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Avoiding common errors may help reduce credit card debt

One financial expert recently offered his opinion on how Massachusetts residents and those in other parts of the country can avoid being overwhelmed by credit card debt. The expert notes that while legislation like the CARD Act may help protect consumers from the financial challenges that result from mounting credit card bills, both Massachusetts consumers and others can on a personal level be proactive in avoiding some costly mistakes that often lead to more debt and less financial security:

At the top of his list of common credit card blunders, the expert highlights the importance of paying off as much of the balance on a credit card as possible on time every month. He also mentions the serious consequences of late payments or frequent minimum payments. In addition to more debt and the possibility of higher interest rates and penalties, these practices are likely to impact a borrower's credit score negatively, meaning that a borrower will probably face higher interest rates on any new loans he or she may need to take out.

The expert also warns against using credit cards for quick cash flow via cash advances. While the expert acknowledges that sometimes emergencies arise and a cash advance is a person's only viable option, the expert especially cautions people not to use cash advances in order to make optional purchases. The interest rate on these cash advances is usually quite high, and a cash advance loan can quickly snowball into an insurmountable debt.

However, as this expert seems to acknowledge, sometimes, serious situations arise in people's lives that require the payment of minimum payments or require cash advances. Also, while no one really wants to put off paying, sometimes it is simply impossible for a family facing an unexpected job loss or a surprise medical expense to pay credit card bills on time.

If a Massachusetts resident finds himself or herself paying the bills late frequently or because there is just not enough money in the bank, he or she may want to consider whether he or she is a good candidate for a bankruptcy. Late payments and minimum payments can be signs of financial stress for which the bankruptcy system is designed to offer relief.

Source: ABC News, "Top credit card mistakes," Adam Levin, July 28, 2013