3 mistakes to avoid when paying credit card debt

You will see all sorts of advice about “managing debt.” But when it comes to credit card debt, mere “management” can get you into trouble.

Truth is, the best way to “manage” credit cards is not to carry a balance at all. Don’t spend more than you can afford. Pay off the entire balance at the end of every month.

But you will find advice out there about how to pay down credit-card balances and keep ahead of the game, as though everyone were in an equal starting position in a game of Monopoly. Some of this advice may be right for you if you can afford it and if it will successfully lead you to a goal of getting all your credit card debt paid off.

Unfortunately, people often don’t realize, until they’ve made even worse financial mistakes, that the advice they tried to follow to pay down on their credit-card debt or to pay it off just wasn’t right for them.

If you are in a position where you are thinking about getting money from somewhere other than your regular source of income just to pay off your credit card debt or to pay it down “just enough,” you are thinking along the wrong lines.

Here are my personal “do not” rules for paying down credit card debt:

* Do not borrow money to pay off credit cards. “Borrowing money” includes things you might not normally think of as borrowing, like using your checking account’s line of credit or overdraft protection.

* Do not take money out of a retirement account to pay off credit cards. Especially do not cash out, or withdraw any money from, a 401k account – you will not only be cashing out part of your future safety net, but you will also be incurring a huge tax liability in the process. A tax liability that – by the way – is likely not dischargeable in bankruptcy.

* Do not spend money on a debt consolidation company (or a debt whatever company) to pay off credit cards. You would be spending extra money to just to repay money. Some people do this successfully, but the people who manage to pull this off already have sufficient income to pay off their debts eventually. And those people could probably pay off their debt without a debt consolidation company by reducing their expenses and making large enough payments toward their debt to pay it all off – and they can also call up the credit card companies themselves to try and negotiate better payment arrangements.

If you’ve looked at your income and found that you “have to” do one of these three things in order to pay off (or even to pay down) your credit cards over time, stop and consult a bankruptcy attorney. Do not dig yourself into a bigger financial mess by making one of these three mistakes.

Don’t make even bigger financial mistakes! If you are drowning in credit-card debt and can’t dig your way out, call me for a free bankruptcy telephone consultation at 201-676-0722.

Photo by MENE TEKEL.

2 Responses to 3 mistakes to avoid when paying credit card debt
  1. Delwell.com
    October 22, 2011 | 1:55 am

    Debt Dangers – Beware of Credit Card Debt…

    Each person in debt today, is not it? Well, not really, but people have more debt than ever before, and the number is growing rapidly. The reason? In a word: money. The banking industry has recognized that more than for the benefit of the people who ar…

  2. bankruptcy attorney Baltimore
    January 27, 2012 | 6:14 am

    It is important to learn effective guidelines on how to systematically pay up your credit card debt. It is not good to delay your payments for too long for the interest rates can drastically increase over time. Learning these things can help you with your money problems and you do not have to end up getting broke.

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