Annual Credit Card Debt

Question? What makes people keep using them when they see the destruction it is causing?

Many people, mostly younger folks and women, have so many credit cards they end up in severe debt and ruin their credit for many years to come. Credit card applications are mailed out by the tons and people keep activating them knowing the interest rate is or will be up to 20% or higher. Everyone needs at least one credit card and no more than two. You also need one revolving (department store) credit card to establish a good credit history. The limit on the credit card(s) should be no more than 10% of your annual salary and the revolving card half that. Always make a minimum of a double payment on all your credit cards and pay on the due date. Never ever be even one day late. The interest rate and late fees will destroy you. If you are experiencing problems the first thing you need to do is carefully cut the cards up and throw them away. If you can not afford to pay the total monthly bill attempt to get a consolidation loan to get out of debt. The monthly payment will be less than the total monthly payment of all your cards with a much lower rate. Some banks and credit unions will be willing to help you out if they know why you are taking out the loan. Financial debt can create so much strain it can even destroy your peace of mind and your marriage. Don’t fall into that trap.

My question to you is: Why do credit card companies continue to blindly give out credit cards to people without checking their finances?

Does it make sense to you to give a credit card to someone who already has several loans and their combined minimum payments is over 50% of their income? Would any sane person give credit to someone under this situation?

This is exactly who credit card companies go after though. Who's fault is it?

2007-01-21 09:14:22 by thinkaboutit

Credit Card Debt

what is new bankruptcy law? I heard that if u have income, that you can not file bankrup now????

Should you file? Lets do some simple math....

If you could somehow pay 10% of your income toward your debt, that works out to about $166 a month. It will only take you 20 years to pay off $40,000 (assuming those nice credit card folks freeze the interest and late fees).

Of course you should file! Read the link below. It describes the changes to the bankruptcy law and what you can expect to happen. Then consult an attorney.

If you have a certain level of income, you can not file for chapter 7. You may qualify for that, but it may not be advisable if you own a home or a lot of property (I'm betting you don't).

If you go chapter 13, you are expected to take all of your "disposable income" and put it toward your debts. They will use a formula to calculate your living expenses, and everything over that you must turn over to a trustee. It's not going to be easy. You will have to go on a very strict budget. Forget dining out and entertainment completely. Cancel the cable tv. Pack your lunches and forget about that morning Starbucks. And it will be like that for 3-5 years.

Over 1/2 of the people who are placed into Chapter 13 get dismissed because they simply can not live on the tight budget. But you don't have a choice. Your budget is already destroyed, creditors are lining up to sue you, and you don't have a hope of getting out of debt for 20 years.

Read the file, then talk to a bankruptcy attorney.

2006-06-02 09:25:49 by Hartanto H

Ok, I am in a really bad situation and could use some prudent advice.

Here's my info:

I have about 8k in debt with my Citigold debit card. 14.5 annual APR

I have about 23,800 in debt with my citibank platinum select card w/ 0% interest on it until January 09'. Upon which it reverts to 6.24 variable interest.

I have a bank of america balance transfer mastercard with a 12 month 0% account w/ 1200 credit line open being unused so far. The 0& offer on this card ends in July.

Now I have about 5k in cash I can use to reduce my balance. I'm thinking of just using the 5k to pay down my citibank platinum select. However, should I use that money to pay off my citibank debit card?

I'm very confused here. I also am thinking of asking for a credit line increase to Bank of america from 1200 to 10k. I started this account back in July. I'm hoping to do a balance transfer.

Basically I thought I could use balance transfers to deal with my debt but with the economy tanking, things are getting hard.

My credit score is around 740.

So my questions are:

1. With the 5k, which account should I pay down first?

2. Should I ask for a credit line increase on my bank of america card? Would it be smarter to just ask for 5k first instead of 10k? It was opened in June with no activity since.

3. Should I open a new balance transfer credit card and try to take advantage of a 0% balance transfer opportunity?

Thank you so much, any help would be appreciated!

I don't have the high credit information on the Citigold, but if it's $25k-ish like Platinum card then pay down the Platinum card to reduce the debt ratio.

B of A might not grant you 10k because credit is really really tight; be ready for that.

Sometimes you get hit with 3% upfront fees to transfer balances but it beats a year at 18% or even at 6.9%.

You have a good credit score and my guess is that you make decent money but ran into a rough patch and have investments that now can't pay off that balance since the investments decreased and need to juggle some bucks till Obama turns around the market with his "wand of Change" and cash them out before he taxes us to death (Long-term CAPGAINS going to 28% baby!!!). (...experience)

1 - See what BofA will do. If they increase your credit your beacon/FICO score may go down 20-30-ish points, give or take. It is a recent account and it sounds like you may have had some recent inquiries on your credit.
a - Citigold or Citibank may pull a periodic report and reduce or restrict your credit limit. Again, the market is getting tighter.
b - Usually credit cards like a balance and payment history before they move. BofA would likely be more willing to move than CitiBank. They have had tighter reigns on credit and mortgages over the years.
c - They may be willing to transfer your Citibank debt dependent upon whether or not you close out that account and whether or not you have other accounts, such as a home loan, through them. It's not likely and banks aren't taking that risk as much as they did in the past.

2 - If you think you can get 0% interest for a year and transfer balances or fractions of a balance - do it.

3 - Don't use the other cards and continue to pay them off. The longer they are opened the longer and better the credit history.

You seem like a smart person..

2008-11-01 01:29:16 by Nick

I don't understand this example of credit card debt repayment...

Let's say John and Jane both have $2,000 debt on their credit cards, which require a minimum payment of 3%, or $10, whichever is higher. Each month John and Jane are charged a 20% annual interest on their cards' outstanding balances.

Here is the breakdown of the numbers for the first month of John's credit card debt:
Principal: $2,000
Interest: $33.33 ($2,000 x (1+20%/12))
Payment: $60 (3% of remaining balance)
Principal Repayment: $26.67
Remaining Balance: $1,973.33 ($2,000 - $26.67)

(found at http://www.investopedia.com/articles/01/ 061301.asp)

What is the principal repayment for? Isn't the payment of $60 each month to the bank paying the debt back? Why are there two charges for paying back the principal of $2000, the Payment and Principal Repayment? I don't get it. Help please!


Thank you all for your answers!

The person paid $60 total.

The first $33.33 just paid the interest that accumulated that month.
The remaining $26.67 pays back the money that's owed, so the balance goes down by $26.67

The current balance is called the principle. So the portion of the payment that reduces the principle is called the principle payment.

Payment is the total amount paid that month
Interest payment is the portion of the payment that pays the interest
Principle payment is the portion of the payment that reduces the principle (balance)

The principle payment plus the interest payment make up the total payment.

2008-10-07 10:34:23 by michellebew

Is it a good idea to add my credit card debit (~$4000) on my line of credit debt (~$4000)? Credit card annual interest rate 24.50%. Line of credit current interest rate 6.75%.

I know the line of credit interest is lower but will it be beneficial in the long run. Is there anything that I should be aware of? Can someone who know about finances explain?

Is the line of credit secured by some kind of collateral or just an open line of credit? If that line of credit is tied to your house, you should be very careful about shifting unsecured debt to secured debt.

The biggest problem with shifting debt is to make sure that you stop using the credit card until you get that line of credit paid off. Too many people shift the debt then run the credit cards back up. Then you have the big bill and the credit cards too.

Are there any fees to transfer the debt to the line of credit? Of course the interest rate difference is so big that even with a fee, you would save money.

Either way, you need to concentrate on squeezing every penny out of your budget and throwing it at that credit card debt. Get it paid off as quickly as possible. Then only charge what you can afford to pay in full every month.

2008-12-25 08:31:50 by "Talk di tings dem"