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Are You Caught in the Credit Card “Debt Trap?”

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Credit cards can either be a convenient tool for trade or a difficult burden. Keeping the balance between spending and bill payments depends solely on the credit card owner. To keep the credit card debt manageable, you have to pay your bills regularly. If possible, pay off the balance on your card every month. If not, pay at least the minimum required payment each month.

Relevant Article: 4 Tips to Improve Credit Even After A Bankruptcy

However, if you always pay the minimum amount, your credit card debt will soon become an unmanageable mess of remaining balances, new purchases, and interest. If you are one of the not-so-few individuals who are deep in credit card debt, then you might want to retrace your steps and see what went wrong. After that, look ahead and see which remedies you can apply to get yourself out of the debt trap.

What made you fall deep in credit card debt?

The convenience that credit cards offer is the major culprit in most cases. You might have found it really easy to pay for your purchases with a credit card even if you really cannot afford it. It is harder to budget your spending when you use credit cards. Everything seems affordable at first, but before you know it, you are overwhelmed with bills.

Interest is a major factor when it comes to credit card debt, and an interest rate is applied to the remaining amount if you do not settle the card’s balance each month.

What are the scenarios you may have to face when you are deep in credit card debt?

  • For credit card bills that are less than 90 days overdue:

If you have a balance that is less than 90 days overdue, you are likely to receive a notification through a letter or call or both from the credit card company to remind you of your obligations to pay. The frequency and type of notifications you will get depend on the credit card company.

  • For credit card bills that are over 90 days overdue:

If your credit card bill is more than 90 days overdue, the credit card company may seek the assistance of a debt collection agency, an agency that is responsible for collecting the money that you owe the credit card company. In some cases, these agencies are part of the money that they will collect from you.

Relevant Article: Paying My Credit Card Bill Just Got Easier!

So, you can expect that they will do their best to make you fulfill your obligations whether in part or in full. They can even take your case to the court if they are unsuccessful. If this happens, the court may ask you to relinquish part of your salary or income until you have paid off your debt, or it might seize your properties as payment.

Filing for bankruptcy

If you do not have any means whatsoever (no property, not enough salary or income) to pay-off your debt then you may have to file for bankruptcy. This is the worse situation you may have to face, and it will be reflected on your credit record for 10 years. When it comes to bankruptcies, there are two types of bankruptcy that you can file, Chapter 13 and Chapter 11.

  • Chapter 13

This is the lesser evil of the two, and it applies those individuals with income. In this type, you get to keep your salary and assets, but you will still need to settle your debts through a debt settlement plan. Paying the debt through this manner can eventually erase it from your record once the debt is fully paid.

  • Chapter 7

This is the worse situation and should be the last resort in handling your credit card debts. The court can and probably will seize your properties as payment for your debt.

In Conclusion…

As the old adage goes, an ounce of prevention is worth a pound of cure. So, before you are buried deep in debt, you should settle your accounts regularly. The moment you have trouble paying your bill each month, you need to stop using the credit card. Cut it up if you have to do so.

As much as humanly possible, you need to pay all of your credit card bills on time. If the debt is already there, then you can seek the assistance of a credit counsellor. As early as possible, you want to draw up a payment plan with the credit card company.

Are you deep in credit card debt? What steps are you taking to get out of debt?

Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

14 Comments

    • I’m sure the work in some capacity, but I do not believe they can achieve anything you can’t do on your own. Secondly, consolidating debt or going with one of those companies doesn’t address the underlying problem or improve your credit. Sometimes, going with one of those companies can negatively impact your credit.

  1. Those companies for the most part make your credit worse and charge you a fee to be their customer. Credit availability is a major problem in our society and it will be hard for things to get better for individuals if they continue to use them.

    • Their help definitely isn’t free.. at most they will give your a credit report with a 48 expiration period :/

  2. In my youth, I tried several times to rework the debt load while working 2 jobs. I sought several different avenues of moving the debt from one lender to the next. The last one that would carry some of my debt would only carry it at a very high interest rate — 29.5% –, and even if I paid more than they asked, they also took 29.5% off of the extra portion that was paid.
    After about 3 years of trying to “fight the good fight” and paying down my debt, I realized that I could no longer continue it due to increased stress, loss of my second job, and multiple accidents.
    Finally I chose to file Chapter 7 and return the only asset that I had, a vehicle that had a lien on it. Coincidentally it was one of the overall issues, since monthly car insurance was actually larger than the car payment itself after having all the accidents.
    I hated it to no end, but did it anyway. 3-4 years afterward, I was finally happy because I met my future bride and I began to plan for our future together.

    • Wow. That’s quite the story. I bet you’ll never do that again! I’m glad you are happy today though. That’s one tough experience to go through.

    • wow.. what an story. Can you give a bit more detail on how things got so bad? You had to work 2 jobs and suffered from 29% interests and a BK. What caused the debt?

  3. I had a lot of credit card debt when I was younger. Zero debt right now! But back when I decided to get rid of my debt, I worked for about 2 years in retail in addition to my full time job at a hospital. I put all the money I made from retail (minus perhaps $20 of “treat” money) into the debts. It was freaking exhausting, but well worth it.

    • That does sound exhausting! But, I’m sure you’re glad you did it!

    • Sounds exhausting! However, I’m sure you can breathe easy now that you got rid of the debt. What did you do once you got the debt down to manageable levels?

  4. I’m a firm believer in paying your full credit card bill each and every month. If you can’t afford to pay it off each month, then you can’t afford use credit cards.

  5. can i have a copy of you book please?

    • I sent you an email with the link. Happy reading!


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