Five Ingredients for Debt Disasters

Five Ingredients for Debt Disasters

Many of us have financial habits that get us into debt trouble. Here are some of those habits so you can look at your self and see if there are some changes that need to be made.

Credit cards can be a great way to pay for emergencies and other necessities when you are running low on money. However, it is so easy to fall into a financial disaster of debt if you use them unwisely. We often have bad habits that could mean a world of difference to us if we could only change them. Here are five financial habits that can mean a debt disaster. Look for these habits in your own life so you can change them if you need to.

1. Using balance transfers as a means to pay your credit card debt. If you do not change your spending habits, transferring balances is not going to help your debt situation because you are likely going to keep charging on the card from which you transferred your balance. Instead, concentrate on paying down your debt and changing your spending habits before transferring balances.
 

2. Ignoring your credit report. If your credit report has inaccurate information and it is negative, your credit score could suffer greatly. This could have an effect on your interest rates and the money you are paying on your credit card balances. Check your credit reports a couple times each year and report any inaccurate information to get the best interest rates possible for your financial situation. It’s easy to report errors so there is no excuse for not doing this.


3. Not letting your creditors know about your financial hardships. By alerting your creditors immediately when you come upon some financial hardships, they are more willing to work with you than if you miss a few payments before contacting them. The creditor may be willing to lower your interest rates or suspend a couple payments until you get your finances back in order. But you will never know unless you call them first.


4. Making late payments. It might seem like just a small fee when you make your payment late, but paying late can cause your interest rates to go up and that can increase your balance quickly.


5. Being satisfied with only making the minimum payment. It can take several years longer to pay off your credit cards if you only make the minimum payment each month. The interest and other fees build up and you could be paying double, triple or even quadruple what you would have paid if you just paid more than the minimum payment. Trying paying double the minimum payment and you will see your credit card balances drop quickly.

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