Help! My credit card debt is leading me to Bankruptcy!
If you know how to use them correctly, credit cards can be a handy tool. The problem is that it can be all too easy to fall into the trap of buying more than you can afford and end up making minimum payments only, while never really paying the credit card off. If your credit card debts are drowning you, keep reading to learn how to break the bad cycle of credit card debts and learn how to use credit cards responsibly so that you can stay far away from bankruptcy.
Cut up Those Credit Cards!
The first thing you need to do is stop making purchases on your credit cards, especially those high interest ones. If you find yourself always pulling that credit card out of your wallet at the store then remove it from your wallet. If it isn’t there, then you can’t use it. If you need to make it more difficult to access your credit card, freeze it in a container of water. That way you would have to thaw it out before using it, giving you more time to think about that purchase. If that still isn’t enough to deter you, then cut up the credit card. It is better for you to not have the card at all than to keep going further and further into debt and towards bankruptcy.
Make more than just the Minimum Payment
If you are only making the minimum payments on your credit card, you would be surprised at how many years it would take to pay it off. The minimum payment on a credit card goes almost entirely towards the monthly interest. A very small amount goes towards the principle amount. So try to pay off as much as you can each month. Even if you can only pay a small amount more than the minimum, it will still make an impact.
Spend Responsibly
Make a realistic budget and stick with it. Make sure that what you spend is less than the amount of money that you make. Keep track of how much you are spending and what it is for. Try to eliminate the things that are wants and not needs, such as eating out in restaurants or expensive new clothes. If you can save some money in one area, you can then apply that money to your debts, paying them off faster.
Pay Off Your Highest Interest Debt First
It makes a lot of sense to pay off the debt with the highest interest rate first and then the second and third and so on. That department store credit card that has 30% interest is costing you a lot more money than the 18% credit card. If you pay off the higher interest card first, it will free up more money to pay towards the next card and continue to make it easier to pay off your debts. Some people prefer to pay off the smallest balance first. It can make you feel good and motivate you to keep going when you see a zero balance on a credit card statement. Whichever approach you take you should feel good about yourself. The decision to get out of debt and sticking with it until the finish line is an accomplishment that you should be proud of.
Consumer Proposal
Consumer proposals are a good option if you have a lot of credit card debt and would like to avoid bankruptcy. A consumer proposal is basically making an offer to pay less than you owe to your unsecured creditors. You would then make fixed payments over a set period of time. In a consumer proposal the amount of your total unsecured debt is reduced and there is no interest charged. You pay back much less than you originally would have had to pay.
If you feel like there is no way that you can take care of all of your debt on your own and you need help, then contact our debt relief specialists at 4 Pillars Red Deer. We offer free consultations and will go over your current situation with you and give you options to help you get back on track.
