100% agree. And once you are in that situation, its almost impossible to get out of it.

Goldbug wrote: The story I normally encounter was someone using the cards for points when an emergency came up, and because the cards were there they used it. By the time things cleared up they normally had the original money to pay off, but also a few months of interest and that can be all it takes for someone to tip into debt.

That's true and it wouldn't take much to send a family spiraling. A sudden death or medical emergency would easily do the trick. The interest rate on some cards is significantly higher now too. I'm diligent about saving my money and keeping an emergency fund for worst case scenarios, but lots of people did the same thing and still didn't have enough to weather the recession.

JGibbs wrote: I use my cards for everything. I'm all about the points, cash back, extended warranties, just any extra value that buying with a credit card can bring. I don't charge more than I can pay and I pay them off every month. I wonder how many people started out with the best of intentions, but wound up in debt doing the same thing. It's something I need to keep in mind.

The story I normally encounter was someone using the cards for points when an emergency came up, and because the cards were there they used it. By the time things cleared up they normally had the original money to pay off, but also a few months of interest and that can be all it takes for someone to tip into debt.

I use my cards for everything. I'm all about the points, cash back, extended warranties, just any extra value that buying with a credit card can bring. I don't charge more than I can pay and I pay them off every month. I wonder how many people started out with the best of intentions, but wound up in debt doing the same thing. It's something I need to keep in mind.

That's a very useful article. I think the first sign that credit card debt is becoming a problem is carrying a balance and only paying the minimum monthly payment. The minimums usually don't cover the interest so if you do that, the debt is just going to start creeping up and people just don't seem to be aware of that.

Goldbug wrote:

FrankN wrote: Lexie, I am sorry to hear that, and surprised you were actually able to do that anyway. I hope you made it out okay.

I've heard that from a few people who got into debt. Taking a cash advance from one card and using it to make the minimum payment on another is effectively robbing Peter to pay Paul. The charges for the cash advance just made the debt larger and put the problem off. Well done for getting out of it, Lexie.

That is exactly right. You are really delaying the inevitable. I am working with a family who was doing that for 6 months and did not realize all of the fees and charges that were being added. It really made their situation much worse.

FrankN wrote: Lexie, I am sorry to hear that, and surprised you were actually able to do that anyway. I hope you made it out okay.

I've heard that from a few people who got into debt. Taking a cash advance from one card and using it to make the minimum payment on another is effectively robbing Peter to pay Paul. The charges for the cash advance just made the debt larger and put the problem off. Well done for getting out of it, Lexie.

Lexie, I am sorry to hear that, and surprised you were actually able to do that anyway. I hope you made it out okay.

I recognized we were in trouble when we began using one credit card to make payments on another credit card. We inevitably ended up in bankruptcy and learned a valuable lesson. Never again!!

MikeJ, please let us know how you are progressing to your emergency fund savings goal!

Charging more than you pay should be the first indicator that people see. We need to be in the habit of paying more than we charge.

A year's worth might be difficult to reach, but its a good target. I normally hear three months, and that's what I try to keep. If you're keeping a full years reserve, that's a lot of money and I'd suggest you look at investing it somewhere that gives you a very good interest rate on it!

That is a great goal, and I am not sure you absolutely need a full year's worth of living expenses. As long as you are investing that emergency fund, I think that is a great idea.

Yeah, an emergency fund is invaluable. My goal is to maintain a full year's worth of living expenses (at my current lifestyle level). I'm not quite there yet but I'm working on it.

That is good you were able to take a positive out of your bad situation. I am sorry you had to go through that, and I am glad you came out of it positively.