Credit card video: Credit card debt warning signs

(2:40)

By CreditCards.com staff

Credit card debt warning signs

Daniel Ray: I’m Dan Ray, Editor-in-Chief with CreditCards.com. With me is Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.

When it comes to debt, there’s no big guy with a t-shirt that says ‘debt’ in giant letters that comes up to you and taps you on the shoulder and says, “You’re in trouble.” But there are some warning signs you can watch out for, and Gail, can you tell us what some of them are.

Gail Cunningham: A warning sign would be, if you’re hiding purchases from your spouse. Do you go shopping and put them in the trunk and only bring them into the house when your spouse is not there? Or, do you have an increase in arguments about money in your home? Also, do you charge everything; things you used to pay for with cash? Do you not have any money, and you put all of your purchases on your charge card? Or how about thoughts of bankruptcy? Has it gotten so bad that you’re considering filing bankruptcy? Then I would certainly reach out for help, and would reach out sooner rather than later. Are you robbing Peter to pay Paul, and Peter’s getting tired of it? And by that I mean that you’re always borrowing from relatives, or you’re trying to pay your Visa with your MasterCard. That’s just really shuffling debt around and that is not getting you out of debt.

DR: Is there any sort of numeric value you can put to it? In other words, I’ve got 25 percent of my income will have to go to pay off this month’s credit card bill, or else I’ll fall behind. Is there any kind of rule of thumb like that that people could use?

GH: Yes, there is. As a matter of fact, we recommend that no more than 20 percent of your take-home pay go to satisfy debt, and by the way, that includes a car payment. So if you bring home $1000 a month, then your debt should not eat up more than $200 of your take-home pay. And you can just figure that out for yourself. And we recommend no more than 30 percent of your take home pay go to satisfy housing. And you see where I’m going with this. You’re not going to be a candidate for any type of loan if you get yourself stretched too thin, and that could really restrict your future borrowing power, or even your dreams of opening a business, or moving on in your career. So it’s really critical that you watch how much you owe and not become overextended.

DR: We’ve been taking about debt danger signals. With Gail Cunningham from the National Foundation for Credit Counseling, I’m Dan Ray.

A credit counseling expert discusses signs that might indicate you're in trouble with credit card debt.

Published: March 11, 2009

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