Consumer Credit Counseling Tips
Consumer credit counseling is becoming a way of life for more and more people.
Credit is an amazingly useful tool for most American consumers.
It allows you to get items of immediate benefit now, while paying for them later.
It’s a useful tool in emergencies, and it’s the only way most Americans can purchase big-ticket items, like cars or homes, or pay for a college education.
This has given rise to the consumer credit counseling industry.
Unfortunately, a lot of people don’t know the first thing about managing their credit.
It’s too easy to look at all the things available in the modern world, say “I want it!”, pull out the plastic and buy now while worrying later. Fact is, most people who get a credit card, manage it terribly – this is how banks make their money off of them.
Some basic tips: Pay off the credit card, in full, every single month. Those interest charges add up fast. In fact, a useful rule to keep in mind is the basic formula for compound interest: The Rule of 72. Divide 72 by the number of interest points you’re paying, and that’s the number of years it will be before the total interest payments equal to the amount of money borrowed.
So, for example, if you’re paying 12% interest on $5,000, 72/12=6, means that in 6 years, the interest payments will equal the $5,000 you originally borrowed. This applies to all interest transactions – your home loan, your car loan, even your bank account works this way.
Obviously, it’s better to have interest paid to you rather than paying it to someone else, which is why paying off your credit cards in your grace period is so important.
The first sign of a credit problem is when you suddenly get more bills going out than you can pay in a given month. The first response to getting your credit straightened out is to talk to your bank, and your lender.
Most of them can work out some method of spreading your payments out over time if you’re in a temporary financial rough spot due to loss of a job, or being demoted to part time, or from medical expenses or a divorce.
If your credit problems are too deep, it’s time to talk to a professional credit counselor. There are several options, ranging from consolidation loans to bankruptcies, depending on your circumstances. Consumer credit counseling can be found in the financial services of your local yellow pages, or be handled online.
The final rule on consumer credit counseling is to start early – the earlier you acknowledge that you need help managing your credit, the better off you’ll be.