Credit - Head Matters

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4.    Identify Ways to Avoid or Correct Credit Problems


If you’re in college, this can be a great time to learn some positive patterns and habits. For example, you learn how important it is to work hard today to have a better tomorrow. You gain an appreciation for lifelong learning. You develop the discipline that comes from juggling academics, work, friends, family, and play.

This is a great time to develop some good habits to help you stay out of trouble with debt. For example,  if you maintain an emergency fund with enough money to cover three to six months of your necessary expenses you could avoid having to use credit if you lose your income.

There’s another habit some businesses would like you to develop—and it’s not positive. That’s the habit of living in debt. If you’re not careful, debt can overwhelm you and create many financial problems. These next sections will explore some of the most common financial sinkholes and suggest ways to avoid or climb out of such obstacles.

a.  Describe Indicators and Consequences of Excessive Debt, Such as Skipping Payments, Juggling Bills, and Wage Garnishment


Since credit card debts are unsecured loans to credit card users, regardless of whether the monthly balance is paid in full, the small print on your credit card agreement is loaded with consequences to you, the borrower. Many of the negative consequences involve added charges and fees. Most of the negative consequences are designed to keep the borrower from over-indebtedness. The greater your financial ill health, the more you are punished.

The following exercise will help you to see if you can recognize the indicators of excessive debt.


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So, you can see that indicators of excessive debt include:

  • Being unaware of your total amount of debt.
  • Being unable to make payments consistently.
  • Using high interest credit cards to pay day-to-day expenses.
  • Using credit cards for a source of cash—at extremely high interest rates.
  • Having wages garnished.
  • Being harassed by creditors for late or lack of payments.
  • Relying more and more upon credit cards for expenses.
  • Losing options—having to choose work over education—that is, sacrificing future opportunities for present demands. 
     

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