Humberto Cruz, writing the Salt Lake Tribune, makes some very salient points about how Americans view their relationship with their credit cards. Like others have said before, Americans seems to have a love-hate relationship with their credit cards. ”Just like interpersonal relationships, Americans’ relationships with their credit cards are both passionate and conflicted,” said Elisabeth Demarse, CEO of CreditCards.com.
Some recent findings from a survey indicate that many Americans are charging purchases they really can’t afford. They have no earthly idea how long it would take to pay back even a modest credit card debt. While most of them know they should review their credit report at least once annually, less than half of them do this.
Most also don’t attempt to better their credit card situations on any meaningful way, opting instead to keep what they’ve got and neither investigate any lower rate cards or to seek them out on web sites designed for this kind of purpose.
In my view we also seem to not to be able to differentiate between credit cards and debit cards. Using our debit cards for almost everything has made it all to simple to not think of the consequences when using a different card NOT tied to our checking account. This insidious similarity has resulted in many unplanned debts.
If we don’t change the way we view our credit card spending habits, then we may find ourselves doomed to live with the consequences of the resulting debts!
When you’re paying off credit cards, the most important thing you can do is pay more than the minimum payment every month.
If you’re looking for ways to come up with some extra money for your next payment, here are five simple things you can do.
- Cancel cable or satellite. Canceling your TV for a month could get you an extra $50 to $100 (or maybe more if you’ve got the serious cable package). That money could go towards paying off a credit card or two, plus you might just find yourself getting more done when the TV isn’t eating up your time.
- Eat at home for an entire month. Eating at restaurants can add up pretty quickly, especially if you’re feeding an entire family.
- Spend cash only for a month. If you’re only paying with cash, it’s a lot harder to make an impulse purchase. You can plan for things like groceries or gas and have the cash with you, but don’t carry more than you expect to need.
- Take a lunch to work. Buying your lunch every day can add up pretty quickly too. Taking your own lunch to work means a little extra planning to get it ready, but it can save you a lot of money (not to mention it’s probably a lot healthier).
- Give up designer coffee. Whether your favorite coffee stop is Starbucks or someplace else, spending $2 to $5 for every coffee break adds up. Give up the designer coffee for a month and see how much you save. Better yet, give up coffee completely and see how much better you feel (except maybe the first few days, but tough it out and you’ll appreciate it).
If you have reasonably good credit and at least one credit card, chances are you’ll receive some offers for new credit cards at 0% interest for a certain length of time.
Some of these offers can be as long as 12 months with 0% interest.
Of course, if you don’t pay the card off before the balance comes due, most credit card companies backdate the interest to the day the charge went on the card. So if you pay off another debt with a balance transfer today and don’t get it paid off on time 12 months from now, you’ll get whacked with a nice fat interest charge.
That’s the reason for these offers – the credit card companies hope you don’t pay it off on time and help them line their pockets a little more.
These offers can be effective if you use them properly though.
If you’ve got other outstanding debts that you’re paying interest on, especially other high interest credit cards, doing a balance transfer onto these zero interest cards can save you a lot of money over the course of a few months to a year.
The catch is that you either need to be sure you can get the balance paid off by the time the interest kicks in, or you need to have an alternative source lined up to get the money to pay them off.
If you’re not absolutely sure you can get it paid off by the time it’s due, make sure you do your calculations with the interest rate that will apply after the promotional period is up. If it doesn’t save you money at that rate, don’t do it.
If you have any credit cards or other debt that is past due, you’ve probably had phone calls or letters from debt collectors.
A lot of these guys are civil enough, but some of them can be so hard to deal with that you wind up promising them almost anything to get rid of them.
They don’t like to take no for an answer. Debt collectors usually get paid a percentage of whatever they collect and they know that being pushy is generally pretty effective.
They also count on the fact that most people don’t realize there are laws that limit what they can do to collect outstanding debts. The Fair Debt Collection Act (FDCA) is in place to stop the harassment that used to be the norm for collection services.
Some of the things the FDCA dictates include the following:
- If you ask for written proof of the debt that’s being collected, the collector must supply it
- If you send a letter to the debt collector requesting that he stop contacting you about the debt, he must do so. All he can communicate to you is that he will in fact stop contacting you and notice of any particular actions that will be taken to collect the money owed
- If the debt in question is either the wrong amount or is not owed at all, you must dispute it in writing. Your dispute needs to be sent to the collector within 30 days of the first contact for collection
These rules don’t get you out of paying the debts you owe, but they do help you avoid harassing, threatening phone calls and letters.
You may have heard the term “retail therapy” – it’s used for people who spend money emotionally, usually as a way to deal with stress or anxiety.
It’s usually a bit of a joke but the truth is that it’s a legitimate problem for some people. Emotional spending is one of the major causes of credit card debt.
If you find yourself heading to the mall or surfing to your favorite shopping website whenever you’re faced with some kind of stress or anxiety, it can be tough to get a handle on your debt.
In some cases, it might be as simple as recognizing the problem so you can stop yourself before you spend. In other cases, it could be more serious and you might even consider counseling or joining a program like Debtors Anonymous (www.debtorsanonymous.org) which is based on the same principles as Alcoholics Anonymous.
However you deal with an emotional spending problem, the most important step is to recognize it and decide to fix it.
