5 Simple Facts about Credit Card Debt

by: Janna Weiss

Wherever there are credit cards, it seems that tales of identity theft and unmanaged debt are always lurking nearby.  But it’s entirely possible to have a credit card – or several – without carrying an unhealthy load of debt or worrying about your identity being stolen while using it online. Fo identity protection, you can use the Fully-Verified’s services and instead of using a photo verification, use video verification to ensure complete security. Plenty of people do just that. Here are five facts about credit card debt that can help you use your own credit cards to your advantage – not to your detriment.

Debt Isn’t Necessary

When you open a credit card account, don’t assume that debt is just a part of the package. Debt is sometimes the result of unfortunate accidents or emergencies, but most of the time it can be controlled. To keep yourself out of debt, use your credit card the same way you would use cash. Set a spending limit, and don’t spend more than you can pay back at the end of each month. Cardholders who pay off their balances each month keep a good credit history with little or no debt. Problems arise when you start carrying a balance from one month to the next.

Debt Will Sink Your Credit Score

If you owe too much, creditors will notice, and they’ll be reluctant to lend you more money. To them, a high debt-to-credit ratio is the sign of undisciplined spending. Make sure not to utilize more than 25% of the available credit on any one card.

Debt Has Other Consequences, Too

Besides driving down your credit score, debt can result in litigation and the garnishing of wages. The laws vary by state, but it is possible to be taken to court over unsecured debt such as credit card balances. Having a judgment against you will look bad on your credit report, and may result in creditors garnishing your wages or seizing your property. You Can Settle for Less

There are plenty of stories of people who settled their outstanding credit card debt for a percentage of what they actually owed. This is possible, but it’s not something that should be taken lightly. First, most creditors will require you to be months behind on your payments before they will negotiate a deal. Be prepared to offer them a lump sum, and don’t expect this strategy to work more than once with the same creditor. Finally, be aware that all of your forgiven debt can be reported and taxed as extra income.

Credit Card Purchases Can Be a Good Thing

It’s important to know when a credit card purchase will be beneficial. For example, you can use credit cards as a short-term loan to help cover the costs of moving, or to buy items that you truly need, but don’t have the cash to cover. Set up your own repayment plan, and stick to it. Repaying the balance over three months won’t cost you too much in interest, but drawing out the repayment over three years would be very costly!