Tips for Getting Out of Credit Card Debt
President Obama on Friday signed into law a bill that would prevent credit card companies from arbitrarily raising interest rates on existing balances and charging certain fees.
The law will certainly help many consumers out there. But it won’t eliminate all of our credit card problems. Many of you out there are probably struggling with credit card debt and will continue to do so even after this law goes into effect in nine months.
So I’d like to offer some tips for getting out of credit card debt. Actually, they come from Curtis Arnold, co-founder of CardRatings.com which tracks the industry. Here goes:
Ditch your card immediately after the first month you don’t pay your entire balance in full. Switch to a debit card. “I feel very strongly about this as I personally know how card debt can start very small, but can quickly snowball,” Arnold said. “I had over $45,000 in card debt coming out of graduate school.” The only exception to this rule is if you have a very low promotional rate on your card.
Admit there's a problem and seek help If you have trouble giving up your card and keep shopping!
Come up with a plan for paying off your debt. Always pay more than the minimum. Even $5 more per month can make a significant dent in your debt.
If you’re carrying a balance on more than one card, you’ll save the most if you focus on paying off the card with the highest interest rate first, then go to the card with the next highest interest card, and so on. Also, consider biweekly credit card payments. This little known payment option can really slash you debt.
Start living within your means.
Sell things you don't need and apply that money to your debt.
Create a realistic budget.
Shop for low rate offers. If your credit score is good (in the 720 range), you should be able to qualify for a rate of about 8 percent in today’s market. Also, consider teaser or promotional rates.
Finally, educate yourself on debt and credit to avoid becoming a victim of the vicious debt cycle.
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