Foreword Communications

Managing Credit Card Debt

With more individuals going belly up financially, keeping your own financial house in order is becoming more important than ever. And one big piece of the financial puzzle is credit card debt. Since most households are now carrying a minimum of $10,000 in credit card debt alone, managing that credit card debt can save you hundreds, even thousands, of dollars every year.


Some important things to remember when managing credit card debt are:

1. There’s a difference between good and bad debt

2. Rein in spending by creating a budget

3. Keep an eye on those interest rates

4. Ignore the minimum payment, and

5. Don’t wait until it’s too late to get help.


Most of us open our mailboxes, both physical mailboxes and internet ones, to find more credit card offers than real mail. Obtaining a credit card has become so easy that only the rare individual doesn’t have one. But far too many people have discovered the drawbacks of credit card spending, usually after it is already too late and their credit rating has suffered as a result.


Credit cards are actually a great way to finance larger purchases, but most people unfortunately don’t use them for such purposes. Using a credit card for consumable purchases is one of the worst ways to use your card because you must continue to pay for the purchase long after you have consumed that meal or taken that vacation. This does not apply if you are using the card to make the purchase so that you don’t have to carry cash and intend to pay the bill in full from money that you have set aside for just that purpose.


Along these same lines, the more you pay toward your balance every month, the less your total interest charges will be. Sure, it’s easy to be fooled by the minimum payment, and there are likely to be times when that’s all you can manage to pay. But, whenever possible, pay more than the minimum. You’ll literally save thousands over the life of the card.


If you find that you are charging more than you can afford to pay, you need to rein in that spending. Keep a spending diary and create a budget from the information in your diary. Be honest too. If you spend $1.50 on a chai latte every morning, write it down. Many budgets go awry because the person is not honest in documenting spending.


Always pay off your higher interest cards earlier. Just like paying more than the monthly minimum, this small strategy can save you a ton of money. If possible, transfer your balances from higher rate cards to lower rate ones. You can even call your credit card company and ask them to lower your rate. It’s worth a try, and sometimes it works.


Finally, if you’ve gotten in over your head, get help! Partnering with a debt counseling agency can help you get back on your financial feet and save you the grief of bankruptcy and harassing creditor calls. Some of these agencies charge for their fees however, so make sure that you don’t get caught in a scam by investigating the company before you do business.


1 Comment »

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    Comment by David Simonds — Friday, August 29, 2008 @ 5:51 am

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