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5 Debt Collection Mistakes to Avoid

Regardless of how conscientious you may be with your finances, you may still have to face a debt collector at some point. It could be a medical bill that you thought had been paid by the insurance company that ended up in the hands of a collection agency. It could be a case of mistaken identity or a debt that you paid many years ago that a debt collector is attempting to collect for a second time. When you are contacted by a debt collector, be sure to avoid these five common mistakes.

debt collection mistakesDiscussing the Debt Over the Phone
When you answer a call from a debt collector, inform them that you will not discuss the matter over the phone. Once you have informed them that all discussions must be in writing, they must cease contacting you by telephone. Request the name of the person you are speaking to and their title, along with the company name and mailing address. Inform the person on the phone call that you will be sending a certified letter to them requesting verification of the debt. You can explain that the letter will outline what constitutes verification and will have a deadline for when you must receive the information. By law, the debt collector must provide you with the information for you to send you a verification letter. If they refuse, tell them that they are violating the Fair Debt Collection Practices Act by refusing to provide the information. If they continue to refuse, hang up the phone. Follow the same practice each time they call, and document the dates and times of the call.

Provide Personal Information
Never provide identifying information such as your social security number, address or place of employment to a debt collector over the phone. Many times, the debt collector does not have that information and by supplying it, you have given them the ability to report the debt to credit bureaus or to use it as a way to “validate” a debt that is not yours. When a debt collector attempts to verify your personal information, explain to them that you do not provide such information over the phone and that they will have to send their request in writing. In addition, do not accept a computer printout that simply shows your name, social security number and the amount of the debt. Although this basically is all that is required by the Fair Debt Collection Practices Act, they are not considered valid by courts. Insist on your original, signed contract as the only verification that is acceptable.

Making Payments on Old Debts
Every state has a statute of limitations on debt collection and many debt collectors will use threatening tactics in order to get you to pay the debt even when they can no longer file legal action against you. By submitting a payment, the statute of limitations is reset and a missed payment can open you up to a lawsuit or wage garnishments. If you pay with a check or automatic bank draft, the collection agency also has your account numbers and can remove money from your account without your permission. Although this is an illegal tactic, many unscrupulous agencies still do it. Check the statute of limitation on debt collection in your state before making any payments on debts that are more than two years old.

Not Keeping Good Records
The Federal Trade Commission has a complaint process for those who have been the victims of unscrupulous debt collectors. However, in order to file the complaint, you must keep records of the violations. From the first time you are contacted by a debt collector, keep a phone log of when the calls were made and how often as debt collectors are restricted regarding the times and how often they may contact you. Keep notes that include the name of the person you spoke to and what was said, especially if the collector was abusive, harassing or deceptive. Be sure to keep all written correspondence between you and the debt collector as well.

Ignoring the Calls
As much as you don’t want to deal with a debt collector, ignoring the calls will not make them go away. If nothing else, exercise your right to receive verification of the debt. By ignoring the phone calls, you risk a debt collector filing a lawsuit, even if they are legally blocked from doing so. Although a judge may throw the lawsuit out as the statute of limitations has passed, it will still mean a day off of work and possible attorney fees.

By avoiding these simple mistakes, you may be able to stop the debt collector from calling and possibly avoid paying a debt you don’t owe or is uncollectible. IF you need help getting out of debt contact Rescue One Financial we can help.

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Types of Debt that Cannot be Forgiven

types of debt that cannot be forgivenIf you’re struggling every month to pay the bills, then bankruptcy may provide you with the fresh start that you need. When you sit down to review your bills and how much you can save, it’s important to remember that not all debts can be forgiven through the bankruptcy courts. Understanding the law will help prepare you to take the next step.

Student Loans are Forever
When you’re trying to get through school and decide to take out a student loan, bear in mind that these debts cannot be written off in a typical bankruptcy. With more than 70% of college seniors graduating with an average $29,400 in student loans, there’s no doubt that several people every year will find themselves in this position. It is possible to have some student loans discharged if you can prove that you’re unable to work due to a total disability, but the standard is very high and most people won’t be able to meet the requirements.

Child and Spousal Support
You can file bankruptcy on credit cards and unsecured debt, but the money you owe to your children or former spouse will remain. This is a double-edged sword. It serves to protect people, but it can cause a real hardship for you if your income levels have dropped and you’re no longer able to meet those payments.

Secured Debt
When a lender has an asset that secures the loan, such as a house or car, they’re not going to let you keep the asset without paying the debt. You can choose to turn the item back in, but you’ll have to pay the balance between the current sale value and the amount that you owe. The good news is that this balance can be written off in the bankruptcy, but you’ll still have to give up the item. Is it worth it?

Fees and Debt Paid for Another
Agree to pay off debts in the name of your ex-spouse with caution because you cannot have them forgiven in a bankruptcy later. While it may be allowed to go through in some cases, your ex-spouse can go through the courts to have you ordered to pay those debts.

Income Taxes and Restitution
Where the government is concerned, debt forgiveness is not an option. If you owe money on income taxes or court-ordered restitution, you won’t find relief from those debts through bankruptcy.

There is a silver lining amidst all of this dark news. Even though these debts cannot be forgiven, there are still options available for dealing with them. In the case of student loans, you can work through your lender to learn more about available programs that will lower the monthly payment. Secured debts may be restructured in some cases, so you’ll take longer to pay them off while still keeping the asset. With the other debts, attorneys or resolution companies like Rescue One Financial may be able to negotiate on your behalf to have the balances lowered. By taking advantage of all the options open to you, it’s possible to get control of your finances again even without filing bankruptcy.

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5 Tips on How to Get Out of Debt on a Limited Budget

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reduce your debt with help from Rescue One FinancialWhen you have high debts to pay off, it’s essential to pay extra on each debt. However, this can be a challenge when you’re living on a limited budget. The good news is that you can take control of your situation even when money’s tight. Here are some tips to follow to help you get control of your expenses and start bringing them down.

Work One at a Time
The average American household has credit card debts totaling more than $15,000. The debt is usually comprised of a few different cards, so it’s important to have a plan for paying off the debt. The most effective system is to write down each debt, including the amount owed, the monthly payment and the interest rate. Choose the smallest debt and put any extra funds towards paying it off. Once that debt is cleared, you can apply that payment plus any extra amounts towards the next card on your list. If you have a wide range in interest rates, it’s smart to focus on the highest-interest card first.

Time to Cut Costs
You need to come up with extra money to pay down the debt, and that means either increasing your income or reducing your expenses. You may not be able to take a second job, but you can find other expenses to eliminate. Keep track of spending for a month to get a better feel for where your money is going. The morning latte on your way to work may be costing you more than you think, and you will see other patterns that can lower expenses. You can also talk to your cable company about discounts or lowering the bill, switch to a cheaper phone provider, and make other changes to lower your utilities.

Embrace Cash
Debt will never disappear as long as you continue to create more of it. You will have to stop charging and switch to a cash basis. If you don’t have the cash in your account to make the purchase, then you’ll have to go without it or save your money for it. This is where an emergency savings account comes in handy so that you can cover car repairs and other necessities that arise.

Talk to Your Lenders
Making a phone call can sometimes make a big difference. Talk to your credit card companies to see what you need to do to lower interest rates or it they can offer other assistance. It only takes a few minutes with each company, and you might be surprised at the options and suggestions they have.

Request Help
Don’t be afraid to turn to the professionals for assistance. Consumer debt went up 11.5 percent from 2013 to 2014, so you certainly aren’t alone with this struggle. Debt management companies like Rescue One Financial may be able to assist you if you’re living paycheck to paycheck and falling further behind. Financial advisors can also help you pinpoint your areas of weakness so that you can get in control of your finances.

It will take a little more work and sacrifice right now, but it will be worth it in the long run to avoid the high interest charges every month. You’ll be able to use those monthly credit card payments to fund your retirement or just enjoy life more.

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Why are so Many Americans Drowning in Medical Debt?

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rescue one financial debt managementCountless of Americans are being swallowed whole by unpaid debts. They owe debt collectors so much that they’re afraid to do simple things like answering their phones or walking out their front doors for fear of being served with the inevitable lawsuit.

The interesting thing about these debts is that they aren’t primarily composed of debt from credit cards, automobile loans, home loans or even loans period. They primarily consist of unpaid medical bills.

The prevalence of overwhelming medical debt becomes even clearer to understand when you have a grasp of who has such debts.

Who Does Medical Debt Affect the Most?
The statistics concerning unpaid medical debts can be extremely uncomfortable to realize. Unpaid medical expenses are so prevalent that one in five Americans between the ages of 19 and 64 will struggle to pay their medical bills.

While this means a little over 56 million people in the United States will have trouble paying their medical bills, only about 35 million will allow their bills to reach a state where a collection agency becomes involved.

Around 15 million of those Americans will use some or all of their hard-earned savings in an effort to pay off their medical debts. This leaves them with nothing to fall back on when they inevitably encounter more overwhelming expenses, as many medical problems tend to be chronic in nature.

Another 11 million Americans will take on some form of credit in an attempt to pay off their bills. A subset of this population will become unable to pay for the loans and credit cards they take out, which will result in collections contacting them too.

The most startling number, however, concerns the number of people who will be unable to pay for basic things like food, shelter, heat and clothing. Nearly 10 million Americans will be unable to afford such things solely due to high medical bills that they are unable to pay.

Why Are Medical Bills so Costly?
There are a number of reasons that medical bills can be so costly, but the three foremost reasons pertain to: the cost of equipment, the amount of time and money needed to train medical professionals, and the requirement of life-long medications to treat conditions like diabetes.

The unfortunate fact is that these costs are unavoidable for people whom understandably need the best treatment that can be provided to them. Imaging machines, expert doctors and medicines are all integral in treating conditions that would otherwise be life-threatening.

The problem is that hospitals, doctors and pharmaceutical companies all need to recoup the expenses that they require to make other people well once more. They may even need additional funds to cover the costly processes of researching new medicines and treatments, which is why many brand-name prescriptions cost so much.

Are You Facing Medical Debt?
If you’re one of the growing millions of Americans whom find themselves unable to pay overwhelming medical expenses, then there are still ways that you can afford to live a comfortable life without having debtors hound at your heels. Debt management and settlement programs may be able to help you out from under a mountain of medical bills.

To learn more about how these services can help you relieve the burden of debt, then contact Rescue One Financial.

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Can you be Sued for Credit Card Debt?

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Many people notice a letter or two in the mail threatening a lawsuit for nonpayment of an outstanding credit card debt. These lawsuits can be filed against any person who hasn’t paid the outstanding credit card debt balance. Here is how credit card debt lawsuits work and how they can impact a person’s credit.

manage Credit Card Debt with a DMP

Can you be sued for credit card debt?
Whenever there is a credit card debt, a lawsuit can be filed against you. The debt collector can have a summons issued if the amount owed is large enough. If there is a lawsuit filed, one’s credit can be severely damaged. Most credit card companies who threaten a lawsuit will actually move forward with the process. Legally, you be sued for credit card debt.

What are the chances of being sued for credit card debt?
The chances for being sued for credit card debt are minimal. The person who owes less than a $1,000 for a credit card debt is not likely to be sued. If the person owes a substantial amount, but is making payments, that person is not likely to be sued for the credit card debt. The average time window is six consecutive months of nonpayment for a credit card debt. If a person doesn’t make six consecutive payments on their credit cards, that person is at risk of being sued.

How do people handle credit card debt lawsuits?
The person being sued for credit card debt should always make an attempt to show up in court. If the person does not show up to court, that person risks having a default judgment entered against them. Occasionally, debts are purchased from other credit card companies. If the person has been sued by a new collector, there may be some wiggle room in how the matter is handled. Challenging the collector’s authority to pursue the debt is strongly encouraged. If the debt is an older, the statute of limitations defense may also be worth pursuing. Some people with high levels of debt consider using a debt management plan.

How do credit card debt lawsuits affect your credit?
Credit card debt lawsuits do look bad on one’s credit, but by the time they’ve been settled, the damage has already been done. Usually, the credit card debt has already reached the 180-day mark by the time a lawsuit has been filed on the person’s credit. The greatest impact for an outstanding debt is on the person’s ability to borrow in the future. The action could affect a person’s ability to borrow for up to seven years.

If a person is less than four months behind on a credit card debt, a company will generally work with the person for a payment arrangement. The negative item on the person’s credit report affects the person’s chances of borrowing in the future. The credit score will have already taken a hit by the time the item enters into default status. Communicating directly with the credit card debt company can prevent negative items like defaults from ever appearing on a person’s credit.

However, if you owe more than you can pay back one might consider hiring a debt management company to help them with a debt management plan. If you are in the situation where you are making the minimum monthly payment because you can afford to pay anymore, contact Rescue One Financial. We have helped thousands with a customized debt management and we can help you!

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Guidelines on how to Manage Debt Worries

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Without a doubt, if you want to get out from under debt problems, you will need to have a positive attitude, and you will obviously need to give it a good effort on your end. While true, plenty of consumers don’t know how to begin to fix their issues. With this in mind, here are four guidelines to follow if you want to manage your debt without a worry or fear.

debt management worriesAdd it all up: First and foremost, if you owe some money to creditors, you will want to know the exact amount. For starters, look at all your student loan paperwork, home loan paperwork and credit card statements. Believe it or not, you may not be in that bad of a position, especially if you have plenty of secured debt. Furthermore, student loans are not as bad as others as the interest rate is not as high. Either way, once you know what you owe, you can take the next steps.

Call up your creditors: If you owe a lot of money, chances are you will struggle to pay it all back. Think about it, if you can barely make the minimum monthly payments, you are one bad month away from seeing your debt worries spiral out of control. To combat this, simply call your creditors and ask for a reduction in interest rates. If you have student loans, consider refinancing them. With this simple tip, you can reduce your monthly payments and pay down your loans quickly and without as much struggle. If this doesn’t work, and it doesn’t always, follow the next step.

Use a professional who can help you get to the bottom of your money issue: If you really want to fix your problems and don’t know where to turn, you should consider using a debt management or debt settlement company, like Rescue One Financial. Often, a creditor will balk at your attempts if you don’t have a professional on your side. But, when you do have someone fighting for you, it’s possible to reduce your overall debt burden and enjoy better payment terms. Not only that, you can protect your credit score and get out of the situation with as little damage as possible. Remember, while it’s possible to fight back on your own, you should use the services of a well-trained and well-staffed debt management company can help you in your quest to pay off your loans.

Extra money: Finally, if you want to pay off your debts, whether you use a company or go at it on your own, you need to increase your income. Think about it, if you can wait tables or get a side job, you can pay off your debts faster. Or, if you have the possibility to take overtime, do it. Finally, if you don’t want to work a second job, at least try to cut down your expenses as a way to increase your monthly cash flow. Then, when doing so, you can pay off the debt and watch as it snowballs down to nothing.

If you need more assistance or require some help, you should contact a professional at Rescue 1 Financial. Simply put, if you do so, you are well on your way to fixing the problem and getting rid of your debts, all without giving up your paycheck for the next decade.

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Managing and Lowering Credit Card Debt with a DMP

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The average credit card debt after removing the worst indebted households in the United States is more than $7,000, and the average monthly credit card payment ranges between $200 and $250 a month or roughly $3,000 a year not including over the limit fees and late payment fees. For a significant number of households, paying credit card debt is a true burden. Thankfully, there are debt management plans that can help you lower your balances and pay off your debt.

debt management plan

Benefits of Debt Management

  • One monthly payment
  • Works with your budget
  • Defined financial goals
  • Fewer calls from debt collection agencies
  • Improved credit score and debt to income ratio
  • Debt counselling

Debt Management for Credit Card Debt Reduction
Debt management plans are custom designed for your specific set of circumstances. Professional debt management councilors examine all of your unsecured credit card debt, your income and your monthly expenditures. From there, the company will help you create a budget to reduce your debt and ease your monthly financial burden. They will also educate you on unsecured debt, income and managing your finances.

Once the company has all of your credit card information, they will call your creditors on your behalf and start negotiations. These calls are designed to reduce your interest rates and the fees associated with your account. This task usually lowers the amount of your monthly payments and allows more of your payment to go towards the principle, which results in lower interest fees at the end of each month. It also reduces your monthly expenditures and leaves you with more cash in your pocket.

How Debt Management Payment Plans Work
After negotiations, the debt management company creates a single monthly bill that comprises the payments for all of your accounts. All you have to do is write one check per month and mail it to the management company. From there, the company splits the payment, according to the amounts owed on each of your credit cards, and mails the payments on your behalf, which is typically much simpler than writing and mailing multiple checks or logging into multiple accounts to pay your bills.

Over time, you will see your credit card balances go down and your overall household debt reduced. During this process, it is still wise to keep abreast of your credit card accounts and make a note of when each account is paid off.

Once an account is paid off and closed, contact your debt management company and let them know. Often times, you will be given the option to keep paying the same amount or reduce your monthly payment. Most debt management companies recommend you keep paying the same amount. This allows more money to be put towards your remaining debt, which reduces your outstanding debt even faster. Additionally, you can make payments that are more than your minimum monthly amount when you have extra cash.

To learn more about debt management and how it can help you lower your credit card debt, contact our friendly professionals at Rescue One Financial.

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When is Credit Card Debt Too Much?

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There are many factors that come into play when discussing a person’s debt load. Every situation is different. Still, there are ways to determine whether your credit card debt might be too high.

Debt-to-income ratio
too much credit card debtA simple and quick way to get a sense of whether you have too much debt overall is to calculate your debt-to-income ratio. A debt ratio is simply the percentage of income that goes toward paying your monthly debts. To calculate it, simply add up your ongoing monthly debt payments – typically credit card, auto loans, personal loans and student loans. Then, divide the sum by your monthly income after taxes and other deductions – your take-home pay. A quotient of 0.10 or lower means you’re spending 10 percent or less of your monthly take-home on debts. A result higher than 0.10 is a warning sign. Also, If your debt load is negatively impacting your credit score – you’ve been turned down for new lines of credit – overall, you probably have too much debt.

Credit card warning signs
First, it’s important look at interest rates. Chances are you’re paying a much higher interest rate for credit card debt than you are for other debts. If your credit cards are maxed-out, and all you can handle is the minimum monthly payment, you’re only paying a very small portion of the principal on your debt. It will take years to pay off even a small debt with this approach, and you’ll end up paying more in interest than the original expenditure. If creditors are hounding you because you can’t make your payments, and you’re not expecting a large infusion of incremental cash any time soon, you can be certain you have too much credit card debt.

Negotiating with the bank
Banks are smart enough to know that someone with high credit card debt can’t just pull the money out of a hat. If you find yourself unable to make your monthly payments, don’t assume the situation is hopeless. Most banks would rather have you contact them, explain your situation and request assistance than have you go off-the-grid. It can be as simple as asking for a reduced interest rate, or requesting a temporary payment reduction. If your dilemma is longer term in nature, and outside factors are in play – like unexpected medical bills – you may want to ask the bank if it will accept a lump sum settlement payment for something less than what you owe.

Getting good help
If those attempts fail, it’s time to enlist the services of a debt management and resolution company. like Rescue One Financial that has professionals on hand who can develop a plan to get your credit card debt under control. They might be able to help you negotiate reduced balances or debt settlements on your credit cards. Similarly, it can advise you on the most effective way to consolidate your debts. It may be possible to get a new line-of-credit at a substantially lower interest rate than your paying on your credit cards, in which case you could pay off your credit cards, consolidate your debts at a lower interest rate, and reduce your monthly payments.

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How to Use a Credit Card Without Going Into Debt

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A credit card can be a useful tool in your quest to spend money and manage your finances. While they have long been demonized as tools that put you into debt, this doesn’t have to be the case. How can you use a credit card without going into debt?

Make the Full Payment Each Month
Use a Credit Card Without Going Into DebtPaying your balance in full each month eliminates the need to pay interest on your credit purchases. It also ensures that you don’t carry a balance from month to month that will have to be repaid at some point. While it may not seem like a big deal to keep $50 or $100 a month on your card, that could add up to hundreds or thousands of dollars over the course of a year.

Don’t Make a Charge Unless You Have the Cash to Pay it Quickly
Many people use credit cards to rack up rewards or cash back that can be used for rewards. If you are going to use a credit card to get cash back from your credit card company, make sure that you have the cash to make the payment before the end of the billing cycle. If given the opportunity, you may wish to use your cash back as a credit toward your monthly payment. This gives you the chance to earn rewards that you may use in the future while ensuring that at least part of your credit card bill is being paid.

Use Balance Transfers to Keep Interest Charges to a Minimum
Instead of paying 20 percent interest on your balance, you can use a balance transfer to keep your interest to as little as 0 percent monthly. On a balance of $100 or more, this could lead to a tangible savings that can make it easier to pay off your bill each month or within a reasonable amount of time. In many cases, people have a hard time paying off their bill and rack up a large debt mostly due to rising interest fees.

Look for a Credit Card That Doesn’t Impose Late Fees or Interest Rate Hikes
Many credit card companies will raise your interest rate or charge you a fee of up to $35 if you are as little as a day late with your payment. While you may be able to plead for leniency with the credit card company, this is not always an option. Therefore, it is important to make sure that you aren’t charged a late fee or any other penalty in the first place. Those who have good credit may find it easier to find such a card.

Your credit card company is going to want to charge you as much interest as possible. While this is good for them, it is bad for you. Therefore, make sure to get a card that either doesn’t charge a lot of interest or pay off the bill before interest is charged. This may enable you to get the most from your card without having to pay a lot of those rewards.

However if you end up racking up debt due to credit card usage, contact the professionals at Rescue One Financial, we can help you regain you financial freedom.

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How To Stay Out Of Debt With A Credit Card

Credit cards often receive a lot of negative attention. However, they can actually be very useful if they are used the right way. In fact, credit cards can help you build your credit. There are several things that you can do to use your credit cards responsibly and stay out of debt. Below are some tips for avoiding credit card debt:

stay out of debt with credit cards

Build Up Your Emergency Fund
Many people use their credit card when an unexpected expense arises, such as a medical bill or a major car repair. One of the best things that you can do to prepare for an unexpected expense is to build up your emergency fund. Try to deposit some money into your savings account every week. This can prevent you from needing to use a credit card if you are hit with an unexpected expense.

Make All Payments On Time
This seems common sense, but it is one of the best things that you can do if you want to avoid credit card debt. When you miss payments, your balance will increase because of late fees. Your credit card company may also increase the interest rate and raise the minimum payment. It is definitely in your best interest to make payments on time.

Pay The Balance Off In Full Every Month
This is a sure-fire way to ensure that you stay free of credit card debt. If you pay your credit card balance off in full each month, then you will be able to avoid paying interest. One of the reasons that many people have trouble paying off their credit card debt is because of the interest rates. If paying the credit card balance off in full each month is not a feasible option, then you should consider paying more than the minimum payment. You will be able to pay your card off quicker and avoid accumulating debt.

Be Cautious About Applying For New Credit Cards
Many people apply for new credit cards so that they can have more credit in their name. While increasing your available credit can help you increase your credit score, applying for new credit cards is not always a good idea. You may be tempted to spend more if you have a lot of credit. Furthermore, your credit score is impacted every time that you apply for new credit.

Only Charge What You Can Afford
Any financial expert would tell you that if you cannot afford to purchase it with cash, then you should not pay for it with your credit card. Far too many people use credit cards as a source to fund things that really cannot afford. You can avoid credit card debt if you avoid charging anything that you do not have the money in the bank to purchase it.

Millions of people struggle with credit card debt. However, if credit cards are used wisely, then people can avoid getting themselves into debt. If you need help paying off credit card debt or want more information, contact the credit card debt professionals at Rescue One Financial.

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