Ask Money

Wasting money on credit card debt

Chris Farrell Mar 17, 2011

Question: I currently have about $12,000 dollars of credit card debt accumulated over the past five or six years. I pay the minimum amount each month (at this point the minimum amount is pretty high) because it’s all I can afford. I’m in graduate school and have a very low income. With the payments I am making, the balance hardly goes down at all each month because of how high the interest rate is. I feel like I am wasting money. What do you recommend I do? I’m interested in some type of debt consolidation program, but have no idea where to look, or which ones are legitimate. Any advice is appreciated! Thank you. Michelle, Tucson, OK

Answer: You’re right to be concerned about where to turn for help. The pay-me-a-big-fee-upfront scamsters and other fly-by-night operators are out in force these days trolling for indebted victims. Steer clear of outfits that advertize on TV, the radio, and even flyers tacked on to telephone poles–I’m not kidding.

A good resource to get a handle on your situation is Reduce Debt, Reduce Stress bt, reduce stress
by Gerri Detweiler, Nancy Castelman and Marc Eisenson. It offers practical advice illustrated with examples on ways to eliminate debt. The techniques they recommend start out slow but gather momentum with time.

They also cover debt consolidation loans. It’s usually a bad idea, but it’s worth reading more about consolidation loans.

The book may offer enough guidance. If it isn’t I would get in touch with the National Foundation for Credit Counseling. It’s a legitimate organization that has been around for a long time. You can find a branch near you on their website. The United Way and a number of churches also make personal finance referrals and services.

I would talk over your situation with a credit counselor. A consultation may offer all the help and guidance you need. But I would explore whether a debt repayment plan makes sense for you, too. In essence, you deposit money each month into an account at the credit counseling agency. It takes the money to pay creditors along the lines of your repayment. The agency lobbies to get better loan terms for you.

I don’t know if your graduate program can get you some more income, but it’s worth a try. Good luck.

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