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5 Tips to Reduce Credit Card Debt It’s easy to say that you should pay off your credit card debt. It is another thing to figure out how to do it. If you find that you are strapped with a large balance on your cards, here are five suggestions on how you can reduce your debt load. 1) Pay off delinquent credit card bills first. Late payments are killers of good credit ratings. If you are behind in paying off one of your credit cards, then this is the bill to pay off first. In addition to destroying your credit rating, your credit card interest rate will increase dramatically (if it hasn’t already). 2) What is your credit card APR rate (annual percentage rate)? Pay off your cards that have the highest interest rates first. People often make the mistake of trying to divide their payments among credit cards. Certainly you have to make your minimum payments for each card on time. Any extra should go to pay off the card with the highest interest rate first. This will more quickly reduce your debt. 3) Ask your bank for a reduced interest rate. It can be as easy as picking up the phone and asking your bank's customer service representative. When you call, say that you need a better rate, or you will switch to a card with a lower interest rate. Especially if your interest rate has increased, whether the increase is due to late payments or the bank has arbitrarily raised rates then call the bank to ask for a better rate. The worst they can say is no. 4) Look for 0% or low interest balance transfer offers. Has one of your existing cards have a great balance transfer offer? Grab it and move your high interest balances. There are also many credit card applications that offer an introductory 0% balance transfer rate or a low fixed rate. 5) If you have extra money in your savings, use it to pay off your credit card debt. Plan carefully with this one. Obviously, you need to have enough in savings for an emergency. But if you have some extra cash available, you will save more by paying off your credit card balances. Do you know how to get an 11% return on an investment? The average credit card rate hovers around 11%. Pay off your credit card debt and that is, in a sense, your “return” on your investment. 6) Look for ways to increase your credit card payments. If you are making minimum payments, then you are paying off your interest rate and little else. It will literally take years to pay off your debt. By paying even a few dollars extra each month, your payoff time will be greatly reduced. Can you take a bag lunch to work a few times a week instead of eating out? Are there any other small things that you can do to save a few extra dollars? Put that savings towards your credit card payment, and you will be rewarded with lower balances. Finally, one note of caution: If you are considering taking a home equity loan to pay off your credit card debt, think carefully about the benefits vs. repercussions. Some financial advisors do not approve of this. It may be possible to get a home equity loan that will have a lower interest rate than you are paying on your credit card debt. However, if you have problems paying off your home equity loan, you could lose your home. Most especially, if we are talking about a large amount of credit card debt, seek advice from a financial advisor first.
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This article contributed by the writers at Nativestar.org
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