Credit Card Debt!

I watched Oprah yesterday. Suze Orman was on. I like her, but I don't. It's weird. She has so many useful tricks and tips, yet there is something annoying about her. Well I usually don't watch Oprah but this one caught my eye. My kids let me sort of watch it.

The first person they featured was an accountant who had 22 credit cards, had most maxed out and had almost $80,000 in credit card debt! Wowzers! That made me feel super good about my own self! But it got me thinking...could I ever be like that?

So I did some research on my own credit cards. I have 8 of them. 4 "major" ones and 4 store ones. Here's how they break down:

1 Mastercard through my bank - I use this for our everyday purchases of gas, groceries, etc. I typically pay off the last statement balance every month but there is always some balance on it since we use it for our everyday purchases.

1 Discover card - This was my first credit card. I feel loyal to it. I have my Netflix subscription linked to it so I pay a whopping $18 to it every month.

1 Chase Mastercard - I got this last summer. They offered me 0% on all purchases until August 2009. We put most of our home improvement costs on it instead of taking out loans or using all our savings. I'm scrambling now to pay it all off before August 1st. In the beginning of May, I took the balance, divided it by how many weeks were left until July 27th (I want to be safe with the interest rate and have it paid off before August 1st) and set up a weekly electronic payment of way too much every Friday. It's hard to swing it, but I'll be so happy come August 1st knowing this is paid off and we don't have any loans. A "smart" person would just save this in an interest bearing account and pay it all off in one swoop - but I'm not that disciplined.

1 Toys R Us Mastercard - I just opened this a few months ago. I wanted an extra 10% off a swing set we bought at Toys R Us. Once it's paid off, I'll never use it again.

1 Kohl's card - I use this to get super Kohl's coupons. I use it maybe twice a year and pretty much never charge over $100 a purchase on it. There's no balance.

1 Macy's card - Again, like the Kohl's, I use it maybe 2 times a year for clothes and the coupons they send with it. There's no balance.

1 Home Depot card - I use it to get 0% interest for 6 months (sometimes 12) on purchases over $299. I think I have about $200 to pay off at 0% interest until September.

1 Lowe's card - Again, They give you 6 months of 0% interest on purchases over $299. There's no balance.

I'll be honest, 8 of them overwhelm me. Thankfully I don't have balances on all of them. I couldn't imagine having 22 cards! How do you keep track of 22 credit cards? And how do you keep track of them when there is a balance on EVERY SINGLE ONE!

So then here's the scary part - I thought "Well, I wonder, if I went psycho and went on a shopping spree, how much do I have to spend to "max out" all my credit cards?" You know what these crazy creditors will let me spend? $74,200!! I really had no idea what my credit limits were on my cards. Suze made me motivated to check it out. You should too!

I actually did a little internet research at Myfico.com. The average person has 9 credit card obligations and the average credit limit on all combined credit cards per person is $19,000. This is a little bizarre to me since my credit limit is almost 4 times this. About 40% of credit card holders have credit card balances under $1,000. 15% of credit card holders have more than $10,000 in credit card debt. And I guess the other 45% are somewhere in between $1,000 & $10,000.

In case you missed it and want some simple tips to pay down credit card debt, here are some hi-lights I took from Suze and Oprah:

- Don't start saving until your credit card debt is paid off. It would be all flashy and whatnot to boast you got $15K in savings, but if you have $22K in credit card debt, someone needs to knock you upside the head. (Suze didn't say the head slap part - I just added it to keep you interested).

- Pay the minimum balance on all your credit cards on time. This seems like common sense to me, but they really stressed this on the show.

- Line up your cards starting with the highest interest rate. Take the one with the highest rate and pay an additional $10, $25, $100, $200 (whatever you can swing) over the minimum a month until it's paid off. Once it's paid off, move on to the second card and apply what you were additionally paying to the first one to the second until that's paid off. So on and so on.

- Don't close your credit cards once they are paid off! Part of your FICO score (credit score) includes your "Debt-to-Credit Available" ratio. So say you have $20K debt on $60K worth of credit you have. If you pay off a $5K balance on one of your cards with a $10K credit limit and close it, your $20K debt to $60K credit turns into $15K debt to $50K credit - this $15K to $50K is actually a bigger PERCENTAGE of debt. So leave the card open so you'll have $15K debt to $60K credit so your FICO score doesn't go down. Isn't that the silliest practice you ever heard of???

- Your credit score is very important. It used to just be that credit cards, mortgage and loan lenders would check it. Nowadays, potential landlords and POTENTIAL EMPLOYERS can check it. The new standard is anything under a 700 FICO score is bad. The range is 350-850. 850 being the best. You can pay to check it online or if you're doing something major like taking out a loan, mortgage or renting a new place, you can ask them to see your report. Usually the person will let you see it if you are nice to them.

- Do not under any circumstances take a loan out on your 401K to pay off credit card debt. Not only is the withdrawal taxable, but when you go to repay your 401K, you already paid taxes on that money so it's like your getting taxed twice on money you weren't taxed on in the first place.

- This isn't a Suze tip, but a Becky tip. Don't be ashamed of your credit card debt. If you are in over your head with credit card debt, find a friend or family member you are comfortable with and talk to them about it. We all make mistakes in life. If charging a little too much is now causing you stress and hardship, it's good to let someone know. Maybe they are in the same boat and can relate to how you feel. Or maybe they are good with paying off their cards and can offer you tips and advice. If talking to someone in your personal life isn't something you can do, find an online support group at Debtors Anonymous.

I think one of the bizarre things I learned about myself is I have a huge credit limit. I didn't even know how much...I really don't know if this is a good thing or bad thing. For instance, the one card that I use the most has a $25,000 limit! Why is this so high?!!? I know for a fact I have never had more than a $5,000 balance on it - and it's usually a LOT lower than that. What if someone steals it? I'd be in deep doo-doo! Do I call to lower it? I have zero idea! I need a financial manager! ;) This economics degree is doing nothing for me right now!

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