Posts Tagged ‘credit card debt’

6 Alternatives to Home Foreclosure


It’s one of those nightmare scenarios that we all would do almost anything to avoid. You get a red typed letter through the post telling you that because you haven’t been able to pay your mortgage, foreclosure is likelihood. Well, though the letter may be extremely unsettling, it doesn’t have to mean the end and … more »

Getting Out of Credit Card Debt

The process of paying off your credit card debt can seem like the most difficult thing in the world. All you see is a mountain of debt that far exceeds your income and to top it off, you’re being hit with a monster interest rate every single month. It is all some consumers can do to pay their monthly minimum fee but all this does is make the debt even larger. Although credit card debt in the United States is well short of its all-time high in 2008, it is still in the region of $850 billion, an astonishing figure.

This equates to an average household debt of over $7,000. 46% of households actually carry credit card debt. This means the average debt of households that owe on their credit card is over $15,000. To get away from this problem, don’t focus on drastic measures. Here are some tips to getting out of credit card that work and don’t involve desperate actions.

Get Organized
List all of your credit cards and include details such as balance owed, interest rate and minimum payment. Place these cards in order with the highest interest rate at the top and combine the total minimum monthly payments. Next, analyze your budget and see how much you can afford to pay above the minimum monthly limit. Pay each card on its due date with extra money set aside to pay extra on the card with the highest interest rate. When the first card is paid off, continue the process until you are free from debt. Don’t fall into the lure of spending simply to rack up credit card reward points.

Monthly Minimum Trap
Don’t ever be content to pay the minimum payment as this is exactly what credit card companies want you to do. Remember, a minimum payment is a percentage of the outstanding balance. As the balance decreases, the minimum payment shrinks. This means even a relatively small debt could take years to pay off. Targeting the card with the highest interest rate is common sense as this will reduce the amount of interest you need to pay.

Get A Reduction
Some credit card companies have obscene interest rates on their cards. Even if you’re not in dire need, contact the company and ask for a lower rate. If you have a decent credit rating and a record of paying on time, they may agree. If you are struggling, call them and admit it. It won’t be easy but they may decide that reducing the rate is better than potentially seeing you default on the payment.

Balance Transfers
Credit card companies are always trying to steal customers from their rivals. As the name suggests, a balance transfer involves transferring credit card debt from your existing company to a new one. There are a handful of 0% offers available which means you pay no interest on your debt at all for a limited period of time. Be wary of such deals however because there can be some hidden traps. For example, if you charge anything else to your credit card before the 0% offer is up, you may be hit with a large penalty. You can also expect a fee of 3-4% to be added when you make the transfer. However, if you have a lot of debt, this could save you money in the long run.

There is no magic formula for paying off credit card debt. It takes patience and time but eventually, you will free yourself from the clutches of credit card companies. One important thing to remember is that you need to aggressively target the highest interest rate cards first and pay off as much as you can each month. The less you pay, the more interest will be accrued thus extending your period of debt.

Why You Should Never Just Pay Your Minimum Credit Card Payment

Are you one of the millions of Americans only paying the minimum balance due on your credit cards each month? Unfortunately, during one of the toughest economic times of our countries history, many Americans are struggling to even make the minimum payment. But simply paying the minimum payment each month will keep you in credit card debt. Let’s take a look at why you should never just pay your minimum credit card payment.

Your credit card balance will not go down
If you are carrying a balance on your credit card and you are only making the minimum payment each month, your balance will not go down. In fact, if you are only paying the minimum, your debt can actually go up each month. You need to remember that you are being charged interest on your average balance. Another thing to worry about is that if you are close to your credit limit, the interest charged may actually send your credit card balance over the limit. The credit card company will then add to that balance by charging you an over the limit fee. You can very well end up spiraling deeper and deeper into debt if you continue to only pay your minimum credit card payment.

Your credit score
If you are continuing to only pay the minimum balance on your credit card, your credit score isn’t improving. You can even lose points on your credit FICO score if you are too close to or over your credit limit. Your credit score is vital if you are looking to purchase a new car or a new house. Your credit score can be a deciding factor in the amount of interest you will be charged on these loans. The better your credit score, the lower the interest rate. As you pay down your debt on your credit care, your credit score will improve.

The creditor can raise your APR
If you are only making your minimum credit card payment each month, or your balance is too close to the limit, the credit card company can actually raise your annual percentage rate (APR). If this were to happen you will then be charged more each month on your balance which will increase your balance and can plunge you deeper into debt.

So if you are one of the millions of Americans buried in credit card debt, you will need to start paying down your balances. Pick the credit card with the highest interest rate and begin to pay more then the minimum balance each month, this will help you pay the credit card off. Continue this same process on the rest of your credit cards until they are all paid off. Remember, it took you time to build this debt up, so it will take you time to pay it off. And remember, the minimum payment is only a suggestion from the credit card company. Of course they want you to take your time paying off your debt, they make more money the longer you take.

Ways to Consolidate Credit Card Debt

Nothing is worse than feeling like you’ve got accumulated more credit card debt than you can handle.  And, realistically, nearly any amount can shortly turn out to be too a lot to handle, thanks to the excessive rates of interest most revolving debt carries.  For this reason, many individuals determine to consolidate bank card debt.

Why Consolidate Your Credit Card Debt?

The only purpose to consolidate your bank card debt is since you want to get out from beneath it – and, realistically, who doesn’t?  However, if you don’t keep this goal in mind, you can simply make a decision that can cost you more in the long term, and even jeopardize your credit score.  So remember, when consolidating your credit card debt, make sure that each move you make will lead to less curiosity and charges and/or a shorter pay-down period.

Consolidate Credit Card Debt on Another Card

Perhaps the most typical approach to consolidate bank card debt is to move all of your balances to the identical card.  In the event you’re like most individuals, you probably get bank card offers within the mail on a regular basis.  In this method of consolidating bank card debt, the thought is to find a bank card offer with a better deal than you are at present getting, and move your balances so to take advantage of the lower rates and fees.

What to Look Out For

Consolidating your credit card debt on one other card is only a good suggestion if the new card really is a greater deal than you already have.  Should you aren’t cautious, you could possibly end up costing your self more money and even destroying your credit rating.  To ensure you don’t end up in a worse situation than you have been before, you will want to:

Discover out how long the introductory price will last.  Most new card gives flash tremendous-low rates at you in massive numbers, hoping you received’t look any further.  However, often these “teaser” charges solely final a short interval of time.  Also, in case you go over your credit restrict or make a late fee it’s possible you’ll lose your initial deal.  Be sure you know how lengthy the introductory rates will final, and what you should have to do to keep them.

Be sure that the introductory price applies to balance transfers.  Many cards supply a different teaser fee for brand spanking new purchases than for stability transfers.  Just be sure you are looking at the correct rate when you make your decision.

Find out the normal rates of interest, and compare them to what you might be already paying.  Don’t make your choice primarily based solely on the teaser charges, particularly if they gained’t last endlessly – which, usually, they gained’t.  Unless you may feasibly pay off your entire steadiness in the course of the introductory period, you’ll need to be certain the traditional charges are also a greater deal than your present cards.

Find out if the card carries an annual fee.  Oftentimes playing cards will make up for decrease rates of interest by charging an annual fee.  Take such charges into account when you’re determining whether or not the brand new card actually affords a greater deal.
Find out if you can be charged a balance switch fee.  Most cards apply a charge to all transfers – the only query is, how much.  Balance transfer fees are often said as a share of the total switch, though some playing cards cap these charges so that they will not go over a sure amount.

Consolidate Credit Card Debt Using a Loan

Another strategy to consolidating bank card debt is to get a loan for the amount of revolving debt.  Debt consolidation loans are helpful because you can unfold the payments over an extended time period, reducing the cost amount.  Additionally, as a result of the loan is for a specific amount and extends over a particular period of time, the payments will be the similar each month, making it easier for you to price range for them.

What to Look Out For

The advantages of a mortgage – decrease interest rates and glued fee quantities – make it an appealing choice for these wanting to consolidate bank card debt.  However, a loan also carries over a variety of years, which can mean that it might take longer to get out from beneath your debt.  To be sure you make the most effective decision on your financial scenario and your credit score rating, you have to be certain to:

Discover out what your rates of interest will be.  Most likely, your rates of interest will probably be decrease than your bank cards, but you want to know specifically how much lower.

Find out how lengthy the mortgage time period will be.  Generally you may choose this yourself.  Ideally, it’s best to select the shortest term you may afford the payments on, as the earlier you get out from under your debt the better.

Evaluate the total interest you’ll pay over the lifetime of the mortgage to the quantity of curiosity you will pay on your cards in the event you pay them off on the similar rate.  Although the speed is lower, the mortgage time period may also be longer than you need.  This means that the total curiosity on the loan could actually be greater than the total curiosity you will pay on the cards.

Consolidate Credit Card Debt without Hurting Your Credit Rating

If not performed properly, consolidating your bank card debt can really do extra harm to your credit score.  To get your debt below management and keep or improve your credit rating, be sure to:

Preserve your revolving debt at no more than 50 percent of your available credit.  Should you consolidate your credit card debt onto one card and promptly cancel all of the outdated accounts, you may harm your credit score score, as this makes it appear to be you habitually max out your accessible credit.  As a substitute, keep enough credit strains open to stability the quantity of your debt – after which don’t cost something more.
Keep two to four credit score cards.  After you have consolidated your credit card debt, choose a pair playing cards to preserve and cancel all of the rest.  Be certain to grasp on to older playing cards, particularly if you are in good standing with the creditor, as these set up your lengthy-term credit history.
Stop making use of for brand spanking new credit strains after getting consolidated your bank card debt.  Don’t succumb to the temptation to maintain looking for an excellent better deal.  As a substitute, choose one and stick to it.  When you move your steadiness round too much, you’ll not only rack up more debt in balance transfer charges, but also damage your credit score rating with each further application.

Getting Your Debt Below Management

It is a scary thing to notice that you are deeply mired in debt.  If carried out accurately, consolidating your bank card debt may also help by reducing the amount paid to interest.  However, always remember that the reason you might be consolidating your credit card debt is to help get you out of debt, and always be sure that each choice you make supports that objective in some way.

Debt consolidation is designed to decrease the monthly funds and the interest rate of an individual who has a large amount of debt. An individual in debt normally works with a debt consolidation counselor to discover a manner to consolidate all the debt he or she has into one, manageable monthly payment. The debt counselor normally will do a free debt consolidation analysis to give you a plan. If the potential shopper agrees to the plan, it’s put into place. However, the consumer is beneath no obligation to accept the plan.

The term “debt consolidation” is commonly misleading and can be abused by mortgage brokers and banks in order to promote someone in debt a excessive interest second mortgage or to encourage them to refinance their home. A second mortgage or refinancing can, in the long run, put an individual additional into debt and is certainly not an excellent solution. A loan is possibly not the greatest resolution to a debt problem.

Debt consolidation allows one to solve the elemental problems of high debt with out having to take drastic steps like declaring bankruptcy. A debtor ought to first be sure that the phrases of the debt consolidation loan are understood. If there are any questions or doubts, they should be mentioned with the debt consolidation loan counselor.

The advantages of a debt consolidation mortgage could be numerous. Month-to-month expenses are usually reduced by up to 50%. Over restrict and late charges are sometimes eliminated by making one normal monthly cost on time. Delinquent accounts flip to current status once more by boosting the debtor’s credit standing to a satisfactory level.