Credit Card Debt Management

Have you ever been asked by the cashier if you want to open a store credit card? Chances are that you have. And guess what? Many people answer yes to this question. While there is nothing wrong with opening a store credit card, you need to make sure that you are aware of the pros and cons before doing so. As you can imagine, despite what the cashier says, there are both pros and cons.

The main benefit of a store credit card is the perks that you will receive. For instance, you may receive 15 percent off of your first purchase if you open a credit card on the spot. If you have a large bill this can work out to quite a bit of savings.

Another benefit is that the store will send you coupons and discount codes on a regular basis. This is something that they do for customers with credit cards, but remember, they are doing this for a reason.

By sending coupons, the store knows that you will arrive and spend more money. In turn, if you do not pay off your credit card in full they will make money in interest.

Speaking of interest, this is one of the biggest downfalls of store credit cards. Generally speaking, a department store credit card will have an interest rate of 10 to 20 percent, and sometimes more. When you carry over a balance you will also carry over any interest that accumulates. And at 20 percent this can be a lot of money.

There are both pros and cons of store credit cards. Before you fill out an application and sign on the dotted line, make sure that you know what you are getting. 

You have used your credit card time after time and now you are facing a huge bill. This is a common situation, and as you know, one that is never fun. The question is: how are you going to pay off this debt? Some people may have the money to do so in full, but others are not nearly as fortunate. If you find yourself in a situation in which you cannot pay what you owe, you need to know what is going to happen.

On your credit card statement you will see your “minimum payment” for the period. At the very least you need to send in this amount. Even though paying the minimum will mean that you incur interest charges, it will not get you in trouble with your credit card company.

But what if I can’t afford to pay the minimum? This is when the real trouble starts. In this case, you need to get in touch with your credit card company at once. Explain to them the situation you are in, and ask if there is anything that they can do. At the very least this will alert them of your problem, and hopefully buy you some time.

If you do not pay the minimum your credit card company will report your account “past due” to the credit bureaus. In turn, the result is a bad mark on your report as well as a hit to your credit score. The longer that you wait to rectify this situation the more damage you are causing to your report and score.

You should never-ever find yourself not being able to pay your credit card debt. At the very least you need to have enough money on hand to pay the minimum. If you don’t, talk to your credit card company and then do whatever it takes to fix this problem before your credit report and score suffer too much damage.  

The title says it all: what do you buy with your credit cards? If you do not have any cards the answer is nothing. But if you have at least one there is a good chance that you use it month in and month out. If you do not know what you are buying with credit cards you should do some research into your past as soon as possible. It is very important that you know where your money is going, and how you are spending it. You may find that you are putting entirely too much debt on your credit cards.

If you pay off your card in full each month there is nothing wrong with using it time after time. After all, this means that you are not paying any interest on the money that you charge. But if you don’t pay off your card in full, you are getting stuck paying interest on your money. As you carry a balance from month to month your credit card debt will continue to grow. And this is not something that you want.

Although your credit card company has put a limit on your spending, you may need to impose your own maximum. For instance, you may have a $10k credit line. But of course, this does not mean that you should charge this much money on your card. If you only feel comfortable charging $500/month, so be it.

If you have a credit card you can buy pretty much anything you want, within reason. Just make sure that you do not go overboard. If you don’t know how much you are charging each month or do not pay off your card in full, it is time to restructure your spending.