Credit Card Debt
The average American has over $7,000 in credit card
debt, however many of you have much more. Let's look at the basics
of how to reduce your credit card debt, as well as where to turn for
help when you are over your head.
The first step is to reduce your available credit. This
is what got you into trouble in the first place! Reducing your available
credit begins with your finding out exactly how much you own on each
card, and what the APR (annual percentage rate) is. The APRs can range
from 5.9 percent to 24.00Percent! Department store cards tend to carry
higher interest rates than major credit cards. However, if you had
bad credit or no credit when you applied for a major credit card,
you were considered "High Risk" and therefore most likely
issued a card with a very high interest rate. Once you have written
down the amounts owed and the interest rates, the next step is to
find out which card carries the lowest APR.
If you have credit left on one of your lowest APR credit
cards, transfer the balances of the higher APR cards to the lowest.
Transferring balances to one card gives you the benefit of making
one payment as opposed to multiple payments. This will help you when
you are budgeting because you know exactly when the bill is due, rather
than having multiple bills that arrive each month, with several due
dates. The next step is budgeting. The only way to reduce what you
owe is to pay the bill on time, and to pay more than the minimum.
If you are in serious credit card debt and are late
on payments and have creditors calling, there is help available. One
option is The Consumer Counseling Center of America (CCCA). CCCA is
one of many non-profit organizations with branches all over the United
States. The organization helps people to get out of unsecured debt:
credit cards, personal loans, and medical bills. CCCA is very different
from a consolidation loan agency in that CCCA does not make loans;
they simply consolidate your debt for you, and negotiate your interest
rates with your creditors.
The program is works like this: CCCA assigns a credit
counselor to your case. The counselor sits down with you and prepares
a budget. The counselor totals your debt and then negotiates with
your creditors to either reduce or eliminate interest all together!
This can save you anywhere from 50% to 100% in interest alone. You
pay CCCA a weekly or monthly payment, and CCCA makes the payment to
your creditors. Your participation in CCCA or a similar non-profit
program also helps you to restore your sanity as well as your credit
rating by:
*Bringing past due accounts up to date
*Stopping creditor harassment
*Keeping payments current
*Settlement of seriously overdue and delinquent accounts
*Over-the-limit and late fees are absorbed
Another way to reduce interest charges is to take out
a Home Equity loan on your house. Home Equity loans have a much lower
APR thus reducing your payment. You can lengthen the term to 10 or
15 years so so you will have a very small payment. If you do this,
do not charge the credit cards back up to MAX. You may also opt to
take out a debt consolidation loan from your bank if you dont own
a house.
Be careful of credit repair scams and credit "doctors"
that claim to "repair your credit" for a fee. No one can
repair credit. Negative information such as charge-offs, late pay,
slow pay, abandonment and no pays can (and will) stay on your credit
report for 7 years. There is no person or company that can remove
this information from your credit report, except for the lenders who
filed the derogatory information. A credit report cannot be changed
or altered, however, bringing your accounts up to date restores your
credit. You are the only person who can restore your credit, and there
is never a fee for restoring your own credit.
If you budget accordingly and can make the payments
or your own, or if your choose to go with a non-profit debt consolidator,
be sure that you never again allow yourself to become a slave to your
debts! Always pay by cash or check. If you must make a credit card
purchase, write a check for the amount and send it to the credit card
company the same day.
Download the Financial Fitness Fact Sheet for
furthur help in budgeting your credit card debt.
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