Credit Warning Signs

Posted by: Michael S. | Apr 29,2008


Procrastination about dealing with credit problems is not at all surprising.  Who wants to look at a bank account with dwindling funds, or look at a credit card bill with a terrible interest rate and finance charges. Don’t feel bad if you’re one of those people (one of many) who sweeps credit problems under the rug for a later time.  It’s an understandable response to a difficult situation.  That said, I don’t want to sound like an enabler.  You really need to get away from avoiding your credit problems.  Here are some serious warning signs that you need to start tackling your credit problems immediately.  I’d say you should start managing your finances before problems turn into a crisis, but if you reach any of these points it’s time to think long and hard about how you’re going to effectively manage your money. 

Credit Card Warning Signs:

1. You pay your credit bills ten days late on a consistent basis: true for mortgages, credit card bills, student loans, and other loans.  If you pay on the due date over the phone or online, this is another bad sign, as it shows you’re overextended.   
2. You only pay the minimum on credit cards.  True, if you’re doing this only to save money, this might not be a problem.  But if you’re paying the minimum because you can’t afford more, this is a warning sign.  
3. Using credit cards for living expenses.  This may the most important one.  It’s the biggest signal that you’re spending is outweighing your income.  
4. By the same token: using credit for cash advances or using cash advance checks.  This is even worse than #3 because the interest rate is astronomical, even for cards with a low rate for purchases.  It just makes a bad situation worse.    
5. Receiving collection notices.  Should go without saying.  
6. Maxing out a card and then applying for a new card, rather than paying the old card off.  Also, continually extending your credit limit falls into the same category.  
7. Living paycheck to paycheck with no savings left over. 

Like I said, those are all reasons to make you want to put your head in the sand and avoid thinking about it.  But you know that’s exactly the opposite tactic you should take. Applying for a balance transfer card to pay lower interest on your current cards and budgeting to scrape together some extra cash you can put towards your credit card bill or savings account are two of the most useful methods for getting out from under the weight of debt.  Neither is a very difficult process and it can just feel good to know that you’re dealing with your problems, rather than avoiding them and leaving all these problems unspoken and boiling beneath the surface.  Click here for our calculators that can help you manage your savings and overcome your current debt problems.  

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