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Credit Card Budgeting & Lessons Learned from S&P



Credit Card Budgeting

By now, everyone in the country has become familiar with the fact Standard & Poor downgraded the nation’s credit rating from a prideful AAA to a slightly shameful AA rating. While we may not know how that will ultimately affect our day to day lives, one thing is for sure: the government is teaching American consumers on what not to do when dealing with our own budget crises.

The Evils of Procrastination

It’s true there are few things more dreadful than having to call our creditors to work out a payment plan during those tough economic times. In fact, many Americans would much prefer a root canal than having to spend time on the phone with the credit card companies. For a perfect example of how quickly things can turn sour, one need only look to the recent debt crisis on Capitol Hill and the reaction from the world’s most recognized credit rating agency.

Because our elected leaders chose to bicker, argue and generally collapse during their efforts of finding a “win win” solution to the debt crisis, S&P saw that as a weakness. After all, if they couldn’t agree on a total solution, what good will the half-baked effort be when they must meet again to decide how to spend taxpayer money? Making matters worse is that Congress waited until the last minute to do anything. That meant a lot of late nights and worry over what would happen next. If you think about it, many of us can relate to that sense of dread when we wait until the last minute to contact our creditors.

The Blame Game

So your Visa is thirty days past due? Odds are, none of us would ever call Visa and say,

My husband and I can’t agree on whether we should pay you or MasterCard.

First, the hubby is not going to be a happy camper when he learns you put the blame on him, but more importantly, you’re not going to get far with your creditors. Instead of laying the blame elsewhere, you’re apt to get much further if say,

We’ve hit a roadblock and are now looking for a way to better navigate our finances for the next few months. Are there any options you can help me with?

It’s simple, to the point, truthful and of course, it shows you could care less about whose fault it is, but rather, your commitment of finding a solution before things get out of hand. Had our national leaders stopped long enough to consider how ridiculous they sounded by blaming other political parties, it’s likely the nation would have had a better collective outcome.

Destined for Failure

While those long and convoluted efforts resulted in some degree of a permanent solution, the fact is, there remain trillions of debt that must be addressed in a relatively short time. Because it seemed as though every single politician had his own ulterior motives, it’s clear the “winning” solution Congress as a whole came up with was anything but, which, as we know now, was a big reason S&P opted to lower the country’s credit rating.

There is strength in numbers and the same holds true when you contact your credit card company. While you want to get things back on track as soon as possible, the bottom line is you must be prepared with a workable solution that your creditor will agree to. If you have $100 due and say to the credit card company, “I’ll pay you $50 next week”, you know the next question is, “OK, and how soon can we expect the remainder of the past due amount?” You don’t have the luxury of saying, “Well, I’ll work on it in the coming months and get back to you.”

Even admitting that you’ve lost your job and you’re working hard on getting all the balls in the air again is a much more honest approach – and one that’s likely going to be met with a more willing creditor. It’s the non-plussed attitude that results in a breakdown of communication between you and your card carrier.

The fact is, no one knows for sure what happens next in terms of how well the country recovers from these devastating blows. There remains uncertainty of yet another downgrade. With unemployment numbers still high, record numbers of bank failures and foreclosures still occurring each week, your credit card company is familiar with these growing problems and how they affect their respective customers.

Be honest, don’t wait until the last minute and don’t place the blame. There’s a big difference in placing blame and taking responsibility and a creditor can see right through those less than noble efforts. Your goal is to keep your credit rating intact and your creditors are certainly willing to help you do just that – provided you’re part of the solution.

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