Your credit card debt can seem like Mount Everest if you are unaware of the laws and debt techniques that directly benefit consumers. Conquering your debt takes planning and strategic spending coupled with communication between you and your credit card company. Sticking to your financial plan will prevent calls from collectors and negative credit marks on your credit report.
Credit Necessity
Having some sort of credit is necessary to obtain a number of items, ranging from housing to vehicles to utilities for your home. Using your credit card to take on debt that you will later repay is necessary to bolster your credit score. Making payments on your credit card debt shows companies you are a reliable debtor.
Budgets
You must create a budget when you have credit card debt. Your budget should divide your monthly income into percentages for food, housing, miscellaneous expenses and debt payments. If you do not have a budget for your finances, you may struggle to repay your credit card debt at the end of the month.
Credit Amount
Your credit card debt should equal no more than about 35 percent of your total available limit on your credit cards. For example, if you have two credit cards, each with a credit limit of $1000, you should keep the total debt under $650 for the two combined. Debt above this percentage could negatively affect your credit score. You can always obtain an additional credit card that you do not use in order to keep your debt ratio low.
Settlement
If you continually have problems paying your credit card debt, you may be able to negotiate a settlement with your credit card company. When a credit card company must choose between you not paying at all and defaulting, or accepting a settlement for lower than your actual debt, the credit card company will usually go with the latter. Ask for the settlement details in writing to prevent legal matters later.
Monitor
Monitor your credit report and credit card statement to prevent the unwanted consequences of unpaid debt or credit card theft. When you have high credit card debt, you may not notice if there is an additional charge that you did not make. Credit card theft occurs when someone illegally uses your card to pay for an item. Check your credit card statement weekly, and use your yearly free credit reports to see if other lines of credit have been opened in your name.
Negotiation
During times of financial hardship, contact your credit card company to renegotiate the terms of your repayment, if possible. For example, if you cannot make the minimum payment for the next three months, inform your credit card company so it is aware of the situation. Using negotiation agreements can prevent bombardment from the collection department regarding your debt.
Minimum Payment
Paying the minimum amount per month on your credit card debt does not affect your credit score. As long as you maintain the minimum payment, your credit card company will not report your account negatively to credit agencies. However, paying the minimum amount usually only covers the interest accrued on the credit card debt.
Legal Repercussions
You cannot go to prison for failing to pay your credit card debt. Credit card companies can, however, file a civil lawsuit against you requesting that the debt is paid in full. A civil court can request for wage garnishment in some states but not for incarceration under any circumstances.
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