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Credit Card – A Debt Trap in Waiting

It's exceptionally exhilarating to receive your first credit card. There's a lot of power that the little piece of plastic gives you. Unfortunately, most people do not know how to manage this newly found power. Credit is an excellent tool to build your score, if you use it right; but if you misuse it, it can be one of the most dangerous drains on your finances.

How Does a Credit Card Trap You?

Every eight people in ten are having major problems with their credit cards. About 6 out of every ten will be close to bankruptcy or already bankrupt because of credit cards misuse.

How does it destroy you financially? The credit card is slow poison. Just as a smoker takes years to destroy his/her lungs, so does the credit card destroy your financial stability ever so gradually.

Most people give in to the temptation of charging expenses to their credit cards when they are short of cash. It's very rare that when they do so, they plan for the payment of the bills at the end of the month. In most cases, they will not even have an accurate idea about how much they have spent on the credit card. This is because it's so easy to charge, and it makes them so happy to be able to buy all the things they want – that they do not want to spoil it by keeping a tab on the size of the bill.

At the end of the month, when the bills comes and these present a huge amount to be paid, these people settle on paying the minimum due amount. Also at this time, they are happy in the belief that they are doing justice to the bills and that they are OK financially. But the reality is that they are walking towards their financial destruction.

The Truth Exposed

When you pay the minimum due mentioned on your credit card, you are actually borrowing at about 3% compound interest per month. This is HUGE! This 3% is charged on the outstanding amount after deducting the minimum due, which is often around 10% of the total bill. As the compound interest builds up, you'll find that after some time your payments barely cover the interest charged on the outstanding amount.

Gradually, you'll max out your credit card, even when your payments (exclusively of the minimum due amount) are regular. Once the card is maxed out, either you find yourself in a complete mess financially, or you will, out of desperation, start using another credit card the same way – compounding your troubles while you will feel, at the time, that you found a solution out of your troubles.

How to Avoid This Danger?

Avoid using credit cards unless it's for real emergencies. Use a debit card instead. When you do use a credit card, ensure that you pay the bill in full immediately or as soon as possible. Keep and use only one credit card in your wallet/ handbag lest you're tempted to give in to wild shopping impulses. Keep in mind that you are paying 3% compound interest per month on the outstanding amount on your credit card. This is a sobering truth for anyone.

Credit Repair Services – 5 myths exploded

Before you go out to hire a good credit repair company, it would be good idea to become aware of a few popular myths. Most people fail to benefit from credit repair services owing to erroneous beliefs and unfounded fears.

Myth #1 - Anyone can repair credit because it's easy

Well, credit repair is definitely not easy, though anyone can indeed learn it if there is ample time and motivation to do so. This is a long drawn out process involving sustained and persistent correspondence with the credit bureaus, which takes time and plenty of effort.

If you are willing to open a credit repair agency, it will be worthwhile for you to learn the ropes; otherwise, it's often wiser to hire a reputable credit repair agency or agent to do the job for you for a fee.

Myth #2 – Money spent on a credit repair agency is wasted

Yes, this holds true if you can do the job yourself. Most people, in spite of knowing what it takes to repair credit, prefer to hire an agency. This is because – as mentioned earlier – this process is far too cumbersome to be handled by oneself.

I always compare this with a chauffeur or cleaning agency; it's not that you cannot drive yourself or clean for yourself – but hiring someone to do this leaves you free to pursue other tasks.

Myth #3 – It's considered illegal for any other person to repair your credit

Nothing can be further from the truth! Credit repair is a task like filing your taxes, for example. You can assign a person or an agency to do this on your behalf. This is definitely not illegal.

Credit repair businesses are ratified by national level regulatory bodies such as the ECRA (Ethical Credit Repair Alliance) and the BBB (Better Business Bureau) and these are legitimate businesses.

Myth #4 – Credit scores and credit reports cannot be influenced or changed legally

Once again, this is a dangerous myth. Your credit report represents the history of all your financial transactions. You will be amazed to learn that as many as 95% of the reports have some or other errors on it.

The credit score is a number that measures your creditworthiness. The first step in the credit repair process is to check and eliminate all the erroneous entries in your credit report. As soon as these are removed, your credit score will improve drastically. All this is not only legal, but also advised by all credit repair professionals as well as the US Government.

Myth #5 – Negative remarks will always remain on your credit report

This is a very popular and fearsome myth. Yes, it's true that serious negative entries such as bankruptcy will stay put on your records for 10 years. However, all the negative entries that have been entered erroneously will be removed once you dispute these in writing.

If these negative items were not true and you can prove these as false, they will be removed forever. If these are correct, they will definitely remain on your credit report until you feed in sufficient positive remarks to overshadow the negative ones.


The Credit Repair Organizations Act
The Fair Debt Collection Practices Act (FDCPA)
Fair Credit Reporting Act (FCRA)
Consumer Credit Protection Act
The Fair Credit Billing Act
The Equal Credit Opportunity Act (ECOA)


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Cincinnati, Ohio 45246
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