Credit card debt......it's a pain in the butt that can burn your finances to the ground. But, the fact is, most Americans use – and too often over-use – credit cards. This you? If what’s in your wallet includes a credit card or two, here are some tips for getting and keeping your balances in check.
Don’t carry the card. Keep your cards tucked safely at home unless you have a specific plan to use it. This helps avoid impulse buys and reinforces the idea that credit must be used carefully and purposefully.
Auto pay your bill. Late monthly payments are a killer. They can result in late fees, an increased interest rate or even a reduction in your credit score. Avoid late fees by arranging to make at least the minimum monthly payment on auto pay. If you decide against that option, be sure to make your payment well in advance of the due date. Mail the check several days in advance. Find out how long on-line payments take to post, and make your payment with time to spare.
Ask for a better rate. You miss 100% of the shots you don’t take. If you are an established and good customer – i.e., you use the card regularly, and pay on time – call and ask for a lower rate. You could see a reduction of 1% or more. Remember that credit card companies are in a competitive industry. They’d rather hold on to an existing customer than recruit a new one.
Consider transferring your balances. Moving your balance to a lower-rate card could save you hundreds of dollars per year, but only in the right circumstances. Don’t transfer a balance unless you plan to pay it off before the new card’s low introductory rate expires. Read the fine print on the new card offering. It’s possible that being late with one payment could send that enticingly low rate into the stratosphere.
Make Your Payments Bi-Monthly – Credit card issuers typically charge interest on a daily basis. By submitting half payments twice a month, you will pay less interest over time and lower your balance sooner. This method is most effective on large balance, high-interest rate cards.
Pay with points. Your credit card may allow you to apply rewards points towards paying your bill. If so, use them to supplement your monthly payment.
Be careful opening –or closing -- accounts. Don’t apply for credit cards you don’t need. Asking for too many cards will lower your credit score. On the flip side, don’t close existing accounts. For reasons known only to the Credit Gods, closing a credit account can also lower your credit score. In fact, once you get an account balance to zero, you may actually want to make a small purchase now and again (and pay it off that month) to prevent the credit card company from closing your account due to inactivity.
Properly employed, credit can be a powerful tool for accomplishing your goals. Follow these rules and you’ll minimize the downside of credit card debt until you can make it go away.
Still have questions?
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