End Debt with Oprah’s Debt Diet
Although the ideal situation is to be able to pay off your charges by the end of the month that is not always feasible for most people making just enough money to pay rent and bills. Even if it isn’t possible to pay off charges it does help to try to pay more than the minimum amount due each month. The Office of the Comptroller of Currency (OCC) has asked credit card companies to increase the minimum amount due from 2% to 4% which will give consumers the chance to play catch up with their outstanding debts. Naturally this increase can move people who are already on the verge of financial collapse even closer to the edge but it also offers the opportunity to slowly dig out of the financial hole they managed to fall into.
Think that it will help to close out accounts that have gotten out of hand? Not necessarily – financial experts say that closing accounts right away will negatively impact your credit scores. Who knew? In college when they were handing out credit cards they made it seem so easy but the reality is that they should have insisted that students take an economics course before accepting their offers. Student loans, now that is a whole other racket in itself.
Another trick for staying on top of your finances is to save all receipts and enter them into Quicken regularly…it is like balancing your check book on your computer. The days of being able to spend money until your account is empty are gone. There are too many companies out there trying to get every penny you’ve got. From banks that are charging unnecessary hidden fees to credit card companies that find ways to triple cross you with late fees, over the limit fees and higher interest rates imposed in a single billing cycle.
The elders were right to keep their money hidden away and pay cash for everything. If you can’t pay cash for it then you probably can’t afford it so stop carrying your credit card around unless you know that you will be using it for a specific purpose. Keep your cards hidden in a safe location at home for emergencies only. That means not using your credit card for disposable items like groceries, eating out, gasoline and entertainment. The general rule of thumb is, if you can’t look at and touch the item while you are paying it off then you shouldn’t have charged it. The reasoning behind this is that you actually wind up paying 2 and 3 times the original amount in interest payments. Another general rule to keep in mind is if your credit card debt exceeds 10% of your annual income, then you are in too much debt.
Believe it or not some banks are actually working with customers to help protect their assets. Although the catalyst for services like spending limit alerts offered by Chase and Citibank was primarily a tool to deal with identity theft and fraud, it serves the consumer two-fold because it can help you track your spending in real time. Take full advantage of these services if your banking institution offers them.
Finally, check your credit report regularly. You’d be surprised how often wrong, outdated or even fraudulent information shows up on your credit report. The time to find out is not when you are applying for your dream home. Consumers are legally entitled to a free credit report every year from the top 3 credit reporting agencies. The credit card companies and banks are not the ones in control of your money – you are.
Oprah’s Steps for Eliminating Debt:
1. Calculate your debt
2. Track Your Spending
3. Learn the Credit Card Game and Get Your Credit Score
4. Stop Spending