Monday, December 08, 2008

SHTF: Credit Cards

When it comes to preppin', money matters. Sure, you can prep for as little as $20.00 every other week, but it will take a lot less time if you go in for $200.00 a week, right?

Having your financial house in order is job one when prepping and preparing for the end of the world. However, some people dismiss good financial planning and responsibility because they get caught up in the urgency of preparedness and forget common sense.

Y2K.. 2011.. New president.. Economic meltdown...

There is always a sense of urgency to empty the bank account and IRA, max out the cards and mortgage the house for preparedness supplies. Not a good idea..

Credit Cards

Credit is a great thing. Like beer, wine and liquor, credit makes you feel wonderful. Because of credit a person can buy a home with a price tag 4 times his or hers annual salary all because of the trust invoked with credit. Good credit takes time to build and only a month or so to destroy. But like liquor, having too much credit can leave a person with a bad hangover.

When it comes to preparing for the end, don't fall into a few of the common misconceptions which come up in the prepper world:

"Why bother paying your credit card bills if the end of the world is coming?"

- If I charged 2500.00 on a credit card while Jimmy Carter was president because everyone thought the end of the world was coming then, a) I would be up to my eyeballs in 28% interest on that charge and b) nearly 30 years later of minimum payments and I still would not have the original principal paid off. And the preps I bought in 1979 would be gone or worthless.
Pay your credit card bills on time and in full!

"Why not run up my credit card balances now getting the things I need (like guns) before they are gone or banned?"

- Although buying a few things outside of your budget for "just in case" seems like a good idea, it is not as good as it sounds. First, you have to pay off that credit card balance sooner rather than later or the value of the purchase starts to diminish. Second, with the economy in the dumper, facing possible underemployment while having 1000, 2000 or 3000 dollars in credit card debt is not a good thing.
Put on credit what you can afford to pay off at the end of the month.

"I am behind in my credit card bills but I am not worried. The government will bail us out to save the economy or a depression will happen and nobody will be able to pay their bills."

- What a mistake to think this way. Come bad economy or good, the lender will get their money. Either they will take you to court, have collections agents hound you or figure out a way to get your home as payment. You will lose and still have to pay back what you owe. Get your credit card bills paid and get out of debt.

"My credit card company is offering me a settlement to pay off my debt or a company called and offered to settle my credit card debt for half what I owe. Is that a good idea"

- No. The settlement will be a seven year black mark on your credit as a closed account/settled. This means the lender received half or less then what you owed. That makes you a bad credit risk to anyone in the future. Second, the difference between what you paid and what you owed is considered income to the IRS. So if you owed 7500.00 and paid 3300.00, you gained 4200.00. That is taxable income according to the IRS which you have to pay.
Instead of settling the account, ask the credit card company for a way to pay back the principal on a monthly payment plan without incurring any more late charges or additional interest. All credit card companies will do this and will work with you. Call and find out.

For preparedness, credit cards can be a good thing.

A clear credit card should be with your personal preparedness supplies.
A credit card can secure a hotel room or rent car when away from home or after leaving home. This can mean life or death in an emergency situation.
A credit card can be used to purchase hard to get things online.
A credit card can be used in lieu of cash for emergency purchases in order to save cash but only in a temporary situation.
A credit card can be used to make a big emergency purchase such as a car repair or hospital visit when waiting may put you or your loved ones in danger.
A credit card can be the ticket to putting yourself out of danger, such as purchasing a first class seat on an oversold flight when the poop is about to hit the fan.

Having good, clean credit is worth its weight in gold. Good credit can help secure that piece of get away property, make improvements to your home and lower your interest payments - which means more money in your pocket for preps!.

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