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What Can You Do About Credit Debt?

Credit cards are one of the most dangerous financial risks that you can take in your life. While on the surface they might seem like a good idea, the credit card is responsible for the debt of millions of people - and the problem is only getting worse. Credit cards can be very easy to be approved for – that is because credit card companies WANT you to spend on your card, so that they can earn the interest that you will have to pay on your purchases. Just because a credit card is easy to get, does not mean that you should have one. If you have a credit card and you have found yourself in debt on it, then this is something that you will want to get sorted out straight away, or else to problem will continue to get worse and worse.

Getting your debt sorted out

The first thing to do if you have credit debt is to stop using your credit card! In fact, cut it up and make sure that your bank knows not to send you another one. You want to reduce your debt, not add to it. It might be a good idea to call your bank to let them know that you are having trouble making payments, and ask for their advice about what to do. Just because a bank wants you to pay interest on your credit card, does not mean that they want you to go broke! They are likely to be open to helping you manage your debt so that you can have your finances sorted out and remain a customer with them. To help you pay off your debt in the shortest amount of time, you will need to work out a budget. Take the total amount of credit debt you have, and work out what the maximum amount you can repay each month is. This should give you a good idea as to how long it will take you to pay off your debt. If this does not seem to be enough, you will want to redo your budget and cut out any expenses you can live without, so that you can pay off your debt faster. You might also want to look into how you can increase your income, such as by getting a second job or by selling items that you do not need. The higher your income and the lower your expenses, the faster you will have your debt paid off and your finances back to normal.

One thing you will definitely want to do is avoid the trap of applying for another credit card to pay off your first. Many people fall into this trap, and you will find that all it will do is to get you into even more financial trouble. Your aim here is to reduce your debt in the long term as well as the short term, so getting into more debt is not the answer. Being smart about things is the best way to go. If there is a way for you to pay off your credit debt with a lump sum of money that will not attract interest, such as with a personal loan from a parent or family member, then this can be a good option. Remember that it is the interest on your credit card that is the real trouble, so paying it off with an interest-free loan will save you a lot of money on your repayments. Just ensure that you pay back the personal loan just like you would any other debt.

How to use a credit card

You have probably heard people claim that they are getting a credit card “for emergencies?. However, this often does not turn out to be the case! Even though this was the intention, the lure of buying things on credit can be very strong and many people succumb to temptation. When you have a credit card, you need to be smart with it. Do not consider it to be just another tool to buy luxury items on. It should be enough to use the cash you have on hand to pay for your purchases. If you do not have enough, you need to ask yourself if you can afford it, and if you really need it. If it is a luxury, you might want to consider putting in on a lay-by system, where it is held by the store and you make payments on it regularly until the total amount is paid, after which you can take the item home. This way will work out much cheaper than putting it on your credit card, as there is no interest to pay, and there is no chance of getting yourself into debt.