Credit card debt is a problem that 56-60 million (1 in every 4) U.S. households have (average unpaid balance $6,000 according to a study done by Consumer Federation of America — Feb. 1997).
Techniques and strategies to ease the burden of the mounting credit card debt problem are not readily available due to a void of consumer education.
Neil Schebetta, “Mr. Mom” by day, moonlights as a personal finance coach teaching classes on freedom from credit card debt at adult schools, moderates a message board on credit card debt, writes a weekly column, hosts a live weekly personal finance conference on America Online (Mondays, 11 p.m. ET. Keyword: Money Whiz) and recently completed a booklet entitled “FREEDOM! How to Free Yourself from Credit Card Debt!”
Schebetta takes opposition with financial planners’ advice to consumers. Here are the major areas of contention:
1) Making minimum payments vs. “level” payments.
A “level” payment is continuing to make the same payment month in month out by disregarding the lower “minimum payment” requested by the credit card statement. People have the ability to pay off the debt 80% faster using the “level” technique.
“The key to eliminating credit card debt is not necessarily in increasing the minimum monthly payment, it’s in keeping payments level,” says Schebetta. People with credit card debt of $10,000 at 19% interest using the “level” technique can/will save $25,927 in interest charges. “And,” Schebetta adds, “fifty-one years of payments.”
2) Paying highest interest rate debt first vs. the lowest balance first.
By paying off the lowest balance debt first people feel good about knowing that they can do it. Once the smallest debt is paid off then the concentration goes to the next smallest debt.
3) Consolidation loans vs. not consolidating.
His students are told that “you cannot borrow yourself out of debt.” When a student is asked how they got into debt and they then realize that borrowing money is what caused the initial problem. Borrowing more money is not going to solve the problem — chances are it will make the problem worse.
“The keys are to stop spending and pay off those debts as your top priority. Yes — make debt repayment your number 1 priority!”
For a copy of Schebetta’s “FREEDOM! How to Free Yourself from Credit Card Debt!” send $5 and a double stamped self-addressed large envelope to: FREEDOM c/o Self-Help Publishing, Dept. BW 6-17, P.O. Box 3094, Fremont, CA 94539-0309.