Credit Card Debt Reduction Tips
December 7, 1999
By: Curtis Arnold
In addition to encouraging credit card competition through promoting the most attractive cards in the country, we strive to help consumers cope with credit card debt by teaching various debt reduction strategies. We hope that you find the following tips beneficial...
Interest Rate Awareness:
We can not stress enough the importance of being aware of credit card interest rates. Please utilize the lists above!!! High rate cards can be put a BIG dent in your pocketbook. To illustrate our point again, a cardholder with an average balance of $2,500 and a 19.99% purchase rate will pay $1000.00 in interest alone in just two years! The same cardholder would pay only $400.00 in interest if the rate were lowered to 8.00%, a difference of $600.00! Also, be aware of cash advance rates. Cash advance rates are typically much higher than purchase rates and usually there is no grace period for cash advances (not to mention cash advance fees). Therefore, avoid cash advances if at all possible.
Taking Advantage of Promo Rates:
While introductory or "teaser rates" are generally short lived and are intended strictly to entice consumers, savvy consumers can benefit a great deal from promotional rates. Look for cards that offer longer term introductory rates and longer term promotional rates on balance transfers (6-12 months). Some cards even offer very attractive long term promotional rates on balance transfers...rates that are good until the dollar amount transferred is entirely paid off!
Consumers that have more than one card with available credit can transfer balances between cards in order to take advantage of promo. transfer rates (a ploy known as "card dumping"). Finally, when the promo. rate period ends (for transfers), it is a good idea to call the card company and request an extension of the rate. Consumers with a good payment history often get extensions. You must be aggressive when dealing with credit card companies! You can also negotiate to have your regular interest rate lowered. Threatening to pay off a given card often puts consumers in a bargaining position when dealing with credit card companies.
Avoiding the Minimum Payment Pitfall:
One of the greatest card pitfalls is making only the minimum payment each month. Make every effort to pay over the minimum each month, even if it is only a few dollars over. The long term impact of making "just the minimum payment" is devastating. According to Consumer Credit Counseling Services, paying the $60 minimum payment on a $3,000 credit card balance would take eight years to pay off and would translate into $2,780 in interest! By paying only $50 more a month, however, the debt would be paid off in three years and result in a savings of $1,800 in interest charges!
The Graceless Grace Period:
Avoid cards that begin computing their grace period at the time of purchases, rather than billing. Only a few cards still use this method of interest computing, but there are still some out there. Keep your eyes peeled!
Credit Counseling Services:
Nonprofit debt management programs can be very helpful when you have over $2,000 in credit card debt. Consolidated Credit Counseling Services, Inc. (featured offer), a nationally recognized non-profit organization, offers a free debt analysis that only takes a few minutes to complete. Such programs negotiate with credit card companies and often can lower credit card interest rates by 50% or more! Furthermore, participation in such programs helps safeguard against bankruptcy.