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The Dangerous Spiral Of Credit Cards Out Of Control

By
Mortgage and Lending with Dan Dowling - United Mortgage Capital Corp.

 

*To read an even more in depth solution, try this site for homeonwers: www.FromBillsToFreedom.com

Here's why credit cards can be a dangerous house of cards if you ever meet hard times.

 

Let's say you have 5 credit cards at a total of $20,000.

Let's say your average interest rate was 10%.

And let's say you suddenly miss a payment. Then you miss a payment on each one.

Right off the bat your interest rates go to 30%! And you have a late fee penalty of $35 per account!

That's 5 x $35 or $125 in late fees.

Plus your annual interest is now $6,000 alone! Plus $1,500 in late fees. That means you are now paying $7,500 in interest and penalties on $20,000! That means your true interest rate is 37%!

That means you're paying $625 dollars a month before you've touched a dime in principal!

There is no way any sane person can get out of this hell on their own. So if you ever do see hard times coming, get help before it's too late.  At the very least you need to explore options the minute you have balances on more than 3 cards or you have more than $10,000 in credit card debt!

Because the minute you start making late payments, or go over your limit, or borrow more on a credit card...your credit score instantly begins to drop and this makes any financing way way way more expensive.

 

I hope this message helps somebody, somewhere.

 

All the best,

Dan Dowling
Altamonte Springs, FL (Orlando suburb)

www.frombillstofreedom.com

 

John Barry Seattle Washington Home Loans
Home Loans - Kirkland, WA
good post. Credit card debt is a problem in America. for those that get out of debt it is a really good feeling! i see more problems on loans due to credit than anything else
Jun 22, 2007 12:14 PM
Christopher & Bernadette Hurley
Go Hurley Group - Sugar Land, TX

Great post. Can you recommend any ways to get out of this load of debt?

Thanks.

Sugar Land, Tx
Where Life is Sweet

Jun 22, 2007 12:47 PM
Angela Allen
WickedWriter.com - Danville, KY
Marketing Specialist

I'd love to see an article on managing credit card debt for the small business owner that I could link to from my blog. Entrepreneurs are often victim of such financial disasters.

Only a few of us read the fine print and understand that one missed payment can sink a (usually) responsible person. I've tried to explain this to people but your post was quicker to the point and more mathematically sound than my verbal examples!

Jun 22, 2007 01:05 PM
Sue Riley
RE/MAXPrestige - Van Alstyne, TX
GRI

Education is also important. My daughter had a class in 7th grade on credit cards and debt and what that means. I thought that this was a great lesson and thanked the teacher for it.

We live in a 'have it now pay later' society. It is our responsibility to teach the next generation. How many of you remember being taught by your parents about money management?

Those of you that are parents I challenge you to talk to your kids about money and not getting into debt.

Jun 22, 2007 01:10 PM
Patricia VanWert
Weichert, Realtors Southern Coast - Sunset Beach, NC
Credit cards are nothing but trouble but most of the world lives on them. Getting into debt is a good reason why I do not have credit cards.
Jun 22, 2007 01:22 PM
Steven Shewell
Primary Residential Mortgage, Inc. - Ephrata, PA
The Mortgage Maverick
Good advice.  Too many people look at credit cards as free money without considering the potential hazards.
Jun 22, 2007 01:59 PM