Should you cut up credit cards and close accounts, even if this might negatively affect your credit score? Dave recommends that you do. Yes, this will affect your credit score. But the biggest problem he sees in the general public is a failure to overcome the personal impulse to spend. Cutting up your cards is a good step to take if you find yourself in this category. For me, my commitment to eliminating debt trumps my personal spending impulse (for the most part, anyway!). I look at a credit card account as a tool, and try to exploit the benefits of a card account, in particular the occasional low-interest balance transfer offer. I am currently paying less than 3% interest because of this type of offer, saving me thousands of dollars over my 3 year debt elimination plan. So, I would not close accounts. But I don't carry these cards with me. I keep them in a small stack in my dresser. I'll get a card out every 6 months or so to make a small purchase to keep the account active.

Dave also answered a question about turning to a debt reduction or debt elimination company for professional help. Advertising for these companies has skyrocketed recently, so you probably have heard them if you listen to the radio or watch TV. A common claim is to legally reduce 60% or more of your credit card debt. According to Dave, a credit card issuer will not reduce your debt unless you are seriously delinquent. These companies typically take $2,000-$6,000 from you, and act as the middle man, negotiating with the issuers. Dave does not recommend this strategy at all. If you find yourself that far behind, then can do the negotiating yourself. The important point to keep in mind, the next time someone says they'll legally reduce your debt, is that it only will happen once you are seriously delinquent. This will destroy your credit.

A final question came from a woman $156,000 in debt, due in large part to paying for her two sons' college expenses. She recently lost her $50,000 a year job. Should she declare bankruptcy? Dave was sincerely sorry for her predicament, but did not recommend bankruptcy just yet. This is a snapshot in your life, he said, and life is a movie. Maybe she'll get a $100,000 a year job soon, in which case paying down the debt is the right course. Or it could go the other way, and things might get even worse. The important thing, according to Dave, is to not panic, and handle the essentials first. Make sure the home is secure and warm, and there's food on the table. Try to make the payments next, and wait and see what happens. If things get worse, maybe bankruptcy will have to be the answer.

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