Spending the money you don’t actually have can be empowering and liberating, but it can come at a high cost if you lose yourself in such a mindset. The very concept of credit exists because nobody wants to wait until money accumulates sufficiently enough for our desired purchase to be fulfilled, however, it doesn’t take long until credit shopping spins out of control. Moreover, someone will always take advantage of people who want things, and they want them now. It’s, therefore, your responsibility to understands all the rules of engagement, even before you apply for a credit card.

Contrary to popular opinion, if you know what you are getting involved with, there’s not much danger of stepping into credit card debt. Often, people make it sound that simply by having a credit card, your financial troubles are just on the horizon. This is a gross exaggeration that probably started circulating by people who have no self-control whatsoever. In addition, even if you do not possess even a modicum of self-control, you can set up your credit in such a way that it prevents you from spiraling out of control.

The first thing to consider when getting a credit card is choosing between two types of credit cards:

1.A limited 30-day credit card, usually offered by American Express. This is a fantastic method of never getting into debt as you have to meet your payment deadline at the end of each month. Therefore, no debt transfer into the next month is possible, which means no compounded interest on your rising debt.

2.A regular, revolving credit card that’s commonly called an open-end account. In the case that you know in advance that you won’t be able to repay your debt within a month’s time, this is your only option. Visa, MasterCard, Diners Club are the most known players in the consumer credit market. Any of those credit cards are practically admissible in every part of the world.

As you have noticed, the open-end account is also called a revolving credit. The trick to not getting into debt is to not use such credit cards as revolving. Delete the “revolving” part of your credit card from your mind. Millions of people are successfully doing exactly that, so there’s no reason that you should be the exception.

In short, do not treat your credit card as a debt management tool but as a payment tool.

Nowadays, there are hundreds of apps that allow you to easily track all of your charges, fees, and payments, and every bit of this vital financial data is literally available to you at the tip of your fingers, 24/7. In most cases, this process can be automated, so that you can receive notifications when a payment is due, how much over the set limit have you spent, set up automatic payments, so you always pay the minimum, and so on.

Although you should always treat your credit card as a payment tool, there are times when it’s wise to use it as a debt management tool. If you want to invest in something or see a great deal on some purchase that you are certain it will not come again, then the protracted payment would make sense.

Of course, while paying the minimum payments for balance transfer into the next month. Just make sure that this period is as short as possible, as transferring your balance into the next month can affect your credit score down the line. With this in mind, you should not go over 6 months of repayment span. Nonetheless, such endeavors should always be viewed A credit occasions that must be avoided if possible. If anything will get you into a credit card debt, it’s the mindset of graduality– “that wasn’t so bad, let me do another one.” Next thing you know, you are over your head with compound interests, fees, and penalties.

Credit score is something that should always be at the forefront of your mind, even before you sign up for your credit card. The better your credit score is, the lower interest rates you will get, and more options will be open to you in any future dealings with the bank. In contrast, getting rid of a negative credit score is a long process that requires meticulous self-discipline, which most people are not capable of. Therefore, it’s best to avoid getting a poor credit score altogether.

Credit score formula has been developed by Fair Isaac Corporation (FICO), situated in Minneapolis, which is why it’s commonly known as the FICO score. All major credit bureaus – TransUnion, Experian, and Equifax are using the FICO credit formula, for which they pay royalty to the FICO. In turn, all banks use the compiled financial report of the 3 credit bureaus, which comes down to a 3-digit number – your credit score, ranging from the lowest of 300, to the highest of 850.

Another key point to keep in mind is that a credit score less than 600 will not be sufficient for most creditors to qualify for a loan. You might not even be able to make a balance transfer. On the other hand, if your credit score is above 600, you will almost certainly qualify for much lower interest rates, and you can apply for new loans without negatively impacting your credit score.

Your credit score is largely dependent on:

On balance, if you suspect that some factor might influence your credit score, it probably will.

What to Expect as Your Debt Prolongs
The banks and other creditor institutions have a well-oiled machine when it comes to dealing with missed payments. They usually follow procedures based on how much time has passed since your last payment.




Getting Out of Credit Debt

If you were already too enthusiastic about the usage of your credit card, and now you are suffering from debt card anxiety, not all is lost. Although the lack of planning is likely the primary cause of your debt crisis, you can no longer afford to not have a plan and to not treat your debt for what it is – a debt crisis.
The sooner you get out of it the sooner you will lift the anxiety and stress off your shoulders.

There are several principles you should follow to manage your credit-card-debt exit:








If these steps don’t work for you, take an extra step by seeking outside help. The National Foundation for Credit Counseling, as well as many other online sources, can give you an advice that’s more applicable to your specific financial and living situation.

Furthermore, you could offer to settle your credit card debt by paying less than the actual balance. This will erode your credit score greatly for many years, but if you present your case well, creditors will meet you if you are already many months behind. However, keep in mind that, in addition to lowering your credit score, a forgiven debt will be counted as a taxable income, unless it’s from declared bankruptcy.

Lastly, in the worst-case scenario, you at least won’t go to jail, as debtor’s prisons were abolished in 1833. However, you will then face a lawsuit, and when the judgment is inevitably won on the side of the creditors, they will be able to automatically seize a portion of your wages, seize your property, and other assets that were non-exempt. At that point, thinking about your credit score will not even be worthwhile as you will be largely cut off from the credit system in any meaningful and beneficial capacity.

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