Today’s economy and lack of jobs have forced hundreds of thousands of people across the United States to miss payments on their credit cards and mortgages. This has caused an unprecedented wave of bad credit scores which have affected consumers from every walk of life. If a person misses even one payment the credit card companies are allowed to jack up their interest rates and impose penalty fees. In fact, even if you are not late on a particular credit card, they can still raise your rates if another unrelated card or obligation goes late. Too late now to read the fine print on the application approval but there are some things that you can do and one of them is to start eliminating credit card debt as a whole.
You don’t really need credit cards do you? Let us examine that proposal. If you don’t have credit cards then you can’t establish a credit history and you will not be able to purchase or lease a new or used vehicle. Without credit history and credit scores you can’t apply for most home loans, though there are some government programs like CALHFA for California first time homebuyers that will consider alternative credit sources. For the most part though you need to have credit and therefore you need to have at least one or two credit cards. The difference between having a credit card and abusing your privilege to have credit are two different things.
If you have a credit card with a $5000 limit and you are always at or near the high limit then your credit score will be negatively impacted. That minimum payment that you are making every month will not make a significant dent in the principal balance and it will seem like you will never be able to lower your balance. That is because most of the payment that you are making is going straight to paying interest, not principal. If you have several cards like this then you can easily imagine what a problem that would be for someone, especially if that someone has lost their job or had their hours reduced.
Eliminating credit card debt is one great solution but it will require you to call the card companies directly and negotiate a reduced payment. Most companies will do this if you have a hardship. They will transfer you to the workout department where one of the reps will ask you a bunch of questions relating to your income and monthly payments like utilities, food, cable, internet, car, etc. Once they have that information then they will calculate a lowered interest rate and monthly payment that is affordable within your budget. If you are approved for this the company will put you on a plan that will pay the debt off in five years at a greatly reduced interest rate and effectively eliminating credit card debt. You need to be aware that the credit card company will close your account and you will no longer be able to use the card, but at least you will be eliminating credit card debt from your life. Once the cards are down to zero you can re-establish credit a little at a time and with some planning and control.