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Credit Card Charge Offs Increase in November

Created: On December 30, 2009 @ 4:43 pm In

Moody’s Investor Services reports that the rate of consumer credit card debt charged off by lenders rose from 10% in October to 10.6% in November. Moody’s expects charge-offs to increase during the winter months and to peak at 12 to 13 percent in mid 2010.  As credit card issuers deal with charge-offs, which are debts deemed uncollectible, consumers can likely expect consumer credit options to remain few and far between. This scenario suggests that consumers have little choice but to pay off credit card debt and make do with the credit they currently have. Making an overall [1] debt management plan can help you determine:

  • How much you owe and how much it costs
  • How to prioritize paying off debt based on how much each account costs (your annual percentage rate [APR])
  • How, or if, you can afford to live on a cash budget and stop using credit cards to bridge gaps between cash and paydays
  • How to develop a cash-based budget that includes saving for emergencies and long term, and enough to pay toward your debts while meeting all household expenses with cash
  • How, and when, to get professional [2] debt consolidation and credit counseling help

Learning exactly who and how much you owe can be a difficult first step, but once you know what you’re facing, you can become motivated to eliminate [3] credit card debt once and for all.

Credit Card Debt is Expensive: Reviewing Your APRs

The APR is a calculation of how much a credit card account costs expressed as an annual percentage. The APR includes the interest rate, membership fees, and penalty fees including late charges and over-limit fees. The APR is clearly printed on your monthly statement and can change according to interest rate changes, balance amount, or fees accrued. Gather your latest round of credit card bills or review them online. Make a list of your credit card debt including:

  • Account number, contact information, and name of issuer
  • Balance owed
  • APR
  • Minimum payment required
  • Payment due date

Set up a spreadsheet or other accounting method to track your accounts and arrange your credit card debt in descending order from the highest APR accounts to the lowest APR accounts.

Total the amount of monthly minimum payments. You should easily be able to make minimum payments, but your goal is to pay more toward your highest APR debt, then apply that monthly amount to the next debt until you’ve retired your credit card debt.  If you find that you can only meet minimum payments, or fall short of meeting them, you need to revise your budget by reducing other expenses or finding additional income. If you’re dealing with an insurmountable negative cash flow, please get [4] debt help.

Total your credit card balances. Write down the amount and set it aside. Although you may be shocked and dismayed by how much you owe, the truth serves as motivation to improve your financial situation. Don’t dwell on the past; as you track your progress toward debt freedom, seeing your balance decline provides more motivation for paying off debt.

Article printed from DebtHelp.com Blog: http://www.debthelp.com/blog

URL to article: http://www.debthelp.com/blog/2009/12/30/credit-card-charge-offs-increase-in-november/

URLs in this post:
[1] debt management: http://www.debthelp.com/kc/22-right-time-contact-debt-management-company.html
[2] debt consolidation and credit counseling: http://www.debthelp.com//kc/233-35-warning-signs-debt-trouble.html
[3] credit card debt: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm
[4] debt help: http://www.debthelp.com/debt-consolidation/credit-counseling.html