Have you set sail into the Have you set sail into the Sea of Credit Card Debt?Sea of Credit Card Debt?
TSCPA Member, CPATSCPA Member, CPA
Company/Firm NameCompany/Firm Name
The Sea of Credit Card DebtThe Sea of Credit Card Debt
• Loss of jobLoss of job
• Extended illnessExtended illness
• No personal budgetNo personal budget
• Straying from spending planStraying from spending plan
• 10 steps to get out of debt AND stay 10 steps to get out of debt AND stay outout
1. Add it up!1. Add it up!
• One or two credit cardsOne or two credit cards
• Limit non-mortgage credit payments Limit non-mortgage credit payments to 15 percent of take-home payto 15 percent of take-home pay
• Make a listMake a list– Who do you owe?Who do you owe?– How much?How much?– Interest rate?Interest rate?– Minimum payment?Minimum payment?
2. Start with highest 2. Start with highest balance.balance.
• Target balances with highest APRTarget balances with highest APR
• Can also pay off low-balance cards Can also pay off low-balance cards firstfirst
• Once a card is paid off, apply that Once a card is paid off, apply that money to other card balancesmoney to other card balances
3. Pay more than the 3. Pay more than the minimum.minimum.
• 47 percent of Americans pay only the 47 percent of Americans pay only the minimum each monthminimum each month
• Traps you into paying interest for Traps you into paying interest for yearsyears
• Curb your spendingCurb your spending
• No extra amount is too smallNo extra amount is too small
4. Restructure your debt.4. Restructure your debt.
• Transfer balance to card with lower Transfer balance to card with lower raterate
• Read your credit card agreementsRead your credit card agreements– Can change with just 15 days’ noticeCan change with just 15 days’ notice– Grace period?Grace period?– Late payment fees?Late payment fees?– Balance transfer fee?Balance transfer fee?
• Pay your bills on timePay your bills on time
5. Home equity, savings, 5. Home equity, savings, 401(k)s.401(k)s.
• Home equity loan or line of creditHome equity loan or line of credit– Consider using ONLY if you’re sure you Consider using ONLY if you’re sure you
can make paymentscan make payments
• Take money out of savingsTake money out of savings
• Borrow from 401(k)Borrow from 401(k)
• File bankruptcy as last resortFile bankruptcy as last resort– New law makes it more difficultNew law makes it more difficult
6. Get rid of the cards.6. Get rid of the cards.
• Keep two national credit cardsKeep two national credit cards
• Close other accountsClose other accounts
• Use debit card insteadUse debit card instead– Automatically deducts purchase price Automatically deducts purchase price
from checking accountfrom checking account– Must ask “do I have the money?” before Must ask “do I have the money?” before
buyingbuying– No bill at end of monthNo bill at end of month– No interest chargesNo interest charges
7. Protect credit history.7. Protect credit history.
• Pay loans and credit card payments on Pay loans and credit card payments on time.time.
• Check credit report periodicallyCheck credit report periodically
• Free copy from Free copy from www.AnnualCreditReport.com
• Review credit report for errorsReview credit report for errors
• Avoid credit repair scams – no quick Avoid credit repair scams – no quick fix!fix!
8. Set a budget.8. Set a budget.
• Track your spending.Track your spending.
• How much are you spending on rent, How much are you spending on rent, food, transportation, etc.?food, transportation, etc.?
• Look for ways to cut back.Look for ways to cut back.
• Freeze your credit cards, literally.Freeze your credit cards, literally.
• Think before you buy!Think before you buy!
9. Ask for help.9. Ask for help.
• Consult with a CPA.Consult with a CPA.
• Contact nonprofit consumer credit Contact nonprofit consumer credit counseling service.counseling service.– Consumer Credit Counseling ServiceConsumer Credit Counseling Service– 1-800-388-22271-800-388-2227
10. Start saving.10. Start saving.
• Pay yourself first.Pay yourself first.
• 3-6 months of living expenses3-6 months of living expenses
• Help you avoid using credit cards for Help you avoid using credit cards for unanticipated expenses.unanticipated expenses.
• Next, save toward financial goals.Next, save toward financial goals.– Retirement, education, etc. Retirement, education, etc.
• What you don’t see, you don’t spend.What you don’t see, you don’t spend.
More informationMore information
•www.ValueYourMoney.org – Texas – Texas Society of CPAs’ free consumer Web siteSociety of CPAs’ free consumer Web site– Articles on variety of topicsArticles on variety of topics– Monthly consumer e-newsletterMonthly consumer e-newsletter– Personal finance toolsPersonal finance tools
•www.360FinancialLiteracy.org – – American Institute of CPAs’ free American Institute of CPAs’ free consumer Web siteconsumer Web site
