Are you in over your head with debt?
Image Source: Flickr User WilPrz
We wrote recently that credit card issuers are loosening up and offering increased credit lines to many consumers – even those considered sub-prime (with a lower than ideal credit score). While requesting a higher line of credit can be wise in some circumstances, for many people it's a road to a high debt circumstance that can quickly become unmanageable. Here are five signs that you have too much credit card debt and need a debt intervention.
#1 You can only pay minimum payments
If you can only afford to pay minimums on your credit cards, you are likely too deep in debt. For instance, if you owe $6,000 at 15% interest and your contract requires you to pay 2% of the balance as a minimum payment, it will take you nearly 30 years to pay off that debt. And, by the time you're done, you'll pay more than $15,000 on the original $6k. And if you charge more at any point, the repayment period and expense will increase.
#2 You have to keep your cards maxed out
If you can't seem to make any progress paying off your credit cards, that's an issue. And, if every time you gain a little ground and have more of an available balance, you swipe again because you're using your cards for necessities, you're in a trap. Having to use your plastic to pay utilities, buy groceries or cover your bills, you have too much credit card debt. And if you get an increased credit limit or new card and max it out shortly, that's another huge red flag.
#3 You are robbing “Peter to pay Paul”
This phrase means you are using one debt to pay another – it's also known as a debt shuffle. Moving higher interest debt to a lower interest card is a sound financial strategy, but if you then run the other card back up, you've accomplished nothing but getting yourself deeper into debt. Also, if you take a cash advance from one card to make a payment on another, have to tap into a home equity line of credit or (the worst) take out a payday loan to pay on your credit cards, you're in way too deep.
#4 You can't get new credit
If you ask for an increased line of credit on a credit card and are turned down, that's a bad sign. Alternately, if you are denied other credit because of your sky-high credit card debt, this is no good. Ideally, you shouldn't carry a balance of more than 30% of your total credit card limits. So if you have four cards that total a $6,000 credit limit, you should not carry more than an $1,800 balance. If your overextended card debt has caused you a denial for a car loan or other financing, you're in trouble.
#5 You're being hit with penalties
As bad as only paying minimum payments is, missing that payment is much, much worse. If you are tardy (or miss) a payment on your credit card, you'll be charged a late fee. Under Federal law, a first offense cannot cost you more than $25. Once you're late a second time, it will rocket to as high as $35. The fee can't exceed the amount of your minimum payment. For example, if you owed a $15 minimum, the late fee can't be more than that. You may also get hit with an over-limit fee. These make a bad situation worse.
If your credit card debt is overwhelming you and making it so you can't pay your other bills or save money, you need an intervention. Bankruptcy can wipe out all your credit card debt instantly if you qualify for Chapter 7. To find out if your debt is serious enough to consider bankruptcy and how this can benefit you, contact the law offices of John T Orcutt today. Call +1-919-646-2654 for a free bankruptcy consultation with one of our North Carolina bankruptcy experts today.