I was searching the web today and I came across a very interesting and informative article which relates to bankruptcy. It was called Ten Bad Habits That Lead to Bankruptcy. Many consumers in Maryland with high credit card debt could have taken steps to prevent it. At the Maryland Bankruptcy Center we will not only file your personal Chapter 7 bankruptcy for you but we will also give you tips on how to stay out of financial trouble in the future. Call or e-mail us anytime for a free consultation.
The ten bad habits are:
1) Misusing Balance Transfers - All of us have found offers for new credit cards that provide a "teaser" rate. "Transfer balances and pay no interest for a year" is a common sales pitch. While it can be a good idea to manage debt by taking advantage of these types of offers, you still have to be disciplined and concentrate on paying down the debt. The common mistake is that the person continues to use the card and creates new debt.
2) Not Checking Credit Reports - Some people believe that there is no value in checking credit reports because they don't think they can do anything to change what the reports say. This is not true. Insuring that your credit report is accurate and challenging inaccurate information can help improve your credit score. An improved credit score opens opportunities for credit at lower interest rates. Lower interest rates can save you a lot of money!
3) Failing to Alert Creditors About Financial Hardships - Some creditors have in-house programs you can qualify for if you alert your creditor to an anticipated problem. If you wait until you are behind on payments, you may not be eligible for some of the programs the creditor could have offered you if you were current on payments.
4) Failing to Budget - Budget your money and stick to your budget. Don't forget about those yearly or quarterly expenses. Make sure you take them into account.
5) Using Retail Store Accounts - I'm sure you have experienced shopping at a department store and being offered the store's credit card. They are tempting as you are offered 10% off your purchases, or sometimes even more! The downside is if you don't pay it off at the end of the month, retail credit cards have much higher interest rates than Visa, Mastercard, or American Express.
6) Procrastinating on Creating an Emergency Fund - Make sure you begin saving a little money each month into a savings account. You never know when a trip to the hospital could lead to a loss of income. You should be prepared for these events. Most experts tell you to have at least 3-6 months of your budgeted expenses saved in a savings account. This money can help get you through a medical situation or a job loss.
7) Paying Bills in No Particular Order - If you can pay all of your bills at the end of each month, obviously it doesn't matter what check you are writing first. But, if you are going to fall short one month, you need to prioritize which expenses are more important so you can pay the important ones. Rent/Mortgage, transportation, utilities, and other "basic living expenses" should always be the priority over credit cards, retail store cards, etc...
8) Charging Purchases Instead of Using Debit Card or Paying Cash - If you have the money in your pocket to pay cash, why charge on the credit card? I know, it's only $20 here or there, right? But what about when you do this three or four times a month. Suddenly, you have balances on your credit cards that could get out of control if you don't pay them each month.
9) Making Credit Payments Late - You might be tempted to simply "eat the late fee" on credit cards if you're struggling to make payments. Try to avoid this temptation as paying late could cause your interest rates to triple. In fact, missing payments to one credit card could could cause ALL of your interest rates to triple on ALL of your credit cards.
10) Making the Minimum Payment Only - Paying minimum balances is better than not paying, but if all you are doing is paying the minimum you won't make much progress paying your debt. Try to pay at least a little bit extra each month. Obviously the best option is to pay off the entire balance each month. Try working a part-time job or overtime and using the extra earnings to pay down debt.
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