Pay off credit cards with higher interest rates. Throw the cards in a drawer and resist the urge to use them further. When the outstanding balances are finally paid in full, cut the cards up and toss them in the trash!
Avoid high interest rates by shopping for a new credit card with the FREE credit card chaser!
Make sure that you cancel the credit card accounts you no longer use. Having outstanding credit lines, that you aren’t using, can negatively impact your credit standing. Your credit score is not only dependent on making your payments on time, but on how much available credit you have in relation to your income. Having too much credit is as bad as having too little!
Credit Card Laws Protect Consumers
When applying for a new credit card, make sure you read the fine print on the credit card agreement. Changes implemented since the passage of the Credit Card Act of 2009 have eliminated many unfair lending practices in regards to credit cards, but consumers should still be aware of all the terms and conditions before they accept a credit card and begin to use it.
Agreements from credit card issuers must advise consumers of penalty interest rates for cardholders who fall behind on their credit obligations.
For most banks, these rates top out at nearly 30%! Late fees, over limit fees and other bank charges must also be clearly detailed on card agreements. Many of these fees have also been limited by the Credit Card Act.
Hold Your Bank to their End of the Bargain
According to the Credit Card Act, your bank can only change your credit card interest rate after providing you with a minimum of 45 days notice, in writing. If you think the change is unreasonable or unfair, you have the right to say no! You may then close your account and pay off the balance under the original terms of your credit card agreement.
If your credit card interest rates get out of hand, you may also negotiate with your credit card company for a lower rate. To keep you as a customer and help you manage high balance accounts, banks are often willing to eliminate fees, reduce required minimum payments, or slash interest rates.
Since suffering devastating losses in the closing years of the 2000s, banks have become far more flexible in dealing with consumers’ credit card issues. New laws have certainly helped, but your bank would much rather work with you than have you default on an outstanding credit card balance.
Pay Off Your Cards Each Month
Handy credit card payment calculators like the one featured on the Federal Trade Commission website, can help you formulate a plan to pay off your outstanding credit card balances.
Currently, the average consumer credit card interest rate nationwide is 16.87%! At this rate, it would take about six years to pay off a balance of $2000, making only minimum 5% payments each month! The interest charges alone would amount to $720!
Paying off the same $2,000 balance in just two years would require monthly payments of $99 and cut the total interest cost almost in half, to $371! Just over 38% of Americans manage to pay off their credit card balances in full each month according to a study released by the Public Broadcasting System.
This same study revealed that 24% of Americans manage only minimum payments on their credit card obligations each month. Using our previous example, but elevating the APR to a penalty rate of 30%, it would take 9 full years to pay off a $2000 credit card balance and cost an additional $1822 in interest charges. This would almost double the original debt!
No Interest Is Good Interest
Using a debit card or a prepaid Visa or MasterCard is another way for consumers to manage their finances, save money and remain debt free. Prepaid Visa, MasterCard, American Express, or Discover logo cards carry all the benefits of regular interest bearing credit cards with little or none of the expense.
Many families find prepaid credit cards a helpful alternative to traditional interest bearing cards.
Younger members of the household can be entrusted with cards that feature set spending limits, helping them to learn to use credit wisely, while at the same time avoiding costly interest charges.
As checkbooks have mostly disappeared from the American scene, they have been replaced by Visa and MasterCard logo debit cards. Most debit cards provide ready access to cash and other services while charging only nominal fees.
The one drawback to debit cards, of course, is that users are limited to their cash on hand. In many cases however, overdraft protection can be added to an account or a line of credit may also be attached to a debit bank account.
Look for the best deals on a credit card with the FREE credit card finder above!
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