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2009-01-19 03:36:26

Paying off Credit Cards during the Crisis

The economy crisis is getting tougher on US credit cardholders. Increased unemployment and drastically reduced household incomes force consumers to wholly depend on plastic in everyday shopping. Consequently, many find themselves nearing the limits and maxing out their cards. If it were happening a year and more ago, you could find easy ways out of the maxed-out situation.

But as the current developments in the industry make issuers reluctant to give a hand of help, consumers get denied in new applications and see their limits slashed.

You are in debt and the only chance to avoid bankruptcy (which is becoming a popular way to survive this crisis) is to start paying off your credit card. Upon analysis of consumer spending and paying habits financial advisors sorted out quite a number of things to be avoided by all means as you are paying off the debt. Some of them, such as giving up making new credit deals, may confuse credit-addicted Americans, but this is what the doctor ordered under the circumstances.

So, if you've maxed out your credit card and now face a huge balance to deal with, make sure you avoid the following missteps:

New credit card deal: Financial experts strongly urge you to give up the idea. While to apply online may seem an easy and fast way to disposable cash, it is the worst thing to do unless you have really brilliant credit. Lenders can no longer face the risk of losses due to the rising delinquency rates. Even if you do have excellent score, you may also be denied a new card for the reason of too tight credit which the bank cannot extend at the time. A denial is almost certain to hurt your rating, increasing the time you'll have to spend in repairing credit after the debt. Store cards should be avoided in the first place for their huge interest rates and unbelievable power enticing you to buy stuff you don't really need.

Late payments: with the high APR charged on your outstanding balance, even a minimum payment seems too much to make. If you have several cards and other loans - mortgage, car loan or personal loan - it's almost impossible to cope with. Nevertheless, a late or missed payment will only make things worse. Many of use know the ruinous effect of the universal default clause which is still practiced by many US issuers. One late payment on one of your cards will signal other lenders to jack their interest rates, too.

Paydays loans: say no to them as the worst type of any credit available. You're charged some of the highest rates in the industry at a time when you cannot make ends meet.

New stuff: buying brand new stuff is not exactly what you need in the crisis not seen in decades. If you really have to get something, consider eBay, garage sales, thrift shops or exchanges with friends.

Extras: just cut your spending but don't leave yourselves with the bare bones. What we mean is why go to restaurant for everyday dinner when you can reduce the visits to weekend outing? That's it.

Stick to these tips while you're gradually paying off your debt and you'll stay safe throughout the crisis.

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