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How Do You Think About Your Credit Cards?

Holding credit card and looking at laptopThere was a study published earlier this year showing that people who are in their 20s or 30s and who have credit cards hold more debt, pay it back slower and actually risk dying in debt. Those of us who were born between the years 1980 and 1984 have about $5600 more in debt that our parents had at the same age and $8100 more than our grandparents.

Why has this happened?

Why does this generation have more debt than their parents did at the same age? Some of it has to do with the fact that credit is now more available and there is less of a stigma attached to credit card debts.

The CARD Act

In 2009 our Congress passed what’s called the credit CARD act or what’s been referred to as the Credit Cardholders’ Bill of Rights. This law was created to make credit cards more fair by disallowing certain practices such as letting a consumer go over limit and then hitting that person with an over limit fee. The credit card issuers were also instructed to make their fees and rates more transparent.

Here’s a video with more information about this act …

But maybe credit cards aren’t the problem

It can be debated that the biggest problem with credit cards isn’t the cards. It’s the cardholders. There is a great deal of evidence that many people just make bad decisions when it comes to how they use their credit cards. The fact is this that this may just be a simple case of human carelessness. As a species, we have a difficult time understanding future costs. Instead, we assign a lop-sided amount of importance to what’s tangible and immediate vs. the unknown future.

Is this you?

Does this sound like you? Do you tend to put more importance on what’s tangible and immediate rather than its future costs? Do you think about credit cards as an easy avenue to obtaining something you want today regardless of what will happen in the future? Are you carrying $5000, $8000 or even $10,000 in credit card debt? Then it’s time for you to consider how you think about credit cards. You need to take a more conservative approach to how you use your cards and how you will handle the debt you’re creating.

The folly of making just the minimum monthly payments

A trap that many people fall into (and not just young people) is to keep making just the minimum payments month after month. You may be thinking that what you’re doing is okay – after all you are making payments – but you need to understand the true cost of this.

For the sake of an example, let’s assume you owe $6000 at 18% interest, that your minimum payment is calculated as 2% of your balance and that your initial minimum payment is $124.80 a month. At the end of one year, you will pay $84.42 in interest (of that $124.80) with only 32.64 applied to your balance. After three years, your minimum payment will be $101.81 with $73.42 going to interest and $28.39 applied to reduce your balance.

And it just gets worse

What do you suppose will be happening after 240 months or 20 years? In this scenario your minimum payment will be $31.08 with $22.41 going against interest and $8.67 applied to your balance. Finally, after 450 months (37.5 years), you will have a minimum payment $14.85. You will pay $0.22 in interest and $0.08 against your principle. In other words, after 37.5 years, you will finally have paid off that $6,000 but will have paid $14,217.15 in interest … on a $6,000 debt.

Put those credit cards to work for you and not vice-versaHand holding batch of credit cards credit card debt

You really don’t want to work for 37.5 years to pay off a credit card debt. What you want to do instead is get those cards working for you. Here are some tips for doing this.

  • Get a card with a great rewards program
  • Limit the number of cards you have – when you have a wallet full of credit cards, it makes financial institutions nervous. The reason for this is that statistics show the more credit cards you have, the more likely it is that your spending will get out of control
  • Don’t get in the habit of making just the minimum monthly payments (‘ enough said?)
  • Don’t use credit cards to buy things you can’t afford – use your card or cards to make only those purchases you can pay off at the end of the month to avoid falling into the interest trap
  • Know the different types of credit cards – all credit cards are not created equal. There can be vast differences in their interest rates, their terms and conditions, annual fees and credit limits. Make sure you read the fine print before getting a new credit card so you will know you’re choosing the right one given your circumstances.
  • Create a good credit history – if you use your credit cards sensibly, which generally means paying off your balances at the end of each month, you will be building a good credit history. Then when you truly need credit like for buying a new car you will have the credit available and that card will be a good friend.

Develop a strategy

It’s important to develop a credit card strategy. Are you using the card to build a good credit history or for maximum rewards? If it’s to earn maximum rewards, choose a card that offers the best cash back, rewards or airline miles. However, be sure to remember that none of these rewards come unless you charge something on the card. Be careful to keep your spending in check, not let it spin out of control and, again, pay off your balance each month.

4 Credit Card Debt Relief Options – Which Would Be Best For You?

frustrated woman with glassesIf you enjoy being seriously in debt, you’re either a very unusual person or maybe as the British would say, you’ve taken leave of your senses. Most people struggling under a big load of debt want nothing more than to get out from under it. If your goal is to become debt free, there are four credit card debt relief options. Which would be best for you? Only you can make a decision. But here are pluses and minuses.

Borrow the money

One of the most popular ways to achieve credit card debt relief is to borrow the money and pay off the credit card companies. You might be able to do this in the form of a debt consolidation loan or you might be able to borrow from yourself by taking money out of your retirement account. In either case, you will get rid of your credit card debts – practically instantly – and should have a much lower monthly payment than the sum total of the payments you’ve been making on those credit cards. There are two reasons for this. First, you are almost sure to have a much lower interest rate than those credit cards and you will have longer terms – or more time to pay back the money.

The minuses

There are two disadvantages to borrowing money to pay off credit card debts. The first is that it does nothing to reduce your debts. You just move them from one set of creditors to a new one. And second, a debt consolidation loan is likely to cost you more in interest because of those longer terms as it could take you seven years or longer to pay back the money.

Credit counseling

A second popular way to achieve relief from credit card debts is through consumer credit counseling. It’s likely that there is a credit-counseling agency in your area. Many universities, community colleges and credit unions offer this service. What this amounts to is that you’re assigned a counselor who will review your finances and then negotiate with your creditors to get your interest rates reduced and any late payment or over limit fees eliminated. He or she will then help you develop a debt management plan to pay back your creditors. In most cases, they will accept your plan so that you will no longer be required to pay the credit card companies. Instead, you will pay the credit agency once a month and it will distribute funds to the credit card issuers.

The cons

The biggest downside to credit counseling is that it will probably take you five years to complete your payment plan. These are five years during which time you won’t be able to take on any new revolving credit and will have to live on a fairly stringent budget. In fact, these are the reasons why many people are never able to complete their debt management plans.

Debt settlement

Debt settlement is sometimes called debt negotiation because it requires you to contact you credit card providers and attempt to negotiate settlements of your debts for much less than you owe. To be successful in this, you must be at least six months in arrears in your payments to the credit card companies and must have the cash in hand to pay for any settlements that you negotiate. Plus, you need to be a good negotiator.

File for bankruptcy/strong>

The fourth option for credit card debt relief to file do a Chapter 7 bankruptcy. It’s a way to completely wipe out all credit card debts and probably in six months or less. Once you file for a chapter 7 bankruptcy, credit card companies can longer contact you. A chapter 7 bankruptcy can also get other unsecured debts dismissed such as personal loans and medical debts.

The cons

The biggest downside of a bankruptcy is that it will stay in your credit report for either seven or 10 years. And you will find it very difficult to get new credit for the first two or three years after your bankruptcy. In addition, bankruptcies are public records. This means a bankruptcy will stay with you forever. A prospective employer could see that you had had a bankruptcy, which could prevent you from getting that dream job.

Who’s Responsible For Our Huge Credit Card Debt?

Stressed, tired, overworked businessman doing paperwork, worrying about his debtsDid you know that our total credit card debt has grown to an alarming $800 x`billion? As you might guess, this is not a small problem. I saw one report recently that the average American is now carrying more than $16,000 in credit card debt. And that’s just the average! We Americans are now paying so much in interest and penalties every year that we may never be able to get out from under this debt.

Whose fault is it?

Why have we become so enmeshed in credit card debt? Some people blame the credit card industry. The credit card providers make it tempting to load up on cards. After all, if we didn’t have these cards, we wouldn’t be enticed to spend all of this money, right? Wrong.

Are we scapegoating?

Of course, the credit card companies do engage in some unethical practices. But the fact is, we’re really scapegoating the credit card providers for out terrible spending habits. Most experts say that any shady practices done by the credit card companies pale in contrast with how we use our credit cards.

How we mismanage our cards

The problem is that most of use our credit cards as a form of extra income when we want to buy something we really can’t afford. This is why an estimated 160 million people spend more than they earn.

A bad relationship

Putting aside our spending habits, it’s pretty clear that we have a poor relationship with our credit card companies. We tend to not pay off our balances each month. In fact, about 46% of Americans don’t pay their balances in full every month so end up accumulating hundreds or even thousands of dollars in interest and penalties. These penalties are for making a payment late or for going over our credit limits and are meant to encourage us to limit our spending instead of increasing it. Paying these fees is like throwing money down the drain.

How credit cards can help us

Credit cards were never meant to be an extra source of income. They were created to be a convenience and to save us money by giving us an extra 30 days of interest free money on the stuff we buy. Their interest rates were designed to penalize those who failed to pay their balances on time but, at least initially, were reasonable enough that we could use them in times of a financial emergency. If we use our credit cards that way, they can help with our financial health. In addition, many of today’s cards come with some kind of rewards. If you have one of these cards and charge up, say, $10,000 a month and get 2% cash back, that’s $200 of “free’ money a month – assuming you pay your balance in full every month.

When you use your card sensibly

If you use your credit card sensibly by paying off your balances every month, you should have a pretty darn good credit score. Since your score dictates how much interest you’ll be offered or what your credit limits will be, this can also help. For example, if you have a score of 696 and the lender’s cutoff point is 700, you would be missing out a better interest rate by just four points and basically paying additional interest for no good reason.

When credit card debt spins out of control

If you find yourself head-over-heels in credit card debt, there are options for getting it back under control. We here at National Debt Relief have helped thousands of Americans reduce their debt and become debt free in 48 months or less. Don’t let debt rule your life. Fill in the amount you owe under the “How Much Do You Owe?” section above and let us get started helping you get back onto the path of financial freedom.

What Everyone Should Know About The Benefits Of A Debt Settlement Plan

Sign saying Debt Relief with arrow pointing aheadIf you feel as if you were falling into a sinkhole of debt, don’t be despondent. There is good help available in the form of a debt settlement plan. In fact, a good debt settlement plan offers five important benefits.

Relief from stress

Once you have a debt settlement plan, you’ll be relieved from the stress and anxiety associated with having to cope with your debt load. You may actually wake up in the morning feeling good about the day ahead instead of dreading phone calls from unscrupulous debt collectors.

Elimination of collection calls

The second benefit of a debt reduction plan is that it will eliminate virtually all calls from debt collectors. If you do receive a call, you can contact your debt settlement company. It will call the collection agency, inform it that it is now representing you in all matters pertaining to your debts and that it is not to contact you again.

Affordable payments

Debt settlement is a form of debt consolidation in that once your debt settlement company has settled your debts, you will no longer be required to pay any of your creditors. Instead you will send the debt settlement company one payment a month that will be affordable. In fact, if you choose an honest and reliable debt settlement company, it won’t charge you a cent until it’s presented you with a payment plan that you approve.

Help with budgeting

Many of the top debt settlement companies have debt counselors who can help you create a budget so that you can do a better job of managing your debts and finances in the future.

Timely payoff

A debt settlement plan should result in a timely pay off so that you can become debt free in a reasonable amount of time. As an example of this, National Debt Relief is almost always able to help its clients become debt free in 24 to 48 months. This is in comparison with the debt management plan you would get from a consumer credit counseling agency, which typically takes five years to complete.

Better than bankruptcy

A debt settlement program is almost always a better option than filing for bankruptcy. Some financial experts believe that a bankruptcy lowers your credit score by as many as 200 points. This could take you from having a “good” credit score of 720 to a “poor” credit score of 520. While debt settlement will also have an effect on your credit score it will probably lower it by only 80 points.

Seven to 10 years

A bankruptcy will stay in your credit report for either seven or 10 years, depending on the credit-reporting bureau and is a public record that will follow you throughout your life. How debt settlement is handled on your credit report varies from credit bureau to credit bureau. It may be reported as ” debt settled for less than the full amount due,” “partial payment accepted,” “settlement” or ” settled.” In any of these cases, it will leave a blemish on your credit report that will remain there for probably seven years. But again, it won’t be as serious as if you had filed for bankruptcy.

Choose your debt settlement company carefully

The debt settlement industry has something of a bad reputation and for good reason. If you see debt settlement as a good alternative, do your homework before signing up with any company. There have been a number of fraudulent companies operating in this area. You need to select one that has been in business for more than five years, that has a number of favorable reviews and that charges no upfront fees. If you contact a company that requires payments up front, shun it at all costs as it is likely to be a scam.

Things To Never Put On A Credit Card

Young couple in financial troubleCredit cards can be a great friend or a terrible enemy depending on how you use them. If you use them wisely, which means paying off your balances each month, they’re like free money or money you can use for almost 30 days at no cost. But if you don’t use them sensibly, you could end up trapped in a terrible cycle of debt. One way to avoid this is to not put any of the following five things on a credit card.

Taxes

If you’re facing a large tax bill, it’s very tempting to just put it on a credit card. The IRS even makes it simple for you to do this. But the payment processors will charge you anywhere from 1.88% to 2.35% and then you’ll have to pay the interest charge on your credit card, which could be as high as 18%. In comparison, the IRS allows taxpayers to set up a monthly payment plan that has a much more competitive interest rate. Its underpayment interest rate varies but is currently at 3%, which is far better than the interest you would pay on any credit card.

College tuition

This is also something to never put on a credit card. People who do so usually learn how difficult it is to pay off credit card charges, especially when those charges start to compound. A much better solution would be to fund that college education with low-interest student loans, grants and part-time jobs.

A big wedding

You might like to have a big, lavish wedding but if you can’t really afford it don’t put it on a credit card. This could be a horrible mistake as the two could end up starting a life together buried under a huge pile of debt.

Medical bills

I know that health care costs these days can be absolutely staggering. I recently had a minor procedure that cost $5000 and my share was more than $600. But using credit cards to pay off medical bills can be a very bad idea – again because of their high interest charges. If you’re hit with a big medical bill, it’s usually possible to negotiate with your healthcare provider to have it reduced or to get a payment plan. Many hospitals, clinics and even doctors will reduce their bills by hundreds or even thousands of dollars if you can pay cash.

A lavish vacation

Life can be very difficult these days and a luxury cruise or a 10-day Caribbean vacation may seem like a heaven sent way to reduce stress. But if you finance that dream vacation with a credit card, you’re likely to just end up creating more stress for yourself. There are ways to get a nice getaway without spending a huge amount of money, such as camping, staying at a hostel or visiting family and friends. Alternately, you might stay home for a few years, save the money, and then treat yourself to that dream vacation.

Debt never takes time off

The biggest problem with putting these five things on a credit card is that they create debt that never goes away – assuming you don’t choose to file for bankruptcy. Otherwise, you will have to find some way to pay it off, which could take five, seven or even more years. There is an old tune that includes the refrain, “the song has ended but the melody lingers on.” In the case of putting these things on a credit card, the song may have ended but the debt will linger on.

6 Proven Strategies For Getting Out Of Credit Card Debt

Young man trying to learn about debt reduction A friend I’ll call John was a very successful real estate salesman. However, when the real estate market tanked in 2007 so did his finances. He started leaning more and more on credit cards and almost before he knew it had $50,000 in debts. If this has happened to you – if you’ve found yourself so heavily in debt – there are six proven strategies for getting rid of those credit card debts.

1. Choose consumer credit counseling

Is there a consumer credit counseling agency in your area? If not, it’s easy to find one online. Whether you go online or to a local agency, you’ll have a debt counselor who will help you restructure your finances and develop a debt management plan (DMP) that should enable you to become debt free in about five years.

2. Get a debt consolidation loan

This is probably the fastest way to get out of credit card debt because all that’s required is to get a new, bigger loan to pay off all your credit cards. These loans come in two types – secured and unsecured. If you’re really in debt like my friend John you will probably be required to get a secured loan. This is one where you use an asset like your house as collateral to “secure” it. If you’re not so heavily in debt, you may be able to get an unsecured loan or one that requires no collateral.

3. “Snowball” your credit card debts

“Snowballing” credit card debt is a strategy that has been used successfully by many people. What this requires is that you put your credit card debts in order from the one with the highest balance down to the one with the lowest. You then do everything possible to pay down the card with the biggest balance, while still making the minimum monthly payments on the other cards. Once you pay off the card with the biggest balance, you use the money that is now available and get to work paying off the card with the second biggest balance and so on. People who have used this strategy have been able to pay off even large amounts of debt in as few as 18 months.

4. Borrow from yourself

If you have a  401(k) retirement plan or an IRA you may be able to borrow from it. This can be the best kind of loan because you literally pay interest to yourself. Most 401(k)s allow participants to borrow up to $50,000 or half of what they have in their plan, whichever is less. While a 401(k) lets you take up to five years to pay back the money, you must pay back whatever amount you borrowed from an IRA in 60 days.

5. Earn more money

If you could get a second job, additional shifts on your current job or some type of part-time work, you could use the money to pay off your credit card debts.  I know that working an extra job isn’t much fun but can be a very fast way to get rid of those debts.

6. Negotiate settlements

A not-so-well-known fact about credit card companies is that they will settle debts for less than what’s owed. However, they usually won’t consider settlement until you’ve failed to make even your minimum monthly payments for at least six months. You need to be a good negotiator and must have the cash in hand to pay off any settlements you negotiate.  In other words, if you were able to negotiate a credit card debt of $5000 down to $2500, you would need to have the $2500 in cash ready to send off to the credit card company. If you don’t have the cash available to immediately pay the settlement, the credit card company would have practically no incentive to settle with you.

A Step By Step Plan For Getting Out Of Debt

Eraser side of pencil next to word DebtDo you feel as if you were stuck in debt hell? It’s not a good feeling is it? You’re probably being pestered or even harassed by debt collectors. You may have trouble sleeping nights or feel as if you were developing an ulcer. This is because the stress associated with being seriously in debt can actually cause physical symptoms. If you’d like to get that debt monster off your back, here ‘s a step-by-step plan for doing just that.

Step 1: Organize your debt

If you’ve let your debts get completely out of hand, you may not be able to remember who you owe, how much you owe each lender and when your payments are due. Get a spreadsheet such as Microsoft Excel or Google Docs and get your debts organized. Your left hand column should be a list of all your lenders followed by a column of balances owed. Your third column should be the interest you pay on each debt and your fourth column the day of the month your payments are due. The reason why you want your debts on the spreadsheet is because this will allow you to “sort” the data. For example, you could sort your debts by balances owed or by the interest you pay on each debt. You could choose to sort from least to greatest or greatest to least.

Step 2: Divide your debts into fixed and variable

Next, you need divide your debts into two categories – fixed and variable. Fixed debts are those where you can’t make any changes such as your mortgage payment, student loan debt and auto loan payments . Variable expenses are everything else or those areas such as food, entertainment and clothing where you could decide to make changes.

Step 3: Make a decision

Step 3 is to decide how to attack those variable debts. There are three ways to do this. One is to pay off the debt with the biggest balance first. The second is to first pay off the one that has the highest interest rate. And the third is to first pay off whichever debt would give you the biggest emotional boost.

Step 4: Create a budget

No matter which of these three options you choose, your next step is to create a budget. You will need to track your expenses for a month, making sure you write down every penny you spend. You will then organize your spending into logical categories such as groceries, clothing, insurance, healthcare, transportation and so forth.

Step 5: Find places where you could cut your spending

Now that you know where your money is going, you should be able to find places where you could cut your spending. For example, you might find that with a little work you could reduce your spending on food by 10% or even 20%. You might also be able to reduce the amount that you spend on clothing and entertainment. If you feel there are just no places where you could cut your spending, turn over your budget along with a red pen to a friend or relative and let them take a whack at it. You might be surprised at what they find.

Step 6: Increase your payments

The purpose of creating a budget and slashing your spending is so that you will have more money to apply to your payments to whichever option you chose in step #3. For example, let’s suppose your plan is to pay off the debt with the highest balance first. You should use all the money you save by budgeting and apply it against that debt until you have it completely paid off. This will free up even more money that you could then use to pay off the debt that has the next highest balance and so on. This is called “snowballing” your debts and it has worked successfully for many people.

Step #7: Watch your debts go away

Every time you make a payment or pay off a debt, make sure you adjust your spreadsheet accordingly so you can see your progress. This can be a powerful motivator to help you stay on track until you become totally debt free.

Revealed – The Ugly Math Behind Credit Card Debt

Stressed, tired, overworked businessman doing paperwork, worrying about his debtsCompound interest can be an incredible power in terms of helping you create wealth over time. However, it has a downside when it comes to debt – especially credit card debt.

It’s only a vacation to Hawaii

If you want to see the ugly math behind your credit card debt, here’s an example. Let’s suppose you have an average balance of $5,000 and are paying an annual interest rate of 22% and that this compounds monthly for the next 10 years. If you’re employed, a balance of $5,000 is really not a really big deal. It’s the equivalent of a trip to Disneyland or a week’s vacation in Hawaii. So, you think, “Gee, how bad could that be?”.

It’s bad

Here’s the shocking answer. When you includ the monthly compounding, this will cost you $44,235 or about nine times what it would seem to cost. In other words, compound interest has changed that moderate credit card balance into a very expensive investment.

Here’s another example of the ugly math behind credit cards. If yours is an average household, you carry an average balance of $15,956 in credit card debt. And you’re probably paying an average current rate of 12.83%. If you were to carry this average balance for as long as 40 years, you would end up paying $2,629,618.

You may not have learned this in school

When you were in middle school, your math teacher may not have demonstrated the ugly math behind debt. But you can bet the credit card companies understand it. In fact, this ugly math is their entire business model.

These two examples of the math behind credit cards are a bit exaggerated. However, this should serve as a wake up call as to why it’s best to dump that credit card debt.

How to get out from under that load

If you’re carrying a big load of credit card debt, you might want to sit down and figure out how much it’s really costing you and the total amount of money you would pay to get out of debt in three or four years. Our guess is that that number would shock you. This is especially true if you have multiple credit cards with an average interest rate of 20% or higher.

”Snowball” those debts

One way to handle that ugly math is by “snowballing” your credit card debts. First, make a list of all your credit cards with their balances and interest rates. Next, order them based on their balances from highest to lowest. Double or even triple your payments to the card that has the highest balance. Once you’ve paid it off, you will have money you can now use to pay off the credit card that has the next highest balance. This has a “snowball” effect because the faster you pay off those cards with the highest balances, the faster you will get out of debt.

Transfer your balances

A second way to defeat that ugly credit card math is to transfer the balances on those high interest credit cards to one with a lower rate. If your credit cards have an average interest rate of 20%, you might be able to transfer all of them to a new card with an interest rate of 12% or less. There are now a number of low interest, no-frills, credit cards available and you might qualify for one of them.

Choose debt settlement

We think the best way to defeat the ugly math behind credit card debt is to let us settle those debts for you. Our debt counselors could negotiate settlements that would save you thousands of dollars and help you become debt free in 24 to 48 months. Contact us today to learn more about debt settlement and how it could help you beat that ugly math.

“Should I Default On My Credit Cards Or Declare Bankruptcy?”

thinking woman with credit card and laptopThe person who recently asked this question on a forum devoted to personal finances said she had a lot of debt because she had been forced to close a business she had opened just a year ago. She had seen a bankruptcy attorney but didn’t like this as an option and was wondering about the ethics of just walking away (defaulting) from her debts.

The disadvantages of defaulting on debts

The thing about debts is that they are like a bad check – they just keep coming back to haunt you. You can “walk away” from debts but your creditors are not going to forgive you. One of your creditors could garnish your wages and get up to 25% of your paycheck. Even worse, it could sue you, get a judgment and then attach a lien to some of your assets such as your house. When it comes time to sell your house, that creditor would get its money off the top, leaving you with much less cash than you had anticipated. Having a judgment in your record will also screw up any financing you might apply for.

What a bankruptcy does to your credit

A chapter 7 bankruptcy typically takes about six months and can cost as little as $500. Once you complete it, most of your unsecured debts will be discharged. However, it can’t do anything about secured debts such as a mortgage or auto loans. It will not discharge student loan debts, child support or alimony, past-due taxes or any debts that you racked up as the result of fraud. Plus, if you have too much income you could be forced into a chapter 13 bankruptcy, which can be a very long and painful process.

Seven to 10 years

Another downside of having a bankruptcy is it will stay on your record for a long time. TransUnion typically keeps a bankruptcy in your credit file for 10 years as does Equifax. Experian usually keeps it in your file for just seven years.

It’s a public record

Even worse, bankruptcies are public records. This means if you have one, it will stay with you forever. You could apply for a job five years from now, your prospective employer could notice that you had a bankruptcy and decide not to hire you.

So what’s the answer

Unfortunately, this is a question for which there is no clear answer. For that matter, neither one of them is terribly ethical. In both cases, you would be stiffing your creditors. If you would rather not have a bankruptcy in your record, you could default on your loans and gamble that it would be many years before your creditors got around to suing you, which would give you time to get your finances in order and then pay off your debts. On the other hand, it you’re looking for a fast way to get out from under your debts and leave your creditors with no recourse, a bankruptcy might be your best alternative.

How To Trade Your Time For Debt Relief


Face it. Your debt has gotten so large, you can’t see any way to get out from under it. Debt collectors are calling you daily – or more often – and the problem is just about tearing your family apart. You’ve calculated your debt to income ratio and it’s so bad you can’t stand to think about the number anymore.

Trade time for debt relief

No matter how much money you owe, I’m willing to bet you could be completely debt free in as few as two to three years if you’d be willing to trade your time for debt relief. What I mean by this is that you could use the extra hours in your week to earn money you could then use to payoff your debts.

If you work a 40-hour week

Suppose you work a 40-hour week. Whether you’ve thought about this or not, this leaves at least 36 other hours a week where you could be doing something to earn extra money. If you were able to get a job in the food service or hospitality industry earning just $10 an hour, that would be $360 a week (less taxes) or about $1440 month you could use to eliminate those debts.

If your owed $20,000

For example, if you owed $20,000 in credit card debts and paid $1000 a month on them, you would be debt-free in just a bit over two years. I’m guessing this would sound pretty good to you – to completely eliminate your debts in about 24 months.

Could you be a handyman?

If the idea of taking a second job either doesn’t appeal to you or just isn’t possible, there are other ways you could trade your time for debt relief. If you have the requisite skills, you could put an ad on your local Craigslist offering to do handyman work evenings or weekends. I see a big demand for people who can do sheet rocking, plumbing, electrical work, flooring, carpentry or cabinet making. If you can do any of these tasks, you could probably charge at least $25 an hour, which would help you get out of debt even faster than a job in the food service industry.

Female Primary School Pupil And Teacher Working At Desk In Classroom

Tutor students

If you’re strong in physics, chemistry, math, biology or the language arts, you could become a tutor. There’s practically no investment involved – all you have to do is put up notices in your neighborhood or on Craigslist and you might be overwhelmed with the response. Math tutors in my area earn $40-$45 an hour, and I’m sure tutors in other areas do just as well. You would probably earn about $20 an hour if you could tutor students in entrance and placement tests such as the ACTs, SATs, GMAT, and the GED.

Buy on Craigslist, sell on eBay

A fourth way to trade time for debt relief is to find items on Craigslist that are underpriced and then sell them on eBay. Many people who sell items on Craigslist don’t understand their true value or just want to get rid of them. If you spend the time required to learn how much specific types of items sell for on eBay, you could likely find them on Craigslist for 50% less or even better.

Pay off that debt in two to four years

You could also trade time for debt relief through debt settlement. This is where we negotiate with your creditors to get your debts reduced, usually by thousands of dollars. Once we settle your debts, we provide you with a payoff plan that will probably take you two to four years to complete, depending on how much you owe. Your payment will be much less than the sum of the payments you are currently making on your unsecured debts so that you would see almost immediate debt relief.

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