Handing the Debt Off

The credit card business is one of the most competitive industries there is. You can tell that because you no doubt get dozens of invitations for new credit cards every week. That is because the only way a credit card company can continue to grow new business is to steal the business away from another credit card company. It isn’t really a business where there are a lot of new customers coming into the market. The types of accounts the credit card companies want are people who are carrying a lot of debt, who continue to pay on the debt but never pay it off and who have no history of defaulting on their loans. If that describes you, then you are on the A list for a potential customer for a credit card company.

If you have a lot of credit card debt, it really isn’t that flattering that other credit card companies want your business. Even more infuriating is when a credit card company who already has you in debt sends you offers for still more credit cards. But there may be a glimmer of light in this tough situation. You might be able to leverage you’re “A list” position with the credit world to find a way to manage your credit card debt more successfully.

Typically if you have three or four or more credit accounts, the credit ceiling on those accounts probably have gotten pretty high. That is because, as we just reviewed, if you carry debt but pay on it, that sets a cycle in motion for the credit card companies to offer you as much debt as they think you might use so you can owe them even more money. Again, while this seems cruel and heartless, that is how these folks make their living so they have to find some way of attracting the debt of the A list customers.

But another method they also use is to offer you an attractive rate of interest to either start a new account or transfer debt from an account you have to your existing account. A common “come on” is to offer you zero percent financing which seems wonderful because in theory you could transfer all of most of your debt to the generous company and not pay any interest which would greatly speed your pay off.

Transferring balances has its good side and its negative side and you need to be smart about both. Read every word of the offer, even the small print on the back of the page because you must understand any hidden fees you might face if you accept their generosity. Almost always the zero percent or low percentage rate is for a very limited time of perhaps three or four months. In credit card land, this is a heartbeat. Then once they have your account balance of your debt built up, they can jack your rates up and you are right back where you started.

So be smart about using these kinds of offers. A great tactics is simply to transfer a fairly small amount of your debt to the zero percent offer. Transfer $1000 and then pay it off over the three to four mouth period. You win because you paid no interest and they lose because they can’t sting you with a high interest rate at the end. Also be aware of any transfer fees or membership fees if you are taking out a new card. These fees can amount to additional interest and negate much of the benefit. But if you are smart and use these offers shrewdly, they can be terrific ways for you to drive down your credit card debt surfing “come ons” from the credit cards companies in a clever fashion. …Read more >>

Taking on Credit Card Debt

Credit card debt is the kind of thing that can go from a convenience to a cruel taskmaster in a short time. Very often the reason you may have a credit card debt problem may not be anything bad about you. It only takes a few bad breaks to drive your debt level dangerously high. Some unemployment, a few high medical or home repair bills or other unexpected expenses and before you know it, you have a big problem.

There are a lot of advertisements for credit card debt consolidation. The first word of caution we all should have about using these services is be careful. A good rule of thumb is that if they have money to advertise on television, they are going to make money off of you in some way shape or form. If you have bad credit and few resources to tap to get that problem under control, the interest rate on the debt consolation could be just as much of a prison as the debt itself. But there are good services out there too so just shop wisely.

So it’s a good idea to have a strategy for taking no credit card debt and starting to turn the corner on dealing with the problem. And part of that strategy is using the resources you have. The biggest asset you may own is your home. Now, most of us are hesitant to use our homes as collateral to get our credit levels down. But if you have a fair amount of equity in your house, it can be a tool to get a second mortgage that has a favorable interest rate that is capped so it doesn’t float up and down at the whim of the lender.

A good place to start finding a good home equity loan is the lender who is handling the loan now. If the company that handles your finances now is doing a good job and doing business with you openly and fairly, you can get to them to negotiate a loan that both gives them some interest to make the loan worthwhile to them but gets your debt level under control. So if you can put all of your debt under a 30 year home equity loan at an interest rate sometimes 5-10% lower than credit cards, that frees up your budget to handle your expenses and start to see daylight on getting out of debt.

Another option for getting your credit cards under control is a credit management service. These agencies will take all of your outstanding credit card bills and work with the lenders to come up with a payment plan so they know they will get paid but the amount you have to put out is manageable by you. Again, these services will have fees but if they can at least put a fence around your rapidly expanding credit card debt situation, it might be a fee worth paying.

The important thing about you taking the first step of seeking help with your credit card debt is that you are taking charge of the situation. Too often, we feel hopeless and develop a victim mentality when we see those debts just keep going up knowing full well that at some point the monthly payments will overwhelm us. Reaching out to skilled and qualified services that can give you back some feeling of control over your debt can be liberating to you and give you hope that there may come a time when the trap of credit card debt still holds you captive. And that will be a wonderful feeling of freedom when you finally get free and are able to live within your means again. …Read more >>

The Basics of Credit Card Debt Consolidation

Credit card debt consolidation is a term that gets thrown around on television quite a lot. You see so much advertising for this service that you have to know that someone is making a lot of money off of people like you and me that have serious credit card debt problems. But once you understand what credit card consolidation is and how it is accomplished, it is very likely you can accomplish the same goals and get the same benefits without paying anyone an excessive fee.

The reasons these services have sprung into existence is that with the economy being so difficult and with gas prices and prices for so many of life’s necessities going higher and higher, many people are spreading their debt over many credit cards. The result is an average family might have three or four or even more credit cards with high debt run up on them and the interest fees being charged can get quite high.

Despite the customer friendly language credit cards use when they try to lure you into running up your debt even higher, these credit cards are making credit card companies a lot of money and they want you to pay them down slowly so they can continue to charge big fees month to month. So the first of credit card consolidation is to get all of that debt into one account, get rid of the credit card debt and perhaps close those accounts entirely and get a reasonable interest rate you can deal with over time.

So the first core principle or “basic” of credit card consolidation is getting rid of multiple creditors and getting all of your debt into one account or at least fewer credit accounts. At the same time its preferable to work with a creditor who is willing to work with you with the goal of reducing debt so the interest rate can be set at a level significantly lower than what you were paying to the credit cards so more of what you pay goes to pay down the debt and less to interest and fees.

One tactic that is often used to move your debt to lower rate interest loans is to use zero percent short term offers from credit card companies. Now watch those because sometimes there are transfer fees that are as high as an interest payment. But if you can move several thousand dollars to a zero percent loan for six months, you can then work on paying off higher interest credit cards while that part of your debt is not running up the balances. But watch out because at the end of the zero percent period, sometimes the interest rate on that loan will shoot up higher than any of your other loans.

The important things that you take charge of your credit and not let it be in charge of you. Start a log or a spreadsheet where you document each credit card you have, what the interest rate is, the expiration date on short term low rates, what you credit limits are and what your payments are. This kind of consolidation of your records will tell you which credit cards need the most attention and where you should look to consolidate two credit cards into one or all of them into the one credit source that you feel you can work with long term. Then you have a partner to help you make a plan to get out of credit card debt and stay that way. …Read more >>