It was extremely difficult to resist the temptation of credit cards in the early years of the 21st Century. There was growth in the real estate market and the economy was booming. Easy credit fueled everything and complacency was common in both realistic loans lenders and borrowers. The former saw little risk and focused on profit with seemingly few risks involved. Borrowers were effectively being given an open checkbook; it was too tempting not to spend. The debt crisis certainly stopped complacency. There were numerous casualties and even though recession has receded there are still people falling into the trap of excessive spending and supporting monthly expenditure by the use of credit cards.
Balancing
Many people used to have a wallet full of credit cards. Often they juggled between the cards, accepting 0% balance transfers when available and generally paying off the minimum each month on each card. That is a recipe for disaster with the inevitable outcome a balance on each card. Each incurs high interest rate charges and there is no easy solution to that kind of problem.
If you get into this situation the first thing that you must do is to sit down and write every liability down, leaving nothing out. The first debt that needs to be cleared is the one that is incurring the highest rate of interest. The reality might be that the reason why you got into trouble in the first place is because of your inability to repay your commitments. Ideally the solution is increasing monthly income but that may not always be possible.
Low Interest Rates
Interest rates are currently low and one solution may be to investigate whether the problem can be solved by taking out a consolidation loan. It will put the core balances into one figure that can be paid off over a defined period with equal monthly instalments. There is help out there for those who need it though the rates on offer may be higher for those with a poor credit score.
It might be difficult for you to sign up to a term loan without actually receiving any money to spend but what is the alternative? Penalty interest will continue to be charged until the balance is paid off; and it is growing by the day.
You may actually rid yourself of this huge problem but that is not the end of the issue. Some of the card companies may be delighted to allow you to continue to use their product. While a credit card is certainly convenient there is an inherent danger. It is to only pay off the minimum monthly requirement which was where your problems began in the first place.
Self Discipline
How good is your self- discipline? If you have a credit card for convenience then it is essential that you pay off the outstanding balance at the end of every month. You do not need to have a wallet full of credit cards if you are disciplined enough to use a credit card purely for convenience.
There is no doubt that the days prior to the recession are unlikely to return. Lenders have stricter criteria than before but credit is certainly still available. If you have managed to extricate yourself from a seemingly hopeless financial situation you most certainly don’t want to return there. You don’t need to have a ceremonial cutting up of your credit cards but you must look at your financial situation realistically. There may be the need for a few economies if your expenditure seems to be outstripping your income but they will be worth it to get out of trouble.
