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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, June 29, 2006

Credit Card Debt

If you are like many Americans you have struggled at times to get out of credit card debt. Obviously, it is best if you never get into credit card debt. But if you do get some debt you need to take it seriously and start taking big chunks out immediately. If you pay only the minimum it will take years and years to get out of debt while paying that credit card company way too much in interest on your balance.

If you are paying 18% interest on your credit card balance of $5,000 you are essentially paying $75 a month in interest (or $900/year). Is that ok with you? Because it should not be. If you interest rate is that high you need to focus on paying that balance as soon as possible. Sacrifice what you must because if your minimum payment is $100 a month on that balance and you pay the minimum, only $10 a month is going towards the principal. Here are some ideas to help:

  • Try to negotiate with your credit card company a better interest rate
  • Try to transfer that balance to a lower percentage rate credit card (ask for them to waive the transfer fees)
  • If you have debt with lower interest rates focus on the highest interest rate, but still make at least the minimum payments on the other
  • Get a second job. It sounds tough, but a couple hundred extra dollars a month an go a long way to paying off your debt.

If you have some other good ideas on how to pay off credit card debt please share with everyone.

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