Pitfalls to avoid when trying to escape credit card debt
Consumers in Michigan and around the country often turn to credit cards following an unexpected financial setback such as a layoff or illness. Paying revolving debt off can be difficult for people who are struggling to make ends meet because minimum monthly payments are made up almost entirely of interest, and other options to pay down debt, such as selling assets or borrowing at more attractive rates, are often not available to those with unmanageable financial situations.
Many credit card companies make their offerings more attractive by setting up rewards programs and offering cashback bonuses, but these incentives can make it more difficult for consumers to escape the revolving debt trap. While these benefits do have a cash value, they often end up costing consumers far more in interest charges and fees than they save them in discounts and bonuses. Another pitfall to avoid is transferring balances to new cards with low promotional rates that increase significantly after just a few months.
Applying all of their available resources to debt reduction can also backfire for consumers. Not having any emergency funds is what prompts many people to turn to credit cards in the first place, and putting no money aside for unexpected expenses when financial conditions improve can lead to a perpetual cycle of debt. Experts also advise consumers to focus on their overall debt picture and not concern themselves too much over how each payment will impact their credit scores.
Attorneys will likely understand how quickly bills can accumulate during times of financial stress, and they may explain how the personal bankruptcy laws provide an escape from overwhelming debt and the possibility of a fresh start. Attorneys could also clear up many of the myths and misunderstandings surrounding bankruptcy filings and explain how pursuing relief under Chapter 7 or Chapter 13 differs from debt settlement and consolidation.