The Revolution: Credit Card Debt
Washington Post Financial Columnist Michelle Singletary returned to share more finance tips for 2012. Michelle Singletary talked to audience members LaRae & Tara, who are struggling with credit card debt.
Michelle Singletary said understands why and how people get stuck with credit card debt. She and her husband entered their marriage with no debt, and she even bought a used wedding dress to save money.
The Revolution: Michelle Credit Card Debt Quiz
Here are some questions to ask yourself about your Credit Card use.
- Are you using your credit card to buy groceries, gas and clothes?
- Do you get an emotional high from shopping or spending?
- Do you buy things because you can afford the minimum payment?
Michelle said if you answer yes to these questions, you are using credit cards to inflate your lifestyle beyond your means.
Michelle Singletary: Minimum Payment Syndrome
Michelle Singletary said making charges and paying only the minimum payment is called Minimum Payment Syndrome.
LaRae was laid off a few years ago and is $12,000 in debt because she’s had to use credit cards to make ends meet.
If she stopped charging on that card and made just the minimum payment, it would take her 30 years to pay off this card, and she would pay an additional $16,500 in interest.
Credit Card Minimum Payment Syndrome
Tara lives in New York City and is in a long term relationship. She has about $15,000 in credit card debt, but she and her boyfriend want to get out of debt before they take the next steps in their relationship.
It would take her 32 years of minimum payments and an additional $24,500 in interest.
Michelle’s Debt Dash Plan: Debt Free In 2012
Michelle Singletary said it’s her mission to help the audience get debt free in 2012. She introduced her Debt Dash Plan to get rid of debt quickly.
- List your debts, starting with the lowest balance to the highest, including credit cards and other loans.
- Put all the money you can toward your highest debt. Then make the minimum payments on your other debts.
- Sell your unwanted stuff to make money and pay down your debts. Garage sales, eBay, and consignment shops are great outlets to make money off things you don’t use anymore.
- Get a second job and use the money you make to pay your debts. Work bonuses and tax refunds should also be applied to that highest debt balance.
Michelle Singletary: Debt Free in 2012
Don’t Close Your Cards
Michelle Singletary said closing credit cards will affect your credit score. You don’t want to close any credit accounts until you finish paying what you owe.
Do Ask For Help
If you need help managing your debt, you have to watch out for fraudulent offers and scams. Michelle recommends resources and counseling from DebtAdvice.org.
Don’t Add Debt
Say not to credit card offers, which will increase as you pay down your existing debt.
Don’t Use Equity
Don’t use your home equity to pay off credit cards, because that just pays debt with debt.
Don’t Touch Your 401(k)
Don’t borrow from your 401(k) plan, because unexpected penalties and taxes can have consequences.
These are great tips, and there’s probably something on this list that anyone can do to manage their debt or find extra money.