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4 Warning Signs That You May Have a Debt Issue

The average American is $90,460 in debt, including credit cards, car loans, student debt, and mortgages. What’s troubling is that not every person who has debt knows they’re in debt, especially if it comes from credit cards. Credit cards are made for ease and convenience. “Buy now, pay later” may sound great, but in reality, it can lead to serious issues down the road.

There are four warning signs you should watch for that will signal you may have a debt problem. If you have a debt problem, one of the first things you should do is contact a debt attorney.

Making Minimum Payments

Having to pay the minimum amounts on monthly bills out of necessity is the first warning sign you may have a debt issue. If you’re consistently paying the minimum payment on credit card bills, you may be spending more money than you earn.

Low payments may be appealing, but keep in mind that minimum payments will keep you in debt longer. If you keep paying the smallest amount possible, more interest will accrue over time.

A great way to avoid credit card debt is simply eliminating credit cards. By switching to a debit card, you can avoid overspending on items you can’t afford. Cash-only is also a great alternative. Allocate yourself a specific amount each month for spending, and once it’s gone, you’re done spending.

Using Balance Transfers Regularly

Balance transfers are the act of transferring outstanding balances from one card to another. Home or car owners who want to lower their monthly interest rates commonly use this practice, but people with outstanding credit card debt can do this as well. If you consider this option regularly, you most likely have a debt problem.

Before you take on any new debt to pay off existing debt, you must first address why you have so much debt and change your spending habits. Focus on the debt that has the highest interest rate and pay the monthly balance. Then spread out your remaining funds to chip away at other debt you may have. If balance transfers are unavoidable, look for one with low or no balance transfer fees.

Relying on Cash Advances

If you’re opening up a new credit card solely for the cash advance, you may have a debt issue. Cash advances typically have unfavorable terms, such as a high one-time charge or a percentage of the advance amount. For example, a $2,000 advance might have a one-time fee of $200 plus interest. Conversely, some credit companies may require you to spend a certain amount before receiving the advance. For instance, there may be a $2,000 bonus, but only after you spend $5,000 in the first three months.

You should only take a cash advance if it’s an absolute emergency. Using it for monthly bills or to pay off debt is a clear sign you have debt issues. Instead, you should be creating a savings account for such emergencies. A good rule of thumb is to put away 20% of your monthly salary into a savings account.

Being Denied Credit

Lenders and credit card companies want you to pay them back. Having too much debt can scare away potential lenders or get you denied for a credit card. Straying over the credit limit on one card every once in a while happens to everyone. But if you’re constantly maxing out all your credit cards, it may be a sign of a larger issue.

If you’re at the point of being denied a loan or a credit card, you need to reevaluate your financial situation. Review your credit reports and begin to pay off your balances. You should be utilizing about 30% of your available credit, but using less is always better. To find the best amount, add up the maximum amount on all your open credit cards, and multiply that number by .30.

Contact Experienced Debt Attorneys

If you have a debt issue, you need help. The debt attorneys at McCarthy Law are dedicated to helping their clients navigate their financial situation and reach a favorable debt settlement. We know the overwhelming burden that debt can bring into your life and are committed to helping clients end the cycle of credit card debt.

Call (855) 976-5777 or complete an online contact form to schedule a free consultation today.

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Jacob Hippensteel

Jacob Hippensteel focuses his practice on consumer protection and business litigation. Jacob regularly assists clients by ensuring that their rights as consumers are protected under Federal and State consumer protection laws. Jacob regularly advises clients on a wide variety of issues, as well as protecting those client’s interests in federal and state courts.