Bad habits sure ticket to debt consolidation need

The typical American family is deep in debt; most people owe about $10,000 in credit card debt alone. That’s pretty amazing, but debts on credit cards of more than $100,000 are not uncommon. How do people find themselves in such financial trouble that only credit counseling, bankruptcy or debt consolidation can bail them out? It doesn’t happen overnight; no one found themselves in such troubles by charging a $100,000 recreational vehicle on their Visa card. No, these problems come from bad financial management and poor spending habits. 

Here are a few typical bad habits that are sure to get just about anyone in financial hot water:

• Failure to check credit reports - As many as one in four credit reports have errors. Some are honest mistakes and some are indications of identity theft. Anything that’s on your credit report that isn’t correct or doesn’t represent something that you have done can cost you money. It may result in higher interest rates for you. You can check your credit report for free, so why not do it?
• Failing to pay more than the minimum balance - Interest adds up and if you have paid late before, you could be paying 30% per year on your credit cards. Recently increased minimum payments will help pay off balances, but if you are only paying the minimum you are still paying an awful lot to the credit card companies in interest. And if you are still charging more purchases, it’s adding up. Pay as much as you can in principal each month, or you’ll have the debt piling up on you in a hurry.

• Paying bills late - Not just credit card bills, but any bills. The credit card companies will raise your interest rate if you pay anyone late, so you’ve got to get in the habit of paying all of your bills on time. Late credit card payments will invoke late fees of up to $39 and you could also trigger the “default” interest rate, which could run as high as 30% per year. It all adds up to trouble for you.
• Using department store credit cards - True, you did get that 10% discount on Aunt Martha’s sweater just for applying, but now you’re using the card every time you go into that store, and it’s costing you a lot in interest. Department store cards have much higher interest rates than general cards, such as Visa. If you’re not paying your balance in full, and you probably aren’t, that extra interest is hurting you. Plus, every time you apply for a store card, they run a credit check. If you do that a few times in a month, it can lower your credit score.
• Charging when you can pay cash - Sure, it’s convenient, but if you’ve got the cash, why not use it? It’s interest-free and has no bill due at the end of the month.

Bad habits tend to multiply. Get out of those bad habits and start some good ones.

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