How to Help People Get Out of Debt

How to Help People Get Out of DebtCredit cards are one of the most useful tools in today’s world. With a credit card, you can purchase anything you want without actually carrying any money at all. A credit card works like a loan. Once you purchased an item using your credit card, you will automatically agree to pay the loan once the billing statement arrives.

However, aside from the fact that credit cards can offer you a lot of advantages, you should be aware that credit cards also have some disadvantages. People who own credit cards tend to uncontrollably purchase items they don’t really need. Besides, with a credit card, you can really purchase a lot of things without having any money at all. With this feature, people tend to purchase items more than they can afford.

With this kind of spending, many people get into credit card debt that will seem very hard to pay off. Every month that you don’t pay the bill on time, you will see that the interest rate will rise and you will eventually end up paying more for the interest rate rather than the debt.

One way to pay off your credit card debt is through 0% APR credit cards. This kind of credit card started out as a marketing gimmick in the US. But today, it is now considered as part of the credit card industry. 0% APR credit card plays a very important role to help people get out of debt or do debt consolidation.

First of all, you need to know what a 0% APR credit card is. APR is short for Annual Percentage Rate. APR is a reflection of the cost of credit. Therefore, a low or 0% APR is better than standard APR that you will usually see in credit cards today.

0% APR credit cards are very useful if you know how to handle it. This kind of credit card is usually used by people who want to reduce or end their credit card debt, if you have a credit card debt that seems hard or impossible to pay off. For example, if you are 10,000 dollars in debt and you have an APR of 20%, you will end up paying 2,000 dollars in interest payments. With a 0% APR credit card, you can use those 2,000 dollars to reduce your credit card debt instead of paying it for the interest alone.

Now that you see the benefits of a 0% APR credit card, it will truly be wise if you transfer you credit card balance to this kind of credit card. Once you transfer it, you can pay off your debt much more easily.

However, you should keep in mind that a 0% APR credit card is usually only an introductory offer by credit card companies to attract new cardholders. Usually, the 0% APR offer will only last for a minimum of six months to a maximum of one year, depending on the introductory offer.

You should choose a 0% APR credit card that offers a longer introductory period for you to be able to pay off your debt effectively. Also, you should keep in mind that you should keep an eye on the expiration date of the introductory offer in order to avoid a high APR after the 0% APR introductory offer is over.

These are the benefits and the things you should remember when getting a 0% APR credit card.

Lack of Knowledge of Credit Card

Knowledge of Credit CardI just took a quiz to check my credit card knowledge against real facts. One of the questions was, “Nearly 144 million Americans have general-purpose credit cards. Approximately how many of them pay off their bill in full each month?”

My choices for an answer were 55, 90 and 115 million. In terms of percentages, they were asking me to guess if 38%, 63% or 80% of the credit card holders pay off their bill at the end of each month.

It was not surprising to know that only 38% of credit card holders pay off their bill and the rest are ’revolvers.’ These are folks who routinely carry high balance and create a lucrative business for credit card companies.

Why doesn’t everyone do this?

Simplified answers are lack of resources, lack of knowledge and poor planning.

Lack of resources

The economy may or may not be getting better but many still feel the crunch of hard times including corporate downsizing. For those caught in the middle of a lay off, paying mortgage or rent takes higher priority than paying off the credit card balance. They also use their credit cards to take care of monthly shortage that increases the balance and makes it more difficult to pay off their entire credit card bill.

Lack of knowledge

It seems to be one of our characteristic not to look at problems for too long trying to find a solution and if too many problems pile up, we tend to prioritize things and only deal with what we can. Many who have high credit card balance have other things on their mind and automatically assume that they have to live with their credit card forever. The fact is with the intense competition for your credit card business, many credit card issuers offer lucrative incentive for you to credit card balance transfer and if you call your credit card company, you may even be able to negotiate a lower term.

This knowledge is not a solution that may help you pay off your entire balance right away, but it may help you manage it better so that the day you can pay it off comes sooner.

Poor planning

Self-discipline, over optimism and stress impact our abilities to deal with situations. That new gadget, those wonder deals on ebay that seem to call to your credit card test your self-discipline. Spending the next pay raise before it is in your hand shows a healthy dose of optimism that may back fire. And let’s not forget the stress. We do strange things under stress, a visit to a local mall, a well deserved massage to soothe the nerves or going out to dinner one more time are some of the ways we increase our credit card balance.

Most of these situations can be resolved with a little planning. For example, have a list of items you want to buy and their price tag. Wait for the next pay raise to show up, go over your list and buy what is on your list.

Put new gadgets and deals on your list and let it sit for a while. Allow yourself a little cool off period before you buy anything. You may be surprised as how many things you don’t have to have and how many things you can buy for much less a little later.

Understand the stress is a part of life and plan ways to cope with them. A walk in the park is healthier for you and costs less than a walk in the mall.