Managing Credit Card Debt

Posted on August 2, 2009 in Business/Law, Consumer Goods

Credit card debt has become a fact of life. Building, repairing, and maintaining your credit plays an important role in your viability as a desirable candidate for housing, loans, and even some job opportunities. At one time, paying off your credit card debt in completion every month was the most popular option. However, with the changing economy and unemployment rates, sometimes this becomes impossible if you are relying on your credit cards to survive. It becomes necessary to learn how to best manage your debt until you can afford to pay it off.

First, know your rates. Call your credit card companies and find out what the interest rate is on your balance. If it’s unreasonable (anything over 12% will end up costing you more than the debt is worth after some time) ask them to lower it. Really, just ask. Surprisingly, that is sometimes all it takes to get a lower rate. If they don’t want to lower your rates, inform them that you intend to transfer your balance to another card. The credit card companies don’t want to lose your debt, because then they lose the extra money you would have ended up paying in interest.

Consolidating your debt onto one card can not only simplify your life, it can save you a lot of money. When you open a new credit card, often there is the famous introductory offer of 0% interest for a certain amount of time. There is also usually a balance transfer offer of 0% for anywhere from 6-12 months. That’s saving you 10-12% of your total debt per month for that amount of time. If you need more credit to consolidate your debts, ask for your credit limit to be increased. If you’re eligible, you can get extra credit just by asking.

If you have a balance of $1000 at 12%, after six months in a 0% transfer that saves you $720 in interest payments! There is usually a transfer fee, but it’s a paltry $75 fee generally, and no match for the savings you will get. During the time your debt is sitting there collecting 0% interest, you can be making payments on it. If you have consolidated all of your debts onto this one credit card, you are also only paying one card per month instead of trying to remember multiple payments.