Credit Card Tips Blog

With the current state of the economy, the unemployment rate is creeping up and is higher than ever in many areas. Although the consumer is unemployed, the payments that are due on credit card accounts and other sources of consumer debt are simply not stopped, so how does one deal with debt while they are without work? Here are some tips and techniques that you can use to effectively manage your debt load – despite your unemployed status.

Rely on Your Savings. In the case that you have developed an emergency fund or savings account, this is the time to use it. The time between now and when you are seeking a new job is the crunch time when it comes to your finances. Use your emergency fund wisely to cover only what you need, not what you want. Now is the time to set a budget and really determine your wants and you needs, only when you learn to differentiate between these two is when you can truly begin to save the money that you require for your expenses.

Use Credit card insurance to cover minimum payments. If you have enrolled in credit card insurance than now is the time to use it. This credit card insurance is used in times like these to ease the stress on the finances that can come with unemployment. Although these costs may come at a monthly fee – you will be thankful that you have signed up for protection in the past.

Cut back. While you are unemployed and searching for a job it is time to cut your expenses down to the bare minimums. Consider cutting back the cable programs that are available or getting rid of the extra cost of a cell phone each month. Wherever you can find a way in the budget to save a couple of bucks, your wallet is going to thank you in the end.

Know your expenses. Now it is time to determine what your monthly expenses are. Knowing these monthly expenses allows you to find the money in the budget to repay debt when you know exactly how much is to be paid to each account, every month. Do not allow yourself the opportunity to overspend in any one category, as it can lead to stresses on other parts of the finance.

Find more money. Liquidate your assets or take advantage of personal loans from friends and family members. Now is the time that you should do whatever it is that you need to that will enable you to make it from month to month. Searching for a new job can be stressful; you don’t want to add on the stress of being unable to pay the monthly bills.

Image by Rain Rannu.

Credit card debt can be overwhelming, when minimum payments seem high and there is just not enough money within the income to make all of the payments and pay for your day to day expenses. There are five steps that you can use to successfully overcome credit card debt,

1. Recognize the Debt

   It is impossible to get out of credit card debt until the consumer realizes how dire the situation can be. Recognizing the debt and establishing amounts that owe to each creditor is the first step of the debt repayment process. Take a pen, paper and recent statements to tally up just how much debt has been accrued. Be sure to include credit card debt, personal debt with loans to friends and family members and any outstanding bills, loans and credit lines. Tallying it up is an eye opener which can often shock the card holder into beginning an aggressive debt repayment plan.

2. Stop Spending

   Put the credit cards away for this portion of the debt repayment plan. Whether you have to freeze the accounts with the credit card company or literally put the credit cards on ice – it is important to avoid accumulating any additional debt once the repayment plan has been started. After the credit cards have been put away it is time to establish a repayment plan!

3. Make a Plan to Repay the Credit Card Debt

   A plan to repay the credit card debt can include the list that you have created in step one. In addition to these total amounts owing, calculate the amount that these debts are costing each month by multiplying the interest rate by the balance of the outstanding debt. Tally the list and arrange the debts from most expensive to least expensive. Number one is going to be the most expensive debt which you will repay first, when number one has been repaid you will work your way down the list repaying the same amount that you have established in the budget for debt repayment.

   How do you know how much should be allocated towards debt repayment? For optimal results, fifteen percent of the income should be allocated towards debt repayment. Any less than fifteen percent and you could risk the debt taking over your life for years to come and any more could mean stress on other parts of the budget.

4. Create a Budget

   A budget will need to be created that allows you to allocate fifteen percent of your income every single month towards debt repayment. This budget should include portions for fixed and variable expenses, savings as well as the debt repayment. Variable expenses are often cut in half when the consumer has been spending outside of their means to accumulate high levels of debt. Sacrifices now will mean financial preparedness later!

5. Stick to Your Budget and Repay the Credit Card Debt

   Seeing statements arrive in the mail that outline the zero balance of the credit card are some of the most rewarding moments through the debt repayment process. Sticking to your budget will enable you to establish some sort of financial security and repay the debt while learning valuable personal finance skills that can help you in the future.