Not every person in credit card debt requires credit counseling services. However, there are obvious warning signs you may need credit counseling now more than ever. Learning more about the warning signs is a great way to stay out of trouble or understand your situation better to take action.
7 Warning Signs You May Need Credit Counseling
You may need credit counseling if you notice these signs.
Warning Sign #1 – When debt is creating tension in the household
If your household’s conversations are stressful and revolve around money, you may be heading towards debt that you are unable to handle on your own. This can be a warning sign that your finances are getting out of hand and you need external help to get out of debt. An objective and knowledgeable third party can be just what you need to move forward.
Warning Sign #2 – Too many past due notifications
If you are receiving past due notifications from your lenders, you might be in financial trouble and may need to reach out to someone who can help you. Past due notifications can mean higher interest rates, even more late fees, and other financial charges. These costs can only put you in more debt. This can be a sign for you to re-look at your finances and reach out to a reputable credit counseling agency to help you come up with a plan.
Warning Sign #3 – Overly relying on credit
Ideally, a credit usage ratio of less than 50% is considered a healthy amount. But if you find yourself to be relying largely on credit purchases to cover your regular expenses, this is a sign that you don’t have enough disposable income for your regular expenses. Consider talking with a credit counselor if this is the only way you can pay your bills. Maxing out your cards damages your credit score, as it raises your credit utilization ratio. This is the ratio between your credit card balance and credit limit.
Warning Sign #4 – Reaching into retirement savings to cover expenses
Borrowing against your retirement savings is another sign that you should probably have a deeper look at your finances. Dipping into a retirement account should be a last resort, as you may incur penalties and fees for early withdrawal. Consider consolidating your debt with a reputable agency sooner than later to sort the situation.
Warning Sign #5 – Relying on balance transfers
If you’re frequently transferring balances from one credit card company to another to get reduced interest rates, you’re probably not able to make consistent or substantial payments to clear the balances in a timely manner. This may be a sign that it is time to seek advice or assistance with reducing your credit card debt.
Warning Sign #6 – Making only minimum payments for multiple consecutive months
Occasionally it makes sense to just pay the minimum of a card. However, if you’re only able to make minimum payments on your cards for many months there are repercussions. These may result in you not being able to get out of debt without paying significant interest charges and other fees. Often the minimum payment on a card will put you on pace to be paying the debt for a longer than average period of time. Talking to a credit counselor can help find a way to reduce spending and increase the amount you put towards debt each month.
Warning Sign #7 – Using cash advances or payday loans
If you’re not able to pay for monthly expenses without relying on risky payday loans, then you need help managing your finances. Sometimes emergency expenses catch us off guard. But that’s still not an excuse to become a victim of predatory loan products. If these types of loans are your only option then you’ve probably overused your normal credit. Or, your credit score has been hurt to the point that you no longer qualify for regular credit cards. Talking to a credit counselor can help find solutions that can prevent reliance on such loans.
Identifying signs you may need credit counseling early on can help you in the debt elimination process faster and better. In addition, knowing these signs paves the way for better financial health in the future.
If you think that you see signs you may need credit counseling, schedule a free credit counseling session with us today.
