You're Not Alone!
According to the Ultimate Credit Handbook, a debt-to-income ratio of 10% or less is great. Unfortunately this is not reality for most Americans. The typical family filing for bankruptcy in 1997 owed more than one and one half times its annual income in short-term, high-interest debt. A family earning $24,000 had an average of $36,000 in credit card and similar debt! Things haven't improved in the intervening 7 years. During the year ending March 31, 2004, there were 1,618,062 personal bankruptcies filed. About 40% of these were joint filings meaning that a total of 2,265,286 people filed for bankruptcy, or 1 in every 130 people. That's not 1 in every 130 adults over 21. Thats 1 in every 130 men, women, and children!
As a nation we're broke! That's right: Broke. According to BusinessWeek, total household debt -- including car loans, mortgage, and student loans -- topped 100% of disposable annual income last year for the first time ever! Quite a change from just 20 years ago when the nation's debt stood at just two-thirds of disposable income.
Despite an really bad economy and record number of personal bankruptcies, last year was one of the most profitable ever for lenders. Fees are rising and lenders are getting more creative about what they slap them on. There are annual fees and interest, fees for balance transfers, fees for paying late, fees for going over your credit limit, foreign currency transaction fees, commissions for cash advances, fees to pay your bill by phone, and even fees for account inactivity, . The list is getting longer, and the fees are getting higher.
6 Steps You Can Take To Get Control Of Your Credit Card Debt
- Buy only what you can pay cash for right now. If you don't have the cash, don't buy it!
- Stop using your cards. Cut them up if that's what it takes!
- Stop the flood of credit card offers. You can force credit bureaus to stop selling your name and address. Dial 1-888-5-OPTOUT to get the forms.
- Consolidate your debts onto one or two low rate cards. Cards often have low introductory offers, but be aware of when those rates change! Try to pay down your debt while the interest rate is low!
- If you can't consolidate all your credit card debt, negotiate with your credit card company to reduce the interest rate. If you've had any of your cards for a while, take advantage of being a faithful customer, and call them up to demand a lower rate. Shoot for 11% or 12%. You'd be surprised at how easy it is.
- Always pay more than the minimum. The credit card companies are not just being nice when they require only a small minimum payment on your total balance. They calculate this minimum to extend your payments for as long as possible, to boost their profits. Scrimp if you need to, and pay as much as you can above the minimum every month. Pay off the card with the highest rate first, and then the next highest, and so on.
