The last couple years have proven to be tough times to be a homeowner. Home values around the country have seen a decline, and many homeowners are now feeling the squeeze from signing up for adjustable rate mortgages. Many homeowners are having a hard time coming up with mortgage payments, while meeting minimum payments for cars and credit cards (even low interest credit cards often have high minimum payment requirements of 2-3% of the outstanding balance). Something has to give, and all-too-often it is the house that falls behind.
The Squeaky Wheel Gets the Oil
There are too many stories out there about homeowners who kept their credit cards current as they fell behind on their homes, ultimately leading to foreclosure. Credit card collectors are notorious for their obnoxious, high-pressure techniques, and unfortunately they are also often the most successful. I used to work in a call center, and I’ve seen these collection practices up close and personal. Believe me, it wasn’t any more fun for me being on the other end of the line, but some people seem to enjoy abusing others over the telephone. I was raised on the idea that you catch more flies with honey than with vinegar, but in the collections world this just isn’t true. The best way to collect money on a credit card is to scare the cardholder into thinking they will be sued, or to pester them to the point that they finally pay just to get you out of their lives.
Shelter and Transportation Before Capital One or American Express
The problem with paying credit card companies when you are in a financial bind is that with only so much money to spread around, something else is going to suffer. I’m not advocating you neglect to pay a just debt, however I am advocating that you sit down with the pile of money you have to work with and put life necessities at the top.
I’m a fan of the Dave Ramsey radio show. I don’t agree with 100% of what he advises, but he is right on when it comes to this subject. When he fields calls from people who are being bullied by credit card collectors he advises them to list out their monthly expenses beginning with life-sustaining expenditures first:
Notice credit cards weren’t part of that lineup. If you have money left over after paying those four basic categories, then by all means make your credit card minimum payments. If you don’t have anything left over, do not stress out about what Bank of America might do to your FICO score, or worry that Discover Card is going to garnish your wages.
If you receive a call from a nasty credit card collector, explain in a calm manner that you have budgeted your bills for the month and unfortunately you are not able to make a payment this time. When they start to scream and yell and call you names, simply put the phone down on the table and go about your business. If you get emotional and yell back at them, they win. Getting you upset is their objective, so don’t let them win!
When your financial situation improves make plans to catch up on outstanding bills, again putting credit cards last. House and car payments come first, and with anything left over you can begin to catch up on outstanding credit card debt. The bottom line is to play by your rules, not the credit card collector’s. After all, you are the one that has to suffer the consequences of missing a house payment, or getting your car repossessed.