Help For Credit Card Debt
If, like many other people these days, you are finding your credit card debt mounting, it may be time to seriously consider the benefits of adopting a strategy known as credit card debt consolidation. What exactly do we mean by that?
Let’s say you have several credit cards from both banks (or other financial institutions) and department stores. It is likely that the interest rate on some of these will be moderate, and on others, quite crippling. There are two basic courses of action you can take. One is to work out a consolidation plan on your own. This is quite achievable once you understand how to go about it. The other solution would be to enlist the help of a credit card debt consolidation specialist to work out the details for you. For some people, having the problem taken off their hands and placed in the services of a professional is the only workable answer.
Now, how would you approach the problem if you decide to handle your credit card debt by yourself? The first step, of course, would be to list out on a single sheet of paper each card with it’s balance, minimum payment and interest rate. This gives you a valuable picture of your whole situation, so that you can make decisions on how to come to grips with it. The next step would be to shop around for information on ‘honeymoon’ interest rates from other card issuers. Whoa! Am I saying go and apply for yet another card?? Yes, but you are only interested in a very special type of credit card this time. As you know, the credit industry is a highly competitive one, and financial institutions now offer super low introductory interest rates (honeymoon, or sweetheart deals) where they will actually pay out your existing (competitor’s) card if you will switch over to them at the special low (introductory) rate. The credit company is working on the assumption that you will simply find it easier to stay with them than change again, even when the introductory period expires and their rate goes up. But if you ‘play smart’ you can use this opportunity to your advantage.
For example, last year we purchased a washer and dryer at a large department store which advertised “30 months interest free”. It turned out that the store itself was not financing the purchases, instead this was done by a credit card company. Yes, you could pay the items off over 30 months with no interest, but if you only paid the minimum payment each month, you would still owe money at the end of that time. Once the 30 months was over the interest goes to 29% ! So, to be moneywise we have made large enough payments to be sure of paying out the debt well before the 30 months expires, AND we never actually activated the card itself that they issued – we pretend it doesn’t exist and do not use any of the ‘available credit’. We just pay on the monthly statements. Of course, even though there is no interest charged, there is still $3.95 per month ‘accounting fee’, which adds up to almost $120.00 over the 30 months, so the finance is not completely free.
When you have investigated several of these super low rate cards, check very carefully the conditions on each to see which will match your circumstances best. For example, we have used a bank credit card which offered 3% on the paid out balance of our old card, UNLESS we made further purchases, at which time interest rate would revert to the regular level of about 10%. Another deal we had was 0.00% introductory rate which was fixed for 12 months only. So long as you can resist the temptation of breaking the conditions (which the company hopes you WILL break!), a careful selection of honeymoon rate cards can really help you end the credit card debt cycle.
What if you decide you really need a professional to help you out of your credit card debt mess? Here is where getting a consolidation loan might prove to be your answer. Usually this would take the form of a decent fixed rate loan that you pay over a certain term, usually up to 5 years. The idea is, of course, that you will end up with just a single loan and a single repayment plan, which should prove more manageable than the various cards you have been trying to juggle.
If your credit score is good, you may be able to get a consolidation loan with an interest rate as low as 11%, which should make it possible to completely pay off the whole debt over the term of the loan. Of course, the interest rates we are quoting here will vary depending on your location, so check the local advertisements that Google has placed on this website to match your personal locality.
As a final piece of essential advice, whichever course of credit card debt consolidation you choose, be sure to get rid of the actual credit cards as you pay them out. Even go to the dramatic extreme of having a card-cutting ceremony in front of your family – you will be surprised how this ‘public’ action will reinforce your determination to be permanently free of debt.