Weather the Storm by Keeping Credit Card Debt

I think it's interesting that when Suze Orman first came out with this advice, people thought she was crazy.

But I now see more and more blogs catch on that this may actually be sound advice to weather this storm. It just goes to show you that changing people's assumed mode of operations is not easy...

I know that personally, I came to the same conclusion before I even heard about it from Orman. It makes a lot of sense.

If your job prospects are currently shaky - I completely agree that cash is much more important than paying down credit.

It was a big change of direction for Suze Orman when she came out with advice. Up until credit started getting tight she was advising people to pay of all their debt first and foremost.

Makes me wonder if she had been giving more balanced advice all along if some people would have been better prepared to weather a job loss, even if they paid a little more in credit card interest.

Absolutely Wojciech. No matter what Suze Orman says, each of us has to find our own right balance of paying down credit card debt versus building the rainy day fund.

Like investing in the stock market, choosing to pay down your credit cards at the expense of building a savings fund is risky business. Sure, you'll be debt-free, but you'll have very little cash to fall back on if you lose your job or your credit card company starts jerking you around. On the other hand, ignoring your credit card payments could result in owing a lot of interest or a dropped credit score due to delinquencies. It's a tightrope that not all of us are able to walk across!

I would also recommend CUTTING THE PLASTIC UP, its easy if your stuck for cash to just whip out old mr visa, but you'll never pay it off even if your paying more than the minimum

Good point! A key factor is to NOT accumulate more credit card debt, so do whatever is necessary to stop using your cards (short of canceling them altogether, which may have a negative affect on your credit score).

As soon as you notice a problem, call your credit card company. They are interested in keeping you as a customer so don’t wait until you’re in too deep. Talk to them and they will often work something out with you. Fixing problems early is a key to minimal damage to your fico score.

Communicating with your creditor is always a good idea. When you find yourself slipping so much that you don't think you'll be able to keep making your minimums, call them to try to work out something before they start reporting delinquencies to the credit bureaus and sending debt collectors after you. They might not agree to negotiating down your debt, but they may be willing to lower your minimum payment. It doesn't hurt to try.

JP Morgan Chase sent me 2 letters which I received on Saturday. The first that I opened told me what a "valued customer" I was but I missed a payment. I pay my bills online and I guess there was a glitch in their system and it only paid $150.00 -vs- the minimum plus $50 that I had put in to pay.

Mind you, this credit card has not been used in over a year but each month the credit limit is lowered.

The second letter tells me that they are cancelling my account because "the balance grew too fast compared to credit limit" and "total available credit on bankcards".

I called the executive office of JP Morgan Chase and spoke to a lady and they will not reinstate the credit card so my credit report is going to take a hit from them. I don't feel like I should continue to pay them because the reasons given for dropping me as a customer is due to their actions not mine.

If my credit report is going to take a hit and I can use that money to keep my business open that is what I am going to do.

Mad as a hatter,
Did Chase report your delinquency to the credit bureaus? (If you haven't pulled your credit report lately, you should). One payment less than 30 days late won't hurt your credit score too terribly much. Unfortunately, however, credit card companies use one missed payment as an excuse to start jerking you around, such as lowering limits or canceling the account altogether. Unfortunately, if you don't pay off your debt with Chase, debt collectors will start to come after you. The debt will continue to affect your credit score, making it increasingly hard for you to qualify for new loans for yourself or your business in the future. Paying off the debt will help your overall credit utilization, which will in turn help your score.

I don't understand the logic of not paying off debt. I know the reasons but they don't make sense to me even in a down economy. Let's assume that you pay off some of your debt and then lose your job. Worse comes to worse, just charge it back up again. Either way, you have access to the money.

Great Article

Credit Card Debt is no fun, especially when your getting a divorce. I only have myself to blame, for the credit card debt that is. But it's managable. I just wished I learned my lesson years earlier. I've written about my personal plan, and so far its working. Time will Tell.

Elementary finance, the problem with depending solely on a credit card is that it might not be there during tough times! Credit card companies are slashing customers' card limits left and right, or canceling their accounts altogether. A savings fund is something you can depend on no matter what action your credit card company may take.

Andy,
So many people only think about splitting up assets during a divorce, and don't realize that divorce also means splitting up debt as well. No matter how stable a marriage, it is important to remember that each of us has a credit score in our own name, and it's up to us (not our spouse) to make sure it stays healthy in case the relationship goes sour or your partner passes away. Best of luck to you.