Credit Card Balances and Delinquencies
According to a TransUnion Report, average credit card balances are at a 7 year high. When the recession hit in 2008, average credit card balances actually fell because charge offs grew significantly. Credit card companies were writing off losses in record numbers, which provided relief for millions of Americans. Today credit card defaults are holding steady, but as consumer confidence increases, credit card balances are once again inching higher.
When making the minimum monthly payments on credit cards reaches the level of the average mortgage payment, defaults are often not far behind. If you are struggling to make minimum payments, then now might be the time to consider taking action. Collection agencies can be very aggressive if payments become late causing additional stress to an already stressful situation.
Options like debt resolution will stop collection calls and offer instant relief by cutting monthly payments around 40%. This can reduce $1,000 in monthly credit card bills to $600, immediately. It will also result in faster payoff times that are generally less than 5 years.
How Do You Know If Your Credit Card Payments Are Too High
Are you only making the minimum payment? The credit card payment is generally around 3% of the balance each month. If you only make the minimum payment it will take 25 to 30 years to pay off the debt, after you stop using the card. For example if you have a balance of $10,000 at an interest rate in the high teens, your total payments will be about $30,000 over 25 years. That’s a long time and you will be actually paying 3 x the amount you originally borrowed.
Do you use your credit card to pay for basic essentials? If you cannot cover basic needs without using credit, you are carrying too much debt. Does food, gas and other essentials get charged because there is not enough left over after the bills are paid? If so it is time to get help.
Have you made more than one late payment in the last year or do you regularly get shut off notices for the utilities. This is another sign that your cash flow is not adequate to cover monthly bills. Late payments result in more fees and other charges that add to your total debt balances. You also are at risk of being charged a penalty rate by the credit card company which can increase your rate to nearly 30%. Credit card companies charge a late fee for being late by a single day.
What Does A Debt Resolution Program Look Like?
There are only two ways to address a debt problem. You can increase your income or reduce your expenses. If neither of these factors change, your debt situation will not change.
Increase Income. If you want to pay down debt the first step is to stop spending on the credit cards and move to cash only living and find ways to increase your income. This might mean taking a second job, working longer hours or double shifts. Then being disciplined enough to take all extra funds and putting it towards paying down debt.
You may need to do this for 5 or more years depending on how much debt you have and how closely you are able to monitor spending.
Reduce Monthly Expenses. This can be accomplished through a strict budget and not buying anything that is not absolutely essential. Many families however have already cut back to bare bones living and are still unable to pay all their bills on time.
If this is the case, then debt resolution may be the catalyst to reducing monthly expenses. If you can reduce your credit card bills by 40%, you may find you can save $400 or even $500 a month, allowing you to pay everything on time consistently. This strategy will provide needed relief immediately. A debt resolution program will also put you on track to be debt free in 5 years or less, offering you a long term solution to debt problems.
If you are among the millions of Americans struggling to make on time credit card payments each month, it may be time to break the cycle of increasing debt balances. Debt resolution can provide a permanent solution that will give you financial relief and the ability to recover in a relatively short period of time.