Tuesday, December 23, 2008

Tame the Debt Monster

Remember a while back when I mentioned Beth's new credit card with the $15,000 credit limit? She went into the bank and asked them about it, and they said that was a mistake, her limit is really $1500. Someone forgot to tell the credit card company, because when she gets her statement, it still says her credit limit is $15,000. A $1500 credit limit in the hands of a teenager is scary enough, but $15,000? If she wanted to, she could get herself in a lot of trouble there.

From what she says, she's handling the whole thing well. She makes a payment every time she uses the card, without even waiting for the statement to come. That way the money is gone, and she can't spend it again. If she keeps doing that, she'll be in good shape. She's in a good position now because she doesn't have any debt, except to us, and hopefully she can stay that way. It does seem that the best way to get out of debt is not to get into debt in the first place.

For people who already find themselves under a mountain of debt, it's not so easy. It seems that the more debt you have the harder it is to get out of it, because you're not just paying for the stuff you get, but you're paying additional money to the credit card companies in the form of finance charges. Heaven forbid you ever make a late payment because the credit card company will hit you with a hefty late fee, most likely raise your interest rate, and report it to the credit bureaus so that other credit card companies can raise your rates, too. It really isn't in their best interests to have people pay that debt off, so they make it as hard as they can. Sometimes it just seems that there is no alternative but to declare bankruptcy.

I think most people would rather Avoid Bankruptcy, and it really should be a last resort, but how do you know if it's the right decision for you? This site, ClearDebt, has quite a bit of information on bankruptcy to help you understand the disadvantages, the advantages, and what is involved. They also have some free tools to help you find your best way out of debt and show how you can become debt free. If you're looking to get rid of the monster on your back, see if ClearDebt has something that can help you do just that.