T Nation

Credit Card Debt


#1

Basically I am pretty pissed with myself for allowing it to get to this point, but my credit card debt is out of control. It's so bad that I can barely afford to make minimum payments every month while working 60+ hours a week.

I've clipped up all the cards(3 of them), cut my real money spending as much as I think I possibly can(no internet at home, canceled gym membership, downgraded my cell phone plan, etc), and I still barely get by living from check to check.

I'm not looking for sympathy, I'm quite aware of my own stupidity. The thing that really pisses me off is you would think with all this debt I would at least have something to show for it...but honest to god I'll be damned if I know what I racked up all this debt on!

I've seen all the commercials about reducing debt but they all sound a little shady to me. I've heard that going through one of these debt consolidation companies kicks your credit score square in the balls, which isn't so cool. So I guess I was just wondering if any of you could offer any advise as to what my options are? I'm not married, don't own a house...just a stupid kid that spends more than his wallet can hold. Any ideas? Thanks.

Analog_kid


#2

Keep doing what you are doing and the problem will fix itself. Don't get another credit card. Keep working and keep paying them off. Try to consolidate to a zero or low interest card if possible.

As you get older, you will earn more. It's a pretty consistent trend.

Keep you head up and don't get down over it. Experience is an expensive price to pay for wisdom.


#3

Start at www.daveramsey.com

Look into getting his book "The Total Money Makeover"

If you follow his program you'll be living a very froogle lifestlye but you'll be out of debt.


#4

I think you're on the right track as far as cutting up your current cards and cutting back on expenses. As you earn more as you get older you should be able to pay more towards your debt and still have some money left over for other things. Just make sure to pay your payments on time every month and maybe in the future if your credit score is good you can transfer your balances onto one card with a really low interest rate and that should help.

My wife went through credit consolodation a few years ago and it really didn't affect her credit score that much, so it could be something you'd want to look into.


#5

words of wisdom(experience?)

What is the interest? If you have any way of getting your hands on any type of money for less interest do so.

Minimum payments will kill you. Do whatever you can to avoid this. You may be limited now, but keep an eye for the zero interest on new balance cards as hedo mentioned. You can continue to transfer the balance to new cards and pay off the balance interest free or at a much lower interest.

Good luck. It sounds like your plan going forward is solid. It will be an adjustment, but you need to get it under control now. Any savings you have--use it to pay off that card.


#6

My girlfriend did a credit card consolidation program 2-3 years ago. Her credit rating is pretty good today, and it saved her a shitload of money if I recall.

If you can barely meet your minimum payments, then sometimes you gotta do what you gotta do even if it has a slight impact on your credit score for a year or two. It's not like you're declaring bankruptcy or anything.


#7

Maybe you should look into bankruptcy. What are they going to take? Shit, as long as they don't garnish your wages.

It might be better just to ruin your credit rating, and knock off being a slave to the credit card companies for years on end. Then in the future, buy things with cash money. Screw credit, it's already screwed you...


#8

Possibly your house or apartment if you have one. It depends.


#9

Well, since I've been dealing with a similar situation, here's my advice.

First, see if you can get a zero percent interest credit card through Chase or Capital One (something with a low fixed APR once the special deal ends (12-15 months). Transfer your balances to that card and work on paying as much as you can each month.

Cut back on as many other things as possible. Reducing your cost of living is one of the best things you can do. Try to live below your means. Do you have a car? Is it paid for or do you have a loan? If you have a loan and a high payment, I'd highly suggest selling the car and getting something you can pay for with cash or in a small loan.

Read these books:

Rich Dad, Poor Dad

The Millionaire Mind

They will greatly help you understand some things about money and why people remain poor or middle class forever.


#10

Because it's impossible for everyone to be upper-class?


#11

Everyone IS upper class.

Compared to 2nd and 3rd world countries (and some 1st world countries too).

The best thing is consolidate your credit card debts to a single zero interest one or a loan and pay off the low low interest. Pay off more than the minimum. It takes time to get rid of the debt but that is the most efficient way to do it because the interest is probably high on the cards and taking you backwards.


#12

I'm not sure of the inter country differences but I'm pretty sure if you cut up all th cards and consolidate or cancel thm it can damageyour credit score as well by reducing your total available debt ratio (or some technical crap). But in your case consolidating to one lower interest card or a LOC would be great if at all possible.

C


#13

Hell, yes. If you can get past the Jesus freak end of it, you will be golden. I have been doing Dave's plan for a couple of years, and yesterday I sent off checks for just under 6k - and paid off our final debts. We have no consumer debt, just a house payment. If feels great! Of ocurse, your friends and family will think you are crazy, because you won't buy anything on credit, but they are broke, Right?

I believe that any able bodied man in the US can become at least well to do over time, if not very wealthy. read these three books, and then (here's the hard part) actually do what they say. You will get there. No scams, no money to send off to anyone, just a little work. You can get all three books at any library:
1)The richest man in babylon - you can read this in one sitting.
2) The millionaire next door
3) Total money make-over - Dave Ramsey

Like most things worth doing, becoming wealthy is simple, but not easy. Finding out what to do is no problem, but can you make yourself do it?


#14

www.daveramsey.com

I'll add a third vote for this. It can be tough if you've got a wife to get on board, but if you are single it should be easier for you to get on track.


#15

www.daveramsey.com

I was doing my budget sheet this morning and figured I'd post a vote for Dave. Even if you are not in CC debt you can learn a lot from him.

I went to one of his classes last year. Not really in debt just tired of always seemingly treading water and not putting much on the side. I learned a lot about investments, money management, insurance, saving for the kids college fund, etc.

What I did learn was that just because you may make a lot of money doesn't exclude you from CC debt. There was this couple in our class, he was a doctor, she was a stay at home mom. They had over $100,000 in CC debt. There were people from college students to older pepole in their 50's in debt. So don't feel alone.


#16

Assumptions

  1. You have 1 salary
  2. Credit Cards are your problem
  3. Salary covers basic living plus minimum interest payments.

Method

  1. Move back with your parents
  2. Lease part of your apartment to someone else
  3. Get a second job
  4. Consolidate and accept bad credit rating for 5 years

It seems from your comments that you spend the money on perishable items and have nothing to account for the expense. Get any basic book on bookkeeping and start recording your expenses.

A more practical approach would be to make a simple list or what you earn and what you WILL have to pay (rent). Any other incidentals (car, food and clothes) will have to be diminished to the bare and for some completely eliminated.

You need to make payments to principal otherwise there will never be peace of sleep for you.


#17

Most of what I see here is good advice. Basicaly, if you can get you hands on the money for a lower interest rate, go in that direction. The first place i'd go is your bank. Make an appointment with a loan officer and a credit counciler and explain your situation. My bank (It's actualy a credit union) is realy cool about personal loans for credit consolidation. They will probably gice you a loan for the amount, with the understanding that you use the funds to pay off the debt and will provide proof that you indeed did pay them off. More than likely the rate will less than the cards you have now.

If you're credit is good and you've been making your payments, there is no reason to go nuts and ruin you credit raiting. Start at your bank, you might be supprised what they are willing to do.

If you don't mind me asking, how much are we talking about here?

La'
Redsol1


#18

Fourth vote for Dave Ramsey. Debt is a killer. Living debt free is really living.

Get his book. Join his website. Listen to shi shows. The guy can actually make selling your car and driving an 84 Yugo sound exciting.

We are going through the TMMO right now as well.


#19

I've been dealing with a credit card bill for a while now. It wasn't a concern at first because I had a zero-percent interest credit card, and I was paying more than the minimum each month. However, I was also still purchasing things every month. Last year, my credit card bill was in the $8,000 range, and it stayed like that for a few months even though I was paying $1,000-$2000 a month on it (because I was also spending the same amount each month).

After my last girlfriend and I broke up, money got tighter, and I wasn't able to pay more than $300 a month on my credit card (I was now living alone and paying all the rent, utilities, etc.). When my father was diagnosed with cancer, he asked me to move in with him to help him out. This helped me financially because I was able to cut costs and start paying $1,000 a month (sometimes more, sometimes a little less) on my credit card. And yes, I've still been purchasing things as needed.

Luckily, I haven't paid interest on my credit card since 2004 because I switch each year to a new zero-percent interest account. I only have $2,500 left to pay off and will have it finished by July.

I also sold my Honda S2000 in February to get out of $405/month payments (plus higher insurance and gas costs). I didn't want to sell my car, but it was something I needed to do to save money or pay more toward bills. So I picked up a 1996 Mazda Miata in near perfect condition and only 52K miles for $6900. I paid cash through my line of credit (11% interest), and I recently transferred that account to another zero-percent interest credit card so I can pay it off quicker and not pay anymore interest (In two months, I had paid nearly $200 in interest through my line of credit. That's equal to one monthly payment. So I was determined to get rid of interest to pay it off quicker).

So, I have two credit cards (one Visa, one Mastercard). Both have zero-percent interest, and I have a balance of $2,500 on one and $6,500 on the other. One will be paid off by summer. The other will be paid off by next fall (or sooner). My only other debt is my school loan (~$3,600) and my monthly fixed costs (food, gas, utilities, cell phone, insurance, etc).

I use one paycheck per month to pay on the credit card. The other paycheck goes toward everything else.

As for my credit, I've kept it in outstanding condition through all this. In fact, my recent credit score put me at 790. I also check my credit every few months to make sure nothing funny is going on, and I always make my payments on time and pay more than the minimum.

As for Rich Dad, Poor Dad and The Millionaire Mind, they have definitely affecting how I think about money and how I plan on making my financial future. You will see the mistakes that poor and middle-class people make (I had been doing the same) and how rich people think and do differently.

Everyone has the ability to be rich. If you read the books, you'll understand what that means and how it can happen. I have definitely changed my thinking, and I will overcome my debts and all other issues I've dealt with in the past 1 1/2 years, and I plan on becoming rich in the future. You can too.


#20

You definitely want to avoid bankruptcy as much as possible, especially since they changed the laws. Too many people were abusing the system in the past with few consequences. It's definitely worth it to avoid it if you can.

I concur with the roll-over method of switching cards to 0% interest. If you're barely able to meet your minimum monthly charges, you will have a VERY hard time reducing the interest-bearing principal.

Is it possible to sell anything that you own and don't need in order to make some principal reductions?

DB