The immediate gratification of making a purchase on a credit card is temporary. That new television, pair of shoes or outfit quickly loses its appeal, leaving you with the painful realization that you’ll one day need to pay for this item.
Most everyone knows this scenario. We all are accustomed to making impulse purchases. In fact, retail stores reinforce this behavior and want you to add that last small trinket to your basket on your way to the cashier. Those impulse purchases add up over time and compound consumers’ debt balances. Moreover, they create a habit of reckless spending that takes years to break.
When looked at closely, the financial struggles that accompany some credit card users amount to a lifelong ordeal. Whether you’re trying to break the habits associated with credit card use or trying to eliminate debt with one of the popular debt-relief methods, you should look at the big picture.
This should help you get an idea of the time frame involved with each scenario:
* Bankruptcy: For many consumers, bankruptcy is godsend. Chapter 7 can allow you to walk away clean from your debts and start your financial life anew. But there’s a catch – bankruptcy can stay on your credit report for up to 10 years, making it difficult to get a loan or a job. Bankruptcy can affect your entire life so be cautious before taking this step.
* Debt Consolidation: Debt consolidation has become a common sight for late-night television viewers and banner-ad ignorers. It is the debt-relief program of choice for those who know no better. This option leads to a life-long financial struggle because it doesn’t actually reduce your debt – it just moves it from one place to another. Your loan could still take up to a decade to repay.
* Paying the Minimum: Paying the minimum balance on your credit card every month is highly inadvisable. Do this and you will be paying down your debt for a long, long time – like decades. The reason for this is simple: credit card companies have greatly reduced the required minimum payment, which means that when you pay the minimum you barely touch the principal of your debt.
Of course, we needn’t all suffer from a lifetime of debt woes. We may be living in a credit-crazed consumertopia, but we can avoid a lot of the financial anxiety that comes along with credit card debt and its treatments.
One method, of course, is to avoid using debt. Read my last post here to learn how I adhere to this model
Another solution is called debt settlement. Similar to bankruptcy, this program allows you to walk away from most of your debt. Unlike bankruptcy, debt settlement doesn’t destroy your credit rating nor stay on your credit report for a decade. You may take an initial hit, but you will rebound much faster.