Credit Card Lowdown

The Lazy Man's Guide to Budgeting: 101 Painless Ways to Cut Spending

The average American today has over $9000 in credit card debt yet spends over $4.00 per day on coffee. Think about that for a second...

What that stat tells you, is that even when we're in bad financial shape, Americans don't want to give up on life's little luxuries in order to cut costs.

With that in mind, we have compiled a list of 101 tips to help you trim your debt without having to give up too much.  Some of these tips only get you small savings every day, but keep in mind that all together these savings really add up...

Lifestyle Change? Nah, Just A ‘Readjustment’
You cannot cut spending without checking how you are doing on your finances presently. So you need to rework your budget (IF you have one!) and reassess your priorities.

1. Necessary Evil: Budgets are painful, tedious and downright boring. But if you want to fix that leaking money tap, a budget is the only thing that can help you. It will help you keep tabs on how much and on what you’re spending, and save you some money in the long run. (If you need help with creating a budget, you could try these sites: Quicken, Microsoft Money, or Moneydance)

2. If you are not single, it is important that you work with your partner to keep you spending habits in line. Both of you must agree on a budget for it to work.

3. Always keep a little money aside for emergency or unexpected expenses. This way your budget will not go into a disarray in case of an emergency.

4.Cutting your spending doesn’t mean you should become a miser. Pinching pennies will only drive you crazy and isn’t good in the long run. It’s a lot like crash dieting – the results may be immediate but definitely not permanent.

5. Get your bank to help you save. Instead of transferring your entire salary into your household account, get 5 to 10 percent of your salary automatically transferred to a savings account.

6. Got a salary hike? You will probably want the big screen plasma TV or the latest SUV now. For a change, instead of investing your money on these, you could consider increasing your 401k or IRA contribution.

7. Stop buying gadgets you don’t need. Those sales guys may make it sound like life isn’t worth living without a propane-fueled weed torch or a call forwarding facility for instance. But do you really need to spend enormous amounts as fees just so you don’t use these thi ngs? Next time, before you buy anything, try and figure out which ones you really can live without.

8. Cut down your spending on luxurious items. Do you know that just cutting some small luxuries can mean a lot to the bottom line? Mary Carlomagno, author of Give It Up!: My Year of Learning to Live Better with Less, cut back on a single expense every month to see how it changed her life and her finances.

9. Cancel that gym membership NOW! According to a study by Harvard, signing up for a gym membership is one of the best ways to prevent exercise AND lose some hard earned money. The same goes for those information websites that come at a price. Do you really need to know about any and every kind of product under the sun before you make a purchase?

10. Is that super-saver deal really worth it? Most times, offers that come as package deals, are just another way of making us pay for more than we use or need. For instance, if you pay a ‘little’ more on your magazine subscription, you can get five for the price of four. Do you really have the time to read four or five magazines? Figure it out and THEN pay the money.

11. Use your retirement funds. If your employer is giving you anything by way of matching retirement funds and you aren’t using it, you are losing big money. For instance, you may be able to save a lot of money on medical and dental fees if you use the coverage offered by your employer.

12. Pay your bills as soon as they come in. This is the best way to avoid wrecking your budget.

13. Use cash. Whenever you can, use cash instead of credit cards. Don't EVER use your credit cards to purchase daily items like groceries. And don’t forget to note down your cash purchases.

Money Crunching

14. If you have a mortgage, you could think of refinancing it. Even a 0.5 percent difference in rates can save you a considerable amount of money.

15. Got a work bonus, or some unexpected money recently? Save the money for things you want to buy but cannot afford right now.

16. Raise your auto insurance deductible. This will make your premium fall. The money that you save can be added to your savings account.

17. Never pay more taxes than what you owe. Of course you will get a refund but you will lose the interest you could have earned if the money was in the bank instead.

18. Special treatment from your bank: You don’t need to be a special customer to get preferential treatment. All you need to do is ask for it. You could ask your bank for a no fee checking account or your credit card company for lower interest rates. You can also check for discounts at shops.

19. Come out of the ‘use-n-throw’ mode: One of the best ways to avoid major expenses is to maintain the high-cost items you own. That means, if you take good care of your car, refrigerator, lawnmower, you can have them running efficiently and lasting much longer. This way, you can save thousands on utilities, repair bills, and replacement costs.

20. Health care is costly and could be one of the biggest drains on your resources. You could try locating free or low-cost community services such as clinics and health care offered at family centers.

Maximize Credit Card Benefits

Credit cards aren’t all that bad if you know how to use them:

21. High credit card interest: If your credit card company is charging you a high rate of interest, it’s going to take longer to eliminate that debt. You could call your credit card company and ask them to lower your interest rate, or you could get yourself a lower interest card.

22. When you transfer to a lower rate credit card, use the cash advances to pay off the balance on your other credit cards or other debts. A word of caution: Read the fine print before applying. Some cards charge a higher fee for transferred balances.

23. Waiver of your credit card fees. You could ask your bank to waive your credit card fees or you could go in for a no fee credit card.

24. If you have a balance on more than one credit card, pay off the highest interest debt first. And while you are paying it off, don’t forget to make minimum payments on each of your other cards. Repeat the process until you’ve paid off all your debts.

25. Better still, you can automate your card payments. This way, you don’t have to worry about late fees. Just ensure that you don’t charge too much to your card.

26. Avoid ATM machines that charge fees. A better idea is to withdraw a fixed amount each month and stick to it.

27. Try to get something back from your credit cards. For instance, you could look for credit cards that offer some kind of reward or probably low APR – anything that could lower your overhead expenses.

28. If you’ve paid off your credit card and don’t want to use it any more, you MUST call the company and ask that your account be closed. That will help you resist the temptation.

Food For Thought

Shopping is fun. That’s until you add up everything and see how big a dent the grocery bill, clothes bill and other bills make in your monthly budget. Here’s how you can lower costs:

29. Try to plan your meals before you shop. Once you’ve done that, make a list of all the items you need to purchase.

30. Budget your purchases. You should have a general idea of how much money you would have to spend for your purchases. Try to limit yourself to this figure. If, for some reason, you just have to spend more than you anticipated, try to cut corners somewhere else. Probably you could leave eating out until next week.

31. Comapre prices. Always compare prices of national, store, and generic product brands. Sometimes store brands may work out to be cheaper and as good as national brands. Thoroughly investigating each purchase can help you get the best value or you may decide that the purchase isn't worth the money.

32. Always skipped the ‘expensive’ grocery stores? They may not be as expensive as you think – large grocery stores often offer more discounts! One trick is to use coupons whenever you can in conjunction with the weekly sales items.

33. You can also purchase items for less with the ‘buy one get one’ sales offers that grocery stores have every now and then. But remember, these offers generally come on items, which are close to their expiry date. So you must ensure that you can finish it all up before that date.

34. Downsize: Always go in for the super-size ice-cream tub? Try one size smaller. It’s also healthy to have lesser.

35. Never shop when you are hungry, tired, or rushed.

36. Try to distinguish between items you must buy and things it would be nice to own. Everytime you pick up something, first ask yourself if you really need it or whether you are buying it on an impulse.

37. Delicious? NO! I know it’s easy to stock up on food from the pre-made section. But the deli counter could also make your purse lighter by a load of money. You can actually bring down your weekly grocery bill by 20% percent if you skip the deli counter. All you need to do is wake up a little earlier than usual and prepare some of your own food!

38. Check your receipts. If you are anything like most others, (and me) you’ll just bag your bill and hope to check it sometime in the future. Wake up call buddy – store receipts can have errors. Errors that can involve you losing more than a little money! Make it a practice to check your receipts. And what can you do with the money you save? Go in for the super-size ice-cream bucket for one!

39. Ever asked for discounts on the purchases you made? I know, even I was shocked I could actually do that. In reality, many retailers are ready to sell an item for less than the listed price. The problem is most consumers don’t think of asking.

No More Shoppin' Till You Drop

40. Play the ‘either-or’ game: Get an idea of the competitive prices of the things you want to buy from other stores or even the Net. And if your store doesn’t offer you a reasonable price, try another one.

41. Pay cash. There are three benefits to it:

- When you use a card, the retailer, restaurants, and hotels have to pay anything between 2 to 5 percent to the credit card company. With cash, there is no such problem.

-Secondly bargaining becomes that much easier. It’s not easy to refuse hard cash you use.

- And finally, you will not try to buy something that’s way off your budget.

42. Know yourself: This one’s more for the female of the species. We tend to have this habit of buying something that looks spectacular on the mannequin. Once you’ve paid a bomb and bought it, you realize you don’t look too good in it. So what do you do? Stash it away in the deepest corner of your closet.

43. Just because something’s coming at a discount, it doesn’t become a must-have. Understand your requirements and see if the things you buy match them.

44. Every time you feel you need to buy new clothes, check your closet first. You many not realize buy you probably have quite a few clothes or shoes you may not have worn more than once.

45. Often when you buy things off the net, you realize that they aren’t the right size or color. What do you do – stash it away or return it? If you value your money, you’d probably want to return and get a refund or an exchange – either way, you don’t lose that money.

46. You may not be able to use this tip this year, but you could in 2007. One of the easiest ways to save money on winter clothing is to buy early. Usually, around September, department stores offer a discount on their winter merchandise. Sometimes, these stores may offer newspaper coupons for an additional 15% off sale merchandise.

47. Winter shopping. If you are late for winter shopping at department stores, you could still try discount stores like Value City or the outlet malls. These stores usually sell coats for less than retail.

48. If you cannot wait till next September, you can maybe do your winter shopping after the current season is over. You’ll be surprised to know that you can find winter coats for nearly 75 percent off the retail price.

49. Fashionable clothes: Have a taste for fashionable, branded clothes but not the money to buy them with? Don’t worry, all you need is some patience. Most high-end department stores have clearance sales at the end of the season and you can get incredible deals at these sales.

50. If you’ve got kids, your budget is already stretched to the limit. You could lighten your burden though by stocking up on school supplies for next year. All you need to do is make bulk purchases every time there is a clearance sale at your store.

51. Gardening need not be an expensive hobby. Instead of buying gardening supplies, you could use old spoons, spatulas and other things to dig, smooth and weed plants in pots or small areas.

52. If you love to buy and read books, you should try shopping online. Sites like Amazon.com, offer great discounts on some items and usually sell books much lower than list price.

53. Try ordering your prescriptions through mail order instead of your local drug store. You will see how much prices fall on this one

No Pain Fun

This bit wasn’t easy – how are you supposed to have fun without spending some money. Well, there are ways to reduce the expenditure without losing the fun:

54. You like buying different types of things? Your call. But ensure that you use ALL of everything. Turn bottles upside down and drain to get the last bit from them.

55. Eating out can be enjoyable, but it can also be quite costly. But that doesn’t mean you curl up at home day after boring day. Here’s one little nugget: Instead of eating out for dinner, try lunch. While the menu selection is usually identical, the prices are much lesser. That’s because dinner is a more popular time for eating out.

56. Avoid costly extras unless you are ready to spend that extra bit. This will save you money AND will help you do justice to the main course. And, if you forgot, stay away from the dessert. Have water instead of wine or other expensive drinks. It’s healthy and cheap.

57. If you have children, you could check if the restaurant you are dining at has a ‘kids eat free’ night.

58. Look for coupons. Quite a few restaurants offer 2-for-1 specials on certain days of the week.

59. Do you have eating habits? Another lovely tip is to eat a homemade gourmet dinner and then go out for dessert. This gives the feeling of having eaten out and doesn’t weigh so heavily on your wallet.

60. Friendly get together: If you love to have friends over but cannot afford to entertain them on a regular basis, ask everyone to bring over food and wine.

61. Watching movies: Love to watch movies but cannot afford tickets for every movie that’s showing in town? Well, try a video swap instead. Most of us buy DVDs, and videos, watch the movie once and forget about it. What you could do is swap your videos with your neighbors, friends.

62. If you love to travel during vacations, off-season’s a good time to travel. This way you get lower prices and no crowds. And wherever you can, try getting accommodation in discount hotels. They are good AND cheap.

63. Cheap travel: Another way to travel cheap is to go in groups and get group discounts.

64. Look for free entertainment and recreation. For instance, you could go to the park, spend a day at the beach, join a book club... anything that you find interesting.

65. Love books? If you love books but don’t want to buy them, you could always join a library.

66. Want to read magazines but cannot afford all the ones you want? Try magazine swapping. The technique is the same as that of a video swap.

Utilities: You Can Save Here Too!

67. Power saving tips: If you need to leave certain lights like your kid’s bathroom lights switched on through the night, you could install energy-efficient bulbs. They provide four times as much light and last ten times longer than regular bulbs.

68. Do you really need to bathe in boiling hot water? You could lower the temperature on your hot water heater and save a load of money in heating. You could also insulate your hot water heater to save money.

69. Winter dillema: Winter does not automatically mean your home has to be HOT. You can set your thermostat at a reasonable level like 68 degrees in winter and lower heating costs. The same goes for summer as well.

70. Use of Microwave: Whenever possible, try to use your microwave instead of your oven-- it’s more energy efficient.

71. Try to do your laundry once or twice a week. This way, you’ll be able to do full loads and save on water, and electricity.

72. Fix anything that’s leaking – faucets, running toilets – everything can make you lose water.

73. Stick to basic phone service and avoid any features that you don't use like call forwarding or call waiting. This saves you a lot of money.

74. Save on Calling. Nowadays most of us have at least one landline and a cell phone. If you don't do much long distance calling; and your cell phone offers free long distance, you can stop your long distance access on the other line.

75. Try to avoid heating up your oven for just one item. For instance when you cook food, try to make extra – two roasts, two pies. You save time, electricity AND money.

76. Switch off unused appliances, lights and other switches. Whenever you leave a room, ensure that you’ve switched off everything unless you plan to return in a few minutes. And when you go to sleep, don’t forget to turn the telly off.

77. Switch off your computer when you are not using it. If you didn’t know, your computer uses way too much electricity when left switched on.

78. Have a gas furnace? Don’t forget to turn the pilot light off during hot weather. The pilot light wastes gas and produces unwanted heat.

Common Sense Savings

Sometimes, the money is lying there waiting for you to pick it up. Only you don’t seem to notice. Check out these methods:

79. Don't misplace your money. Watch the ground and see if you can find pennies lying around. You probably don’t realize the amount of money that just gets lost because you misplace it. You'd be surprised at how quickly you can come up with a hundred pennies. And while you are at it, don’t forget to check the car floor, under the couch cushions.

80. Want a good haircut from an up market salon but don’t want to pay the price? One way to do it is by going to the salon on training day. This way you can get your hair styled by the top stylist at almost no price at all.

81. Don’t throw away leftover food. You can put them in serving sized containers and fridge. Next time you are busy or tired, you’ve got dinner waiting in the fridge for you.

82. If the quantity of leftovers isn’t too much, you can add it to dog or cat food occasionally. This stretches their regular food and reduces the cost.

83. Whenever you eat at a fast food place, save the unused packets of ketchup, mustard, salt, pepper. This will stand you in good stead on picnics or trips out of town.

84. Try cooking food from scratch. You could do this on weekends and cook enough for the week and freeze the food. This will save you a load of money and is much healthier than any take away.

85. And no, you don’t need to always follow manufacturers’ instructions. When you do your laundry for instance, just because it says on the box that you need a full cup, doesn't mean that you really need that much. Use your common sense and reduce the quantity of your usage to see the products last longer.

86. Maintain your vehicle to ensure that it doesn’t run into problems. If the tires are not inflated well, oil’s dirty, air filters are clogged… your fuel costs will rise considerably. You can cut your fuel consumption by up to 10 percent by just taking good care of your vehicle.

87. Avoid multiple trips whenever possible. If you need to go to town for something, try to club it with a few other things so that you consolidate your trips and get the most out of fewer trips.

88. When it comes to cars, idling aren't good. All you’re doing is driving up your fuel costs. Make it a rule to turn off the engine if you are going to be parked for more than half a minute.

89. Save on your fuel. Research shows that you can cut fuel costs by 30 per cent if you drive carefully. Surprised? So was I. What most of us don’t realize is that accelerating and braking all the time is the most expensive way to drive a car. And then there is also the wear and tear on brakes. You can save a lot of money by just being aware of the cars around you, keeping your distance AND driving carefully.

90. Do you really need that air conditioning on all the time you drive? It adds to fuel costs, so try to use them only when you need to.

91. If you are planning to buy car, try to do it around the end of the month. Most companies have sales targets to meet and the month-end is a good time to get the car at lower rates.

92. Use a hot water bottle instead of an electric blanket to stay warm.

93. If you have a garden, it’s a good idea to plant perennial flowers instead of annuals. This ensures that you don’t have to spend money every year for plants and can enjoy your garden for years.

Bet You Didn't Know This

94. Get money that’s owed to you. Don’t know how to do it? Read Assets Unknown: How to Find Money You Didn’t Know You Had, by David Folsom. Alternately, you could check out unclaimedassets.com.

95. Get products at cheaper rate. There are many websites on the Internet that offer goods at dirt prices or even for free. For instance, there’s Freecycle.org a giant exchange of products and services at no cost.

96. Ever heard of reward programs? Quite a few departmental stores, book stores and other types of shops offer rewards cards that automatically record your purchases at that particular store. This helps you get a savings reward coupon annually.

97. When out purchasing anything, never stick to one retailer if you want to save money. Always shop around to know about the best prices on offer.

98. The net’s here to help you again. Heard of Refund Cents? All you need to do is pay a subscription fee to get alerted on new deals. You can save on almost everything from groceries to clothes.

99. Go Goodwill Shopping. No, I’m not joking. You’ll be surprised to know they have brand new merchandise at dirt cheap rates.

100. Did you know that companies offer freebies – all you need to do is ask. You can call Freebies magazine or search under “freebies” on Google. To get a list of freebies.

101. If you don’t like the idea of freebies, you could ask companies for coupons. You can either check valuepage.com or contact a company directly for coupons.

Banking on the Devil

What do you do that when you cannot repay your credit card debts due to rising interest rates and increasing prices? It’s a pretty painful situation – one that you would not like to be in. But that’s the thing about debt – nobody wants it but it comes. So, what’s the next best thing you can do to moping and feeling bad about life and yourself? Well, you can be a (wo)man and look for a solution. And if you cannot think up a solution on your own, don’t worry; there’s still a way out. All you need to do is call your credit card issuer. I know that’s like asking the hangman if there is a way to escape the death penalty, but hey, guess what!

These guys are not so bad after all! Banks like Citigroup and Bank of America insist that you can call your credit-card issuer, and seek debt counseling or even use their debt workout programs. Not only do they support debt-counseling services, but they also offer debt workout programs. Now that’s what I call a real devil. I mean these buggers are actually the reason you are in debt… they give you cards and say, “Go and spend all you want. We’ll pick the tab.” And then when it dawns on you that nobody’s gonna pay for you and that you are stuck real bad, these guys lend you their shoulder to cry on. Can it get any better?

Well getting back to the topic, Citigroup offers various options such as reducing minimum payments, reducing interest rates, waiving fees going forward or crediting back fees that have already been billed. But, hold your horses. There’s more to the story. According to consumer activists, some cardholders found that their interest rates were raised after they told card issuers they were in trouble. So what’s your take on this?

Is credit counseling a waste of time and money?

Meet Jack. He had a job as a salesman at a local departmental store. He’s not doing too badly for himself – he’s got himself a home, and manages to pay his monthly installments on time and has even managed to save a little from his monthly salary towards his retirement. He was quite well off until an ownership change laid him off. In his mid-40s, Jack is suddenly jobless and has been trying without success to find some kind of employment for the past five months. In the meanwhile, his bills have piled up. Collectors started calling, threatening to repossess his home and his car.

Jack soon realized that the matter was getting out of hand and that he had only one option left – file for bankruptcy. Once he made the decision, he didn’t waste any time contacting a credit-counseling agency, so he could get over this first step towards bankruptcy. Here he was supposed to review his finances and find a way to repay his creditors. And that’s when he realized the futility of this provision in the new bankruptcy law.

This is a story that most people who have filed for bankruptcy, are familiar with. You approach a counseling agency hoping to get some kind of advice and the only kind they can suggest is to file for bankruptcy! The basic problem with the credit-counseling provision of the bankruptcy law is that usually, it's too late by the time many consumers get counseling. Their financial situation is so bad that they have no choice but to file for bankruptcy. And according to some observers, credit counseling isn't working as intended. It doesn't appear to be shifting more people into debt-management plans instead of filing for bankruptcy. And the worst part is that credit counseling is proving to be pricey for the consumers with most of them being unable to cough up the high fees required by the agencies.

Credit card debts & solutions

Credit card debt is one of the most common types of debt people face. The resulting debt may cause more than just a pinch on your resources. Nowadays, credit card issuers ask their customers to call them up for debt counseling services and even debt workout programs. Sounds quite a bit like being the cause of a sickness and then providing the cure for it. Anyways, credit card companies offer various options to customers like reducing minimum payments, reducing interest rates, and many more such services. There is only one niggling doubt – how effective are these services?

According to some consumer activists, cardholders have found that informing the credit card issuer could work to their detriment. In some cases, consumers found that their interest rates had been raised after they informed their card issuers about their present situation.

So what can be done in such a situation? If you are facing a bad debt problem, it is best to first contact a good credit counseling agency that will give you a lowdown on your options.

Here too, be on your guard. Before you sign up with a counseling agency it is good to know more about their services, fees and the extent to which they can help you. Otherwise you may end up paying through your nose for a service you may not need. It is also very important to check other facts like your counselor’s qualifications, how the payment is made and if there is any chance to waive the fees.

Don’t rush into a debt management program until you have a good idea of the avenues available to you. And most importantly, don’t call your bank until you are absolutely ready with your options.

Your credit card debt’s up for sale

Have you ever wondered what happens to the credit card debt that you don’t pay off? Of course, your credit score goes down, you have bill collectors breathing down your neck, and over time, you will be staring bankruptcy in the face. But what happens to the actual debt that you couldn’t pay off?

When you and thousands of others don’t pay up your debt, the bank is saddled with huge debts. Banks don’t have either time or money to follow up on these debts and collect them. So, they use the services of loan brokers like the National Loan Exchange who sell these debts to collection agencies. The present going rate is five to 10 cents to the dollar. These collection agencies then assume the burden of collecting debt from you.

The Indiana Jones school of debt management

You’ll be surprised to know that you can learn a lot about personal finance and credit card management from the movies. For instance you just have to watch the Indiana Jones series to learn a few important lessons in personal finance. Investopedia.com reports:

When confronted by a gang of armed guards, Indy instinctively follows bar brawl rules: take out the biggest guy first and work your way down from there. The idea is to remove the most dangerous enemy while you still have the energy. Your approach to debts should be the same: prioritize and then eliminate. How do you decide which debt goes first?

Read more: The Indiana Jones Guide to Getting Ahead

Read the fine print in your credit card contract… It could make a huge difference

Did you know that when you sign up for a credit card, you might be giving up your right to sue the credit card company? According to a 2005 Consumer Action survey, nearly half the banks that issue credit cards require you to give up this right and instead resolve a complaint through arbitration.

So, if you have a dispute, then remember that suing your credit card issuer may be out of bounds for you. You possibly have to go through an arbitration, which is a private process and takes place outside a courtroom. What you can expect is an independent arbitrator or a panel that will hear your case. And you may not have the right to appeal an arbitration decision. In case this method of finding a solution to your problem doesn’t bode well with you, then you may have to look for options. Since the number of issuers who require arbitration to settle disputes are less than 50 percent of the total, you could always switch to another credit card issuer. Usatoday.com reports:

Multiple lawsuits are now winding their way through the court system, challenging the validity of arbitration clauses in credit card and other consumer-product contracts.

Read more: Here's a map for dissecting credit card fine print

Banks should support customers to avoid defaulting on payments

A recent survey asks banks to support customers before they default on their credit card payments. The Consumer Action's 2005 Credit Card Survey is based on the nonprofit organization's assessment of 146 credit cards from 47 banks between April 1 and June 21. The survey shows that nearly 50 percent of the banks surveyed have universal default policies.

A falling credit score is stated to be one of the main causes of a universal default rate hike. Other factors include late payment of mortgage, car loan, or other credit obligations, clients exceeding the credit limit or having too much debt. If you have too much credit, get a new credit card or even inquire about a car loan or mortgage, you could expect a default rate hike. Destinationcrm.com reports:

"When people call the credit card company and say, 'I'm having trouble meeting my minimum payment,' [it] is the wrong thing to do in today's world, because the credit card company will very often come back at them with a much higher interest rate or a lower credit limit, " says Linda Sherry, director of national priorities for Consumer Action (CA), and the survey's coordinator.

Read more: Credit Card Woes Continue For Consumers

This is the American nightmare!

Just about everyone will agree that today we are earning much more than what our parents did. We are told that we can expect to live a much better life than they did. Wanna know the real truth? Of course since you are grappling you’re your bills and don’t know where the money’s all gone, you do have an idea. But here are some figures you can crunch. Today, the costs of necessities are rising at an incredible rate and the average household income has actually dropped by nearly $2,000!

Sounds incredible? Well so, where does that leave the hard working American who is working himself to death just to realize a simple dream? With more and more bills! The hope, that someday you could hang up your shoes and watch the sun set gratified in the knowledge that you have enough money in the bank to tide you through, is all but vanishing.

Today, even before you can begin your career, you are saddled with college debts. Then there are the mortgage loans and auto loans. If you want to get married and have children, remember that in a little over a decade, you may be taking another big loan to pay for your child’s education. Sounds awful, but there seems to be no way out of this morass.

And here is the saddest part. Unable to meet even basic requirements, growing numbers of people in the middle class segment have taken to using their credit cards as ‘safety nets’ for all the necessities that they cannot afford to buy due to lack of money. And this takes them into a debt trap from which the only escape could be to file for bankruptcy. A real dismal scene this.

A Credit Card Debt Survivor's Easy-to-Get Tips

Financial gurus say only people with low self-esteem make credit card faux pas - But I was a confident person, though not an expert, and was in control of my finances. I made all the regular payments on insurance and mortgages. Took out insurance for the family and myself and also lived a reasonably good life with a holiday every year.

Life was great till I saw how much my credit card debts were... I decided to take a good long look at my spending and repaying and let me tell you it wasn’t easy understanding and accepting the mistakes I made. Down the financial memory lane I was astounded at my bloopers. But with some good commonsense I managed to snuff out this sparking dynamite of a problem.

After some research I realized that paying the minimum balance on my credit card did nothing to my principal debt. So I learnt the ugly truth that the 2% or the now 4% minimum monthly payment mainly went only to the interest and only the rest to the principal. That means that I would never actually pay up the principal. Like my holiday bills will never be paid if I continue to make the minimum payment alone.

The thought of paying off the credit card companies for the next thirty years was scary. So I did what most people did in 2005 – refinanced my home with a cash-out option. With the extra cash paid off my credit cards with the highest debts one by one and kept up minimum payments on the one credit card with least interest and best features. You can imagine the pure pleasure in cutting up those paid up cards.

Today, my home maybe the collateral but I don’t default on the payments and whenever I buy on credit I make sure to pay back as much as possible of the purchase possible. So are you facing mounting credit card debts like I once did?  The key is to aim to make the maximum monthly payments on your credit card purchases and to remember to chuck the high interest cards.

Simple steps to ease debt

While most of us do realize how important our credit rating is, a large number of people don’t know what to do to improve their ratings. Agreed, you could go to a credit counselor and work out the best solution possible. But if your debt burden is not too high, then you could use a few of these tips to get your credit score back on track.

Credit cards are one of the main reasons people fall into debt. They are easy to carry and use. But they also spell trouble if you don’t control your expenditure. So one of the first things you need to do is take one drastic step: eliminate credit cards from your daily life.

Sounds ridiculous doesn’t it? But stopping using them means you have an idea of how much money actually leaves your hands. Of course, in the short term it may mean your credit score gets affected, but in the end, you are better off knowing how much is spent and on what.

Next thing is to create a budget and set timelines within which you must have made all your essential payments like bills, loan repayments etc. Initially this may be difficult and you may be tempted to put it off, but it is best to get over this difficult part as soon as possible. If you find yourself incapable of creating a workable budget, then go get yourself some help. But don’t delay making one.

Sticking to your budget and living within your means is the next step. Difficult, yes but not impossible. All you need to do is keep your debt within manageable limits. As a rule, your non-mortgage debt payments should not be more than 15 percent of your pay each month. Use these simple steps and see your credit score rising.

Three simple steps to debt freedom

According to economists, getting out of debt is as difficult as trying to quit smoking. Extremely difficult, both these tasks require a great amount of determination and the will to break the underlying patterns of behavior. But of course, there is help and following these simple but difficult steps will ensure that you are debt free for life. CNN.com reports:

Play let's make a deal Call your current card companies and explain that you intend to transfer your balance to another issuer unless your rate is lowered, suggests Scott Bilker, author of "Talk Your Way out of Credit Card Debt." If your credit score is above about 750, you should be able to get your rate under 10%, he says. And, he adds, you should still be able to knock a few points off your rate even if your credit score is as low as 650.

Read more: A smart credit-card plan; the perfect paydown strategy; 11 moves to consider.

Transferring your credit card balance? Beware of transfer fees

If you’ve been using credit cards, and have a debt that is big enough to cause you some pain, then you are a prime candidate for this game. Here you are given tantalizing offers of transferring your credit card balance to a new card at zero percent interest for six months. Sounds just too good to be true, right? And yet, you cannot resist the temptation. After all, this way, you can transfer all your debt to the new freebie card and avoid paying interest for some more time.

But if CardRatings.com, a consumer-oriented Web site, is to be believed, you’re better off staying miles away from such offers. Card issuers attach a fee called a transfer fee every time you move your credit around. These fees are a percentage of the amount transferred and the catch here is that no cap is spelled out for the transfer fee in the card agreement. So, essentially if you plan to put $10,000 on your new card, an uncapped 4 percent fee would put you down by $400!

Consumers upbeat about repaying credit card debt

Consumers are extremely upbeat about the overall credit situation if an Experian-Gallup Personal Credit Index(SM) survey is to be believed. For the second month in a row, optimism levels are at their highest. Most customers strongly believe that they can and will reduce their debts and improve their financial situation soon.

Three quarters of the people surveyed were planning to reduce their credit card debt in the New Year. However, not everyone could say the same thing about their overall debt levels. One possible reason for the optimism is that people have learned a bitter lesson the hard way. The year that went was one of the toughest in recent years.

Daily costs were on the upswing, many people lost their jobs and prices of things were rising. All of these are good breeding grounds for a heavy credit situation. However, with the experience of 2005 behind them, people have a better idea and a plan to deal with debt and to even eliminate it.