are quickly becoming a major problem for the American people. It is so easy to get into debt with a credit card, and anyone with a mailbox and a pulse can get one. Many Americans can't get out of debt and they run into credit problems; some even file for bankruptcy. The reason it is so easy to use a credit card is that when you use plastic instead of cash, you spend more because you don't emotionally register the pain. If you lay down $50 at lunch, you'll notice if it's a $50 bill. With a credit card, you don't even realize what you paid. The typical American carries five to seven with an average balance of $1,670 per card (People weekly).
Banks are pushing the credit card to consumers in an effort to make money on the interest rates and various fees that can be charged. Since the early 1990's, banks have upped the credit limit on customer's cards by more than a third, and sent out another three billion offers in 1997 alone (Dollars and Sense). The new targets for these credit card companies are the low-income household families. While only 20% of poor families had a credit card in 1983, 40% did in 1995. Their balances were higher than ever, exceeding $1,300 on average in 1995, up $700 from 1983.
The reason these credit card companies are focusing on the low-income people is that once they are in debt, they can only afford to make the minimum payment and therefor can never pay off the balance of the credit card. For example, it would take 34 years to pay off a $2500 balance if a person just paid the banks suggested minimum payment. The middle class is also going further into debt. Credit card debt rose 23.5% from January 1997 to March 1998. Sixty three percent of all U.S. households now owe money on their , and last year they spent $70 billion in interest charges and fees. Credit card debt now accounts for 43% of all consumer loans and is growing faster than all other types of household borrowing, including home mortgages or auto loans. The average household now owes an amount equal to 95% of their yearly income (Dollars and Sense). Credit card companies make it is very easy to get into debt, but almost impossible to get out. The problem being that if you only make the minimum monthly payments (which most of us do) you will never got out of debt. There are many ways to start getting out of the hole and paying off your . Below are seven steps to financial freedom: 1. It is very helpful to see what you owe on paper. Take a sheet of paper and list the months of the year at the top. List each of your along the left-hand side and leave a space afterwards for the following items: Payment amount, interest paid, interest percentage and total owed. Under each month, enter the amounts that apply to each card. At the bottom, add up your total payments, total interest paid, and amount owed. What makes this even easier (this is what I did) is to put these items in a spreadsheet program so you can modify the amounts each month.
2. The total amount that you are currently paying (even if it's the minimum amount) will be the lowest amount you continue to pay until your debts are paid off. This is your "goal" amount. As you pay off the balances, the total minimum payments will get lower, but the total you pay will not.
3. Once you've determined the total current payment amount, take the card with the highest interest rate. If you have several cards that have the same high interest, then choose the card with the highest balance. This will be the card that gets paid off first.
4. Pay the minimum on all cards each month except for the "chosen" card with the highest balance. Any difference between the minimum amounts due and the "goal" amount should be added to the minimum amount due on the chosen card. As that card is paid off, the money you were paying on it gets transferred to the next highest-interest card with the highest balance. You will continue to pay off this way until they are all paid off.
5. If possible, you should try to make your goal amount higher than the minimum amount due. Even $10 extra a month will help. It is much better to put any extra money you have towards paying off a card with a 18% interest rate, then putting it in a bank that is only paying you 3% interest.
6. Take advantage on credit card offers you receive offering a low balance transfer rate. Watch for promotions offering at least six months of a low rate with no annual fee. You can also contact your credit card company and ask then to lower your interest rate.
7. Above all else, do not use your credit cards anymore (Popeck). The hardest part for me was not using my credit cards anymore, I simple cut them up and throw them away. When I get paid each month I immediately write out checks and send them off to the credit card companies.
I leave myself about twenty dollars each month for play money. So what if the damage has already been done and you have a bad credit record? The best credit repair is time and a debt repayment plan. All of us have seen the advertisements on TV, in the newspapers, or on the Internet: "Credit problems? No problem", "We can erase your bad credit 100% guaranteed.""Create a new credit identity legally.""We can remove bankruptcies, judgements, liens, and bad loans from your credit file forever!" These are all lines that companies use to entice consumers to pay up-front money to "fix" their credit. If you decide to respond to a credit repair offer, beware of companies that: Want you to pay for credit repair services before any services are provided, Do not tell you your legal rights and what you can do for yourself for free; Recommend that you not contact a credit bureau directly; Suggest that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security Number; or Advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity; if you follow illegal advice and commit fraud, you may be subject to prosecution. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the promised services (Credit Repair: Self-Help may be Best).
If a person has had a problem with a scam credit repair company, they can file a complaint with the FTC by contacting the Consumer Response Center by calling 202-382-4357. No one can legally remove true facts that have been filed on your credit report. In fact, negative reports are ...