Credit Card Debt Management
Credit Card Debt Management should be attended to by consumers in the same way that lenders analyze (or should analyze) Credit Risk Management.
Proper Credit Management indicates: Just because a lender issues credit doesn’t mean that the borrower can go out and use it financially responsibly. Credit management basics suggest a lender uses 3 key components for lending those are:
- The Cost of Lending Money
- The Return they receive from Interest, Penalties, and Fees
- The Amount of Credit that will not be Repaid
Consumers should use a similar method for credit card debt management. Prior to using the credit consumers should answer the questions:
- What is the Cost of this Credit – “How much will it cost me to repay”
- What are the Benefits of Using Credit in the Present Situation
- How am I going to repay this credit
- At what Point will this Credit put me in Danger of Financial Hardship
- What can I do to Mitigate Losses if something Unexpected Happens
These are simple questions everyone can answer using credit debt management principles. Along with these 5 questions we typically suggest a simple process of listing monthly income and expenses with your current assets and debts. This credit card debt management evaluation can be completed in less than an hour but can be the source of peace of mind and other financial and emotional benefits for years.
These activities have been in banking models for decades but there has never been a strong suggestion for consumers to do them. Even though the last decade in banking may not be one to emulate or aspire to replicate in your personal finances. We find it easy to appreciate the decades of research that have taken place on this subject in the corporate sector and suggest the underlying models would be an improvement for consumer credit management.
There has been a tremendous increase in consumer credit management and overall credit management services recently.