The last six years since the recession hit have been tough for a lot of families. Many people suffered extended unemployment, and many of those who kept their jobs as companies downsized experienced wage freezes or pay cuts while the cost of gas, food, and utilities continued to rise.
It’s not uncommon for people to turn to credit in a pinch, especially if their hope is that relief from their financial woes — whether that’s a new job or a pay raise — is somewhere on the horizon. However, using credit just to get by can lead a person into a financial hole that can be difficult to dig back out of even when times are better and more money is flowing in.
When credit card debt becomes unwieldy, the pressure on your finances can result in having to make some difficult choices. For many families, overwhelming credit card debt leads them into bankruptcy, which damages their credit for many years into the future.
However, if you can recognize the signs that your credit card use is becoming unhealthy and seek help before it’s too late, you may be able to save yourself some hardship. These are some of the key warning signs that your credit card debt may be spiraling out of control and leading you into serious financial trouble. These tips may also help you in preventing bankruptcy.
1. You’re Only Paying the Minimum
If you can only afford the minimum payment on your credit cards, interest is building up and you’re only going to go deeper into debt. It’s always a good idea to pay more than the minimum if you can so that your balance gets reduced with each payment. That also helps keep your credit rating healthy. If you have multiple credit cards and can only afford the minimum on each, that may be a sign that you’re carrying too much credit card debt.
2. You’re Skipping Payments
If you can’t make payments at all, or you’re skipping months and catching up later, that’s another warning sign that your credit card debt may be too much to manage with your current income and household budget. Skipping payments or falling behind will add late fees as well as allow interest to rack up, and it’ll just be that much harder to pay off your credit card debt down the road.
3. You’re Using Credit to Pay Off Credit
When you’re transferring balances or using one credit card to pay the monthly payment on another card, that’s a sign that your credit card debt has become unmanageable. When you’re juggling credit cards like that, chances are you’re not far off from not being able to make the payments at all. You may only be one emergency away from the whole system collapsing.
4. You’re Using Payroll Advances to Pay Credit Cards
Payroll advances may seem like an easy and quick fix when you need to get over a financial hump. However, these temporary loans come at exorbitant interest rates, and often people find that they get trapped in a cycle of needing to take payroll advance after payroll advance just to make ends meet after they pay the cash advance fees. If you’re relying on payroll loans month after month, it’s probably time to seek help with your debt.
5. Your Cards are Maxed Out
It’s generally a wise financial strategy to only spend as much on a credit card as you can pay off in a month. Sometimes you may need to make a larger purchase and take a little longer, but if you’ve gotten into a situation where you have multiple credit cards and they’re all maxed out to their credit limits, then that may be a sign that you’ve taken on too much credit card debt. If nothing else, having cards that are maxed out — especially if you’re then only paying the minimum monthly payments — can be harmful for your credit rating.
6. You’re Using Credit to Pay for Necessities
If you’re using your credit cards to pay everyday living expenses, such as buying groceries or paying your utility bills, because there isn’t enough money in your bank account to cover your basic needs, that’s a sign that you should consider seeking help with your debt. When you reach the point of using credit just to survive, that often means you’re just a heartbeat away from financial collapse. When your cards are maxed out, you may find yourself in the position of being unable to meet even your basic needs.
7. You’re Ignoring Collections Calls and Mail
When you’re receiving messages and letters from collection agents, you soon may find yourself being sued over your debt, which in turn can lead to your paycheck being garnished. Chances are you’re already struggling to make ends meet, and getting garnished would push you over the edge. If you’re getting collections calls and letters for debts you can’t pay, it’s probably time to seek debt help.
If any of these warning signs sound familiar to you, you may be able to find help managing your debt either through an organization like a nonprofit consumer credit counseling agency or by consulting a debt help lawyer who can negotiate settlements with your creditors. It may be that bankruptcy is the best option for you, and an experienced bankruptcy lawyer can help you make that decision as well.
If you’re struggling with credit card debt or are receiving collection threats, the Cleveland bankruptcy attorneys at Luftman, Heck & Associates may be able to find solutions to your financial worries. Call us at (216) 586-6600 today for a free consultation.