Monday, December 26, 2005

    Finances with JustaDog - Recovery

    Are you one of the many millions that whipped out that magic plastic to engorge that buying appetite this Christmas season? I know plastic can give an individual the perception of power - but it is only that - a perception.

    Without divulging all sorts of boring details I consider well-versed in the world of credit card debt. About 7 years ago I had unsecured credit card debt at over $78,500. Although I was never late for a payment and was able to pay more than the minimum due each month the amount of interest I was paying was absurd and was unproductive money going out the door. It would be hard to justify bankruptcy because of my income and besides - I was the one responsible for the debt and I'm against the concept of bankruptcy just to weasel out of being responsible.

    Within a year and a half I went to having no credit card debt using very simple logic. I hope this might help some of my readers:
    1. Start by putting your credit cards into a spread sheet along with the amounts due - use one column for each month so you can your debt by month, and total what you are paying out for your debt at the bottom. This helps start accountability. Add cells to even track the interest your charge.
    2. Targeting accounts to terminate. This step is important and may be the reverse that you've heard others advise. With your spreadsheet in front of you choose the card with the least balance - it doesn't matter what the interest rate is.
    3. Bold step: Cut the card for that account. Call the credit card company and tell them you want the account closed. They will shuffle you off to someone else who will ask you why you wish to close the account. You say I'm going to just transfer this balance to a lower interest card. If they ask you which card you just say I'd rather not disclose who I have cards with. They (most likely) will say If we give you an interest rate of 5% would that help?. You say how long would that be good for?. Doesn't matter - just try and get it lower.
    4. The goal is to pay off 1 account, then send a letter to the company and simply say you wish to close this account (give the acct. number) and tell them to indicate with the credit reporting agency they deal with the account was closed by consumer request.
    5. Very soon a couple of entries in your credit report that indicate you are closing accounts that are paid off will generate mailings to you for 0 interest accounts. Be very careful - choose an offer that has ZERO balance transfer fees and ZERO interest for no less than 6 months. Now target the higher interest rate accounts to transfer over. When you get the plastic for these new accounts chop them immediately!
    More in the next installment.

    No comments: