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THE SECRET to paying off credit card debt is really very simple: All you need to do is earn more than you spend, and apply the savings toward paying down your debt. So then what makes tackling credit-card debt so hard? Sadly, many seem to be losing the battle of the credit-card balance. Consider that 61% of all credit-card holders carry a balance, according to CardWeb, an industry tracker. And among families that have at least one credit card, the average balance is a staggering $9,659. Ten years ago it was $5,875.
"People are out of control," says Howard Strong, a consumer attorney and author of "What Every Credit-Card User Needs to Know." "They're out buying love at the malls." And they aren't succeeding. According to a survey of 1,500 consumers by Consolidated Credit Counseling Services, a whopping 71% said debt is making their home life unhappy. Part of the problem is that the credit-card companies have made it easier than ever to carry a balance. "People are addicted to minimum-payment crack," says Steve Rhode, co-founder of Myvesta, a debt-counseling service. (Click here for other costly credit-card tricks.) But many fiscally responsible people can also find themselves woefully in debt after some sort of personal crisis, such as a divorce, illness or the loss of a job. So what are the warning signs that your credit-card debt has changed from nuisance to crisis? For starters, if you think that you might be having a problem, then you probably are, says Rhode. Generally speaking, your debt-to-income ratio (not including mortgage payments) shouldn't exceed 20%, which means that you shouldn't be devoting more than 20% of your net monthly income to paying off credit cards and other non mortgage debt. Other signs of trouble, according to Gerri Detweiler, author of "Slash Your Debt," include: · Only being able to make the minimum payments on your debt. · Maxing out several or all of your credit cards. · Frequently charging items with the intention of paying them off at the end of the month, but then finding
that you're financially unable to do so.
· Using credit cards for everyday purchases like groceries.
· Using credit cards to pay for things you know you can't afford.
· Worrying that people close to you will find out just how deep in debt you really are.
If the creditors are calling or if your credit report is already suffering due to late payments or bills that you've been unable to pay at all, then you probably should consider visiting a credit counselor. But if your credit rating remains intact and you're feeling disciplined, you should be able to dig yourself out of this hole on your own. Here's some advice: Get a Grip
The first thing you need to do is figure out just where you stand financially. This means knowing how much you owe (and how much you're paying for it) as well as how much you've saved. In other words, you need to know both your net worth and your cash flow. Ultimately, you're going to have to come up with the ever-dreaded budget, so you can know just how much you have to spend and how much you can use to pay down your debt each month. Based on your answers, our calculator will give you a reasonable estimate of when you can kiss that debt goodbye — and how much it will cost you before you do.
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