned food. If I recall, after our essentials were covered we had maybe 50-100 for the MONTH for groceries. I was spending 50-100 each week at the grocery store. We weren't going out to speak of (MAYBE once a month.) We also had unexpected other expenses (and some that should be expected like 6 months car insurance payments.) So, if we had quit using the credit cards we would have not eaten, not been able to get car repairs (or pay insurance which as I recall had to go on a credit card.) Could we have borrowed from friends and family? I guess that's a possibility although we were a good distance from them.

Over the years I've looked back to those 2 stretches of our lives where our debt has gone up and I've tried to think if there was any way I could have avoided us going into debt during those stretches. Could we have just quit using the credit cards? I look around and ask if we've spent money on luxuries. We really haven't. We have at most eaten out once a week and always at some of the cheaper places (or if it costs a bit more we save it to reheat for another meal.) We don't drive luxury cars, they're both simple and we bought them used (currently they're both paid for too!) We have 1 television. No, it isn't an hdtv or even digital tv. Do we have things that we could get along without? Yes, probably. There's certainly a bit of fat that could be trimmed and these last two years we've tried to really trim that fat every way we possibly could.

I guess my point here is this, in our situation we would have gone without essentials if we hadn't used our credit cards. In fact, we probably would have cut things that would have prevented us being able to get to work reliably. Those times that we've gone into debt our income just didn't meet our rent+utilities+groceries+health bills+car bills total. The credit cards acted as extra liquidity and unfortunately we are still paying for that.

So, the bottom line is if you are out shopping for the latest cds and dvds, new clothes and you sit down and see huge amounts of credit card debt. Take a look at your budget. Take a look at how much the things you HAVE to have cost and how much you make. As for your living expenses, can you downsize? What about utilities, is it possible to save there? I know from our experience that many times you just don't have too many options to downsize living expenses. We lived in a one bedroom apartment for quite a while that really wasn't cheap, but it was the cheapest around. What about your income? Is it possible to find ways to make more money?

We've learned so much about budgeting over the last 12 or 13 years, but the bottom line is you can't always cut the cards up cold turkey and quit spending. If you're in a position to do that, great. It's one way to guarantee that you won't be adding to your credit card balances. Also if you are able to do that, your pathway to eliminating your credit card debt should be much easier.

Evaluating Your Credit Card Debt Situation

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One of the first things you need to do is take an honest look at your credit card debt situation. Before you eliminate your credit card debt you have to know just how much there is and where it's costing you the most. I know, if you're like me you dread seeing those credit card statements coming. You open it, take a quick glance at the balance and due date, maybe skim the recent transactions to make sure nothing unauthorized has been charged and you quickly file it for later payment.

This might hurt a bit, but now is the time to take a closer look. Pull out a sheet of notebook paper (or a spreadsheet if you want - whatever makes it EASY to work with.) Put down a few bits of information - the account name (discover, mastercard, visa, etc.) The outstanding balance and the APR (Annual Percentage Rate). If you like you may also note the due date since most cards will be due about the same date each month. Other information you could make note of is the minimum payment amount, how much interest that card accumulated this last month and perhaps the phone number to contact the company. We can use all of these bits of information in our effort to eliminate credit card debt.

You'll want to do this for each account you have. Personally I like using a spreadsheet some times and then other times I prefer just a sheet of paper. The point is to not get distracted with fancy spreadsheet formula setups and pie charts and graphs. All we want is a nice (probably ugly though) listing of the raw numbers. How much do you owe, how much is it costing you, what's the APR and how do you contact them.

Okay, look at your cards and the interest rates. Insane interest rates aren't they? 22% ? 6% ? Here's your first step to financial freedom in this coming sentence. Find the credit card that has the highest rate for your right now. That's going to be your FIRST target to eliminate. That will be the one you focus on first. Is it your highest balance? If so, then consider a balance transfer to a lower card to accelerate your progress. Think it may not be worth it? Look at how much in $$$ you accumulated in interest THIS month. Multiply that by 12 and see how much this one is costing you each year. Next, look into balance transfer charges and find out what interest rate you could get on a balance transfer. Do some math (it's really not that hard. Just multiply the outstanding balance by the old percentage rate to see what your currently paying (divide by 12 to get the monthly amount) and then multiply that by what would be your new rate and divide by 12 to get the monthly amount.) Compare the numbers on a yearly basis and be sure to take any extra balance transfer fees into account (and credit limits.) If it looks like you'll save any money then go ahead with the balance transfer.

This is going to have 2 benefits to you. 1) You should be saving (perhaps a LOT of money) on the interest charges. That's a big benefit on it's on to be certain, but 2) You also wind up reducing your monthly bill payments to make by 1. That's right, you've probably struggled trying to figure out how to pay more than the minimum amount to several cards throughout the month to be making progress on each one. It's like a swordsman fighting multiple opponents, it's very challenging to do successfully. You have to consolidate your "enemies" whenever possible. Now, you can simply combine the amount you were paying for the two cards to the one that you've consolidated to.

Here's another suggestion for you that will likely help. Once you've identified the card with the highest interest rate, quit using it. Yes, absolutely rule that one out. Even if you NEED the liquidity that the credit cards give you, choose the one with the lowest rate. DON'T EVEN DARE to think that once you consolidate it onto another card that you can use it "just this once" and then pay it off next month. (It's a TRAP! Life will surprise you and you won't, or you'll be anxious about making the other payment in time and then you'll be back to face TWO seperate balances instead of the one you've consolidated.)

Are there alternatives to consolidating the balance of a high rate card to a lower rate card? Yes, we'll look an another idea next time.

The stress caused by Credit Card Debt

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I'm going to start out with a post that really details the argument for WHY you need to do what you can do NOW to eliminate your credit card debt. This may get a bit long, but I'm going to talk about all of the things that having credit card debt does to your life. First and foremost on this list is the stress that credit card debt brings to your life. Why do you feel stress? Well.... let me tell you about our situation. I'm self employed and make around three thousand dollars a month. My wife has part time employment and full time Mom to our two children. So, for starters debt has had us second guess our decisions. Should she work full time? But then what about child care and those expenses? She would certainly prefer to be full time with the children, but... every time an opportunity comes up for more hours, even when it's doing something she doesn't want to do, we have to go through this thought process of "well we do NEED the money."

It's funny to me in some ways because if our credit card debt were retired by the wave of some magic wand we would be doing quite well. We'd have a good amount of savings each month and while we wouldn't necessarily be rolling in riches, we would be able to amass a pretty good savings pretty quickly. But those monthly payments of 300-800 to the credit card beast.... that is the problem. Because of that, we haven't had savings to speak of during our married lives. (Something that has got us into a pinch more than once and something that ALSO causes us worry and stress that we have little or no cushion against the unexpected.)

Given that I'm self employed and wasn't able initially (nor since, yet...) to really separate business/personal finances I'm also in the dilemma of constantly needing to have available credit on our cards. Some of my work involves the need to purchase supplies or equipment for projects for clients and in 90% of those cases if I can't buy the supplies then I can't do the project. So, I've needed to watch and make sure there's "headroom" on the cards to fund future work projects. At times that has become stressful simply because we've run so close to our credit limit that we haven't had much of any headroom.

I always had this fear in the back of my mind that at some point the credit card company (or companies) would decide to not reissue our card and require that we pay off our balance. This was (more or less) an irrational fear provoked by our situation, but.... it's fairly easy when you're at a disadvantage to someone or some company that you feel such phantom fears and doubts. What if they were to immediately demand payment in full? Well... to tell the truth they're more likely to want continual interest payments on the balance (reassuring isn't it???!?)

Stress.

Work.

Debt.

More work.

Stress.

We have for the most part declined opportunities at a vacation for several years now for a few reasons. First off, I have been adamantly devoted to try to make sure that I deal with any potential work for my clients as quickly and tirelessly as possible. Do I like the work that much? Probably not, but I feel like I NEED to because of our debt situation. I feel like I need to take those weekend calls and go above and beyond the call scheduling wise so that I can squeeze out every last potential drop of revenue to pay down our debts. Stressful? You think? I currently work probably close to 80 hours a week trying to keep up. If I don't have paying work I try to develop other streams of revenue that may pay off in the near future. I've become a workaholic because I feel like I need to.

Then there's the matter of other work, yard work, house work. In some cases I would be better off outsourcing SOOOOO many things to others. But, because of our debt I feel like I have to do it myself to preserve 100% of our money. I can't pay someone to do the yard because I have some time to do it. (No matter that it only happens every other or every third week because it takes several hours to do.) Usually, by the time I get to it, I'm beat out because I've been pushing to get my OTHER work done.

So, here's what debt forces you to do, rethink or second guess all of your income making decisions, it makes you feel guilty about leisure time (I really should be working to get us out of this.) It makes you less likely to take a real break from your work and keeps constantly reminding you about your finances. It's very much like a cancer on your finances because it's always there gnawing and eating away at your money (through your monthly payments), time, energy and even your health.

Many times I've felt as though we were in somewhat of a "bunker" mentality because of such long stretches of trying to spend as little as possible and make as much as possible to appease the credit card companies. These are among the reasons why I've started this site. It is such an oppressive feeling to be in debt I want to help others find their way out of it as we are doing.

So, here's the last thing that I'm going to write about how credit card debt stresses you out. Guilt. Yes, guilt. I have guilt over how we got into this situation. Maybe I shouldn't have been self employed. We should have separated the finances (realistically we didn't have enough liquidity to approach that even.) I shouldn't have spent the money. (Oh, I guess I shouldn't have bought groceries.... and had medical bills.) I'm stupid... that's all there is to it. Don't beat yourself up over being in debt. It happens, sometimes life just HAPPENS. That doesn't mean it's ALL your fault. What's important is what you do next. Do you sit and blame yourself or do you start making plans, taking steps and acting to fix the problem?

Okay then. Let's work to eliminate our credit card debt together! Stay tuned to this site for more.

About This Site

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I'm building this site as a resource for all of those people, like me, who at some time in their lives been plagued with credit card debt and are looking for a way out of that debt. Credit card debt can be a dangerous financial pit that is easy to slide into, but difficult to escape. It brings with it many concerns, feelings of guilt and really dramatically changes our lives. I hope that you will find encouragement and ideas in these pages that will help you to escape from credit card debt.

Our story is that of a couple that got into debt out of necessity. Buying groceries many times had to be put on a credit card because there just wasn't a lot of income coming in. Of course, we didn't get the cards paid down each month and it kept spiraling. It seems as though many times we started to make progress until the next set back, big car repair, or surprise long distance bill. (I'm sure you know the story...) We had just started out and didn't have any savings and so the credit cards became the cushion of "liquidity" for our day to day lives. Over time we started digging out and managed to come almost even (within about $1500.) When work situations changed again and the lack of health insurance afterwards came at a very inopportune time. A surgery, broken ankle and baby later.... we were back in the hole to the tune of $20,000+ I really quit counting when it was above $20,000. That's just what was on the credit cards and doesn't count the monthly payments of $200 to the hospital, the other loans that we have had outstanding, etc.

So, believe me when I say that this is OUR story too. Credit card debt can be stifling. I'm self employed and unfortunately when I started, we didn't have the funds (or awareness) to make the finances separate from the beginning which means our credit cards have also been working capital for business supplies and projects. So, we're in a position of occasionally needing to use the cards to purchase supplies for projects (or decline work) as well as the fear and pressure of what will happen if we're not able to keep up payments. Well... I could go on for quite a while about how debt changes your outlook on things and your life. (Especially when you're self employed/consultant/etc.) I think I may save that for future posts.

With all of our experience at being in debt (and climbing out) we have learned a lot about eliminating credit card debt. There are going to be many suggestions and ideas on this site. Some we have used and they have worked for us. Others we weren't able to use because of our situation. This site is for us and you both, use what suggestions work for you and leave the rest. This site is about declaring war on your credit card debt and charting a strategy with day to day tactics you can use to eliminate your credit card debt and declare victory over your credit card debt. That sounds fairly dramatic, but I think it's an appropriate way to look at it because credit card debt is like a cancer on your finances and it's important to take it as a serious threat to your future. That much said. Don't loose HOPE. You can do it!

Contact Us

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Disclaimer

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I'm sorry to HAVE to write this post, but I think I need to do so....

I take no responsibility for your actions in relation to advise that you see on this site with regards to eliminating credit card debt, or anything else really. I will be telling you about things that I think will work to eliminate and or greatly reduce your credit card debt, but I take no responsibility for your actions if your implementation of my advise either fails to improve your situation or makes it worse. I am not responsible for your financial situation.

Many of the tips you will see here are things that have helped myself or others out of difficult financial situations. That does not necessarily prove that they will work for you, or anyone else. However, you are encouraged to think for yourself and implement those ideas that you think are good and helpful. We cannot take responsibility for the results.

Like I said, I really dislike having to write this, but the little lawyer in my head suggests that we better do so.