The New Rules Of Credit Card Debt

The measures that the credit card companies are taking to lower their exposure to risk are going beyond limiting the level of credit debt you may be allowed, but even paying you to cancel your card.

Personal finance expert Suzy Orman in a recent appearance in Oprah's show spoke of new credit card strategy that consumers need to adopt in order to control credit card debt.

The strategy that Suzy is proposing is to pay the minimum of your credit card monthly debt and use the rest of the money to build up a cash fund to have at least for eight months of living expenses. She writes "I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can."

While I am in favor of paying your credit card dept as quicker as possibly and possibly the full amount and thus question her approach of paying the minimum of your credit card debt in the light of the rising credit interest rates, I do appreciate her approach of building the much necessary cash funds that will cover your expenses for eight months should there be an economic emergency. To pay off your credit card debt first of all you need to CUT your spending and control it. This will be the most important step to consolidate your credit card debt. I remember when I was in the university doing my MBA about six years ago, we were told that we need to have about three months of cash reserves to keep us going should we be unemployed. Now it is the reality of our current economic situation that Orman is advising to have eight months of cash reserves ready.

The New Rules of Credit Cards

• Pay attention to credit limits

• Pay off the highest-interest rate card first

• Ask for a lower interest rate

• Don't forget about your other bills

The above mentioned steps are necessary in the backdrop of the credit card companies lowering the credit limits aimed to reduce their risk. Pay close attention to your credit card statement. You may see that the limit is lowered without communicating with you. I read heard many voices online that complain that their credit card lowered their spending limits without communicating with them. Some companies may use the word "adjusted" vs. "lowered" when referring to your credit card limits.

By the way, have you noticed that recently you may have not received as many credit card offers in your mail compared to last year? I kind of like that. Don't push people into more debt. People have their own minds and will be able to make their own decisions about spending and other personal financial matters, including credit card debt.