Unfortunately, once you have credit card debt, you can be dragged into a spiral of problems that can actually put you further into debt, even if you do not use the card again. The problem is you become locked into high minimum payments that can be increased by the card company at whim. If you have a balance of $1000, you may start by having to pay 3% of that debt as a monthly minimum payment or $30 monthly. The credit card company could up that to 6% or $60 per month. You also have to pay the interest on the $1,000 charge, which can be raised as well, even retroactively. You might have started with a card with a 10% interest rate ($100 on a $1000 charge), but that could go up to 20%, making it $200.
So you may make a $1000 charge and start paying $30 the first month when you owe $1100 (the charge plus interest). The next month the minimum payment could be raised to $60, but you’ll owe $1170. If the company next raised the interest rate, you may owe suddenly $1310! And, you haven’t charged a thing. Of course, this all happens over time, not all at once in two months, but you can see how credit card debt can become creeping debt. If you can only afford to pay your minimum balance each month, your debt will increase.
There is some help for you. President Obama enacted new credit card reforms in May of 2009 which will be in full effect by the summer of 2010. Card companies now will not be able to raise your interest rate (say from 10% to 20% as in the example above) unless you are more than 60 days late with your payment. So lesson number one is always make your minimum payment on time.
However, the new laws do make it allowable for credit card companies to increase the interest rate on new purchases, not on your old charges, if they give you 45 days’ notice. Lesson number two then is do not purchase new items on credit cards until you have cleared up your debt.
The new laws do allow credit card companies to increase minimum balance payments so lesson number three is if your minimum balance increases, be sure to contact the company and ask to be part of their hardship programs. With such a programs it becomes possible with some companies to create a payment plan that could lower your interest rate and /or your monthly payment. (The better your credit rating, the better your chances are for negotiating with the company.)
The last and most important lesson is to pay off your credit car(s). Consolidate your card debts on one low-interest rate card. Bring in extra monies by having a yard sale, selling your unused gold jewelry, renting space in your garage or home, even getting a part time job, and send what your earn into the card company, even as an extra payment or before the payment is due to whittle away at the accruing interest and at the principle when possible.