How To Contain Your Own Personal Credit Crisis

Friday, February 17th, 2012

Credit cards are an essential part of life. If you ever want to rent a car, buy something online or purchase a snack on an airplane you will need to have some plastic in your wallet. However, the downside is that it can be all too easy to slip into debt if you get carried away with making charges. Especially during heavy-spending times like holidays or if something happens that cuts your income stream down to a trickle, amassing a lot of credit card debt can happen in a heartbeat.

There are steps you can take to keep things under control, such as:

Negotiate a lower rate.

If the interest rate on your current credit card seems on the high end, call up your creditor to ask if they can lower it for you. This has a better chance of happening if you have been a long-time cardholder and if you have a good, strong history of paying your bills on time. These days, fewer creditors seem to be willing to budge when it comes to lowering APR’s but it never hurts to ask.

Transfer your balance.

If your request for a lower interest rate was met with refusal, start shopping around for a new card. There are many great balance transfer deal available at the moment, so keep your eye out for cards bearing special sign on promotions such as 0% interest for a fixed period of time, typically between 12 and 21 months. Make sure you investigate all of the other details as well, such as the balance transfer fee, annual fee and what the interest rate will shoot up to once the promotional period expires.

Make it a top priority to pay on time.

Pay your credit cards bills each and every month by the due date. If you don’t you will be subjected to a late fee. But worse than that, you will likely lose any special promotional interest rate if you have a balance transfer card and your creditor will report your late payment to the credit scoring bureaus which will result in a drop in your credit score.

Pay down your most expensive debt first.

What this means is that if you have outstanding balances on more than one card, you should concentrate on paying off the balance on the card with the highest APR first. Pay the minimum on your other cards while you aggressively attack the high APR card until the balance has been paid off. Then turn your attention onto the card with the next-highest APR and continue on in this manner until all of your outstanding balances have been paid off.

Pay twice as much as the minimum.

Your credit card bill will have a lot of information on it, including your recent account activity, the total amount you owe, your next payment due date and the minimum amount you are required to send in prior to that date. These minimum payments are typically around 3 to 5% of the balance owed, meaning that if you only ever send in the minimum amount it will take you years to pay down even a small outstanding balance and you will wind up paying a tremendous amount in interest charges. To make any headway on settling your debt, you should pay at least twice the minimum amount. Consider paying more whenever you can swing it.

Don’t skip a Payment

If you are seriously struggling and fear that you can’t handle making your credit card payments at the moment, contact your creditor immediately to explain your situation. Try to work out another arrangement, such as a lower minimum payment or change the date when your bill is due. Don’t be afraid to solicit the aid of a not-for-profit credit counseling agency if need be.

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