The alternative option to bankruptcy that most people don’t realize is available is called Debt Settlement.  Debt Settlement is a process in which a negotiator is able to reduce the debt by a significant amount. In today’s market there are so many companies out there trying to win your business that you may get confused as to which company to go with. My advice is to first research the companies and compare their fees. With the new FTC rules, starting October 27, 2010 for-profit companies that provides debt settlement services over the telephone may no longer charge a fee before they settle or reduce a customer’s credit card or other unsecured debt. To make things easier, there are debt settlement networks such as United States Organization for Bankruptcy Alternative that you can contact. Their role is to regulate the debt settlement companies to insure that they are not fraudulent.

When researching a company always compare their fees. Some companies may charge a large fee while other’s my not charge any fees. But the way to save the most money is to negotiate with the creditors yourself. With this method you will need to have knowledge regarding policies, conditions, and terms. Most people will attempt this before they even call a company for help. There are chances that you may succeed on your own but prepare for lots of run-arounds.

Debt settlement is a great method to lowering your total outstanding balances by 40% – 60%. The reason why it’s so common today is because creditors are more willing to accept a settlement versus not receiving any payments at all. A creditors incentive is to collect funds that would have been lost if the customer was to file bankruptcy. The other incentive would be that they could often recover more funds then if they were to sell the bad debt to a collection agency. Collection agencies often purchase bad debt for about 1 to 12 cents on the dollar.

Becoming debt free through a debt settlement process is a fantastic way to get back on track. Remember, the key is to find the right company to assist you.

Now, we’ve all signed up for a new card and received in the mail. The first thing we do after that is generally always the same.  On the card is a fancy sticker that says you must call to activate your card.  The funny thing is that once you are approved for this new card your card is almost always already activated.  The credit card companies just use this activation method as a way to build trust between their clients, and a way to start off your relationship on a positive note.  While it is not always necessary to call and activate your new credit card, it is generally a good idea anyways.

The next myth I am going to discuss involves those fun new credit card offers you get in the mail every single day.  You know the ones I’m talking about, the ones that say you’re already approved and that you can get a new credit card immediately if you will just accept this offer!  While many of us have learned that most of these offers should be immediately ignored, that doesn’t mean they are going to stop sending them in the mail.  One myth that has grown out of this process is that by sending the offer back to the company in the pre-addressed envelope will let them know that you are no longer interested, alerting them to stop sending you offers immediately.  Well, that’s not going to work.  Sending back those offers will not opt you of the service of receiving those offers in the first place.  The only guaranteed way to do it is to look for some sort of online service, and there are many different sites that will do it.  While these sites will not eliminate every offer you receive, it will go a long ways towards reducing the overall number.

The third and final myth I am going to discuss today involves your personal identification whenever you are using a credit card.  Many merchants nowadays will make you show some sort of proof of identification whenever using a credit card so they can cut down on fraud.  However, there is no agreement between most major credit card companies and the merchants who accept them saying that ID is required.  In fact, in most cases it is prohibited.  The merchants’ quest for ID is purely to help guarantee their own self interests so they do not get cheated out of a large sum of money.  While many of us hand over our identification willingly, you should know that you do not always have to.  However, not doing so may result in a bit of a fuss from the merchant.

While these three myths are not things that generally cost the public large sums of money, they are three small steps towards a better educated general public.  The more you know about credit card companies and how they work is going to help you in the long run when you are trying to figure out your own personal finances.

As I discussed in our previous article it is necessary for you to create a budget for yourself in order to help monitor your finances.  Even after you are able to escape your debt you must continue to follow this budget strictly, tweaking it as necessary in order for you to keep it up to date with your finances and other such situations that may arise.

Another popular idea that I highly recommend in this stage is to visit a financial advisor.  Now, while seeking out help through articles such as this is a great help it is rarely enough to answer every question you might have.  A financial advisor is a very worthwhile investment that can really help you out in this sort of situation.  They can also help you allocate your resources wisely and in a way that is going to be strictly beneficial to you as an individual, whereas articles such as this are much broader and focus more on the masses than the individual.

We discussed in an earlier article the importance of spending money wisely, and that is essentially what you must do to stay out of debt.  The great news is that you have already been living a financially healthy lifestyle for awhile now since you were able to get out of debt, so it is important to continue along that trend.  However, all the money that you previously spent on getting out of debt can be used how you like.  One thing that I do recommend is that you save a portion of this money in case of an emergency.

Another very popular thing to do once you’ve escaped debt is to begin to save for something you previously didn’t have.  It is very hard to save for a car or house while you are constantly wrestling with your credit card debt, but now that it is gone the money you save will still be there in a few weeks when you check your balance again.  The ability to save is seemingly a lost art in today’s economy, but if you can master this skill you will live a much more comfortable life than those struggling with debt and overspending.

After you have paid off all of your credit card debt you must continue to live in a similar manner to the way that got you out of debt in the first place.  Too many times have I seen individuals fight for years to get out from under their credit card debt only to fall right back into it again soon thereafter.  The way this is avoided is by staying away from previous habits that got you into debt in the first place.  If you are able to master this small yet crucial skill you are going to be on the fast track to financial freedom.

I have heard all kinds of excuses during my stint as the Debt Reduction Doctor, DRD for short, and all of them begin to sound the same after awhile.  Some people have too much debt, others don’t know how to get started, and some just keep piling more debt onto their already impressive pile of owed cash.  The trick to escaping credit card debt is diligence and perseverance, both of which are traits that can be learned and perfected.

First things first to all you credit card addicts, get rid of your credit cards!  Throw them away!  Burn them!  If hiding them in the closet is not going to be able to stop you from digging it out and spending more then by all means put it through the shredder!  There is one constant fact about credit card debt, if you don’t use your credit card you won’t rack up more debt.  This is much easier said than done for most.  If you are in a state where you are deep into credit card debt then you are probably very used to relying on your card in many instances.  This is a habit that must be broken if you want any chance of getting out from under your debt.

After you have gotten your credit card under control begin to set a budget for yourself.  I can’t remember how many times I have given the same advice, but I know I will say it again in the future.  Without a hard budget there is no way for you to monitor and check yourself on a consistent basis.  Sure, we all think we can do it mentally and have things just go through our brains but we cannot.  It is simply too much information for us to always be thinking about, which is why a hard copy of a budget is the perfect solution.

Now, after you have developed your budget you must remember that it can, and will change.  It is not set in stone, and it will vary depending on your income from month to month.  For instance, when you get a tax return you are going to have a few extra bucks lying around that could be spent on luxury items you cannot normally afford.  Or, you can do the responsible thing and use it towards your credit card debt.  Of course that’s not the most exciting choice, but that is what your doctor recommends.

Begin to chip away at the credit card debt you have established, but recognize that it is going to be a process.  It isn’t going to magically disappear after a few months of diligent payments.  This is generally a process that takes years to complete, so be sure you are ready for the long haul.  Eventually you will notice the numbers start to dwindle, and you will become excited about making your next credit card payment!  Don’t believe me?  Just wait and see, but it certainly feels good once you are coming close to achieving that ultimate goal.

Once you are out from under your credit card debt you are now in just as difficult a spot.  What you do after you get out of debt is going to be just as crucial as all the steps you took to pay off your credit cards in the first place.

A long time ago somebody described the aspect of credit as “Man’s Confidence in Man.”  It is obvious to see why, considering it is essentially a loan that one individual, or company, is expecting another individual to pay off with added interest.  However, nowadays you can choose to look at this slightly differently.   In my personal opinion, credit has nothing to do with the level of faith the credit card companies have in you, but the level of faith you have in yourself.  Credit cards are perfect examples of a slippery slope that can lead to very long term consequences, and can have a profoundly negative effect on your life.

While all of this gloomy talk of credit cards may seem like an attempt on my behalf to scare you away from credit altogether, nothing can be further from the truth. Credit is a fabulous way to make your life easier and more luxurious, when it is used correctly of course.  Not every person has the spare money in their pocket right now to bring home that fancy new television, but you know in a month or two you will be able to pack it up.  Credit cards are going to allow you to bring that new toy home now, which is something that we all would enjoy.  However, to quote a famous superhero’s father, with great power comes great responsibility, and if this credit card is abused you will begin to face an uphill battle even Spider-Man would have trouble swinging out of.

In the modern world, credit card debt is known almost as a way of life.  Unfortunately, this constant access to instant credit is destroying many people’s financial stability because of their inability to control themselves.  In all honesty, the best way to manage your credit card debt is a simple line that you have heard many times before, don’t spend more money than you earn.  This apparent blatant remark is something that many people struggle with on a daily basis.  Just because you have the credit limit that will allow you to spend a certain amount of money doesn’t mean you have the finances to spend the money, and that is a very important distinction.

Just as I stated earlier, credit cards do offer many good qualities as well. Responsible use of credit is a fabulous way to establish a history of financial dependability, which will increase your chances at receiving an important loan, such as a mortgage or even a car payment.  The balance between responsible and reckless credit use is a very thin line, and it varies by each individual, so it is up to you to determine where you stand in the ever changing world of credit debt.

If you are trying to avoid credit card debt altogether or simply looking to put a cap on the mountain of debt you already face, there are many small pieces of advice that can help.  First off, never use a credit card for something you have the money to pay for yourself.  Avoid credit cards with high interest rates and try not to use the credit card for items you really want, but only items you feel you need.

Open-ended credit is available to anybody at anytime.  At any given moment, thanks to the marvels of the internet, you can instantly apply for thousands upon thousands of credit cards.  Now, almost every card is going to be different from the one before it.  Some have no annual fees and high interest rates, some have high annual fees and low interest rates!  Honestly folks, the credit card coaster is one that travels in outrageous patterns and hits all different cylinders.  The trick is to find the card that works best for your particular budget and way of life, and this is much more difficult than you might think.

When you apply for a certain credit card you are instantly given a credit limit.  Much of this depends on your credit history, but basically boils down to what the credit card companies are comfortable giving you to spend.  As you begin to use your card, responsibly of course, you must start making monthly payments on the balance of your card.  Your monthly payment is going to depend on how much money you owe, and will vary from month to month.   If you owe $200 one month your payment may only be $15, but if you increase that to $500 the following month you may be looking at a monthly payment of around $60.  Like I stated before, much of this depends on your interest rate and other details that are going to be different for every different card.  One quick side note, if you are using a card that utilizes the annual account fee you must also take that into consideration when marking out your payment plan.

There is no doubt that this form of credit is one of the most convenient ways to borrow, but it can come at a high cost.  If you overstep your boundaries and spend too much you may be looking at an unforgiving pit of minimum payments that barely cover the monthly interest rates. Trust me, this is not a good position to be in.

Another trick used by credit card companies to keep you trapped is their minimum payment.  As you pay off more and more of your debt the minimum payment is going to be reduced.  This may seem like good news, but it is actually the credit card company’s way to keep you in their clutches a little longer, squeezing more money out of you the entire time.  One way to avoid this vicious cycle is to continue to pay more than the required minimum when attempting to pay off an open-ended credit account.

While this is perhaps the most convenient form of debt, it has the potential to be very dangerous.  When used correctly it can be a very powerful ally, but when abused it can lead to frustration and financial nightmares for years to come.  If you are seeking a revolving credit account be wary, it can be your best friend or your harshest enemy, so spend wisely!

If you want to start off on the intelligent track there are some things you must do before ever even spending a dollar on a credit card.  The first element is crucial, do your homework before you apply for a credit card!  Always take a close look at the terms of the card you are seeking, and be sure that you understand every aspect of this card.  You need to know what the annual fee is, what the interest rate is, and what sort of penalties you are facing if you fail to make a payment.  All of these things are going to play a major factor in your financial life once you start consistently using a credit card, so be sure to do your research beforehand.

Once you understand your card(s) and the different rates they offer, you will undoubtedly begin to use them.  It is important that you always know your current balance, however, or else you may overextend yourself.  Just as we have stated many times before, be responsible with your spending, and a large part of this depends greatly on how up to date you are with your current balance.  Never let it get out of hand or beyond reach, and if you begin to feel you are developing a spending problem with your card, get rid of it!  Always control the card, not the other way around.

The role of debt in your life is very often substantial, so it is always important that you take a wise and balanced approach to the world of credit.  Think of credit cards almost like a casino; they are built as a maze to keep you in and are always trying to entice you with new features and flashing lights, fancy advertisements everywhere trying to draw you in every moment of the day.  It is up to you to be able to withstand these temptations and look past the shallow joy that they are promoting.  A responsible credit card owner knows that credit cannot be used just for toys and fun, but as a tool that can make financial life more satisfying and less stressful.

Any dedicated economist knows that nothing is free.  There is a cost for everything, even if they claim it is free. This is the approach you should take when you are seeking to earn credit card rewards.  You may earn airline miles or gift cards, but they certainly do not come without cost.  Every time you use your credit card for a purchase you are paying the price of that product plus whatever potential interest you accumulate due to lack of payment or other situations that arrive.  This means that the free miles you thought you were earning are actually increasing in price with every purchase you make, and the more you spend to earn rewards the more these rewards end up costing you in the long run.

It is very common for people to want to believe something instead of using their brain and thinking through a process clearly.  The reason companies’ use the word free so often is because of the positive connotation it gets from people who see it and become immediately intrigued.  The problem, however, is that nothing is free, and that you end up paying for your free items regardless.  Nobody understands that more than the ruthless credit card companies, who will constantly be looking for new ways to trap you in their web of interest and unpaid bills.

So, let us pretend that you sign up for a new card because the rewards program is absolutely stunning.  You can earn gift cards to your favorite restaurant, airline miles, or even cash.  This seems like such a stellar deal you can’t sign up fast enough, and once you receive your card you immediately start to spend.  You will certainly rack up a good deal of reward points if you use your card enough, but the real problem is the inflating number on your credit card statement.  You may earn yourself a $25 gift card to Olive Garden, but you are also quickly over a thousand dollars in debt and looking at months of interest payments just to get out from under the shadow of debt you have created.

Now, credit card incentives do not always have to be a terrible thing.  They can be helpful and a positive way of providing some advantages to using your credit card.  However, just like any other form of credit you must always be wary of these rewards and never over-extend yourself.  Spending too much to receive a reward is still spending too much, and you will be left in a much worse position than you were originally, even though your only incentive was to get a few airline miles that you thought were free.

The new law means that every credit card company must consider each applicant thoroughly before handing them the keys to the credit express.  The credit card companies must examine the applicants ability to pay off the loans they are given, and if they are deemed unable to do so then they will not be receiving the card they are seeking.  Life on easy street for credit card seekers is coming to an abrupt halt, and the future is apparently now.

Now, if you are unable to verify your income in a thorough and direct manner you may quickly find yourself without a credit card.  For most people this change won’t have a tremendous effect, but for others it may be somewhat concerning.  The people this new law is most likely going to affect the most are the unemployed and small businesses that use credit cards when they are in a pinch.  So with this new law there is the possibility that some small business owners will be unable to keep up the new demands of the law, leaving some of them out in the cold.

Most small businesses are struggling in this current economy as it is, and the new Credit Card Act is only going to compound their problems.  When the economy is struggling and less clientele is circulating amongst small businesses, they rely on credit cards to help them get by.  With this new law there is a chance that this safety-net luxury will be unavailable in the very near future.  If this becomes a well that small businesses can no longer drink from there may be a drastic reduction in the amount of successful small businesses we see.

Now, this is news that probably doesn’t apply to many of my everyday readers, but debt is already a serious concern for many small business owners in today’s market.  Being prepared for an upcoming shift in the credit card world is something that may be crucial to your business to survive.  Obviously not all will be able to withstand the sudden change in policy from the credit card companies, but with the proper research and preparation there is a good chance your business can be better prepared when the time comes.

Now, we are going to stick strictly to credit card debt for this scenario because as I have discussed earlier, installment debt usually gives you a clear look at the future and lets you know when and where you will pay off that particular loan.  With a credit card, or revolving door loan, paying off your debt is purely based on how much money you spend towards your account.

For starters let us put in a level of debt that is fairly high, but something that many people are facing right now.  If you are looking at a $10,000 credit card debt currently with a pretty standard interest rate, say around 18%, it will take nearly fifteen years to pay it off if you keep going making only the minimum payments.  If you choose this method you will also rack up nearly six thousand dollars in interest alone, meaning you will pay 160% of the money you originally borrowed back to the credit card company.  Now by simply doubling your minimum payment each month you are looking at only seven years and closer to two thousand dollars in total interest.  Obviously it pays to pay more than just the minimum payments in these sort of scenarios.

Now let’s say you are even deeper in debt than the first example, and are facing a credit card deficit of $25,000.  Paying only the minimum balance for eighteen years will get you out of this hole, with it obviously reducing in time by one half if you double the amount you pay each month.  Only making the minimum payments on this level of debt will have you paying almost $15,000 in interest alone by the time your debt is paid off, meaning you spent more money on interest than most people do on used cars.

In our final example we will look at a lot less severe level of debt, only five thousand dollars.  In the end you will end up paying only around three thousand dollars in debt, but that is almost eighty percent of your initial debt level.  Increase the amount of money you spend monthly and you can finish paying off this level of debt in five to six years rather than ten to twelve.  This is a drastic difference you are certain to appreciate.

Now the obvious message here is that paying only your minimum payments is going to result in a lot more money lost in the long run.  Sure it seems like you’re saving money now, but in actuality you are costing yourself big time down the road.  Now, you can take these three examples and find out about where you stand in this sort of situation in relation to your own level of debt and begin to plan accordingly.  This is a very useful tool when looking into your financial future, something that we should all be doing.