The Holiday Credit Card Trap by Cornelia Amiri


This holiday season try to avoid excessive credit card use. High interest and high balances are a risky combination for consumers. Millions of people find themselves unable to pay everything to everybody. Owing thousands of dollars to creditors, they are unable to make a dent in their revolving balances. Hard working people committed to handling their affairs find themselves caught in the clutches of the credit card trap, unable to fend off the effects upon their families.

Responsible individuals can find themselves in this situation. A single mom, Charlotte, in Georgia, explained, "I want to be a good Christian. I want to be a good steward. I don't want my daughter to see Mommy yelling at the credit card people on the phone." Jennifer, a single mother in Texas, said, "I do it; my sisters do it; my mother does it. I want to break the cycle. I don't want my daughter doing it. We were in the store the other day and she said, 'just put it on a credit card.' I am going to give her an allowance and have her keep to a budget now. I don't want her having to go through this."

What should you do if you find yourself in the sinking sands of revolving credit? First, call for help. Before you find yourself drawn into the scenario of robbing Peter to pay Paul, turn to family, friends, and community organizations. Second, take control. Three options to overcoming financial difficulty are (1.) increase income, (2.) decrease budget, or (3.) a combination of both. By heading off charging credit before balances get out of hand you can pen down the debt with a decrease of living expenses or an increase of income. If not, the rising balances will swamp you with debt that is difficult to repay.

A bad credit rating can affect your future financial and employment opportunities. Third, check your options thoroughly if you can't handle it on your own. It may not be wise to transfer unsecured debt to secured debt, for example, credit card balances to a consolidation loan held by your home equity.

An air-conditioner repairman with a wife and five children said he took out a debt consolidation loan not even realizing it was on his equity. Before, his mortgage was $700 month with property taxes and homeowner insurance included. Now he pays over $900 a month for his mortgage and extra for property taxes and homeowners insurance.

Before you go with a debt management plan, check the organization's status with the Better Business Bureau at http://search.bbb.org/national/search.html or ask your creditors who they recommend. Probably the best advice is to get word of mouth recommendations from several friends or family members. Consider all options before choosing bankruptcy. It can seriously affect your credit rating.

Head off the stampede of rising balances. When it comes to revolving credit, less is more. Keep only one or two cards, which have no annual fees and a generous monthly grace period. Use them only for emergencies. Maintain low balances and pay them off monthly to avoid finance charges. Check your statements for unauthorized charges. Contact creditors immediately to correct errors.

Halt temptation by putting a stop to the flood of junk mail: pre-approved credit cards and credit applications. Per the Fair Credit Reporting Act you can exclude your name from lists used by the credit reporting agencies. Call 888-5-OPTOUT to be removed from the lists for a minimum of two years. After the call you will receive a form in the mail. Send it in to be removed from the lists permanently. You will notice a change in the volume of credit card junk mail within 60 to 90 days. Also, write to Preference Service, Direct Marketing Association at P.O. Box 9008 Farmingdale, NY 11735 or log onto their website at http://www.dmaconsumers.org/ and add your name to the delete file.

For no-risk credit, avoid finance charges and high balances. Make your money work for you instead of making money for the creditors.