Credit card debt cancel

Getting debt-free in '90 - how to dissolve credit card debt

GETTING DEBT-FREE IN '90

Debt was the last thing on Leslie's mind three years ago when she landed a job as a commissioned saleswoman for a large corporation. She had been warned by co-workers that the commissions were erratic, but when her earnings soared dramatically during her second year, so did her spending. She bought a condo, a new car, and a time-share at a vacation resort - all on credit. Last year, however, her commissions dropped 50 percent - leaving her stuck with a big mortgage, $15,000 in other debts and nagging fears about paying them back.

If you, too, are anxious about your bills, you're not alone. A recent Gallup poll reports that 63 percent of American families worry about their debts. There's good reason for concern. The average American uses 18.5 percent of after-tax dollars to pay nonmortgage debts. This is dangerously near the 20 percent level that signals a serious debt overload, according to Luther R. Gatling, president of Budget & Credit Counseling Services, in New York City.

Consumer debt and personal bankruptcies hit record highs in 1988 - and easy credit is the culprit, according to Gatling. "The eleven credit cards the average consumer carries can become debt cards because they encourage overspending," he says. "When you charge, there's a fantasy that you're not spending real money. Paying creditors seems fairly painless with tiny minimum payments that keep you endlessly paying 18 percent interest - while ignoring total debts that may be dangerously high," Gatling cautions.

The good news about debt is that you can break free of it. Leslie, for example, spent three hours with a credit counselor to work out a repayment plan that will have her back in the black in two years. Once you understand the warning signs of a debt crisis and practice some simple strategies, you, too, can become debt-free.

ARE YOU HEADED FOR TROUBLE?

Even if you don't have problems meeting payments, you may have a "hidden" debt overload, Gatling warns. If your paycheck is being overstretched to pay creditors, there is no flexibility to protect you from the loss of a job or unexpected expenses. You could be closer to the edge than you realize if you owe more (not including your car loan or mortgage) than you could repay within a year.

Whether you're seriously overextended or a little in the red, erasing your debts is a savvy financial move for the nineties. Tax breaks for interest paid on installment or credit-card debt have dwindled down to 20 percent on your 1989 return, 10 percent in 1990 and zero after that.

ATTACKING DEBT PROBLEMS

Try these antidebt tactics to prevent drowning in debt. * Reduce revolving credit. "Add up the credit limits on your cards and unsecured loans. If you could borrow more than you can pay in a year, cancel excess credit," advises Gatling. "The temptation to borrow will be reduced and your credit rating will improve. People can be turned down for a mortgage for having too much credit - even if they owe nothing," Gatling says. Limit yourself to four credit cards. * Stop carrying credit cards. Promise yourself to get through a day without incurring new debt - then do it again the next day. You'll almost always spend less when you pay cash. Another option is a debit card, which immediately deducts the bill from your bank account. * Speed up repayment. The faster you pay your balances, the more you'll save on interest. Paying more than the minimum will get you out of debt sooner. * Avoid bankruptcy. "For many people, it's a major mistake," Gatling says. "It appears on your credit record for ten years, making you poison in the eyes of future creditors, and possibly with employers, insurance companies and landlords who may also have access to your credit record." * Seek debt counseling or a debt support group. For expert help at little or no cost, contact the National Foundation for Consumer Credit at 8701 Georgia Ave., Ste. 601, Silver Spring, Md. 20910, or call (301) 589-5600 for the address of the nearest office. This non-profit group advises debtors, and can often negotiate more lenient repayment terms. Debtors Anonymous, a free self-help support group to help debtors achieve and maintain solvency, has meetings nationwide. Send a self-addressed stamped envelope to Debtors Anonymous, Box 20322, New York, N.Y. 10025, or call (212) 642-8222.