As a nation we are almost totally dependent on our credit Cards. The cards are very easy to use, from buying plane tickets to a pack of gum. This isn't always a bad thing. Credit cards are very convenient and are safer to use than cash. Then, if you are not diligent your spending can get out of control. You start buying more things than usual and you have a hard time making the full payment each month. Then, with penalties, fees, high rates, and continued spending debt accumulates much to fast. This scene is repeated all over the U.S. and it can even happen to you. So if you are in debt by a little or a lot you may want to consider some of the steps below.
1. Know you Debt position.
Debt is a scary thing and you can very easily let it get out of control, it's easy to start ignoring your bills and let them pile up. You need to really sit down open up all the bills and find out the total amount you owe so you can start the process to becoming debt free. It is a great idea to then list your cards in order of highest rate to lowest.
2. Pay off your Highest cards first
The cards with the highest rates are charging you the most, so paying these off first will make it easier later to pay off the lower rate cards.
3. Call you Credit Card Companies to get a better rate.
Find on your bill or on the their website there toll free number for customer service. Then ask them to lower you high rate credit cards. I would suggest telling them you are getting better offers from other companies and you want them to lower your rate or you will move on to another company. A lot of the times the reps are authorized to lower your rate and not lose you as a customer. If you get your rates lowered this will be very helpful in your quest to be debt free.
4. Try to get a new card.
Are you getting new card deals in the mail saying you can get a 0% interest rate if you transfer to them. It could be a great idea to help lower your monthly payments, but you want to make sure you read the fine print and find out how long the 0% will last. You don't want to be stuck with a higher interest rate card than you had a few moths before. That would defeat the whole purpose.
5. Avoid fees and penalties
Avoid late payments by all means necessary. If you make a late payment the credit card company can increase your interest rate to 25% or more. If you have a hard time keeping track of your due dates, you should set up an automatic payment from your checking account to your credit card each month. If you don't pay all you cards on time they can still raise you rate if they see you've made a late payment on another card. Make sure you don't go over your credit limit as these fees can really add up. You can also get hit with a $35 fee or more.
6. Get your credit score up
If you have trouble getting a no- or low-interest card, it's is most likely that your credit score is too low. This is the number you get based on how you manage your debt. So, if you have a lot of late payments or your cards are to their maximum limits your credit score will be low. If you make all your payments on time over the next six months to a year and pay down a lot of your biggest balances first, you should be able to improve your credit score by as much as 40 -60 points.
Word of caution on "credit surfing" or getting a new card. Don't close the old one because you are then eliminating a perfectly good credit history and your score will take a hit. Closing a credit card with long established history only to replace with a new card with no history can hurt you so be careful!
Great post.
Cheryl That sounds like a rockin idea. I would be all over that. What a great way to help people out.
J.
Cassie Thank you,
J.
Kirk that is very true. Maybe reduce the line of credit, but never get rid of your oldest card. Especially if it is a Major card.
J.
Cheryl- Sound like a great idea. I agree that the government should re-visit that idea. People are going to get these $600.00 checks and in turn going out to spend $1,000 on that big flat screen TV they have always wanted, because mentally they think that TV is only going to cost them $400.00. That remaining $400.00 will be placed on a high interest credit card, they will continue to pay the minimum payment and in turn that TV is now going to costs them in some cases double! This would be a great seminar to hold for past, current & future clients at our office. "What to do with your check from the government" and advise people on paying down high interest credit cards or other debt in order to position them to purchase a home or maybe an investment property. Something to ponder!
George
George That is what the government is hoping you will not do. That is paying down the card. They would rather you spend it on a TV. If we would get a $600 dollar check 4 times this year I could see how this works. I know I will use it to pay bills. It's like giving a booster shot, but not a follow up shot.
Hope it works.
J.
Steven Thanks for the comment. Cards do suck for the most part.
J.
Justin That is a good idea. I got 2.9 until paid off. That really helps a lot.
J.
Rick I have been doing that as well. My budget is very strict now.
J.
Great post, great suggestions, Jeff.
I get so busy, I neglect paying my bills at times..so they are late. EESHHHH!
I just hired an assistant, so hopefully I get this under control!
Have a great night!
Julia
Julia Thanks. Let me know how the assistant goes. Maybe you can let me know what works best for you.
J.
Courtney. Thats for the comment. Happy selling.
J.
your website is good ...............
Jeff - Great post. I would add that sometimes it give a psyhological victory to pay off the lowest balance card first. Also, on credit surfing, getting new credit will also lower credit scores.
I don't think the government should reward people for indebtedness. Credit card debt should not be deductible, IMHO.
Other rules I follow
1) Don't take cash advances on your credit card
2) Never charge more than you can pay off in any month (plus any minimum payment on current balance).
3) Don't charge groceries
4) If you charge more than you can pay of in any month, make sure it is on something you abolutely need, like a doctor bill, etc. Give up one thing a month, like a movie, or go out to one less meal a month.
I think the best way to reduce our debt is to create a budget, set goals and look for ways to live more happily while we pay off our credit card balances. And I am sure that this we help us to live our life smoothly.
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Usha
Simply put, there's good debt and bad debt. Good debt is a mortgage. Bad debt is a credit card. I go at it like this. If you can't pay off the balance for the month, you can't afford it.
Always good advice to hear. This is one of the things that can weigh on anyone.
Bonner
Michael.
That is a good way to go about it.
J.