Who is Mustang Advisors?
Are you stuck in a seemingly endless cycle of debt that keeps getting bigger by the month? You’re not alone. Mustang Advisors is here to help!
According to Mustang Advisors, every year, nearly half of American adults rack up massive credit card debt (often breaking the previous year’s record) along with accruing interest rates. It’s incredibly easy to run up a balance that spirals out of control until you end up with some serious financial health issues. When the debt reaches critical mass (i.e. your paycheck can no longer cover the bill), you’re in trouble and you start looking for ways to pay off the debt. Every time you miss a payment to your credit card company, you’ll incur penalties and/or triggers that result in higher interest charges. You will soon be asking yourself if you need to take out a personal loan for debt consolidation.
The Trap of Instant Gratification
You would think it’s easy for a person to make tactical financial decisions with their available credit. Sadly, that isn’t the case because many Americans easily give in to the marvels of instant gratification and fall for “too good to be true” loan scams. Credit card consolidation companies are really good at convincing cardholders to keep spending beyond their means and manage their personal finances irresponsibly.
This is often done through low-interest promo periods and zero-interest balance transfers that often skyrocket once the promo period ends. The cardholder is usually too giddy to look at the terms and conditions and sign off on them.
Once cardholders default on their payments for a sufficiently long period of time (generally over six months), their account is sold off to a collection agency – for a profit. Debt collection agencies then go to work on their newly acquired account and leave no stone unturned to harass the debtor into paying back what is owed. This is all in a day’s work for credit card companies.
Jeff Dunham, America’s Favorite Comedian Ventriloquist
The Signs That You Need Credit Card Relief
You have to watch out for common red flags of too much credit card debt so you can course-correct right away. If you find one or all of the following issues, it’s a sign that you’ve got some serious problems with credit card debt.
- Your credit card balances are maxed out
- You have low savings
- Your paycheck can barely cover the statement balance on time
- You’re using cash from one credit card to make a payment on another
- You’re using a credit card to make everyday purchases such as groceries, bills, and movie tickets
- You’re getting into arguments with your spouse about money
- You’re spending more money than you earn every year
- You’re not sure how much you actually owe
- You’re forced to forego paying the bill to cover the debt
- You applied for a new loan offer or credit card and were turned down
- You’re getting calls from creditors about overdue bills
How to Pay off Credit Card Debt
If you find yourself trapped under a massive credit card debt and are in need of credit card relief, do not panic. There are businesses and programs specifically designed to help you recover. While you’ve got several options to pay back your debt, the first step is to understand your current financial situation. This will give you a more realistic idea of your options. Plus, you’ll become wiser about things not to do with your credit card.
During the panic that ensures when one gets caught in a credit card debt, it’s easy to give in to the flight or fight response by doing absolutely nothing. This is the worst possible thing you could do at this point. Do not ignore your credit card bills because the interest rate will just keep accruing and you’ll sink deeper into the debt. You’ll have to spring into action – the sooner the better.
But here are a few things you should not do to get out of credit card debt.
Do Not File Bankruptcy
Bankruptcy is the absolutely last thing you should have on your mind right now. While there are instances where declaring bankruptcy could give you a way out of your debt, it won’t absolve you of all your debt obligations. Many debtors often resort to filing a Chapter 7 because it can remove unsecured debts such as credit cards, personal loans, medical bills, and other bills.
What it won’t do is eliminate secured debt such as mortgage loans, back taxes, spousal support, insurance policies, and even car repair bills.
Filing for a Chapter 7 bankruptcy comes at a severe price. For one, you’ll find it almost impossible to get new credit in the future – or at least 2 to 3 years down the line. If you do apply, your application will be declined or slapped with a massive interest rate because lenders view you as a high risk. But that’s not all. You may be forced to pay higher premiums on insurance covering health, automobile, house, and more. It may be difficult to rent a house or apartment.
Furthermore, the bankruptcy will stay on your credit report for 10 years and will be recorded in your personal file forever. This makes buying a house with mortgage extremely difficult for the next 10 years.
Do Not Close Those Cards
If you’ve been using a credit card for many years, do not close it. This is because it negatively impacts your credit score. A whopping 15% of your credit score is based on the length of your credit history. If you’ve had a credit card for 5 years and close it, this will negatively affect your credit score and the debt-to-credit ratio.
What Are My Options Then?
There are two effective ways to help you erase your debt. The first method is called snowballing and the second method is called debt stacking.
With the snowball method, you focus on paying off the lowest balance and gradually work your way up to the highest. It’s much easier to pay off the debt by starting with the lowest balance first. Make sure to continue to pay at least the minimum payments on the other cards.
The debt stacking method is a polar opposite of the snowball method because it focuses on the credit card debt with the highest interest down to the lowest. Once you have identified the order of interest rates on all your credit cards, you focus on paying off the debt with the highest interest. The idea is that it will save you a lot more money in the long run. However, it’s a slow step and requires a lot of patience in dealing with it. Many people, who may have gotten into debt due to instant gratification, will not be able to go down this route.
If you are overburdened by your financial circumstances and have difficulty maintaining a monthly budget, you can get in touch with professionals who will provide you with help for paying off your credit card debt. They’ll review your financial situation and explore all your options to get rid of your debt.