Welcome to the arena. You probably volunteered for this by signing up for credit card or choosing to take out a loan. Now you find yourself stuck in a place filled with existential dread and threats closing in on all sides. Despite the low limit, you have racked up considerable debt, have to face down high interest rates, and worry about a bad credit score.
Maybe you got here because you weren’t totally responsible with your money. You weren’t blowing it on yachts and bottomless mimosas, but it’s sometimes hard to resist spending when you have a new spark of available credit. Maybe you used the card for emergencies or put an important bill on it to keep the lights on or the heat running. Maybe the day-to-day expenses of life just added up slowly over time.
No matter what the reason, the debt is circling like a hungry vulture.
Just like in the book and movie, the game is rigged against you. The bank or credit company wants you to pay more. They jack up interest and charge extra fees whenever they can get away with it, and they do this to keep you trapped.
If you’re smart and strategic, you can survive this. You may not bring down the whole system like Katniss with one arrow to the dome, but you can fight, stay alive, and come out stronger.
How the Debt Game Sucks You In
Debt isn’t just math. It’s emotional, stressful, and also involves some degree of shame. Start by cutting that last part out right away. There’s no need to be ashamed.
Most people living paycheck to paycheck or under or near the poverty line are practically forced into debt just to survive. That’s not a failure on your part. That the sign of a broken system. Here’s how it works:
- You aren’t paid enough for the basic expenses of everyday life.
- You get a credit card or loan out of desperation.
- Something forces you to use the card – emergencies or day-to-day costs.
- You make the minimum payments because that’s all you can afford.
- Interest piles up, which only adds to your stress and repayment difficulties.
- You’re completely buried in debt and have no clue how to escape.
Even if you acted irresponsibly when you first got the credit card and bought things you shouldn’t have, that would be the only point in this whole thing that’s your fault. Also, you have to embrace the idea that you can’t turn back the clock and make a different decision. The world of credit is designed to keep you down.
How do you survive the arena when everything is working against you?
Know Your Enemy
Even if you have no hope of paying off your debt right now, it’s important to know what you’re up against. Let’s break down all the credit crap no one really bothers to explain – often because they don’t understand it themselves.
Utilization Rate
This is the amount of credit you have that you’re currently not using. So, if you have a $500 total limit on your credit card, and you used $400 of it, your utilization rate is 80%.
The credit bureaus who give you that all-important credit score (or FICO score) really hated if your utilization rate is above 30%. They also hate it if it 0%. They want you to use credit but not too much. This shows them that you can use it responsibly.
At this point, before you even start thinking about paying off your debt, understand what your utilization rate is. It helps you create a strategy for getting back to a healthy place and what to do in the future to make things even better.
Minimum Payment
While this is the amount that the credit card company needs you to pay every month before they start getting nasty, don’t let this number come for you in any way. Paying just the minimum means you will stay in debt, and it will just keep getting worse and worse, as time goes on.
If that is all you can manage right now, don’t freak out. Paying the minimum keeps you afloat for now, but it’s important to understand that it’s designed to make it difficult to keep treading water. Even adding one or two dollars to the payment every month can help. No matter what, always paid on time. The last thing you want is late fees.
Interest Rate
This is the percentage that the credit company charges you when you borrow their money. That’s what using a credit card is, after all. When you buy $100 worth of groceries on your MasterCard, you are actually borrowing that $100 from the company. You’re supposed to pay off completely before the due date. If you don’t, you have to pay that amount plus interest.
Choosing credit cards with low interest rates makes sense. If you have one with a rate of 20% or more, it was probably the best you could get at the time. Whether you made some bad spending decisions in the past or you desperately needed the credit for food, gas, or medication, what’s done is done. Now it’s time to move forward and learn new methods for survival.
Small Moves Are Better than No Moves
In the Hunger Games arena, when one player got too far away from the other contestants, the powers that be added firestorms and creepy dog monsters to force them back into play. Things like increasing interest rates and extra fees play this role in the credit games.
It’s always better to take some kind of action than it is to sit back, wait, and ignore the stress. You don’t need to create a huge payoff plan right now. If you’re broke and struggling to survive, snowballs and avalanches just feel like something you get buried in. Here’s what you need to do now.
- Target the ticking time bombs. Which credit card or get is closest to being maxed out, has the highest interest rate, or has the nearest time limit for payments. Tackle that one first.
- Round up payments and add all the extra income to your debt repayment plan. If the minimum payment is $28, pay $30. If you save $5 on with an online coupon, send that five dollars immediately to your creditor.
- Call them and beg for mercy. (Okay, you don’t actually have to beg.) You might be surprised to find your credit card company will lower your interest rate, waive a late fee, or set up a hardship repayment plan if you ask them. What do you have to lose? The worst thing they can do is say no.
Protect Yourself from Further Damage
When you’re in a hole, stop digging. It’s really easy to get stuck in a credit debt trap. You need to make rules for yourself so that you can escape. Other than all the in-depth repayment plans you can get into when you have money to do so, follow these three things no matter what.
- Set up auto-pays for the minimum amounts.
- Don’t close old accounts even if you pay them off.
- Do not apply for more credit cards (except in a few very specific circumstances)
Facing the Worst Contender
Debt isn’t just a financial issue. It’s also psychological warfare. It’s been scientifically proven that people in poverty or those living paycheck to paycheck without many options have a much higher stress load, which affects everything from their physical health to energy levels to rates of depression and anxiety.
Debt constantly whispers at you that you messed up, you’re falling behind, or that you’re failing.
These things are not only lies, but they’re incredibly unhelpful for your survival or making plans to improve your life and financial situation. Tons of people are in the exact same fight. It’s okay to be tired, angry, and afraid. These are natural reactions to high-stress situations.
The system is designed to work against you. The people who design the system have tons of money, and they always want more. This doesn’t mean you’re powerless, however.
You’re here, you’re still trying, and you’re surviving. That’s a victory.