The Banker’s Guide to Solving Your Own Personal Credit Crunch

One Community Bank’s 3-Step System for Wiping out Credit Card Debt nnNow more than ever, the news about banks lending money is doom and gloom. From the president’s sobering speeches about this country’s financial crisis to the headlines to the 24-hour financial news segments, the message is clear: “Banks aren’t lending money anymore…”nnBut not all banks are created equal. In particular, community banks that make their own decisions, have their own boards and manage their own funds are operating business as usual; that means they’re lending money as they’ve always been; but that doesn’t mean it’s a free-for-all, either. nnEvery bank wants to make good decisions, and lending money is serious business. Banks want to make sure they are lending to people not just who can pay them back but who can afford the loan in the first place. nnLooking at someone’s credit card debt can be the first step in determining whether the money the bank does have to lend will be a good investment. Unfortunately, many people fall short when it comes to managing this very specific kind of debt.nnAccording to Robert Sumner, CEO of First National Bank of Pasco (FNB Pasco) near Tampa, Florida, “Credit card debt seems to be the biggest problem our clients have when getting themselves in trouble.”nnSumner adds, “Everybody complains about their mortgage payments, their car loan, but they get surprised when we show them that, once you add up all their credit card debt, it can sometimes equal or even surpass what they pay out in home AND car loans each month!”nnIn an effort to inform his current, and potential, clients on the dangers of credit card debt, Sumner and the folks at FNB Pasco have come up with the following 3-Step Debt Solution Plan:nn• Step 1 – Admit Things Are Out of Control: The first step in solving your own financial crisis is to admit there is a crisis in the first place. This can be as simple as taking five minutes to gather ALL of your credit card bills together (no hiding any) and adding up the monthly payments. If your blood pressure is rising halfway through the stack, you’ll know things are nearing crisis point. nn• Step 2 – Get Things Under Control: If it’s clear that your debt load is becoming insufferable, take steps to get them under control. This could mean a system of paying off one credit card at a time. In other words, if you have six credit cards, pay the minimum on five and the maximum possible on the sixth until it’s paid off. Once you’re down to five credit cards, pay the fifth off before focusing on the fourth, and so on. Of course, if your debt load is crippling you may want to consider a debt consolidation service. (Your local community bank can often recommend several credible candidates.)nn• Step 3 – Keep Things Under Control: Once you begin to get your debt under control, keep it there. Says Sumner, “We see people all the time who have worked so hard to get their debt under control, only to sully their ‘clean slate’ with even more debt so that they wind up, months later, in the same boat.” Having a budget and sticking to it is a great way to begin keeping your debt under control. So is limiting yourself to one or two credit cards and always keeping both under half of the credit limit. nnWe all have debt; debt is a basic fact of modern American life. The goal is to have good debt; debt that allows you the freedom to pursue certain financial goals without limiting others. Using this simple 3-step plan you can always be sure you’re striving for good debt over bad.n