Did you know that the average American household is in credit card debt over $8,000? Did you know the leading reason for divorce is because of a financial situation? Did you know that over 1 million people file for bankruptcy every year? Most people are in debt because they don’t know any better, they are just uneducated.
So what good and bad debts. Well bad debts are anything that loses value the moment you purchase it. The best example would be a car. Cars constantly depreciate everyday. Buying any consumable products on credit is bad. Consumable products are those that are used up and then need to be replaced. Example would be food, clothing, and cleaning supplies.
Isn’t it just so easy to get that in store credit card offering you no interest for 6 months? Well chances are you won’t pay it off by the end of the no interest period. Be careful of the “save 15% today when applying for our credit card.” When you see that you should know everything you buy on that card is bad debt.
Good debt is that which what you purchase will over time make you money. The best example is real estate. Most of the time property appreciates its value. Also some interest is tax deductible. That’s a win - win situation. Buying collectibles, house, and advertising on debt can mostly be considered good debt as long as it makes you money.
Be smart and look at the long term affects of your decisions. Budget and planning will also help you overcome debt problems.
Check out 3 steps to becoming debt free here.
October 24th, 2007
In the United States statistical reports show that nearly 80% of consumer expenses are on credit and the most convenient way to shop is to use credit cards. Moreover, according to the American Consumer Credit Counseling (www.consumercredit.com ), the total U.S. credit card debt in the first quarter of 2002 was approximately $60 billion. That equates to an average debt to more than $8,000 with a typical interest rate of 18.9%.
If that’s not enough to make you sick to your stomach, the Motley Fool’s Credit Center (www.fool.com) features several more mind-blowing statistics:
Total consumer credit: $1.7 trillion.
Total finance charges Americans paid in 2001: $50 billion.
Percent of U.S. households deemed credit worthy by the lending industry: 78%
Number of credit card holders who declared bankruptcy last year: 1.3 million.
It’s no wonder so many people are now heavily buried in debt. Along with it came lots of debt relief programs aiming to provide consumers effective ways out of debt.
Among the many debt relief programs available today, debt counseling is one of the most well-liked programs, helping more than the average consumers who seek debt consolidations.
Debt counseling is one way of teaching consumers how to administer their profits and expenses. This program will also teach them how to avoid further accumulation of debts.
In essence, debt counseling should have been a preventive measure for accumulating debt, but the problem is that most people use this after they have already accumulated lots of debts.
With debt counseling, you can learn multiple ways on how to avoid debts. The main focus of debt counseling is to educate and empower the consumer regarding their expenses, balances, credit score and staying out of debt.
All of these things will put a great impact on the interest rates as well as the types of loans one can apply for. It is important for every consumer to seek debt counseling before they start charging their expenses.
Here is a list of things that your debt counselor can do for you:
1. Debt counselors can teach you the whole credit card process.
One of the greatest issues facing people who have accumulated debt that is spiraling out of control is they aren’t aware of the actual operation of their credit cards.
According to surveys, almost 75% of credit card holders aren’t aware of their balances, not even the amount they are paying off monthly.
How is that? This happens when consumers only pay the minimum required balance stated on their credit card bill. They are only prolonging the process and accumulating bigger debts through interest rates.
The point here is that paying the minimum balance on your credit card won’t get you any farther. It may lessen your actual balance but may only aggravate the situation because of the time it will take you to finish everything off. (Here’s a tip: Pay ten dollars above your minimum payments to cut down your interest).
With debt counseling, you are made aware of your payments and on how you should go about your balances so as not to accumulate more debt.
2. Money management is the ultimate tool that they can teach you.
Debt counselors can give you complete details on money management. Here, consumers are taught how to manage their expenses and their credit card bills.
Debt counseling programs will teach you how to be aware of your credit card billing statements every month. In this way, you become conscious of your expenses and your available credit limit. The key really is two-fold (1) not to exceed your credit limit and (2) use only half of your limit.
The problem with most consumers who are heavily buried in debt is that they are not aware of their monthly expenditures, thus, tending to cross over the specified credit limit.
Keep in mind that credit limits will most likely keep you in track. Once you have gone overboard, chances are you will find it hard to pay off your balances.
3. They will teach you how to use cash instead of plastic.
There’s not dispute in today’s society the use of credit cards are essential. However, since the emergence of credit cards, consumers tend to neglect the real functions of credit cards. They don’t understand that credit cards aren’t extensions of their profits. Any amount used on credit cards is still payable.
So if you have been charging more than what you can pay in a month, you will definitely accumulate more debt.
Moreover, debt counseling will teach you not to use your credit cards when paying for your basic necessities like gasoline and groceries. These items are so basic that you should have included them in your monthly budget.
By any chance, acquiring them on credit will only entice you to get more than what your budget allows.
Debt counseling is for you if you are overwhelmed in debts and is an effective way of managing debts.
Jay Sutton is website owner of Debt and Credit Solutions and is knowledgeable and well-versed in debt and credit related laws. For more information, please go to http://www.101-debt-solutions.com view the entire site and sign up to the DCS newsletter and arm yourself with the knowledge you need to successfully handle your debt and credit situation.
October 24th, 2007
