Debt smart

scott-bilker photoBy Scott Bilker

Scott,

I’ve been living above my means for years, using credit cards to pay for the difference from what I make and what I spend. I can’t be in denial much longer as the cards are getting to their max. I currently don’t have any past-due payments since I still use the credit cards to offset what I can’t pay. What do you recommend I do?

I was thinking of going to the credit card companies and letting them know that I’m struggling, to see if they would stop charging me interest, but I’m afraid of losing a good interest rate or the payments going up as they’ll mark me as high risk. I just don’t want to go through the harassment I’ve heard other people have gone through with them calling or trying to go after what you own or your paycheck.

I have two homes. I downsized with the second one, but that backfired when I couldn’t get rid of the first one. So it’s renting right now for the majority of the payment. And I have no equity in either of them. Please let me know ASAP what you think, as I need to do something before it’s too late.

Kate

Kate,

Don’t worry about the past. Just go forward today and make the best decisions for saving money. As Tony Robbins says, “The past doesn’t equal the future.”

I would not call the credit card companies and tell them you’re having problems. They don’t care. In fact, they would probably stand ready to make things worse. You want the credit card companies to think that you are in perfect shape, that you’re the best possible customer. That’s the place to be when trying to negotiate with them. You don’t want to say, “I’m struggling and I have no money so I won’t be able to pay. Please, I beg you, cut me a break.”

Ha, ha. Like they’ll have any mercy. They’ll be thinking to themselves, “The first time she’s late, we’ll raise her rate to 30%. And since she’s in trouble with her credit she won’t be able to get any new loans to pay us off. We’ll have her trapped.”

If you call, tell them this, “Gee, I’m tired of paying your high rates. Either you give me a break on these rates or I’ll take my business elsewhere. You can see that I’m never late and I always use my card. So, if you want to keep me, you must treat me better. I have many options because I have good credit.”

See what I’m saying. If they don’t give you a break then you should transfer your balances to other lower rate cards. You can find my recommended list at http://www.debtsmart.com/cards/.

Next, you should take a super close look at your spending. Track it all. Make a list and find out where all the money is going. Look for ways to cut. I know, I know, easier said than done. Just give that a try for a while and see where it takes you. Also liquidate any unneeded or unused assets like jewelry, bonds, etc. and pay off the debt. Get that monkey off your back.

Ultimately, it’s best to handle everything yourself if possible. Stay in control and take back your financial life. You’ve already taken many first steps. Keep it up and you’ll see the results you want.

Best,

Scott

(Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart.)

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