Use a Balance Transfer Calculator to Avoid a Debt Collector Problem

How to Play the Credit Game

If you are like most Americans, you have enjoyed the low interest rates and perhaps made more purchases for big-ticket items within a shorter period of time. And, the credit card companies have knocked themselves out trying to capture your business. For the most part, they have been extremely successful. At the end of 2003, the average household had at least $9,000 in credit card debt. (The overall consumer debt in this country has doubled in less than 10 years to $2 trillion without taking mortgages into consideration.)

THIS IS HOW THE DEBT COLLECTOR PROBLEM, OR GAME, BEGINS:

And yet another amazing credit card offer has just arrived in the mail. The offer: a 0-balance transfer rate—a transfer balance at 0% interest rate for six months and thereafter 12% and no annual fee. (What usually is not said is that the new purchases are at the 12% rate and the payments are first applied to the transfer balance.) It certainly seems like a good thing—if you’re not using a balance transfer calculator. Many of us remember the days of paying 21% interest with an annual fee. As a result, the debt is transferred to the new, 0-balance transfer rate card, which is indeed a smart move, especially if the debt is paid off before the interest rate kicks in.

 The problem:most people do not pay off the debt within the zero interest-rate period and to make matters worst, rather than tucking away that old credit card, it is also continually used.(Even better than tucking the old card away, using the money that was o­nce a payment and saving and/or investing it.)

 What happens?The merry-go-round begins of yet another balance transfer and hopefully paying off the balance this time, while continually using the older credit cards with the higher interest rates.And the more balance transfers that you make, the more fantastic offers for balance transfers you receive.More likely than not, these balances will not be paid off before the interest rates start and if the discipline is not there to cease using all of the available credit, the game clock starts ticking.

 The next step:the interest rates start and for those in a lot of debt, o­nly the minimum is paid. If your rate, for example, is that unfortunate 18 %, this could amount to paying $10.00 per month for eight years for a television that originally cost $500.In the end, it cost you, $939.

 WHATEVER YOU DO: DON’T BE LATE

 Or, if your financial situation is almost critical, you make a late payment.A lot of the fine print in the agreement that few actually read, allows a sudden jump in the interest rates, landing you at 29% when you are late. (When you can least afford it, the higher rate emerges out of thin air.)Some of these agreements allow this increase in interest when you are late with your utility bill and not necessarily with the bank that issued the card!And, unbelievably, late payments have reportedly caused some people to experience higher auto insurance rates, which has prompted some states to pass legislation disallowing insurers to use credit scores to cancel or not renew personal insurance policies.Being late is apparently the Number o­ne NO-NO and could get you into trouble with all of your creditors.

 If things continue to go downhill, you may charge over your credit limit.Ouch!This is usually around $35.00 dollars and continues to be billed until you have paid down to your limit. Some pay down to the credit limit and are slapped with the new interest rate that pushes them over the limit and for yet another month at least, the wonderful over-the-limit fee.   

 Now your situation is critical and perhaps you miss a payment altogether.You have now entered a zone of seeming no return.You are racking up late fees, high interest rates and perhaps worse, debt collectors are calling.Although, not as obnoxious as they o­nce were due to the Fair Debt Collection Practices Act of 1996, they are permitted to call your home during (not before) 8 a.m. to (not after) 9 p.m. or at your job if your employer does not disapprove –how they will find this out is anyone’s guess. They are not permitted to threaten, harass, lie or use unfair practices to collect the debt.But the fact that they can call continuously is, for most of us, harassment enough.

 WORST-CASE SCENARIO

 And the worst-case scenario, something unexpected and/or unplanned happens:you lose your job, you or someone in your family becomes ill and you incur large medical bills or your previously working spouse dies.Along with trying to cope with an extremely difficult and emotional situation, you may have to face a mountain of debt.As Americans are no longer sufficiently saving for the future, less than 2% of after-tax income is saved, most of us are o­ne or two paychecks away from financial disaster, meaning if something comes between us and our income or medical bills spiral out of control, life becomes extremely hard.

 HOW TO WIN THE GAME

 How to avoid this trap?First, if you are made these incredible credit offers, do take advantage of them, as you will save a lot of money in interest o­n your pre-existing debt.But, you must read all of the fine print provided with the offer.These banks are out to make money and are making less than they used to simply o­n interest –which means that they must make up the difference somewhere.Secondly, if you do not have the discipline NOT to use all of your available credit, cut up the cards with the highest interest rates and keep o­ne or two for emergencies o­nly.Make the largest payments o­n those with the highest interest and pay slightly over the minimum if you can afford to or just the minimum o­n the lower interest cards.(Some advisors suggest that you pay off the lowest amount owed o­n a card first regardless of the interest rate, as the emotional reward of having paid off o­ne card in a relatively short time is great and provides a lot of encouragement.If this would be the case for you, then by all means do it this way!)   Make sure that all of your payments are made o­n time this includes the seemingly unrelated, electric bill.

 (Hopefully, the knowledge that late fees and over-the-limit penalty fees account for more than 30% of the card-issuers profit and for some of the "big names" profit has reached 40%, is enough incentive for you to get your financial house in order and to get your debt under control.Credit card debt should be short- term debt and not a life sentence.)  

 The moment you start having trouble making payments, contact your creditors and explain your situation.Some may lower your interest rate and most will at least adjust your payment schedule and minimum payment.Most creditors are willing, particularly in the beginning to accommodate a customer that is temporarily experiencing difficulty.

If you are not able to do this, contact us, get out of the game and become a WINNER.