Debt consolidation - More Options for Reducing Credit Card Costs
Borrowing money against your credit cards has always been among
the most expensive ways to borrow money, and when you fail to
pay your bill in full each month, borrowing is exactly what
you're doing. You're not alone; the average American household
now carries more than $8000 in credit card debt. It's easier to
accumulate credit card debt than other types of debt for the
following reasons:
They're easy to use. It's far
easier to borrow spend money on a credit card, even thousands of
dollars at a time, than it is to go to the bank and secure a
loan. Convenience can easily lead to
overindulgence.
The interest rates are higher
than for other types of debt. The interest rate on your mortgage
may be 6%. The interest rate on your credit card may be 25%.
That adds up in a hurry, especially if you are carrying a
balance.
There is no set repayment schedule
requiring you to pay back a set amount each month. The only
requirement is that you pay at least 2% of your outstanding
balance. Many people pay exactly that, and no more, causing the
interest to accumulate quickly
Credit card
lenders tend not to be very forgiving. If you make a late
payment, you could end up with a late fee of as much as $39
in addition to having your interest rate
increase.
Many credit cards come with annual
fees, which can add to your debt, especially if you don't pay
them in full. Then you end up paying interest on the annual
fee!There are number of solutions available. All they
require is a bit of time and diligence. Besides shopping around
for the card with the best rate and doing a bit of
debt consolidation to
place all of your credit card debt on the lowest interest card
you own, you might also consider the following:
Ask
your lender to waive your annual fee. The competitive nature of
the credit card business means that your lender will often waive
these fees just for the asking. They would usually rather waive
your fee rather than lose you as a customer. It costs nothing to
ask. If they do waive the fee, add the fee amount to your next
payment.
Pay more than the monthly minimum
payment. The minimum payment may soon go to 4%, which may place
many borrowers who currently pay only the 2% minimum in a bind.
Get in the habit of paying more each month, or pay your bill in
full, if you can.
Did you get a large tax
refund? Send it to your credit card company. Sure, it would be
nice to spend it on a new TV, but if you spend it on a TV while
carrying a balance on your credit card at 25%, you are
effectively paying 25% interest on your TV.Use your
debit card instead of a credit card. They have the same
convenience and ease of use, but few of the
drawbacks.
Paying off the national average of $8000
in credit card debt can take a lifetime if you only make the
minimum payments. That is a trap that you should make a
concerted effort to avoid and by taking a few simple steps, you
can keep your debt to a minimum.
About the author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the
owner of Retro Marketing, a firm devoted to informational
Websites, including End-Your-Debt.com, a site devoted to debt consolidation and
credit counseling, and HomeEquityHelp.net, a site devoted to
information regarding home equity loans.
Author: Charles Essmeier
