Credit Card Debt Ridiculously Higher than Before
Posted on February 25, 2008 12 Comments
OMG, have you seen this???
I’m going to start instituting black-out days for all my readers. As in, during March, you cannot use your credit cards for the 3rd-15th of the month, or something random like that.
Seriously, can we start spreading the word about not buying sh!t on credit cards? Use your debit card and don’t overspend! The Christian Louboutins are not worth years of debt! Target has stuff that’s just as cute!
When credit cards put you in jeopardy
CNN.com
(CNN) — Americans are drowning in debt.
Consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year. And it’s become a habit for them to spend more than they have. The overall credit card debt grew by 315 percent from 1989 to 2006, according to public policy research firm Demos.
To compound the problem, fewer people are paying their credit cards bills on time. The percentage of people delinquent on their credit cards is the highest it’s been in three years, according to CardTrack.com.
With banks tightening their standards and the drumbeat of recession getting louder, there’s no better time to grab control of your debt now.
First, you have to determine if your credit card spending habits are out of control. Here are some signs:
- You find that you can’t make your minimum payments on your credit cards.
- You realize you’ve been borrowing money from family members or friends to cover your payments.
- You’ve gone to a lender you wouldn’t normally use — like a payday lender that loans you money at really high rates against your next paycheck.
Once you’ve made a list of your debts, it’s time to prioritize your payments. Interest rates, on average, can range from 10 to 18 percent, according to Curtis Arnold of Cardratings.com. Tackle your highest-interest credit card first. With rates averaging about 14.5 percent, you really want to knock out the high-interest debts quickly. Try shifting high-interest credit card debt onto cards that have lower interest rates.
The principle is not the only problem, it’s also the interest you’re accruing. If you have a $2,000 balance at a 14 percent interest rate — and make just the minimum payments — it will take you more than 14 years to pay off that debt plus the interest. Try to pay more than the minimum payments on your credit cards whenever you can.
Another tip: Keep a close eye on your card’s interest rates and find out if there is room for negotiation
Credit card companies are increasing fees and cutting credit limits, and some are increasing rates, according to Arnold, so be sure to scrutinize your monthly statements. Often the details of these changes are included in the fine print on your statement.
If you’ve been a good customer and you have good credit, now is a good time to negotiate for a higher credit limit or to knock some points off your interest rate, says John Ulzheimer of Credit.com.
All it takes is a phone call. And it could save you hundreds of dollars in interest payments. Many credit card issuers already have policies in place. These credit card companies don’t want to lose your business. Of course, if you don’t have a great credit history or you’ve made a few late payments, you may not get anywhere.
One of the most important steps you can take in tackling debt is improving your credit. Your credit report is being even more closely scrutinized today by credit card issuers, mortgage lenders, auto dealers, insurance carriers and even potential employers.
Also, don’t close old credit cards accounts. Even if you don’t use them frequently, it looks better for your credit score if you can show a long credit history, said Ulzheimer.
And, he says, delay some spending.
As a rule of thumb, you should try not to use more than 10 percent of your credit limit when making purchases. “The people with the best credit have a utilization rate of no more than 7 percent,” he says.
If your credit utilization is 50 percent or more of your credit limit, you are doing some real damage to your credit score, says Craig Watts of Fair Isaac, one of the companies that provides credit scores. When the new FICO ’08 scoring model is adapted in May, if you have a utilization of over 50 percent, you’ll be penalized even more heavily.
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12 Responses to “Credit Card Debt Ridiculously Higher than Before”
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February 25th, 2008 @ 8:06 pm
Remember the good old days when credit card interest was tax deductable? I wonder if that helped cause what we see today. Also it doesn’t help that I can charge a Big Mac along with my fuel purchase!!!
February 25th, 2008 @ 8:33 pm
What is the NEW FICO ’08????
I am trying so hard to get our debt down this year and finally was thinking our credit score will start going up. I have not heard of this new FICO!
February 26th, 2008 @ 12:39 am
I heart my cc–I use it for EVERYTHING, and get 5% cashback on most of my purchases. I end up getting $50 from them every other month…and I pay my balances in full every month.
And I’m not convinced that I buy more with the cc than I would with my debit card.
It’s not the credit cards that are evil–although the banks that manage them certainly have enough tricks up their sleeve that they come close–it’s that people can’t seem to understand that ‘credit limit’ does not equal ‘cash available.’
February 26th, 2008 @ 12:52 am
i gotta agree w/ sense to dollars above, my c/c is my best friend! helps me budget, gives me back $, and makes like simpler for me.
of course, if you’re not paying it back to zero each month it’s a different storty, but i’m gonna keep on using mine … it’s borrowing money for a month FREE
February 26th, 2008 @ 8:50 pm
Try having a credit card with a 30% interest rate. Good old Wamu.
I had to get a second job JUST to pay this card off.
February 29th, 2008 @ 7:19 pm
This is a very scary trend. Here’s a thought. Stop buying crap. I think it’s a PF blog, as well. Not terribly sophisticated but succinct and to the point. You can even make it into an acronym for those quick moments you walk buy those shoes you really want (thought bubble “SBC”). We need some insurance for our financial futures and it can’t happen if we undermine our lives by consuming ad nauseum. It never leads to good things.
Jerry
http://www.leads4insurance.com
March 3rd, 2008 @ 5:22 am
Totally agree with Jerry – don’t need to buy cheaper crap. Cut the crap altogether. When you get rid of the need to have so much stuff, your life simplifies in ways beyond financial. (“Stop Buying Crap” is a PF blog, and it’s a pretty good one.)
Frequent debit card use is not necessarily good advice, with regards to the fallout of a number getting stolen. I’d rather have it be a problem with my credit card than with my bank account.
June 3rd, 2008 @ 6:41 am
Frequent debit card use is not necessarily good advice, with regards to the fallout of a number getting stolen. I’d rather have it be a problem with my credit card than with my bank account.
——————-
Bradpitt
Frequent debit card use is not necessarily good advice, with regards to the fallout of a number getting stolen. I’d rather have it be a problem with my credit card than with my bank account.
” REL=”nofollow”>http://www.stop-credit-card-debt.com
October 27th, 2008 @ 8:46 pm
Another way to reduce debt is with 0% APR balance transfers, although the way the economy is going, you might not be able to do that for much longer.
September 7th, 2009 @ 5:49 am
Alarming but true. As a matter of fact according to Sallie Mae report, every household has an average debt of $7000. And surprisingly, a huge percentage of the debt pie belongs to college students who have an average debt of $5,000 upon graduation!
Well, there is nothing left to do than to correct this. That means living lower than our means and paying off debt. Then start spending wisely and save more.
September 30th, 2009 @ 2:51 am
Most of the consumers of credit cards today are unaware of their spending habits and is likely to encounter problems like this. I make it a point to always monitor my finances and make inquiries with my credit card company for any irregular behavior regarding my credit card.
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