A very interesting story surfaced today on CNN.com. In fact it made the top news on CNN today. The story is about Don Cressman, an average individual, 53 years old, who fell into a huge trap of credit card debt, while also discovering the many tricks that credit card companies have towards squeezing out every last cent from their customers.

Do you know what happens when you are late on making a payment? Are you aware of all the hidden fees and charges that you can be charged against you? Sadly, did you know that Americans hold $850 billion in credit card debt, and the average balance per card-holding household is $8,568, according to the Consumer Federation of America.

Did you know that even borrowers who pay their bills on time can fall victim to deceptive practices used by the card issuers and get slammed with rising interest and hidden fees? In this wonderful article written By Jessica Dickler, CNNMoney.com staff writer titled, Getting squeezed by credit card companies.

I learned all too quickly how innocent people are getting squeezed by credit card companies for every last penny they have. People don’t read the fine print. There is a reason for that too and credit card companies know this. The fine print is not very easy to understand. Among the 15,000 words in the hidden fees, credit card companies will stuff in one or two vital sentences that totally change everything about your contract that would make you really reconsider doing business with your creditor if you had the chance to go back.

Eric Jilson from iStockAnalyst.com mentions that it requires much perseverance in working towards becoming debt free.

In a recent article released titled, Credit Card Debt Elimination Requires Perseverance, Jilson said, “Despite the conventional wisdom, getting out of credit card debt is simple. Not easy, maybe, but simple. It requires only one thing: will power. No matter what the amount owed or the APR on the credit cards, consumers can overcome their cash flow problems, avoid the temptation to make unnecessary purchases or buy things they don’t need, seek assistance and plan for the future.”

I believe this to be true. The first line of action against getting trapped is in forcing yourself to read the fine print. If you can’t interpret the terms and conditions, I would recommend hiring an attorney to review them for you. The cost of an attorney is nothing compared to the years that you could spend paying off a credit card debt with mysterious hidden charges. The second line of action is just as Eric Jison mentioned, you have to have self discipline and be very strong when tempted to make unnecessary purchases.

Related Stories

37 Days To Clean Credit – Like most people I got a line of credit in college and quickly racked up over $14,000.00 in student loans and credit cards. Not to mention, with a small amount of income coming in, I missed payments left and right and within a few short months – my credit was completely shot. A credit score only a mother could love. Life at this pointed sucked… I was constantly being denied for gas cards, car loans, credit cards, “secured” credit cards, and business loans. It was so bad, I even got denied a job! – Read the full story of Chris Brisson.

How a family can get out of credit card debt
Written by Shane Higginbottom

This may sound a bit corney but it is true in our lives and worked for us.
You have to have a purpose a raison d’etre and a goal in mind.
Our goal was to buy a house in the coming year.

Our personal credit card horrow story goes back five years.
When I first met my gilfriend she was in a nasty child custody battle for her son. Being the committed
boyfriend that I am and having the available credit.
I decided to help her out by paying for some of the lawyers fees using my credit cards. The total fees at the end of
the custody battle were well into the 20k range.

Which really tapped our available resources and were bleeding us dry monthly.

That and we were both very irresponsible with our money, eating out, going to movies ,concerts shopping. The list goes on.
It gets worse we started going to the payday loans places to make ends meets, pay credit card minimum payment, rent food and bills.
Until the fateful day when the piper came a calling and some of the bills went to collection, hydro threatening to cancel, phone threatening to cancel.
What we didnt know was that our incomes were sufficient at the time to more than pay for everything.

But like I said our irresponsibility with money and credit cards blinded us.

Here is how we did it and its a plan we used to get out debt and buy a house in just under 6 months.
I would say cutting up our credit cards helped but there just wasnt room on them to be using them.

Our plan went like this:
We decided to live frugally
We added up our income.
Made a list of everything and everyone we owed.Starting from our expenses and the fixed amounts that we knew
wouldnt change.
Ie:
rent,
heat,
hydro,
cable,
phone,
internet,
car payment,
life insurance,
house (apt)insurance,
Car insurance.

We made a deal with the lawyer to pay monthly. An added fixed cost of 300/month

Now about the credit card debt, which was over 20 k.
We had to swallow our pride and just fess up and admit that we screwed up and called our credit card companies.

What we were looking was a payment agreement and a lower interest rate and at first try we werent all that successful until out of
desperation (we called numerous times) and basically told them that we were on the verge on just our right declaring bankruptcy
and that if we did then they wouldn’t be seeing any of the money.

What the credit card company asked for was if we could make a lump sum payment of 8k. I almost fell off of my chair here I was asking to have the amount of
interest lowered and make a payment arrangement because we were cash strapped and they wanted 8k?

What we managed to do was to call friends and family and explain our sordid situation and asked for help as a gift that we might or might not be able to return.
This took alot for us to do.

In the interim we went back to basics and cancelled our cable one of the 2 cell phones, bought bus passes instead of driving the car and paying gas.
Went to food kitchens and food places that help out the poor with handouts.

All to save money which we would be using for the lump sum payment.

Then it dawned on us that we had 3 credit cards all with differnet interest rates.
What we did with the money we had managed to save was paydown the lowest balance first, not the highest interest rate first our thinking was that it would
free up money to go to towards the others with higher interest rates.

And the difference went to our lump sum fund.

SO for instance we had three cards which were maxed out 2k @ 9% 8k @ 18% and 10 k @ 12.5%
We realized that our monthly income was approx 5800/month and that after writing everything down that our monthly fixed expenses were
approx 2297$ (3000$) but were overspending by about 1700 month on other things like shopping, movie rental, going out for dinner.

We never did manage to convince our friends and family to help us out. Sad really. When you need a leg up in the world that it isnt there.
So we did on our own.
By trimming down our fixed expenses ie car insurance (cancelled it) no car for a while. and no gas. cancelling our cable eating from food kitches bi-weekly
and having our families help us out with the food bill.We managed to save just over 1000/month.
We didnt manage to pay off all of the credit cards but we made a good dent in them and got our personal finances under control.
What’s intersting and this might be a good lesson for you out there.
Is that banking and finances and getting credit is really not tied too closely to the real world. What I mean is that, when it came time to
to start looking for a house we realized that we would have to get a downpayment togethor.
Which wasnt really anywhere on the horizon honestly, considering that we couldnt save. But what the bank wants to see is numbers.
In our case they wanted to see 12,586 dollars in our account. approx 5% down payment.
What was alos intersting was that when our mortgage broker pulled our crdit bureau information. (beacon score) for one reason or another
It was pulling information from before my credit meltdown, so I looked numbers wise (again not reflected in the real world)
This gave us some bargaining room with some of the people we wanted to have help us out with getting a mortgage. So what we did was again go to the well
of our friends and ask them for money which we would payback immediately. How did we do that. Our bank at the time was offering a 7% cashback mortgage.
So we pulled the numbers togethor from our friends telling them that in 10 days their money would be repayed from the cash back.
Again just showing the bank numbers that had nothing to do with reality. So in essence we got our first house with nothing down and some money to spare.

Title:  Credit Card Debt Relief – Keeping the weight of credit card debt off
Written by  BankCD Man

Credit Card Debt is suffocating this country.  The best solution is to stay away from credit cards to begin with.  However, there are certain purchases these days that generally require some credit history, so that is difficult.  Here are some methods for managing credit cards and some personal history about knowing your limits.

First, establish a categorized budget.  At a minimum your categories need to include Food and Household,  Auto expenses such as gas, payment, insurance; house expenses such as rent or payment, maintenance, upkeep, insurance, and taxes; phone and internet; school expenses; doctors visits and medicine; entertainment, and miscellaneous (be very careful with this one.  Also, if you believe in tithing or giving to charities make that your first category.  When you are just starting out and trying to build a history, use the credit card to purchase those items you have budgeted for.  After you’ve used the credit card, go home and transfer the funds immediately so there is no balance.  Don’t wait until the end of the month.

I decided to sign up for a rewards type credit card.  I did the above, but didn’t pay it off right away.  Then I forgot and did the same the next month.  It seemed like I had all of this extra money.  I then made purchases of items I didn’t need.  Suddenly, I was in debt.  I learned the hard way that credit cards aren’t a good thing for me.  I didn’t have the real discipline necessary to pay them off each month.  No my budget has a credit card category and less money for entertainment and other things.

I’ve done a few things to get out from under the debt.  First, I alluded to adjusting my budget so I took into account the monthly  payments I know need to make.  Secondly, I took on extra work to pay the credit card debt down faster.  Just making the minimum payments would take years.  Paying extra pays the debt down faster and greatly decreases the actual interest I will be paying down.  Many people seek debt consolidation loans.  But the only way this can work is if you lock up or shred your credit cards.  Most people get the consolidation loan, then run their credit cards up again.  At that point they are in twice as much debt.

Next, create a savings account and be diligent about putting funds in there.  You should save up three to six months of monthly expenses before making major purchases of dream items.  This will give you some Cushion to cover items such as car repairs, broken appliances, etc.  Although, they don’t happen monthly, you need to plan for them.  You know its going to happen, you just don’t know when.  Plan ahead.

Finally, practice wait training.  When you think you have to have something, wait at least thirty-days before purchasing it.  Do some extra research and price hunting and give yourself time to decide if it is truly something you have to have.  Impulse buying is a huge budget killer and ultimately can lead to more debt.

Do your best to not get into debt.  But if you do, follow the above plan.  It will take a few years of discipline, but before you know it, the credit card debt weight will be gone.

Credit Card Benefits, Risks and Debt
Written by Mário Rui Melo

This article aims to show the benefits and risks inherent in the use of credit cards, what are the best ways to deal with them and other tips that may be a great added value to their users.

Every day, the number of people that uses credit cards as a means of acquiring products and (or) services easily and without bureaucracy, increases. It happens that this, it is probably the main reason why the credit card can be as dangerous and can put many families in a financial situation of bankruptcy.

This payment method is very easy to use and perhaps hence, is frightening because of the ease of use we are led to abuse of benefits and, without giving account are full of debts with extremely high interest rates, sometimes the highest in the market.

How can we escape this temptation to spend more money than we can pay?

Usually the problem with credit cards is the lack of management of our money and not the lack of it. Behold, some tips for survive the use of credit card:

• Always try to pay all the things you buy or pay in money. Use the credit card only in case of extreme necessity.
• Pay the card debt on time because interest rates are the highest in the market.
• Be sure you have money to pay the credit card debt, in the end of the month.

This type of payment must always to be used with great responsibility because it may jeopardize the financial future of any person and, in some cases, whole families. Remember that the credit card only allows to make purchases and payments with money that may not be available at the time, but that will be later, or until the date of payment of credit card accounts, that money must be available.

If you spend more than you earn, certainly you will have problems and accounts to pay that, with your financial liquidity, will be impossible to pay.

According to the latest statistics, about two thirds of people who have credit cards must pay every month of the financial burden resulting from its use. In recent years, there was a change of cards with fixed rate to floating rate cards, when interest rates began to rise, there are currently about two thirds of all cards with variable rates. Interest rates of this type of credit have been rising, increasingly, and the effects of this rise fall, mainly on the working classes and families of middle income.

When you enter a situation of debt with credit cards which you can not quit, never ask a credit to pay this debt because that only will make things more difficult and complicated. The first thing to do is to save money. Try saving on everything you can, try to walk more, don’t spend money in restaurants, mobile phones, cinema, Also save on food, on the phone, the cable TV and all you can. Finally, try to re-educate yourself up when it comes to shopping and all kinds of expenses. Think always very well before buying anything. Do you really need what you’re thinking to buy?

Good luck and remember, reduce the costs and get used to leave the credit card at home.

Living with Debt & Its Solution
By Erik Wyche

Having been down the road of debt, which ended up in me filing for bankruptcy, I can provide some insights into preventing you from reaching such circumstances. The first hurdle to overcome is being able to acknowledge the problem. If you are in debt, you’re not alone. The average family owes upwards of $9,900 just on credit cards. If your monthly expenses, including debt, exceed 65 percent of your income, you should be very aware of what’s going on and take a hard look at your finances. The best advice I can give is to not ignore the problem. The bills are not going away so you must face the problem and solve it.

An issue I had was thinking about the daunting task of digging myself out of this hole. To me it seemed like a process that was going to take years to fix. Advice that I give now is that you might not be able to become debt free in 30 days but stop spending for 30 days. Stay away from the plasma TV that is being offered interest free for 12 months and do not even bother going to the mall.

In those 30 days you should be looking to see if you could get your mortgage at a more favorable rate. This will lower your monthly payment to free up some cash to tackle other debts. Credit cards should be consolidated if possible or at least transferred to another card of yours with the lower interest rate. One mistake people make though is that they close the accounts with $0 balances. You should keep these accounts open. Closing them can actually hurt your FICO score. On the flip side, do not go out and open a bunch of accounts either, as this will also hurt your FICO score. If all your credit cards currently have high interest rates just pick up the phone and give them a call to see if you can get lowered. You will be amazed at how cooperative they can be.

Once you have freed up some cash do not fall into the trap that now you can go and spend. This is not a shift-debt strategy but a zero debt strategy.

Once you get some breathing room, something I could not get accomplished, you need to figure out a long-term plan. This means you need to come up with a budget. The word most Americans do not comprehend that entirely well. How well do you know what you spend? Most cannot answer that question with any certainty. Grab a piece of paper and write down what income you do bring in and expenses. This will give you a brutally honest picture of you finances.

Once you have a budget stick with it. Pay down you debt and be disciplined. Make sure you understand the order in which the debts should be paid. All secured loans should be top priority. You have put collateral up and if you do not want it taken from you these debts must be paid first. Do not skip credit cards but they should come after secured loans. Credit cards also have an order in which they should be paid. The cards with the highest interest rate are first to go. Remember, stick to your budget.

A key to making your budget work is having enough money. Here are some tips for holding onto you cash:

• Brown-bag it to work
• If you have a 30-year fixed-rate mortgage, making a payment every three weeks instead of every month can drastically reduce the length of your loan.
• Learn to love leftovers
• Save on postage by paying your bills online
• Bundle you media services
• Wash your own car
• If you are going to be out the room for more than 5 minutes, turn off the lights
• Use your debit card for purchases instead of your credit card.
• Go grocery shopping with a list and stick to it.
• Shop out of season when prices are lower
• Bike or walk instead of driving when possible
• Buy an artificial Christmas tree
• Stop smoking

Of course there are many more ways to save money but this will give you an idea of what you need to do.

Finally, never give up. You don’t want to fall back into the mess you were in. There are always going to be ups and downs in the economy, but if you follow the simple money management rules you will succeed. I know I have learned my lesson the hard way but I now follow these rules and I am able to keep my head above water. You can to.

The Slippery Path of Credit Card Debt
Written by Brennan Kingsland

Isn’t it fun to find a wonderful bargain while you’re shopping? There’s something almost magical and fulfilling about handing over that plastic card and signing the dotted line so you can gather up goodies. In fact, it’s so temporarily rewarding to find such a deep discount on that jewel of a purchase, that it’s easy to convince yourself you are being a savvy shopper.

But are you really saving money with that special deal? Not unless you are able to pay off the balance before it becomes due. Otherwise, you have to include the price of of your finance charges into the cost. And that can add up very quickly!

There are often valid reasons for using a credit card. They’re an excellent way of keeping an accurate record of business expenses. And trying to obtain a rental car without a credit card is a very expensive process. But, unfortunately, most of us use our credit cards in a way that winds up costing us more than leaving a cash deposit for a rental car ever would.

Have you read the fine print on your credit card contract? Do you really understand what interest rate you are paying for using that financial institution’s money? Do you have any idea of what that money, or that “great bargain”, is really costing you?

One thing you need to understand about using credit cards is that, unless you pay the amount due completely each month before interest is added, your debt grows, even when you don’t purchase anything else. And most families DON’T pay more than the minimum each month. In fact, more families and individuals than ever before are finding themselves unable to meet even the minimum payment. How did this happen?

There are several reasons for this. Some are our own fault and some are the fault of the credit card companies, but the end result, either way, is lots of families drowning in credit card debt. Let’s look at some of the ways this debt accumulates.

First, credit card companies are eager to loan you money by establishing a credit card account with you. That’s how they make money. New grads and college students receive numerous offers to get the latest credit cards, often with the fabulous design of their choice, at a fantastic low rate, (perhaps even interest-free for the first 90 to 180 days). What those new users don’t pay close attention to is how that low or free interest rate will JUMP, often to 15%, 22% or even 29%, after the honeymoon period is over. With the new-found freedom to buy, buy, buy, with no interest rate or penalties, instant gratification becomes ingrained. It just gets easier and easier to spend money without really feeling like you’re spending money. And by the time that interest rate kicks-in, you already have the card maxed-out, or nearly so.

Instant gratification isn’t an affliction of only new card holders. Many people who should know better run their credit card debts up to the MAX, then get a second, third, fourth or more, simply so they can continue shopping on borrowed money, whether for necessities or for that momentary feeling of shopping pleasure and self-gratification.

A third way to get in trouble with credit cards is to not understand that those companies got you to sign on the dotted line that they could RAISE YOUR INTEREST RATE for any number of reasons. We had a credit card for 17 years, at a very reasonable rate – 7%. My husband, who always pays the bills, had a heart attack. While I was at the hospital with him for his open-heart surgery, I neglected to pay the bill within the agreed time because I was a ‘little distracted’. Our rate jumped to 29%, after seventeen years of a perfect payment record. That new interest rate, combined with the medical expenses of heart surgery, almost bankrupted us. It was a painful lesson and a scary close call but we learned some valuable lessons.

First of all, you need to take a cold, hard look at your spending habits. In this iffy economy, just ignoring the problem will not make it go away. If you are paying only the minimum amount each month, you need to recognize that YOU HAVE A PROBLEM. The smart thing to do is face the problem and GET HELP. Start by paying off the card with the highest interest rates first. When that card is at zero, start doubling-up payments on the next-highest interest rate, and so on.

It is very possible to contact the credit card company and negotiate a more favorable interest rate. Or, there are companies that can help you reduce your credit card debt, but as with everything, there are good ones and bad ones. Now that you’ve decided to straighten-out your financial life, take the time to research and get recommendations. Don’t just go for the glossiest ads or the biggest promises. And be very wary of debt consolidation loans. Yes, you can reduce all your bills into one easy monthly payment, but what will you do with the extra money? Will you use it to pay-off existing debt or start a savings program? Or will you spend the money on more ‘must have’ luxuries. Debt consolidation only works if you stop running up more debt in the meantime.

Whatever course you decide to take, be proactive. Don’t just dodge the phone calls and hope bill collectors will go away. They won’t AND your credit will be ruined. I repeat, GET HELP!

I’m not suggesting that you cut-up, or burn all your credit cards, but unless you can trust yourself to STOP charging, then perhaps you should get rid of them. I personally feel it is better to keep ONE credit card for genuine emergencies, but keep it where you can’t get to it unless you MUST!

Don’t be at the mercy of credit card debtors! TAKE ACTION NOW!

Preventing and Overcoming Credit Card Debt
Written by Prasad Khose

I was so happy when I got my first credit card. Many friends suggested me, not to take a credit card and I have successfully turned down all bank offers for some time, but somehow one day I failed.

Life was so easy after credit card, new clothes no problem, lot of shopping no problem, diamond ring for wife, sure. Then the day came, I got the credit card statement, it was shocking. I don’t know when I spent this much money only in one month.

This is the story of every credit card holder, some managed to pay their bills & try to keep control on future bills. Unfortunately some people can’t even pay minimum due amount of the bill and there starts credit card debt. It’s very easy to fall in credit card debt and very difficult to get out of it.

I would like to give some suggestions to avoid credit card debt and how to pay off your credit card debt.

1. Use your card sensibly, I know everyone does that, want to do that. However there are times, when we don’t think about credit card statement. Use your card as you are paying by cash or check.

2. Try to pay your monthly bills on time, some credit cards have very high interest amount. It gets quite difficult to pay off the balance with high interest. At least try to pay minimum due amount of the bill.

3. Almost all credit card companies allow to pay using EMI, take the benefit of it. Clear all the pending amount and try not to use card till all amount is paid.

4. Use your savings to pay off, I know it’s hard to do but if you compare the interest rates on savings & credit card, you will come to know why I am suggesting this.

5. Friends and family is there to dig you out of it, make sure you pay them back and don’t loose trust which is really important.

6. Try to negotiate with your credit card company. Let them know your situation, let them know you may have to declare bankruptcy if there is no other way. If they come to know that you want to pay and they might loose all amount because of bankruptcy, they will try to help you. Request for a lower interest rate, lower repayment schedule. This may work and you will be saved.

7. There are some organizations who will help you to repay, like americandebtcontrol, cleardebtsolution, freedomdebtrelief. Google for more. But these organizations have their terms, you can not just go there and say reduce my debt, try to find out more about it.

8. File bankruptcy, not too good suggestion but if situation demands, we can’t help. Remember your credit record will contain this information for 10 years, so before doing this try everything you can do to pay off all amount.

While paying off the bills $50 savings per month also does make difference.

1. Watch movies at home instead of going out.
2. Bring your lunch from home, stop eating out.
3. Use coupons, discounts for groceries.

Remember to use your card sensibly, it will help you to avoid all future financial problem and unnecessary trouble.

Seven Steps to Exploding Your Credit Card Debt into Tiny Pieces of Nothing
Written by James Hobbs

With all the clamor and noise over debt reduction and credit card debt from the credit counselors, debt consolidation companies, the lawyers who will help you (for a fee, no doubt) and bankruptcy court (for the real basket cases) you would think that managing a household budget requires an MBA, or at least your own personal ATM.

Well, Jim Dandee is here to tell you that just ain’t so. You can get out of debt on your own, and it doesn’t take going into more debt to do it. Even if you believe there is no way possible to squeeze one more drop out of your budget, get the wringer out anyway, we’ll be squeezing in places you may not have thought of before.

OK, here we go:

1) Stop charging new debt! Sir, Madam, step away from the credit card! And put your writing hand in your pocket for a while—no more new loans! None!

2) Create a budget (or a spending plan, if you prefer). You have to know where your money is going! Every penny counts! Don’t believe me? Maybe that’s why you’re here in the first place—because of not heeding sound financial advice… (insert cow-pie eating grin here). If you don’t know where your money goes, how do you expect to control it? People tell me I’m a blunt kinda guy (people tell me other things, too, but that’s another topic), but it’s only because I care (plus it’s kind of fun being a blunt kinda guy…). If you are not sure where the money is leaking out of your wallet, write down all of your expenses for a month, then make your “spending plan” (budget).

3) Cut out the crap! Clean up your budget, for real! I mean, are all those stops at 7-11 everyday really necessary? And if you really think you have to have that Starbucks Mocha Latte every morning, take a look at your backside in the mirror one time—seriously, small things must be sacrificed to get the big things. Consider this: why do you suppose such a large portion of our convenience stores and motels are being bought up by Indians and Arabs? Because they know how to sacrifice! What Americans know is how to spend all kinds of money in convenience stores and on vacations in motels! Stop it! Put that money away to pay down your credit card debts!

4) Do you have more than one credit card? You have to decide which one needs to be paid off first. Ideally, you should pay off the one with the highest interest rate first, but some people are more easily motivated by taking the smaller bites first. If that’s you, start by first paying off your smaller balances. Remember though, that high interest rate isn’t getting any lower, and it’s costing you more everyday… Shhh, what’s that sound? That’s the sound of money leaking out of your wallet from that high interest rate your paying…

5) Speaking of high interest rates, a study done by the Massachusetts Public Interest Group shows that 56% of credit card customers are successful in getting there interest rates reduced by simply calling the credit card company or bank and asking. It may take a little whining, cajoling, or talking to the supervisor, but it can be done in many cases.

6) Pay the minimum payment each month on all your debts except your number one priority from step 5. Put all that “extra” money you found in Steps 2 & 3 towards that top priority debt. Under no circumstances make only the minimum payment toward your designated priority debt, or you will not get it paid off in this or your grandchildren’s lifetime. Diligently use all that “extra” money for this debt.

7) Shampoo, Rinse, Repeat. As soon as you get one card paid off, repeat the process on the next one. At this point, you should be getting pretty good at it. Keep going until all your debts are paid in full.

This isn’t quantum physics, folks. It’s easier than you may think, but you have to get real! Be creative! Sacrifice the small things… bigger things are on the horizon—

jdBoone is a web consultant, marketing strategerist, grant writer and all-round white hat guy for The Center of Hope, Inc. alternative rehabilitation program in Clearwater, Florida. His latest launch can be found at http://www.witnesswear4christ.com

Paper or Plastic?
Written by Annie Binns

No, I’m not talking about your grocery bags.

I’m talking about cash or credit, and I’m asking you to consider what your life would look like today if you had spent the last five, ten or twenty years answering that question with, “Cash, baby!” I think Ralph Waldo Emerson said it best: “Money often costs too much.”

How would you feel today if you had zero credit card debt? I’m not saying you should cut up your credit cards – in fact, having and using credit wisely is a valuable tool and having a good credit score can save you money on things from car insurance to what you pay for your house!

What I am saying is that those credit cards should be paid off monthly. And yes, by paid off that means your balance is a big fat goose-egg! There is a simple way to avoid credit card debt – and if you teach your children this technique, it will be one of the best things you can ever do for them! Consider the following decision matrix for any purchase, any amount, every time!

If you need to use your credit card to pay for your kidney transplant, I really don’t expect you to take too much time considering it! On the other hand, if you need new tires for your car, you could consider waiting until you had the cash to pay for them.

Am I preaching to the choir? You already have tons of credit card debt and are barely making those minimum payments every month? How do you get out of credit card debt without filing for bankruptcy?

Notice the phrase, “without filing for bankruptcy.” I know that for many people that really is the best choice. However, it should still be your last choice.

Honestly, there are proven ways to pay off your credit card debt. I’m going to tell you about two of them, but first I’m going to tell you what doesn’t work.

Paying your minimum balance every month does not work.

We’ve all seen the math. If you charged $5,000 at the respectable rate of 9.9% interest and make the minimum payments of 2% per month, it will take you OVER 21 YEARS to pay off that debt. Don’t make me say it again. Oh, if I must: OVER 21 YEARS!!!

That’s crazy. Say you throw in an additional $25 each month. That time frame drops to just over eight years. An extra $50 each month gets you down to FIVE YEARS to payoff.

You may be thinking if you had an extra $50 each month, you wouldn’t be in so much credit card debt to begin with. If you spend one month using the decision matrix above, I guarantee that you will find things that you don’t need to buy, and could even (dare I say it?) live quite comfortably without. Will it be $50 each month? Maybe not. The important thing is to take whatever extra you can find, wherever you can find it, and add it to your monthly payment.

The second proven method to pay off your credit card debt is with a debt-consolidation loan. This is often a good choice when you owe more than 10% of your annual income on multiple credit cards, and an even better choice if you also have a mortgage, car payment, 2.5 kids, a dog and a goldfish.

There are reputable companies whose business it is to review your credit card debt, negotiate to lower that debt, pay off your credit cards and give you one loan to pay instead. The payments will always be lower than your combined minimum payments on your credit cards (otherwise it wouldn’t make much sense!) But beware – your total payment after interest may be more than if you had paid off the credit cards directly.

This is a very competitive market and the internet makes it hard to tell the difference between the good and the bad. You should interview at least three companies before choosing the one you want to work with. Start with the following questions:

• Do they require an upfront payment?
• Do they require a monthly fee?
• Will they pay off your debts and issue you a new loan?
• What is the total cost of the loan? This disclosure is required by law.
• Always ask this question: “Are there any other fees that you haven’t disclosed yet?”
• Remember, if it sounds too good to be true, it probably is!

What it really takes to be debt-free are the same skills we need for all other parts of life: Patience, integrity, planning and sacrifice. And a little bit of luck doesn’t hurt, either!

The Cons of Individual Voluntary arrangements as a remedy for insolvency in the UK
Written by Don Ace

The following article has be written based on my own research, if you are in such a situation where IVA’s are an option, I urge you to seek advice from the Citizens advice bureau or your own solicitor.

IVA’s main aim is to ‘provide an alternative and beneficial process to that of bankruptcy for those individuals who found themselves in a position of the most serious financial difficulties.’[1]

It can be argued that the root of IVA’s is held in the old 19th century method of deeds of arrangements.[2] Both of the methods hold the same key ideology or makeup, the main difference though is that a voluntary agreement is binding where as a deed of agreement could be rendered void by a bankruptcy procedure.[3]

IVA’s have a number of areas that’s end result could be a detriment to the debtor. The first of being regarding the requirement of 75% majority approval of the creditors[4]. If the proposal is rejected (or due to the arrangement being challenged[5]) by the creditors the fee for the Insolvency practitioner (IP) still stands and this cost ranging from about £1,200 is another burden on an already bankrupt individual, as well as leaving them under threat of court action[6].

Also if successful with the application and the IVA is accepted the extra fees for the IP (or nominee) are still applicable and must be paid first before any repayments are made to creditors, therefore if at a later date the IVA should fail, the debtor may be at the same or worse position as when he started.

A further problem may arise if the individual who made it is not an IP but another ‘authorised[7]‘ personal.[8] Which is most cases are private companies such as Loan Direct etc.

‘…the IVA procedure is reliant on the skill and judgement of the professional individual fulfilling the roles of nominee and, usually thereafter, supervisor.’[9]

The problem being therefore that a lot of these private firms who run these IVA’s ’sell’ the process as a miracle cure for individuals in debt and according to research[10]has resulted in an increase of IVA’s taken up (up to 28% of all bankrupts take this route), the problem being though that due to the business like nature of this professions with the individuals profiteering from the method, the question therefore must be put whether when creating these IVA arrangement do these nominee’s have the debtors best interest in heart, i.e. does it have a chance of succeeding or are they looking at their own bottom line and risk a high amount of failure[11].

Concluding then on the individual voluntary arrangements the time frame in which it occurs (up to five years) is in equal to other procedure though a lot longer than a default bankruptcy discharge though its benefit[12] arguably justifies the extra time. On the negative side though the extra expenditure in doing an IVA is great especially when an initial deposit is required and become an extra burden if it fails.

[1]Green, M (November 2002) Individual Voluntary Arrangements — Over-indebtedness and the Insolvency Regime, Short Form Report, http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/policychange/ivapolicyresearch/ivapolicyresearch.htm — last accessed 14 April 2008.

[2] Tolley’s Insolvency Law and Practice, (1998) Vol 14, No 4 IL&P 230, 1 July 1998, The release of co-debtors under individual voluntary arrangements, Rick Munro Lamport Bassitt, discussing the judgment in Johnson v Davis.

[3]Page 79 Corporate and personal insolvency law.

[4] Consumer debt: causes and cures of financial distress by Sue Morgan. Ibid.

[5] S 262 IA1986 or s6 Sched A1 Para28 in the case of CVA’s

[6] http://news.bbc.co.uk/1/hi/business/1245757.stm

[7] Under s389A  IA 2000

[8] Page 87 corporate and personal insolvency. Ibid.

[9] Page 321 of Insolvency legislation, annotations and commentary 2007ed. By L. Doyle and A. Keay.

[10] Consumer debt: causes and cures of financial distress by Sue Morgan. Ibid.

[11] Tolley’s Insolvency Law and Practice (2002) Vol 18, No 1 IL&P 9 1 January 2002New rules and new roles for the individual voluntary arrangement by Keith Pond

[12] 17% better realization of assets as compared to bankruptcy, ibid.