As the pinch from low prices and shrinking markets starts to hit the farming sector, heartbreaking stories will once again appear about producers who tried to stay afloat by using credit cards to buy staples like feed and fertilizer and even large ticket items such as tractors or plows.

Managed properly, credit cards can provide an effective tool to cover emergency expenditures and provide good records of expenditures. Improperly used cards can put anyone on on the fast track to financial disaster.

"It is not unusual to see credit card companies offering $100,000 credit lines or even unlimited credit limits, " said Suzanne Badenhop, Extension marketing specialist in the UK College of Agriculture.

Unfortunately, many farmers have quite a bit of equity in land and equipment that would qualify them for such a credit line and this amount of buying power may look very tempting.

"If the farmer needs that tractor for his operation right now and he only has a short term cash flow problem, than using a credit card may be a viable alternative for a quick loan,". said Badenhop. "But it should be paid back within the next twenty to twenty-five days... otherwise he will be paying as much as 18 or 19 percent interest on that debt."

If a producer decides to buy an expensive item this way and then just makes a minimum payment on that expenditure, the interest charges could force that individual to eventually pay over five times as much for that item.

"Anyone using a credit card for basic necessities and then only paying the minimum amount due each month on that bill should consider that a warning signal that you may be in financial difficulty," said Badenhop.

Other credit danger signals include buying items with a credit card that you used to buy with cash, skipping payments, taking out new loans to pay old loans, and relying on additional income such as overtime wages to make ends meet.

"For the farm community, there aren't a lot of people out there offering help so

a lot of the time they go to their county Extension agents for help," said Badenhop .

Agents can show individuals how to re-evaluate their budget, find out where they are spending their money, and determine ways to cut back and free up money to pay their debts.

One specific program for farmers is called the "Power Pay Analysis" program that is available at most Extension offices. This program shows how many months it will take to pay off farm business debts with the current rates of interest being paid on each of the various loans. The program is also adjustable.

"If a producer is expecting some additional income such as a tax credit, the program will show the often dramatic results of paying off a good chunk of principal," said Badenhop.

Anyone with credit problems can also get help from the Consumer Credit Counseling service.

"Basically this non-profit group works with creditors to freeze the interest and set up reasonable repayment plans. Most creditors want their money back and they are willing to work with these agencies," said Badenhop.

"The Extension service also has sample letters that will allow individuals to request

setting up such programs with credit companies, but you have to have a legitimate reason for

renegotiating a debt. You can't just say that you are a bad money manager, " said Badenhop.

No matter what strategy is chosen to try and get out of debt, it will probably be a time consuming and painful transition period.

"Once you dig a credit hole, is can be very difficult to climb out," warned Badenhop. "The best bet is stay out of the credit card debt cycle in the first place. "

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