Who's In Control, You Or Your Credit Cards
By Meredith Hirons

Time to start with a clean financial slate.  Bail out your sinking ship of credit card debt so you can spend the next century sailing smoothly toward your financial goals.

Much of our spending is attributable to spur-of-the-moment decisions: "It’s on sale!" "It’s more than I wanted to spend, but I love the extra options." "I don’t feel like cooking, let’s eat out." Before long, you’ve spent your entire paycheck, and when the cash runs out it is easy to "just put it on the card".

The groceries you bought, the gas you put in your car, and the meals you enjoyed are long forgotten before the bill even arrives in the mail. And if you pay only the minimum payment each month, it will take over 30 years to repay the debt. The dress you bought on sale will long be out of style before you’ve even paid for it.

The statistics are staggering! Last year U.S. consumers paid $65 billion in credit card interest. Personal bankruptcies reached a record high of 1.35 million in 1997, eight times the rate in the depression. The Federal Reserve Board says that on average consumers owe more than 20% of their income, not counting their mortgages and home equity loans.

You may have a dangerous problem with credit card debt if you:

• Use credit cards to pay normal living expenses, via a cash advance
  
  
• Have no emergency savings
  
  
• Approach or exceed your credit card limit each month
  
  
• Pay only the minimum payment on your cards
  
  
• Are chronically overdrawn at the bank
  
  
• Have a total credit card balance that rarely decreases
  
  
• Charge more each month than you make in payments
  
  
• Owe more than 20 percent of your take-home pay to creditors
  
  
• Incur late penalties on outstanding debt
  
  
• Worry excessively about money and financial problems

To reduce credit card debt, the first step is to cut your expenses. Track your expenses for an entire month by categorizing your checks and charges into major spending categories—dining out, gas, groceries, clothing, snacks, etc.

How do your expenses compare with your take-home income? Just as a ship can’t sail if half of it is sinking, your household will sink deeper into debt each month if your expenses exceed your income.

Determine which expenses can be cut to get your spending under control. Then use the money you’ve saved to pay down credit card balances.

You may also want to stop using your credit cards until they are paid off. You don’t have to destroy them all but you have to stop using them. Put them in a very inaccessible spot—anywhere but your wallet. Some people even put them into their freezer in baggies filled with water to keep them on ice.

Next month, I’ll discuss more ways to manage debt and eliminate credit card balances.