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Getting out of credit card debt

Having trouble paying your bills while in college? Are you getting notices from creditors? Are your accounts being turned over to debt collectors?

You're not alone. Many college students face a financial crisis during their schools years. But often, it can be overcome. Your financial situation doesn't have to go from bad to worse.

Credit Cards

To avoid late payment fees and possible interest rate increases on your credit cards, make sure you send in your payment a week to ten days before the statement due date. Late payments on one card can increase fees and interest rates on other cards.

Avoiding interest charges

• Pay off your entire bill each month.
• If you can't pay the balance at once, pay as much as you can.
• Try to shift the remaining balance to a credit card with a lower annual percentage rate (APR)

Be aware that credit cards with rebates, cash back, travel awards, or other perks may carry higher rates or fees.

If you or someone you know is in financial hot water, consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. Debt negotiation is yet another option. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

What to do

Develop a Budget:

List your income from all sources

• Start with your "fixed" expenses - those that are the same each month
• Next, list the expenses that vary - like entertainment, recreation, and clothing.
• Writing down all your expenses, even those that seem insignificant
• The goal is to make sure you can make ends meet on the basics

Contact Your Creditors

Contact your creditors immediately if you're having trouble making ends meet. Tell them why it's difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don't wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.

Dealing with Debt Collectors

• The Fair Debt Collection Practices Act dictates how and when a debt collector may contact you
• A debt collector can't contact you before 8 a.m., after 9 p.m., or while you're at work
• Collectors may not harass you, lie, or use unfair practices when they try to collect a debt.
• They must honor a written request from you to stop further contact

Deceptive Ads and Scams

The Federal Trade Commission (FTC) has taken action against companies that deceptively advertise major credit cards through television, newspapers, and postcards. The ads may offer unsecured credit cards, secured credit cards, or not specify a card type. The ads usually lead you to believe you can get a card simply by calling the number listed. Sometimes the number is not toll-free. A ‘900’ number service, for which you are billed just for making the call, may instruct you to give your name and address to receive a credit application, or give you a list of banks offering secured cards. It also may tell you to call another ‘900’ number — at an additional charge — for more information.

Deceptive ads often leave out important information.

• The cost of the ‘900’ call — which can range from $2 to $50 or more;
• The required security deposit, application, and processing fees;
• Eligibility requirements like income or age;
• An annual fee or the fact that the secured card has a higher than average interest rate on any balance.

How to Avoid the Scam

To avoid being victimized, look for the following signs:

Offers of easy credit. No one can guarantee to get you credit. Before deciding whether to give you a credit card, legitimate credit providers examine your credit report.
A call to a ‘900’ number for a credit card. You pay for calls with a ‘900’ prefix — and you may never receive a credit card.
Credit cards offered by “credit repair” companies or “credit clinics.” These businesses also may offer to clean-up your credit history for a fee. However, you can correct genuine mistakes or outdated information yourself by contacting credit bureaus directly. Remember that only time and good credit habits will restore your credit worthiness.

Source: The Federal Trade Commission