When Credit Card Debt Gets Dangerous

Credit cards are flexible financial tools that can help you with purchases, travel, and even lend a hand in an emergency. With the privilege of using your credit card to get an instant loan at millions of locations around the world comes the responsibility of managing that credit wisely. You can protect yourself and your credit rating by recognizing the signs of credit trouble and always remaining in control of your credit situation. 

Are you in credit card trouble? Answering “yes” to just one of these questions could mean your credit card debt could be getting dangerous:

• Do you pay only the minimum payment month after month? 
• Do you take cash advances to pay daily living expenses?
• Do your monthly minimum credit card payments exceed 15% of your take-home pay?  
• Do you pay important payments such as rent or mortgage late? 
• Do you borrow from one credit card to pay another? 
• Do you apply for other cards because you have reached the limit on your existing cards? 
• Do you transfer balances to new accounts to avoid paying off debt? 
• Do you find yourself always out of cash?

Being honest with yourself if your credit card situation requires some attention is the first (and often the most difficult) step. But from there, you have many options to regain control of your cards. 

Fix it yourself:

• You may be able to solve your debt problem simply by managing your money a little more carefully.
• Tally your debt to get a realistic total picture of your financial situation.
• Stop charging. Put away your cards.
• Review your past few statements to see how you've been spending your money and what value those purchases really represent. Use the information to evaluate the make a monthly budget and stick with it.
• Look for areas where you can cut spending, and apply that money directly to reducing your debt. Eat out less. Cancel your cable. Take the bus. Avoid late fees by paying your bills on time.

Talk to your lenders:

• You should initiate the first call to your lenders. Don't wait until the creditor figures out that you have a problem to start sorting out your finances. Lenders will be much more flexible if you call them first.
• Most lenders will help you rearrange your debt payments because it's in their best interest to help you get back on your feet financially. Lenders may extend your payment period, or work with you to consolidate or refinance your debt.

Seek professional counseling:
The National Foundation for Credit Counseling can refer you to authorized agencies that offer help with debt management, educational materials, creditor relations, and crisis resolution. Call 800-388-2227 to connect with a local credit counseling organization. 

Other remedies:

Beware of “credit doctors”. They often promise to whisk away bad credit, repair your credit report, or give you a whole new credit history for a price, but it may be illegal or simply impossible. Consider bankruptcy only as a last resort, but make sure you understand the consequences before filing. You'll have trouble getting any of type of credit for at least the next 10 years. If you do get credit, you'll have to pay added finance charges or produce more collateral. Explore all other options before seeking this drastic approach.