Don’t Cut Up Your Credit Cards – Get Out of Debt

March 18th, 2011 | Posted in Debt Relief

You heard me right… Don’t cut up that credit card if you want to get out of debt. I know that a lot of experts suggest that you cut up and throw away your credit cards as a deterrent to using them and as a manifestation of your desire to get out of debt, but don’t you do it. There is nothing that the credit card companies would like more than for you to cut up your credit cards before you pay them off.

The problem is that most people wait until they have maxed out their cards before they decide they need to get out of debt. Then they cut up their cards and say they will never use than again. Well the fact is that the cards are maxed out and they really can’t use them unless they up their maximum or pay down the card. Banks absolutely love people who have maxed out their cards and pay the minimum payment for the life of the card. This maximizes the return on the banks investment.

A general rule of thumb is: If your debt (excluding payments on the loan for a house or rent) is 10 percent or less of your income, then your “financial health” is in order. If it is from 10 to 20 percent, then you’ll probably still be overburdened and should get another loan. But if your debt is from 20 percent, you should definitely steer clear of that loan. Always be careful. If the lender is ready to give you credit, it does not mean that you should borrow exactly this amount. You should also take into account your fixed and variable costs in order to determine your solvency. Remember, if you have a large debt on your mortgage, you need to compensate for this decrease in your debt to income ratio.

They are new at their job. At some point in our lives, we have all been “the new guy” (or gal). I always hated being the new guy because it meant that I’d often be asked questions by borrowers that I didn’t know the answer to but was supposed to. What is a reasonable settlement offer? Do I have to pay interest on the settlement? How long of a period can I make payments over?

Counting its own debt load, you also need to take into account the following factors: * The stability of your income * Your other regular expenses * Your need for cash from month to month * All of your personal needs, desires and goals * Any unforeseen expenses that may occur (e.g. the costs of care for sick family members or emergency treatment).

They are incompetent. A close cousin to the “new guy” is the incompetent guy. I find the incompetent guy the hardest to deal with because unlike the new guy, the incompetent guy will never learn and will ruin lives until management has the good sense to fire him. Incompetent guy is hard to deal with because he is not knowledgeable, unresponsive and uncooperative. I worked with a guy like this, and got to hear about how poorly he treated people after he was fired and I took over his accounts. He wasn’t a mean spirited person, he just honestly was overwhelmed by the job, and on certain days he would take it out on his customers who were just trying to get their situation rectified

Don’t Forget The only way to get out of debt is to be mindful of it. If you ignore it you will, at best, find it hasn’t changed after decades of paying on it. At worst, you will find your debt has increased beyond anything you could have imagined.

Alarms Accumulation of debts can bring a lot of suffering. Here are some examples that indicate that you have gone too far: * You’ve received the bills for your debts this month, but have not yet paid the bills for the last month * The amount to be paid is a lot more than you expected * You try not to read the mail and not respond to phone calls * You avoid looking at your bank account

Harris Smith is a writer on personal finance education. Her article tackles the pros and cons of home equity line of credit . Clear Debt Now offers links to Debt Consolidation and consolidation programs in your area.