7 Tips to Reduce Credit Card Debts
Credit card debt, for many people, is a difficult subject. It’s easy to say that you should pay off your card debt. It is another thing to figure out how to do it. There are several ways that you can consoliate your credit card debts. If you find that you are strapped with a large balance on your cards, here are five suggestions to help you to achieve credit card debt consolidation.
1) Pay off delinquent credit card debt first.
Late payments are killers of good credit ratings. If you are behind in paying off one of your bank cards, then this is the bill to pay off first. In addition to destroying your credit rating, your credit card interest rate will increase dramatically (if it hasn’t already).
2) What is your credit card APR rate (annual percentage rate)?
Pay off your card debt that has the highest interest rate first. People often make the mistake of trying to divide their payments among their cards. Certainly you have to make your minimum payments for each card on time. Any extra should go to pay off the card with the highest interest rate first. This will more quickly reduce your credit card debts.
3) Ask your credit card company for a reduced interest rate.
Credit card debt consolidation can be as easy as picking up the phone and asking your bank's customer service representative for a lower interest rate. If you have been paying all of your bills on time, and you have a good credit rating, then it is worth the effort to reduce your interest rate. The worst they can say is no. Note: While you are on the phone, ask your bank if there are any low interest rate offers for balance transfers. You might be able to transfer balances from other cards that are charging a higher rate.
4) Make credit card comparisons and look for a 0% or low interest balance transfer credit card.
Has one of your existing cards have a great balance transfer offer? Grab it and move your high interest balances.
There are also many best credit card offers that give introductory 0% balance transfers for up to 18-24 months or a permanent low fixed rate. Usually
you will have to pay a one-time balance transfer fee. However, if you
are expecting to carry the balance for some time, it often pays to
transfer your balances. Ask yourself: How long do I need to have this
card balance? How much do I currently pay in interest? How much will I
save over the life of the introductory rate? Subtract the cost of the
balance transfer fee to arrive at your total savings?
5) If you have extra savings, use it to pay off your credit card debt.
Plan carefully with this one. Obviously, you need to have enough in savings for an emergency. Suze Orman, the financial guru, recommends that you have savings that give you easy access to eight months worth of income. But if you have some extra cash available, you will save more by paying off your credit card balances. Do you know how to get an 11% return on an investment? The average credit card rate hovers around 11%. Pay off your credit card debts and that is, in a sense, your “return” on your investment.
6) Look for ways to increase your payments.
If you are making minimum payments, then you are paying off your interest rate and little else. It will literally take years to pay off your debt. Pay even a few dollars extra each month, and your payoff time will be greatly reduced. Can you take a bag lunch to work a few times a week instead of eating out? Can you share a ride to work a few times a week? Think any other small things that you can do to save a few extra dollars? Put that savings towards your card debt, and you will be rewarded with lower balances.
7) Should I use a home equity loan to pay off credit card debt?
Finally, one note of caution: If you are considering taking a home equity loan to pay off your credit card debt, think carefully about the benefits vs. repercussions. Some financial advisors do not approve of this. It may be possible to get a home equity loan that will have a lower interest rate than you are paying on your credit card debt. However, if you have problems paying off your home equity loan, you could lose your home. Most important, if we are talking about a large amount of credit card debts, seek advice from a financial advisor first.
Why You Need to Reduce Your Credit Debt
Credit debt is
especially costly, since interest rates are generally higher for credit
cards than for other types of debt. There are several things that you
can do to reduce your interest rate and lower your debt including credit card consolidation by transferring your high interest balances to low interest credit card offers.
These include such things as careful budgeting, using balance tranfer
credit cards, applying for a card with a lower interest rate and much
more. We hope that these articles have proven useful and that you have
successfully lowered your credit card debt.