How to Eliminate Credit Card Debt

There are many options you can use to eliminate credit card debt. Some of the options are fairly basic and will take time. Other options are extreme, and while they will eliminate your credit card debt, they will also heavily damage your credit score.

First, you can pay over time while eliminating credit card use. This is the most basic way to eliminate credit card debt. All you have to do is pay more than the minimum balance (and by more I mean 20% more than your minimum balance) while eliminating your credit card use. This means that you do not use any credit cards during the time period in which you are repaying the debt. What sense does it make to pay down one credit card while you are charging an equal or greater amount on another credit card?

It is important to note that you only want to stop using credit cards. You do not want to close the credit card accounts. Closing your credit card accounts will hurt your credit score and offer no benefits for you. Therefore, do not do it.

Second, you can call your credit card companies and ask for lower interest rate. This tip should be used in conjunction with the first tip. By lowering your credit card interest rate, your monthly payments will count more towards your principal. Thus, you will pay off your debt sooner.

Third, you could consolidate your debt. I am sure you have seen many of these kinds of companies advertising on television or on the radio. Basically, these companies call your credit card companies and negotiate a lower interest rate and a lower monthly payment. Your credit card accounts are closed (this is a negative because is negatively affects your credit score) and you send your monthly payment to the debt consolidation company. That company then sends your payments to the appropriate credit card companies. These consolidation companied are usually “non-profit” and take a small fee to cover “administrative costs.” Make sure you fully check out the company before giving them your business.

One other point on consolidation; your credit card companies will send you a letter once an interest rate and monthly payment have been negotiated. This letter will basically state that if you are late on a payment while you are using this debt consolidation program, the deal is off and your credit card will reset back to its original interest rates and back to its original monthly payment. Therefore, do not be late.

Last, you can file for bankruptcy. I am not going to pretend to be an expert in bankruptcy, therefore, if you choose this option, go see a qualified attorney. What I can tell you is that filing for bankruptcy will severely damage your credit score. Additionally, filing for bankruptcy will cost you several thousand dollars. The attorney fees for bankruptcy will be less than the interest fees you would have paid over the life of the debt (assuming the outstanding debt is large enough), however, bankruptcy should always be your absolute last resort. As I stated, if you have questions about bankruptcy, go see an attorney.

Many options exist for you to eliminate your credit card debt. Make your choice wisely because a wrong choice could damage your credit score for years to come.

How to Get a Lower Interest Rate on Your Credit Card

A lower interest rate is a great asset to have. The most noticeable benefit is that you can save a lot of money on interest charges. However, you can also use that credit account as a bargaining chip with other credit companies. You can use the time tested “can you beat this offer” routine. Thus, the question is, how do you get a low interest card?

First and foremost, if your credit score and credit report qualify, you can apply for a low interest card. This is the easiest and most obvious way to obtain a low interest credit card. However, this method is only the easiest and most obvious if you have the credit score and credit report to allow you to get such a card. If you do not have the best credit score or report, there are some tactics you could use to lower an interest rate.

If you already have a credit card and your record with that card is flawless, you can call the credit company and request a lower interest rate. You have to be firm and you have to make a credible request. As a general rule, credit card companies want to collect at least between 8-10% interest on credit balances. Of course credit companies love when you pay more, thus, they never tell you that you can get a lower interest rate than the one originally given.

Anyway, back to the credible request. If your interest rate is 18%, asking for a 6% interest rate is just a waste of time. Even if your credit was flawless, no credit card company would drop your interest rate 12 points at one time. It is more realistic that your rate would end up somewhere between 13-15% based upon your relationship and history with the credit company and on your credit score and credit report.

The bottom line is, your options are limited unless you have a good credit score and credit report. Therefore, if your score and report are less than par, you are going to have to deal with your current credit account companies in order to get a lower interest rate. The worst thing that can happen is that your credit card company will not lower your interest rate. The best thing that can happen is that the company will lower your interest rate, therefore, why not give it a try? Just remember to keep it credible, but stay firm with your request and bring up your great history with the company from which you are trying to get a lower rate if the company seems reluctant.

Cash or Credit - Which Should You Use?

As a general rule, you should never buy something with a credit card unless you have the money to pay off the charge. Many people like to buy things on credit (even though they cannot normally afford the item) with the intention that they will pay off the purchase in the long term. This is a mistake because you will end up paying more in interest than you would have had you paid cash.

Another way to use a credit card is as a rewards point builder. First and most obviously, you must have a rewards credit card for this to work. The process is very easy from here. All you do is use your credit card to make specific purchases throughout the billing period. When your bill becomes due, you pay off the entire amount. Obviously, you have to have the money available to pay off the entire monthly amount. Additionally, you must keep very accurate records of your charges in order to ensure that you have enough money on hand to pay off the monthly balance in full. The whole purpose is to build reward points without paying interest on your charges. Keeping accurate records and charging only specific purchases will help you accomplish this goal.

Most people are surprised when they get their monthly bill because they do not realize how much they have spent on food and gasoline. These charges can add up fast. If you are responsible with your credit and keep accurate records, this should not be a problem. How do you know if you are a responsible credit user? Let me put it this way; if you have to ponder whether or not you are a responsible credit user, chances are that you are not. This does not mean that you cannot utilize the rewards points strategy; all this means is that you probably should not purchase food or gas on credit because there is a chance you will charge more than you can afford. If this is the case, you should use cash (or a debit card) for food and gasoline purchases.

Basically, everything comes down to responsibility. If you are responsible, you could use cash and credit interchangeably without worry of getting in over your head. However, responsible or not, always keep accurate records of your credit so that you do not lose track of your spending.

What You Should Know About Credit Card Costs

Yes, credit cards can have costs. There are two main costs associated with credit cards: (1) interest rates; and (2) annual fees. However, even though these are the two monetary costs, there exist many intangible costs (such as customer service).

First, the monetary costs. Why oh why would you pay just to own a credit card? Annual fees are just nuts! Unless you have bad or no credit, have absolutely no other choice, and desperately need credit, then it may be... NO, scratch that sentence – there is absolutely no reason to pay an annual fee on a credit card. There are far too many credit choices from which to choose. Do not get a card with an annual fee, it is that simple.

In addition to annual fees, credit card companies charge other fees of which you may not be aware. If you are ever late on a payment, there is usually a fee. If you go over your credit limit, there is usually a fee. Know what these fees are and factor them into your decision as to whether to obtain that particular card.

How about interest rates? These can be pretty sneaky. First, you should notice that the interest rate is different for credit purchases and cash advances. Cash advances always carry a higher interest rate. Additionally, your monthly payment will not count towards your cash advance balance until your credit purchases balance is paid off. Why? Cash advances carry a higher interest rate, therefore, the longer that that balance remains unpaid, the more money the credit card company makes.

Also, make sure that the interest rate that is advertised is not an “introductory” rate or a “variable” rate. Introductory rates only last a couple of months (at most, one year). After that introductory period, your interest rate resets to the default rate. The default rate is usually a lot higher than the introductory rate. Therefore, be aware of what you are getting yourself into.

Variable rates change with economic conditions, therefore, you could have a great rate one month and a terrible rate another month. Do not play a guessing game with you credit card interest rate. Get a low fixed rate and you will be much happier.

Intangible costs can ruin a credit card. Have you ever called your credit card company only to listen to an infinite amount of menu options? When you finally get a real person on the phone that person tells you that you have called the wrong department. In an attempt to transfer you, the main menu comes back up and you are back to square one. At the least, this whole process is a waste of time. Why put up with this? As I said before, too many credit card options exist for you to have to settle for one with mediocre service. Your time is valuable; do not waste it on bad customer service!

Know the costs that are associated with a credit card. By doing this, you will be able to make the best decision possible based on your needs and wants.