Bad Debt Credit Card, Know When To Borrow

Bad debt credit card sounds like it's not a good idea but actually if handled properly, it's great for rebuilding the financial health.  It is also a great time to learn about bad debt.  For example, if you are having a difficult time making the monthly payment, don't use the credit card for meals and vacations and other things that are quickly consumed.

Essentially, a bad debt credit card is one that is issued to those whose debt history is bad.  This may surprise you because why would anyone issue a card to those who have a bad debt history?  Well, the issuers are taking a chance on you that you will default sometime and they will earn money off you.

So what do you do in such a case? Well, do what they are doing and use the issuers to rebuild your credit. Just watch very carefully that you do not default ever. This is not difficult to monitor anyway. Just list down each purchase and take note of the due date so you do not miss out on any payment due date. You will see your credit history build up each month. Here are the things to learn before delving deeper into bad debt credit card:

• Debt is good if you are borrowing for a college education or a home; Just make sure you're dealing with a reputable company and borrow only what you can afford to pay. Research for the best interest rate available.
• Debt is bad if you borrow for things that are quickly used and cannot afford to pay in full when the statement comes around.
• You are not alone for Americans run up a high credit card debt.
• Control the spending or it will control you. List down each expense for a whole month. See which ones are unnecessary and cut them out so you can use the savings to help pay off your debt.
• Pay more than the minimum each time or risk having to pay thousands more for an item.
• List down all what you owe and start paying off the ones that charge the highest interest rate first while paying the minimum on the others. Once you're done paying off the first debt, work on the next highest interest rate loan or card and so on down the line until you're debt free.
• Build an emergency fund for some unexpected expenses. This is usually three to six months of the income.
• Know that borrowing against the 401K and home is not a prudent thing to do. You might end up not having enough funds for retirement or you could lose your home if you default.
• Paying off the mortgage is also not a good idea if you possess other debt because usually the interest rate is low and may be tax deductible. Refinance the mortgage if the interest is high to one that incurs a lower interest rate.
• Know that there is help available from reputable companies but watch out for the bad ones.

There you have the information needed to make sure you have the facts on hand. As with everything else knowledge is power so knowing the ins and outs will help make the best decisions on whether to rebuild one's credit history with the use of a bad debt credit card.

Roger Guzman, M.D. and Evelyn Guzman

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