Credit Card Debt Consolidation

You have enjoyed using your credit card. Now its time to get serious and pay up!

There are two choices when tackling credit card debt.

• Pay first the balance with the highest annual interest rate. Most financial experts recommend this strategy. It does not matter if the principal is lesser than the other cards. Your principal does not change but if you continue to pay a high interest without making a substantial dent in the principal amount, then you are just wasting money.

• Continue to pay minimum on the other credit card debts even as you pay that priority card to avoid surcharges. When you are done with the first card, move on to the next one using the same method.

• Aggressively attack your credit card debt. Double or triple your minimum payments. Or better yet, if you do have the money for it, pay all your balances in one swoop and get it out of your life, fast!

• An alternative plan is to pay the lowest balance first regardless of how much the interest rate is. This is preferred by some because it knocks off a few bills off the list in a shorter time. Another reason is that the debtors feel more gratified and motivated to see that they are making a quick progress. However, this is not widely advised because although you remove a few debts, the interest will still pile up on your other balances.

Most credit cards charge around 12% to 18%. At this rate, you are better off paying your balances in full every month. You are just prolonging your agony every time you pay the minimum. Be smart and pay up!

Once you start paying your credit card debt, do not compromise. Stay with your plan and watch your balance inch down to zero. Read your bill statements thoroughly and understand how your interest rate is calculated.

Tips on getting the best deal out of your credit cards:

• If you decide to transfer your balance to a new card with an introductory offer of low interest, make sure you pay all your balances before the offer expires. When that period lapses, the interest can shoot up the roof and you will soon be paying for more than what you actually bargained for.

• Be punctual with your payments. Some card companies will charge you with the regular interest rate if you do not pay on time. This drawback will put you further behind your repayments. Also, find out if that low interest applies to both your old balance and new purchases.

• Some cards have a grace period or the amount of days you have to pay your balance before your interest starts accruing. If that is the case, then it is best to pay your full balance within this period and actually save money. • Fees you need to know about before signing up for a card.

• Annual fee – avoid the credit card that charges this if you always pay your balance in full.

• Closure fee – some cards will charge you for closing your account.

• Late fees – pay your bill on time. You can get charged for paying a date late. The interest rate can also increase as a penalty.

Credit cards can build up your credit rating and can come in handy during emergencies. As long as you do not use it excessively, there should be no problems.

Everything you do with your credit card shows up on your credit report. So if something goes wrong and you miss a payment or if you pay less than the minimum, it will show on your credit report. Pay your balances in full and on time. You want to build up your credit standing, not mess it up.

Helpful tips for credit card use:

• Use only one credit card. Choose one that has a low interest rate and a sensible grace period.

• Ask yourself before purchasing with a credit card: Do I really need it? How long will it take me to pay it and is it worth the hassle in the end? What is the actual cost of the item when the interest amount is added?

• Pay the entire balance on time. The balance should not exceed 20% of monthly income. If you cannot pay it in full, then you probably should not have used it for purchasing in the first place.

• Curb your expenses. Cut off expenses that you can do without. Only use your card during real emergencies.

• For every card transaction, subtract the amount from your budget so you can pay your bill when it arrives.

• Never lend your credit card or leave them where anybody can access it. Report it immediately if you find that it is missing.

• Think beyond today. Plan for obligations that might come up in the future so you will be prepared.