Many estate planning clients I meet with express the legitimate concern that upon their death creditors may take their heirs’ inheritance. This is because the probate process in Kentucky (as well as other states) gives creditors the right to receive payment from the assets of the decedent’s estate. When property passes through probate the heirs may very well have to liquidate property in order to satisfy creditors. Particularly onerous are credit card lenders, and while it is advisable to avoid credit card debt in life, it is also beneficial to a person’s heirs to avoid the credit card debt trap.
It can be easier said than done – some things are simply outside our control (things like unforeseen car repairs and medical emergencies); but there are strategies that can help manage credit card debt.
View it as a debit card
One of the best ways to avoid credit card debt is by changing the way you view your credit card in the first place. Most people consider a credit card as a way to borrow the money they do not have, or a way to advance funds to avoid using existing cash reserves in a bank account. This mindset is prevalent, and unfortunately this is the easiest way to fall into the credit card debt trap. Borrowers end up stacking expenses on a credit card until they can no longer keep up with current living expenses while making meaningful payments towards their credit card debt – in essence the credit card payment exhausts funds to live from, and to make up for the shortfall credit card users have to then go back to the credit card(s) for basic living expenses. This is the debt trap – and it’s a feature of the debt system, not a flaw … this is what the credit industry intends to happen.
Instead, treat a credit card like a debit card and only use the card to spend the money that you currently have on hand (or better yet, cut up the credit card and just use a debit card!). This helps avoid incurring those extra fees by allowing you to pay off every bill on time and in full.
Use the card responsibly
Treat your card responsibly, too. This means no giving it out to other people to borrow, no taking cash advances, and no signing up for multiple cards in an attempt to get around the spending limit (or to do the old “credit card balance shuffle” … transferring high balances between cards to take advantage of lower interest rates).