Controlling your Credit Card Debts  

 There are many people in financial trouble today because of credit card debts. Most people even try to blame the problems on the credit card companies for the debts due to high interest rates. Whatever the excuse, the blame is totally your fault if you are in credit card debt. It was you who applied and received the credit cards, and it was you who used them. It is always easier to cast blame when you should have learned to use them appropriately in the first place, or before you used them. Credit cards can be a great asset, but if you do not use them correctly, you can find yourself with big financial problems.

 What is credit:

Before you can learn how to control your credit cards, you must understand exactly what credit is. Credit is basically a tool that is offered by a loan institution. Credit enables you to get now what you know you can not afford at that moment. Credit can also be a vital business tool to make money.

What is a credit problem:

As I see it, there are six forms of credit problems. The first form of a credit problem is running out of money at the end of the month and not being able to pay your debts. The second form of a credit problem has to do with your past credit history which ultimately continues to follow you and affects anything that has to do with your credit worthiness. The third form of a credit problem has to do with paying all of your bills on time but no money to do anything else in life. The reason why this is a problem is because you have stretched yourself into a position where you can not improve the current situation. The forth form of a credit problem is having debts you can not afford but you have not filed bankruptcy. The fifth form of a credit problem is at the point of filing bankruptcy because it’s the only way out of your debt. The sixth form of a credit problem is you have filed bankruptcy and are in debt again with no hopes of recovering. This is the worst situation to be in out of the other five situations.

A credit problem can be at any amount. It does not have to be several thousand dollars in debt. It can actually be any amount that is not paid when the bill is due. Everything that involves money affects your credit. The argument of paying cash still affects your credit because when you are paying cash, you are not building your credit worthiness, which will hurt you when you desire the additional credit.

Identifying your credit Status:

The first part to fixing, repairing, or correcting your credit problems is, knowing your personal credit situation. Unless you have a credit score over 750, you have a credit status and room to improve your credit standing. Credit scores range from 400 to 900. You should be at least a 700 to take advantages of saving money on your loans and other related credit issues.

There are three parts to knowing your current credit position. The first issue you need to know is based on the above six forms of credit problems. One, what is the status or your credit situation? Two, what is your current credit score? Three, evaluate your credit status after you know your credit score, know what debts you currently have, and have a list of your past credit problems which are documented on your credit history file. By doing this you should be able to determine where you currently stand as it relates to your credit worthiness.  

 How does credit card problems occur:

 Credit card problems occur when you abuse your credit cards. This abuse gives the credit card companies leverage to control you and your finances, and that is why your interest rates rise from the initial interest rates.

 This process begins with your first credit card, which usually gets maxed out soon. Then; comes the offers for new credit cards. Before you know it, you have several credit cards with large balances. This cycle continues until you realize you are in financial trouble. Not major trouble, just enough financial trouble to cause a burden on your finances and your life. Some people try to work through these issues with success, and then there are others who make the situation even worst. What usually gets most people is the holidays, birthdays, and other special occasions. Before they know it, the cards have full control and everything else around them seems to suffer because a large portion of their salaries are going to the credit card debts. The problem is the fact that these loans are not being paid off, they are merely just paying the interest, and having a difficult time managing that task alone.

The main reason why credit cards become a problem is the fact you do not realize they can be such a burden and they are very easily obtained. The credit cards also offer convenience and if that was not enough, they offer instant gratification which is the number one cause of the credit card problems. Your only solution is to cut your credit cards up, pay off the debts, and pay cash for your items. Here are two rules you can use to validate your spending. One, if you can not pay cash at the time of purchase than you do not need it! Two, if you still need to purchase the item when you have the cash, than buy it! The second rule has to do with delayed gratification which means if you can wait a few days or a week and still have the cash and the desire for the item than you should buy it. The second rule is designed to keep you from buying items you think you want at the time of the purchase. In most cases buy delaying the purchase, you will move onto a different need and realize you really did not need that item at that moment. These two rules alone will save you several future dollars and I encourage you to use them.    

Why Does credit card debt occur:

The reason why you fall into credit card debts are most likely due to the fact that you are upset emotionally. You have to first understand that you are a working money machine and the loan institutions have to find a way to tap into your money source. The best way for loan institutions to tap into your money source is by offering you these credit cards. Loan institutions know that if they give you a credit card, you will use it. Once you do, the “hose” is placed in, and your money is slowly drained from your money source. Loan institutions hope you max out your credit cards where you will have to carry the balance and pay them their achieved interest. That is also another reason why loan institutions will give you a larger credit limit, to spend the rest of the limit. So, while you’re thinking you are paying your bills on time and building credit, you are actually giving the loan institution more leverage to abuse you. The problem is not just with one credit card. The loan institutions keep sending out all of their junk mail, and most individuals keep applying for new cards usually for balance transfers. This cycle continues until you realize you are in real financial trouble. At this point is when most individuals get a new mortgage loan or a home equity loan to help pay off these debts. This is exactly what the loan institutions want you to do because if you do, you can start building new balances on your previously paid off credit cards. Hopefully you can stop this cycle prior to ending up in Bankruptcy Court. Everyone has a stopping point, and hopefully your stopping point is prior to bankruptcy court. Loan institutions are not evil, they are a business and businesses have to make money. The way they make their money is by making interest on the money that has been borrowed. Once you understand how the loan institutions operate, you can use that information to your advantage.

 Understanding and taking control of your debts

 Now, that you understand how and why these credit problems occur, it’s time to take control of them. If you want to take control of your finances, you must get out of debt. The only way you can accomplish this is by not using the credit cards until they are paid off with no balances. You basically have to stop using your credit cards if you want to be in control of them. There are times when credit cards should be used; however, that time will be when you are debt free. Before you can make money with your credit cards in any business venture, your debts must be eliminated.

Here are the steps to controlling your credit cards:

1)      Stop using your credit cards

2)      Determine how much debt you have on each of your credit cards, and total this amount.

3)      You need to know the total amount of your minimum payments due on each credit card each month, and then total this amount.

4)      You need to know if you can afford the total minimum payments due on all of your credit cards.

5)      You need to know what else you can afford to add to these minimum payments, 50.00, 100.00, or more. You need to know this amount and then add it to the monthly payments.

6)      You need to concentrate on one credit card at a time while paying the minimum payments on the other credit cards.

7)      Begin paying down your debts one card at a time. When one card is paid off, move that payment plus the minimum payment to the next credit card. Don't forget, you should have extra money being applied to the credit card you are paying off during the process. Continue this process until all of the credit cards are paid off in full without any remaining balances.  

If you can manage at least steps one through four, than you can take control of your credit cards debts. Steps five through seven has to do with paying off your debts which must be accomplished prior to saving or building any amount of wealth.

Article by: Dynamic Publishing (c)

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