Q: I have a friend who is really in debt because of her credit cards. I’ve tried to talk to her about the problem but my words seem to fall on deaf ears. I think if she read about credit card debt in your column she might realize the trouble she is in. Will you help?
A: You have brought up a very serious problem that is being experienced by many, including an increasing number of seniors. I am sure most of us have known of someone who used their credit cards to extremes. Having a credit card can certainly be a convenience and, in the case of an emergency, a blessing. But having a credit card can also be a trap resulting in overspending. When we use a credit card we have a responsibility to ourselves to use it with restraint and to the credit card company to have the ability to pay the bill.
We should remember that using a credit card is nothing more than obtaining a short-term loan. So before zipping out our credit card to make a purchase we should ask ourselves the question, “Would I really take out a loan to make this purchase?”
When using a credit card try to keep purchases within income limits so the bill can be paid in full each month.
Trouble begins when the bill is not paid in full each month and interest charges are applied. The charges accumulate quickly making it even more difficult to pay the bill the next month. Then if payments are late or missed completely additional penalties make a bad situation worse.
By paying only the minimum amount stated on the bill the remaining balance that already includes interest and penalties is subject to additional interest charges. By paying only the minimum balance it takes years before the bill is paid off.
If it is difficult to pay the entire balance each month consider canceling the account or at least putting the card away until spending and debt are under control. Restrict the number of cards you have and don’t be hooked into accepting new cards because there is a gift or discount offered on a purchase.
Don’t be tempted to obtain a new card because of a very low interest rate. Often this is a come-on and after several months that introductory rate is replaced by a much higher rate.
It is most important to understand the rules that apply to your card. Know what the interest rate is and determine if that rate applies to previous balances only or if it is also applied to current purchases.
Be aware of when your payment is due and if there is a grace period. Review any enclosures that accompany your bill as these enclosures often contain important information about changes to your grace period and interest rates.
If you have a card you aren’t currently using make sure you are not being charged an annual fee for nonuse. Review your billing statement carefully to make sure you understand everything that is included.
Keep track of unpaid amounts and past due notices. If you stop hearing from these creditors it doesn’t mean that the debt has been forgotten. More likely it is being turned over to a collection agency and will be reflected on your credit reports.
Having good credit is the responsibility of each of us to establish and to maintain.