Things you shouldn't do when trying to pay off your Credit Cards
Being in credit card debt can be an extremely depressing situation. Many people who owe large amounts of money on their credit cards will do anything to pay them off. While you should want to pay off your debts, it is important to be wary of which methods you choose to use. Some of the methods used for paying off your credit cards can bring more problems than solutions.
There are a number of methods people use to pay off their credit cards which can get them in more trouble. Much of this advice is given by 'experts' who don't have the best interest of the consumers in mind. Many people make the mistake of getting a home equity loan to try to pay off their credit card debt. While this sounds like a simple plan, there are a number of problems which can arise. Homeowners who get an equity loan will have to pay a variety of different fees, many of which may not be initially disclosed to them.
Homeowners typically aren't informed about these fees until they are well along in setting up the equity loan. In addition to this, your home is now at risk of being taken if you fail to make your payments. The real problem with credit debt is the inability of many consumers to live within their means. Once they've consolidated their loans using their equity, they will often end up in more debt, and will have to make payments on their equity loan.
The second mistake people make when trying to pay off their credit cards is taking the money from their retirement savings. Many people fail to realize that they will be penalized for at least 10% for removing your money early. You can also expect to get taxed for the normal income tax rate. After this is done you will only receive about 60% of your savings, and this may not be enough to pay off your cards.
Another mistake many people make when attempting to pay off their cards is using a cash advance. Cash advances are very expensive, and you may have to pay a 5% fee plus an interest rate which could be as high as 20%. Because of these fees, taking a cash advance will do little to help you pay off your debt. Many people also try to use payday loans, and with interest rates of up to 35%, they are of little help in paying off your cards. The best method for paying off your credit cards is to become responsible when managing your finances.