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No Easy Way Out Of Credit Card Debt

By Mark Huffman
ConsumerAffairs.com

January 1, 2007
For millions of consumers, the dawning of a new year brings a credit hangover, one that lasts a lot longer than the kind caused by over indulging on New Years Eve. Consumers, already in debt, normally run up even larger bills preparing for the holidays, and evidence suggests this past year was no exception.

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Plastic Prison • Credit Tips And Tricks • Get Control of What You Owe • No Easy Way Out Of Credit Card Debt • Penalty Fees, Interest Rate Hikes, and Misleading Contracts Await Credit Card Shoppers • "Convenience Checks" Carry a Heavy Price Tag • New Forms of Credit Scoring • Understanding Credit • Credit Bureaus: Who You're Dealing With • Reading Your Credit Report • Credit Scoring: The Fickleness of FICO • Credit Knowledge: A Long, Hard, Struggle --- News • House to Hold Hearings on Credit Card Interchange Fees • Confronting a 'Culture Of Debt' • Feds Back Tighter Credit, Debit Card Rules • Director Takes Aim at Banks in New Film, 'Overdrawn!' • Floating Due Date Snags Chase, Citibank Customers • Congress Takes On Credit Card Interchange Fees • Consumers Lobby Congress to End Credit Card Abuses • Congress Takes On Credit Card Abuses • Credit Counselors Go Risque With their Message • Credit Card Debt Climbs Worldwide • As Credit Delinquency Rises, So Does Credit Relief Scrutiny • Congress Calls Out Credit Card Companies • College Students Warned Against Credit Card Trap • High-Fee, Low-Credit Charge Cards Prey Upon the Poor • Senate Bill Would Curb Abusive Credit Card Practices • Fed Proposes Tighter Controls On Credit Card Rates • Senate Panel Slams Abusive Credit Card Practices • Congress Targets Credit Card Companies For Reform • Report Finds High Debit Card Overdraft Fees • Bank, ATM Fees Continue To Rise • Credit Card Fees Rise, Disclosure Statements Inadequate • Free Credit Reports Mark First Anniversary • Credit Card Debt Sinking Many Older Consumers • Experian Launches New Credit Score; Critics Unimpressed • Credit Cards Target Students • Credit Card Companies Fear "Perfect Storm" • Credit Bureaus Introduce New Scoring System • More Banks Using Universal Default to Hike Interest Rates

According to a recent survey by Consumer Reports, 23 percent of Americans will not pay off their holiday debt until March or later, equaling $14.6 billion in interest-accruing debt. Over one-quarter of Americans use credit cards most often when holiday shopping, contributing to the $63.6 billion charged on credit cards throughout the shopping season.

"With the average household saddled with $9,000 in credit debt already, anything that significantly adds to that impost could be potentially devastating," said Tod Marks, senior editor, Consumer Reports.

Marks and other financial experts prescribe discipline and a systematic approach to personal finances as the best way to eliminate debt. It starts with setting some goals for the new year.

"Without your financial goals, you don't really have the proper motivation to get out there and save. Without a plan, you aren't getting anywhere. If you don't set financial goals, you may never see financial independence," advises Martin Lukac, with RateEmpire.com, a consumer banking marketplace.

To get out of debt, financial experts suggest a four pronged approach:

• Analysis look at what you own, what interest rate you are paying, and when you would like to be able to retire the debt.

• Budget eliminating or reducing your debt will not happen without some sacrifice. Unless you come into a windfall of cash, the money to pay off the debt will have to come from your current cash flow. Look for places were you can save money from your current expenses and be disciplined about applying that savings toward paying off your debts.

• Be Bold It never hurts to ask for a little help. Call your credit card company and see if you can obtain a lower rate. This time of year lots of people shop for new cards, and credit card companies are mindful of that. If they refuse you, then become one of those people shopping for a lower rate card and transfer your balance.

• Raise CashLook for possessions that you can sell and generate cash. Use the cash to make a large payment on one of your credit cards.

Financial experts caution that there is no easy, painless way to get out of debt. For that reason, it is wise to be highly skeptical of the advertised claims of some so-called debt counselors. Numerous complaints to ConsumerAffairs.com tell of situations where paying large fees and following the advice of a debt counselor actually made the situation worse.

What if you are starting the new year in serious financial trouble, made worse by a binge of holiday credit card spending?

The U.S. military, which is dealing with the growing credit management problems among its enlisted ranks, urges an honest confrontation of the problem. Contact your creditors and let them know you are having difficulty. Many will be willing to work with you, and long as they get regular payments.

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