Teach Your Kids to Avoid Debt Settlement
Often, people end up in debt because they haven't been given the financial lessons necessary to avoid being in debt. Don't leave the same legacy to your children. Instead, teach them how they can avoid facing debt settlement - not necessarily by avoiding credit cards completely, but by using them responsibly.
Teach Good Credit Habits
You do have to pay for credit card purchases. Perhaps one of the biggest misconceptions kids have about credit cards is that the plastic can be used to pay for purchases when you don't have the money. This is only partly true. The rest of the story is that you have to eventually pay off your purchases a little at a time or all at once.
Minimum payments aren't as easy as they seem. So the credit card company just wants a little money every month, that's fine, right? Sure, minimum payments may work in the short term, but a variety of things can happen that make it impossible to even make the minimum. For example, the credit card issuer can raise the minimum payment, something they have the right to do. Or, you could lose your job. Other expenses creep in and claim your income.
Paying your balance in full is the best way. When you pay your balance in full at the end of the month, you avoid the risk of minimum payments that suddenly become unaffordable. If you pay your balance off every month, you never have any credit card debt to worry about.
Only charge what you can afford to pay in full. This is how you can be sure you can afford to pay your balance in full, because you know before you charge exactly how much you can afford to pay. It doesn't matter if your credit limit is $10,000, if you can only afford to pay a balance of $50, then you should only charge $50.
Resist temptation. Credit cards are very tempting. Credit card issuers dangle credit in front of you hoping you'll charge as much as you can, even if you can't afford it. Why? Because credit card issuers make more money when you charge more. They also make more money when you take a long time to pay off your balance, i.e. make minimum payments. You must be able to say no to things you can't afford and instead save up for them.
Explain the Effects of Debt Settlement
On the surface, debt settlement sounds like a good easy way out of your debt. Your creditors get 40% to 60% of your total balance, you're let off the hook for the rest, and you still get to enjoy the stuff you bought. Except that debt settlement can hurt your credit and your ability to borrow more money for several years.
Once you settle debts, the same creditors who dangled credit in front of you, will turn you down for future applications. They won't want your business once you've shown you can't pay your debt obligations. You can turn your credit situation around after debt settlement, but it's much easier to stay debt free from the beginning.
Teach Good Credit Habits
You do have to pay for credit card purchases. Perhaps one of the biggest misconceptions kids have about credit cards is that the plastic can be used to pay for purchases when you don't have the money. This is only partly true. The rest of the story is that you have to eventually pay off your purchases a little at a time or all at once.
Minimum payments aren't as easy as they seem. So the credit card company just wants a little money every month, that's fine, right? Sure, minimum payments may work in the short term, but a variety of things can happen that make it impossible to even make the minimum. For example, the credit card issuer can raise the minimum payment, something they have the right to do. Or, you could lose your job. Other expenses creep in and claim your income.
Paying your balance in full is the best way. When you pay your balance in full at the end of the month, you avoid the risk of minimum payments that suddenly become unaffordable. If you pay your balance off every month, you never have any credit card debt to worry about.
Only charge what you can afford to pay in full. This is how you can be sure you can afford to pay your balance in full, because you know before you charge exactly how much you can afford to pay. It doesn't matter if your credit limit is $10,000, if you can only afford to pay a balance of $50, then you should only charge $50.
Resist temptation. Credit cards are very tempting. Credit card issuers dangle credit in front of you hoping you'll charge as much as you can, even if you can't afford it. Why? Because credit card issuers make more money when you charge more. They also make more money when you take a long time to pay off your balance, i.e. make minimum payments. You must be able to say no to things you can't afford and instead save up for them.
Explain the Effects of Debt Settlement
On the surface, debt settlement sounds like a good easy way out of your debt. Your creditors get 40% to 60% of your total balance, you're let off the hook for the rest, and you still get to enjoy the stuff you bought. Except that debt settlement can hurt your credit and your ability to borrow more money for several years.
Once you settle debts, the same creditors who dangled credit in front of you, will turn you down for future applications. They won't want your business once you've shown you can't pay your debt obligations. You can turn your credit situation around after debt settlement, but it's much easier to stay debt free from the beginning.
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