Credit Card Debt Management

So you’re living paycheck to paycheck and you really need a credit card to help with all those little emergencies that can arise. But maybe your credit record got into a bit of trouble in the past and now you’re left adrift in a sea of helplessness. There are people out there who want to help you get back on your feet — people other than Joe the Used Car Salesman.

The first thing you need to embrace is a change of thinking. Emergency funds are the absolute best answer for emergencies. Credit cards are only for emergencies when there is no emergency funds and small purchases, like gas, that you pay off in full at the end of each month. While credit cards can get you into trouble if you don’t change your spending habits, it is true that the lack of a credit card to build up your credit rating can make it nearly impossible to buy a car, a house, get a decent rate on car insurance, and even, in some cases, rent an apartment.

So how do you get the almighty credit card if you don’t have any credit? Start with a retail store credit card, which is absolutely ridiculous because this is usually far from “necessary purchases” and it becomes very easy to get carried away. It’s the psychology of shopping — it is easier to buy more with painless spending (meaning you don’t see money leaving your hand, so there’s no emotion involved). Nevertheless, retail stores are, unfortunately, the most lenient with their credit policies. These are usually low-limit, high-interest cards that can serve as the foundation for the future of your credit.

Talk to your bank. Of course, banks are not the most generous of all lenders right now. They made too many stupid loans to too many high-risk borrowers and now they are reaping their rewards, which they are passing on to you, the consumer. You want credit at the bank? The waiting line is growing as fast as the denials.

Get a secured card. This will require you to put money into an account, which you can then access with your credit. It’s kind of like using a gift card that you bought for yourself, except it boosts your credit rating.

So those are some ideas to get you started on the road to a bigger and better credit rating. It can seem like a financial juggling act at times, but building up your credit is a worthwhile task in our credit-centered society.

The fact is, we live in a credit-oriented society. Even if you loathe credit cards and never want to see one again, you really need them if you ever plan to finance a major purchase like a house, car, higher education, etc. You should have at least one credit card, use it for gas or grocery purchases, then pay it off each month. It’s essential to your financial well-being.

Without maintaining at least one loan, your credit rating goes down the toilet because there is nothing by which a lender can judge your fiscal responsibility and accountability. The easiest loan to obtain and maintain is a credit card, even if it’s a small, low-limit student card or retail card. Sometimes a person reaches a point in their life where they do want to buy a house, but have zero credit rating. It’s simply a thing they never thought about, often because they never had to. This is most common among young professionals, as well as widows or widowers whose late spouse may have been the only name on the couple’s credit cards and loans. If you are in this position, don’t despair — it’s not too late!

As aforementioned, it is relatively easy to build up your credit rating with credit cards. You can start with a retail card. These type of cards are more readily approved and have a low limit, so it is slightly less difficult to get in trouble. The bottom line is to pay off your credit cards each month! Then, when you take care of the small things, bigger things like home financing will be no hurdle at all.

You are Mr. (or Ms.) Popularity. All the credit card companies want to be your friend. You get at least one credit card mailing every day, but in this age of mailbox tampering and identity theft, is this really a good thing? How does one approach the problem of credit card offer overload?

1. Don’t use it as a basis for assumptions about your credit score.

Some people with bad credit believe that more credit card mailings equal a credit score that is on the mend. This is not true. If anything, it indicates that the credit card companies smell an easy buck, someone who may not pay on time or will take out cash advances or any number of other things that would allow the lender to jack up the interest rate.

2. Opt out.

Even if you do have good credit and your offers are targeted more at things like low-interest balance transfers, you shouldn’t be flattered. This mass of mailings is still posing a risk to the safety of your identity and your financial future. You can opt out of receiving these mail offers by calling 1-888-OPT-OUT or by visiting OptOutPrescreen.com. For more information, visit the Direct Marketing Association’s tips for “How To Get Off A Mailing List.” Of course, the Federal Trade Commission has similar detailed information on its site.

When it comes to credit cards — and all marketing materials for that matter — it pays to know your rights. Make it as difficult as possible for strangers to obtain your information or gain an opportunity to apply for credit under your name. If you do receive credit card offers in the mail, remember to use a shredder as a precaution. You might just be stopping yourself or someone else from becoming the victim of identity theft, the fastest growing crime in America.