Debt is the four letter word that can destroy your whole financial life. Debt can eat away at your hard earned income as you find yourself working just to pay off the interest on your home loan, automobile loan, student loan, and credit card bills. While a home loan is a low interest loan; credit card debt is the worst kind of debt because the interest rate is sky high and it can take 30 years to pay off a small balance. You can find yourself paying ten to twenty times the amount that you originally borrowed over the years. That is why credit card debt is one of the first debts that you should aim to eliminate. In order to get a handle on your financial life, check out these five warning signs that you are drowning in credit card debt.
Credit Card Debt Warning Signs
1. You need your credit card so you can pay your monthly bills.
A major red flag is if you cannot pay your basic living expenses for 30 days without using your credit card. If you have to rely on your card to pay the gas and electric bills, car insurance, groceries, fuel costs, and insurance then you are not managing your finances properly. A credit card is not a crutch to rely on to make it from month to month. Credit card lenders have been known to reduce credit lines from customers who become too dependent on credit cards and carry high balances from month to month. The first step to getting out of debt is to stop creating new debt. If you rely on your credit card as a tool for survival, you either need to reduce your living expenses or increase your monthly income.
2. You regularly take out cash advances.
Cash advances from credit cards are one of the worst deals going. These cash advances comes with a three to five percent fee based on the amount of money borrowed and include a $15 fee thrown on top that for the “convenience” of getting cash. Cash advances charge upfront fees, have interest rates in the 29 percent range and start accruing interest instantly since they have no grace period. Start building an emergency savings account so you don’t rely on cash advances.
3. You have no idea how much money you owe.
As the old GI Joe cartoon used to say, “knowing is half the battle”. The only way to get out of debt is to know how much you owe on your debts. You should have an app, notebook, or folder with all of your account balances so you know exactly what you owe. Then you can formulate a plan of action to attack your balances and pay your credit card debts now. Don’ t be afraid. Log into all of your credit accounts right now and find out exactly what you owe.
4. You have stopped opening your mail.
If you no longer open your credit card statement, you are making a big mistake. Just because you don’t open a bill does not mean it doesn’t exist. Always open your credit card statements to make sure they are accurate. So, the next time they come don’t just throw them in a drawer somewhere or in the trash. Go through your statement and make sure it’s accurate. Also, as you start to pay the balances off, you will be glad to see them shrinking on your statement.
5. You avoid answering your iPhone.
You no longer answer the phone because you know that it is a bill collector calling about your credit card debt, so you have stopped answering the phone. That’s a bad strategy! The best way to get out of debt is to be proactive. Take the time to negotiate with your credit card debt collectors. You may be able to negotiate lower interest rates, defer payments, waive late fees, or stop an account that is about to ding your credit before it heads to collections.
Take advantage of the aforementioned five tips so you can keep your head above water in the current of growing debt.