Credit And Debt Management

							by: Kelly Kennedy

Today's consumers benefit drastically from the usefulness of credit. Credit cards are especially
useful for large purchases, emergency situations, reservations, identification, and protection from
fraud. Unfortunately, millions of consumers abuse credit cards beyond their financial earnings.
The use of credit results in costly interest payments and late fees, impulse buying, overextended
lifestyles, and the unnecessary stress from harassing telephone calls from collectors.

Do You Think You Might Have a Problem with Debt?

Below is a list that will help determine whether you are a single mother debt problems.

Over the Limit Credit Card Spending

If all of your credit card balances are greater than 80 percent of your credit limits, you should
consider this a danger signal to debt.

Too Many Cards/Too Much Debt

If you can't pay off your combined credit card debt within one year, you should consider this a
serious issue.

Out of Money

Many people use credit for small purchases such as food and gas. If you previously paid cash for
these or other small items, but are now using credit, not debit or cash, it could be a sign that there
is a problem.

High Debt-to-Income Ratio

Your debt-to-income ratio measures the amount of debt you have against the amount of income
you are making. You can calculate this ratio by dividing your total monthly debt payment
(excluding mortgage/rent) by your total monthly gross income (before taxes). If your debt-to-
income ratio is close to or over 20 percent, this is a sign that you may have a debt problem.

Emergencies

Crises and emergency situations do occur, and sometimes people are unable to afford such things
such as emergency auto repairs or medical expenses because their credit cards are tapped or the
majority of their earnings are put towards debt repayments. It's always important to keep an open
line of credit available for such situations.

Minimum Payments

What many people don't realize about revolving credit card bills is that making only the
minimum payment can take 12 to 15 years to repay. You are not applying any significant amount
toward the principal if you are only making minimum payments concluding that you may be
overextended and in need of putting together a spending plan.

Using Your Credit to Make Payments on Other Cards

Taking cash advances to pay bills is not a solution for paying off debts. If you are paying one
credit card with another you are actually creating more debt. You will also be faced with any
cash advance fees and interest from that new line of credit.

Balance Transfers

Many creditors offer new credit cards with balance transfers available at low interest rates for
only a limited introductory period. It's important to remember, though, that after the introductory
period the interest rate usually skyrockets up to 19 percent or more. As well, a growing number
of credit cards are associating fees with transferring balances.

Skipping Payments

If you are late with getting payments in such as your mortgage, rent, car loan, or utility bills
more than once per year and are juggling bills and skipping payments, this is a definite sign that
you have a debt problem.

Borrowing Money

If you are borrowing money from family and friends and unable to pay them back while
struggling to pay your bills, credit counseling can teach you how to budget or advise you to go
on a plan for paying off your debts.

Debt Consolidation Loans

Are you borrowing from a new source to pay off an old debt? Many people who do so obtain
debt consolidation loans to pay off all their existing bills. However, once the bills are paid off,
some people wind up charging on their credit cards again. This means having to pay back the
loan plus the new credit card charges, which ends up driving people into further debt. Learn
more about debt consolidation at Incharge.

Unsure of the Amount Owed

If you have no idea how much debt you owe on a monthly basis and keep using credit cards,
your financial spending might be slipping out of your control. If you noticed that you were
nodding your head up and down as you read through the list of debt problems you could be on
your way to a serious problem with your finances. What to do about it as a single mother comes
next.

Help for Single Mother if in Debt
If you're ready to tackle your own debt pile, here's what you need to do:

Get to know your debt

Study everything relevant about your debt such as your account balances, the interest rates, if the
interest is deductible, how and when those rates can change and find out if you'll face any kind of
penalties for paying an account early. If youre not sure call your lender and ask.

Prioritize your debt

Divide your debts into two piles

This article was posted on September 01, 2005
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