HOW DO I KNOW IF I HAVE TOO MUCH DEBT?

Know the signs.

Look at your financial picture to see if it reflects any of these signs that you may have too much debt.

• Your disposable income has dwindled
• You pay your bills, and there’s nothing left over
• You can only make minimum payments on your credit cards
• You have more than two major credit cards with outstanding balances
• You take cash advances to pay other cards or bills
• You have no emergency fund—try to keep a three-month salary cushion
• You use credit cards to pay for items you previously purchased with cash.

Look at how you use your credit. For example, home loans are usually considered “good” credit. If you have a loan on your home, you will probably have a larger return on your investment so the credit is seen as positive. However, what you use your credit for determines whether or not you may have problems, not the type of credit you have.

This table illustrates the importance of paying more than the minimum payment each month. If you make a 2% minimum payment of $40 each month on a $2000 balance at an annual percentage rate of 15.99%, it will take you 83 months to pay off your debt. If you double payments each month, the number of payments drops to 31 months.

The payment chart is provided courtesy of MBNA America® and is provided for illustrative purposes. The assumptions used here may not be applicable to your account and the way in which you use it. You should not rely on this example to determine your own financial status. MBNA America and MBNA are federally registered service marks of MBNA America Bank, N.A.

Accumulating debt to live above your means is never a wise decision. We can help you assess your credit and get your financial deficits back in line.

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Article: Put Savings (and Yourself) First With a Budget

Learn more about ways to save and reduce your credit debt. If you haven’t revised or established a budget, now’s the time to start planning. Our budget basics section can help you gain control of your debts before they control you.

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