Be Well: What to Know About Managing Credit Card Debt

<div class="block">Leslie Tayne, a financial attorney, joined Cheddar News with some advice for viewers on managing credit card debt, noting that one of the first steps people can take in protecting their finances is to not open too many credit cards. &quot;If you end up with 10 or 15 different credit cards and the balances go up, any savings that you might have had with the discount to get the card is eliminated if you don&#39;t pay it off at the end of the month,&quot; she said.</div>

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Financial attorney Leslie Tane joining us today on be Well, welcome to the show. Thank you for having me, Leslie. I'm so happy you're here because I've had problems with this topic in the past and I know a lot of our viewers have as well. We're talking about those little pieces of plastic that can really get us into a lot of trouble and affect our lives. Credit cards, you know, having a good credit score makes it a lot easier to buy a house or a car or whatever you may want. That's right because it, it becomes a lot harder if you end up having that bad credit. A low credit score means you could have trouble getting that car loan, buying that new house, even renting an apartment because you know, a lot of landlords want tenants who know how to manage their money. Yeah, so luckily Leslie is here to help us out with Dos and don's of credit cards plus ways to avoid bankruptcy. So Leslie, let's start off with the red flags. What are some of the don't of having a credit card? Don't have too many credit cards. It's very tempting to take on a lot of credit cards, especially for store discounts. So you could end up with 10, 15, 20 different credit cards making it really difficult to manage. Yeah, a lot of college students get in trouble with that. Here's a free T shirt, here's a credit card, here's a pencil, a credit card or you're going to save $20 today off your purchase if you sign up for a credit card, but then you end up with another credit card to another store that you don't need. Exactly. And then it becomes difficult to manage that and remembering when to pay. So what happens is if you end up with 10 or 15 different credit cards and the balances go up any savings that you might have had with the discount to get the card is eliminated if you don't pay it off at the end of the month. Now, what about that idea? They say, you know, you can roll it over to this one and has 0% financing for a certain period of time. Is that a good idea or not so much? So, a balance transfer can be really helpful as a financial tool, but you have to really be able to understand what the costs are involved. There's usually a balance transfer fee that's applied. And even though there's a 0% introductory rate, it does expire and often you'll find that at the expiration of that rate, the rate is actually higher than you're currently paying on your card. And also remember that you do take a hit to your credit every time you roll into a new financial product because a lot of people failed to realize you don't want those hits and look it up your credit. It could cost as well. So talk to us about when you should use the credit card because you have those people who use it for everything and people who only use it in emergencies. Credit cards are a great financial tool as a supplement or in addition to some of the um purchases that you make certainly larger purchases where your credit cards have benefits on them, some points, airline points and also other benefits. Like if you buy a protection program, those are great uses for credit cards. However, when you're using a credit card, you don't want to use it as a supplement to your cash flow because you'll end up getting into trouble at the end of the month. The balances will just continue to go up if you can't pay them off. So when you're using credit cards, know how much you can play on the credit cards and that there is an ultimate impact to your budget and your credit. Now, if you're someone who has accrued a lot of debt and you're looking at these statements going. Oh my goodness. How do you start to tackle something like that? So debt can feel really overwhelming for many people. It's, it's just so psychologically traumatizing to look at your balance to see that you have a high balance and an inability to pay. So take a deep breath, find a really quiet time to take a look at your budget and see how you can pay down the debt. Understand why you're using the credit cards in the first place. Is it a supplement to the income? Do you have too many things being charged on your credit card that you're even not aware of like subscriptions? So first step, take a look at your budget. What can you afford to pay out each month to pay down your credit cards? Can you use your debit card or cash for your other day to day purchases? So your credit card balances don't go up and when you have several credit cards like you mentioned, don't do. Sometimes you're confused on which one you should pay off first. How do you decide on what's the most important one to pay off first or should you try to pay a little bit on each of them? So there's different methods of paying off credit card debt. It can include going after high balances. It could go, it can include going after the high interest rate cards depending on what your ultimate goal is and your ability to pay. You could even do a combination of both. So some people are successful paying down the high interest ones first. Or the high balance ones first, see how much funds are available in your budget to do. So because I've heard of the theory of paying off like the smallest one first. So you get that sense of accomplishment and you know, you can check it off like, wow, that one's done and then tackle the next one. But then I heard other people say no, you have to attack the one with the biggest interest rate because that's the one that's, you know, really choking you. There isn't one right method for everybody. Your situation is different. Even if you have the same credit cards, the same amount of debt, everybody's financial situation is slightly different. You have to see what works for you. But if you pick a method, it's best to try to stick with that for at least one or two billing cycles to see if it's effective. You could always pivot to a new method if that doesn't work for you or your financial circumstances change. And what about when the phone starts ringing and the debt collectors are called? What should you do? And how should you deal with them? Some people I know it's bad. They just avoid it all together and don't try to answer those calls. It could be really scary when debt collectors start calling you and today they can text message you and even contact you through social media. So it could be really, really scary when that starts to happen, be prepared to have a conversation, but don't make promises to debt collectors that you can't keep. So don't tell them you're going to pay if you're not going to and don't promise and set up a payment plan if you can't stick to it. So if you're not ready to have the conversation, you could wait to have that phone call. But if you are contact the creditors and take notes because it is overwhelming and you might not remember who you spoke to what you discussed and what they promised you. Now, what about for bankruptcy? How do we just avoid, you know, filing that all together filing bankruptcy? Some people see as the ultimate last resort, there are lots of ways to avoid filing bankruptcy and there's lots of really great alternatives to bankruptcy too. So it's not the end result of not being able to pay your bills. Take a look at really what's happening and if you really feel that bankruptcy as an option, talk to a certified bankruptcy attorney in your local area who could advise you appropriately remember that you need to know what your budget is. You need to know what your taxes are and you have to be very organized when looking at a bankruptcy as an alternative. And just to clarify, if you do file for bankruptcy, are you totally out of all of that debt that you owed regardless if it's a credit card or a loan or a car loan. Not necessarily, there are generally two types of bankruptcies for consumers. A chapter seven and a Chapter 13, a chapter seven will get you completely wiped out of the debt. But a chapter 13 is a repayment plan. And depending on the plan that's submitted, you could pay 100% of the debt back plus fees. So you also have to qualify for bankruptcy. So it's not automatic anymore. That's why you need to understand what your actual income is and what your debts and assets are some great points. Thank you for clearing all of that up. That was very helpful. All right. Thanks to financial attorney Leslie Tane for joining us here on be. Well.