Have you set sail into the Sea of Credit Card Debt? TSCPA Member, CPA Company/Firm Name

The Sea of Credit Card Debt Loss of job Loss of job Extended illness Extended illness No personal budget No personal budget Straying from spending plan Straying from spending plan 10 steps to get out of debt AND stay out 10 steps to get out of debt AND stay out

1. Add it up! One or two credit cards One or two credit cards Limit non-mortgage credit payments to 15 percent of take-home pay Limit non-mortgage credit payments to 15 percent of take-home pay Make a list Make a list –Who do you owe? –How much? –Interest rate? –Minimum payment?

2. Start with highest balance. Target balances with highest APR Target balances with highest APR Can also pay off low-balance cards first Can also pay off low-balance cards first Once a card is paid off, apply that money to other card balances Once a card is paid off, apply that money to other card balances

3. Pay more than the minimum. 47 percent of Americans pay only the minimum each month 47 percent of Americans pay only the minimum each month Traps you into paying interest for years Traps you into paying interest for years Curb your spending Curb your spending No extra amount is too small No extra amount is too small

4. Restructure your debt. Transfer balance to card with lower rate Transfer balance to card with lower rate Read your credit card agreements Read your credit card agreements –Can change with just 15 days’ notice –Grace period? –Late payment fees? –Balance transfer fee? Pay your bills on time Pay your bills on time

5. Home equity, savings, 401(k)s. Home equity loan or line of credit Home equity loan or line of credit –Consider using ONLY if you’re sure you can make payments Take money out of savings Take money out of savings Borrow from 401(k) Borrow from 401(k) File bankruptcy as last resort File bankruptcy as last resort –New law makes it more difficult

6. Get rid of the cards. Keep two national credit cards Keep two national credit cards Close other accounts Close other accounts Use debit card instead Use debit card instead –Automatically deducts purchase price from checking account –Must ask “do I have the money?” before buying –No bill at end of month –No interest charges

7. Protect credit history. Pay loans and credit card payments on time. Pay loans and credit card payments on time. Check credit report periodically Check credit report periodically Free copy from Free copy from Review credit report for errors Review credit report for errors Avoid credit repair scams – no quick fix! Avoid credit repair scams – no quick fix!

8. Set a budget. Track your spending. Track your spending. How much are you spending on rent, food, transportation, etc.? How much are you spending on rent, food, transportation, etc.? Look for ways to cut back. Look for ways to cut back. Freeze your credit cards, literally. Freeze your credit cards, literally. Think before you buy! Think before you buy!

9. Ask for help. Consult with a CPA. Consult with a CPA. Contact nonprofit consumer credit counseling service. Contact nonprofit consumer credit counseling service. –Consumer Credit Counseling Service –

10. Start saving. Pay yourself first. Pay yourself first. 3-6 months of living expenses 3-6 months of living expenses Help you avoid using credit cards for unanticipated expenses. Help you avoid using credit cards for unanticipated expenses. Next, save toward financial goals. Next, save toward financial goals. –Retirement, education, etc. What you don’t see, you don’t spend. What you don’t see, you don’t spend.

More information – Texas Society of CPAs’ free consumer Web site – Texas Society of CPAs’ free consumer Web site –Articles on variety of topics –Monthly consumer e-newsletter –Personal finance tools – American Institute of CPAs’ free consumer Web site – American Institute of CPAs’ free consumer Web site