Foreclosure Blog

Don’t Live Through the Recession on Credit Cards and Debt

In today’s economic climate, it is becoming increasingly difficult to plan for the future. Crushing debt burdens and unstable or nonexistent employment conditions are combining to put huge pressure on Americans from coast to coast. Personal bankruptcies were supposed to go down as a result of the 2005 reform amendments, but just half a decade after passage of the new laws, people are turning Chapter 7 or 13 again in ever increasing numbers. And the foreclosure crisis has been ongoing since 2006 at the latest. With all of these devastating economic impacts, it is important for everyone to evaluate whether they are in trouble financially or not, because things can always get worse.

Creditors, too, are facing more difficult times. The good news for them is that, if times are good, they make money from collecting debts like credit cards and mortgages. And even if times are bad, as has been proved over and over again, they can just go to the lawmakers in Congress who print up a few hundred billion dollars to cover the losses sustained by the banks. And if that is not enough, the banks and creditors can ask for tens of trillions of dollars to be printed by the Federal Reserve System, which has been more than accommodating since the 2008 financial meltdown.

Since it is unlikely that average people will ever get to see or use any of the tens of trillions of dollars that were printed up by the banks (except as rising prices due to inflation), debtors are forced to take preventive action in the face of a declining economy and higher prices. There are numerous warning signs of being in trouble with debt, all of which people should watch out for.

Hmm, which one isn't over the limit this month...?

For instance, are all of your credit cards charged to their maximum limits? And are you using your meager income to pay off one credit card so that you can transfer balances around from the other accounts every month? If so, you are probably at the limit of what your credit can do to help you, and it is now becoming a burden. Especially if you are still using the credit cards for various charges when you are able to, while operating with them very close to the edge, it may be time to stop using credit cards altogether. You are just prolonging the inevitable default and making the collection attempts even worse in the future.

Another huge sign of debt trouble is using credit cards to pay for goods and services that are necessities because you do not have enough money any other way to pay for them. Putting heat and electricity or groceries on your credit card is never a good idea, especially if you do not have enough funds in your possession to pay these bills any other way. Once you are at this point, you can expect any little financial crisis or unexpected bill to push you over the edge, so it would be best to stop using credit as soon as possible. Do not put the necessities of life in the hands of your creditors.

Finally, if you are already bouncing checks or sustaining heavy overdraft or over the limit charges on your bank accounts or credit cards, you are probably spending too much more than you make. This is simply unsustainable, and racking up closed accounts and bounced checks will not make anything better. In fact, they can create legal problems where there used to be only financial ones. At some point, we all need to ask for help, and if you are at the point of having banks sue you for closed checking accounts with negative balances, it might be time to seek assistance.

Unfortunately, this is the reality that many people are now facing. It is not that uncommon a situation to be in, as economic opportunities have been diminishing in this country for some years now. But whatever your current financial difficulties may be, it is always better to take care of them earlier rather than later, and stop the dependence on credit as soon as you can. And because the economy may take many more years to improve, simply living through the long depression using debt will not be possible forever.