| The Cycle of Debt
With new and inventive loans The Cycle of Debt is a dead end road for consumers. Buying things on credit, especially things you could not otherwise afford, sure can make life much more enjoyable. Much more enjoyable for this moment. But what happens when you the credit card bill comes in? Your minimum payment goes up. You eat away at some of your credit line. We can very quickly get accustomed to living above our means, and may not even notice it. A credit card bill is just another bill, right? Wrong. The items we purchase on credit cards are items that lose value quickly, they are depreciable. How much are you paying in minimum payments each month towards all of your credit cards? Many of us pay out several hundred dollars each month just on making minimum payments on credit cards. This could be equivalent to a new car payment. A new car, though depreciable, would have more value in years to come than clothes, shoes, or vacations would have even in the next few months. This author is not suggesting you trade in one form of debt for another, just making a fact of what you could have had. With a car loan, at least there is an end, a moment where it is paid off, and it is officially 100% yours. With credit cards, there is no end. You can pay the minimum payment each month for the rest of your life and never pay off your credit cards. Why? Because many of us keep charging on the credit cards and with the added finance charges and the occasional credit card related fees our balances are just on a steady increase. But what happens when we reach our credit limits? We ask if it can be raised or the credit card company may be kind enough to grant us a credit line increase just because we have been good customers. But is the credit card company really kind, really looking out for your best interest? Maybe in the event of a family emergency or other such jam, if you have been a good customer, they can certainly get us out of a temporary bind. But for the long haul, you are money in their pocket. They want you to keep charging, to keep paying the minimum payments. You are their financial security. At some point you will reach the credit and lending ceiling. You will reach your max for the amount of credit and outstanding debt banks are willing to put on the table for you. Then you will be in serious trouble, as you will be accustomed to living a life you cannot afford. The credit card scenario and The Cycle Of Debt goes like this: - You get one credit card. And whether intentionally or not, you max it out. - You either get a credit line increase, a second credit card, or both. - You are still making minimum payments on the first credit card and charge up the second one. - Debt creeps up on you. - You get more credit cards and your out of pocket monthly expenses just to keep up to date with the minimum payments on all of your credit cards becomes more than you can handle. - You get a consolidation loan at the bank and they pay off all of your credit cards. You make one simple, often lower payment. Your credit cards that the bank has paid off for you are shut down. - You still get credit card offers in the mail and think it won�t hurt to get another credit card for emergencies. - You charge a few necessities, and the flood gates reopen to a new wave of more credit cards and more spending. - If you have a home, you can take out a home equity loan to pay everything off again. - You exhaust all of your borrowing resources. Most people are within one paycheck of financial implosion. If something happens to your job, your spouses job, or too many unexpected things come up at once, you can find yourself in need of some serious Debt Disaster Relief. But what do you do and where do you turn to? What are your options? What will the credit card companies do if you don�t pay your bills? What will happen if you default on your home equity loan? The free E-Book: Debt Disaster Relief can help to answer all of your questions. If you are in debt and looking to get out, this free E-Book is packed with tips and information about how to get out of debt, how to stay out of debt, and how to make your money work for you. Be the banker, don�t rely on them. For Related Articles see � Getting free things from credit cards, Is it worth it? How much are my credit cards actually costing me? I�m in debt what do I do? Options are? Christmas Creativity, how not to go in debt this year What is the key to getting ahead in the future? |