I have represented thousands of people with too much credit card debt. The reasons for the debt can vary greatly, from unplanned medical bills, to an abrupt loss of employment, to gambling problems. Regardless of the reasons for the debt, there are various signs that a person has too much credit card debt. These indicators include the following:
- You don’t know the balances on your accounts. Many times this is because the debtor knows he or she has no ability to pay. It is an even worse sign if the debtor is not opening mail bills at all. This is a sign of depression, which can often accompany financial problems.
- You have made minimum payments for three or more successive months. This signals an inability to reduce the outstanding balance and likely will result in a repayment term of 15 years or more.
- You have been at or above your credit limit for three or more consecutive months. As with minimum payments, this evidences an inability to reduce the balance.
- You have repeatedly made late payments, and not simply because you forgot. Needing to use your monies for other purposes, such as rent or mortgage payments, or car loans, or any other purpose, means you do not have enough money for the credit card debt.
- You are using your credit cards or cash advances to make your minimum credit card payments. It does not matter whether the other monies are coming from credit cards or personal loans, payday loans or auto title loans. Borrowing from Peter to pay Paul will eventually result in a problem.
- You are considering a debt consolidation plan with payments which will extend for five or more years. This is generally too long a term to repay the debt. A lot can happen over 5 years to disrupt your plans. Such a long term repayment plan is a clear sign of trouble.
- You are stressed. Financial pressures are stressful, of course, but there are options for dealing with credit card debt. Letting your health be affected is not a sign you want to see.
Debt service payments should not exceed this percentage
Credit experts generally suggest that your debt service payments should not exceed 15-20% of your take-home pay.
Those percentages are arrived at by taking your total debt payments and subtracting your mortgage or housing costs. The remaining cash is then divided by your take-home pay to arrive at the percentage going for debt service.
There are various options for dealing with credit card debt. Be sure to consult a professional you can trust. A consumer credit counseling service is a good source of information and advice. Avoid debt consolidators if at all possible. Far too many are ineffective or, even worse, in the business only to take your money.
Another good source of advice is an attorney who specializes in solving financial problems. Do not rely upon advertisements for such a referral. Ask your accountant, banker, or another lawyer for a good referral. You do not necessarily need a bankruptcy lawyer, but you need one familiar with bankruptcy so you get an assessment of all options for solving your financial problems.
Some states, such as Wisconsin, offer wage earners an option to repay debt over a period of years, without interest. This can result in substantial savings and enable debtors to pay their debts in a manner they can afford.
Learn your options and get advice to help you decide which is best for your particular situation, and do not let pride or vanity get in the way of doing what is best for you and your family.