One Way or Another, You Pay Credit Card Debt.

Good morning.

I wanted to take a break from the markets today and talk about debt for a bit.

One of the biggest financial mistakes people make is getting too deep into credit card debt.

Too much credit card debt can come back to haunt you in the event of a loss of income due to a job loss or illness.

Here’s an example.  Let’s say you have $10,000 in credit card debt, suddenly lose your job, and find yourself unable to pay back the loan.

Eventually the credit card debt will go into default, and the credit card company will charge the debt off as a loss.  You will then be hounded by debt collectors who purchased your debt from the original credit card company in hopes of recouping some, if not all, of the balance you owe for a profit.

Debt collectors have a seven-year window to legally collect the debt from you.  If they fail to do so in that time limit, they cannot legally pursue the debt.

At that point, you may think you’re in the clear.

Not quite!

The IRS will recognize any debt that you have been excused from paying as income…and tax you accordingly!

So the $10,000 in debt you did not pay will be considered income as far as the IRS is concerned, and you may get hit with a tax bill of between $2000 and $3000.

So just remember, when it comes to credit card debt (or debt of any kind), you will pay one way or another.

*  The Stock Market is For Everyone, Eric Milton’s short guide to stock market investing for beginners, is available in e-book and paperback formats.  If you like what you see on this blog, we hope you’ll take a moment to purchase and read the book, let us know what you think via a blog comment or Amazon review, and share this information with others!  Thank you. *

 

Wealth And Credit!

Yesterday, the Federal Reserve announced that they would be increasing interest rates by a quarter of a point.

“How will higher interest rates affect me?”  If you’re wondering about this, read on:

First off, auto loans, home equity lines on credit, and some other loans will not be impacted by the Fed’s decision.

The biggest change you will likely see is that the interest rate on your credit card will go up by the same amount of the increase.  If you carry a balance from month to month, then this is obviously not a good thing.

What I would do in this situation is contact my credit card company and ask them if they could lower my rate.  Many people are not aware that you can do this, but you most certainly can!

And remember: debt is the enemy of wealth.

You should pay down your balance as soon as possible, and avoid carrying a lot of credit card debt.

Until tomorrow!

*  The Stock Market is For Everyone, Eric Milton’s short guide to stock market investing for beginners, is available in e-book and paperback formats.  If you like what you see on this blog, we hope you’ll take a moment to purchase and read the book, let us know what you think via a blog comment or Amazon review, and share this information with others!  Thank you. *

Debt Is The Enemy Of Wealth!

Good morning!  Today I’m going to talk a little about debt.

I was inspired to mention this topic by something that I overheard at work.  A small business owner applied for a business loan, and was denied due to a FICO score of around 500.

Building wealth while racking up a large amount of credit card debt, defaulting on loans, and the like is very difficult, if not impossible to do.

Remember: debt is the enemy of wealth.

I listen to a podcast about financial planning.  The host was talking about a couple he knows that has an annual income of $1,000,000.  They have a net worth, though, of -$200,000.

How could that be?

Debt!

If you’re in trouble with debt, take steps to get out today.

*  The Stock Market is For Everyone, Eric Milton’s short guide to stock market investing for beginners, is available in e-book and paperback formats.  If you like what you see on this blog, we hope you’ll take a moment to purchase and read the book, let us know what you think via a blog comment or Amazon review, and share this information with others!  Thank you. *