Although credit cards interest rates have not been affected by the recent surge in the prime lending rate, the fact remains that credit card debt is usually the most expensive debt you can have. The average is around 20% and even the so-called ‘low interest’ cards carry a rate in excess of 10%. Expediting the demise of your credit card balance should be the number one focus for anyone looking to improve their financial situation. Here are five actions to get you started.
1.If you are carrying a balance, the first step is to put the card(s) away. Whether you put them in the food processor or just temporarily turn them off (my recommendation), you need to own up to your mistake and not add any more fuel to the fire. If it’s the case where you have no choice but to use the card (a prepayment for example) make sure to make a payment to cover that charge right away.
2.Take a minute to fully understand the consequences of a credit card balance. Search out the details of your credit card statement until your find the section that tells you exactly how many years it will take to eliminate that balance with minimum payments. While you are at it, make sure to confirm the interest charge for that month and just how little of your payment is actually going toward reducing the balance. It can be a bit shocking, but also quite motivating! The government has a simple online calculator for you to easily analyze different repayment options.
3.Plan your repayment attack. Making a few random spending sacrifices and hoping that you will have a little more left at the end of the month to pay towards your card is wishful thinking. You need to figure out ASAP the maximum amount you can throw at your credit card debt every month and chart out when you are going to be debt-free. Set up an automatic transfer from your bank account to your card every payday and make that money invisible – you can’t spend what you can’t see!
4.Look to consolidate your debt. You may be able to leverage the equity in your home to remove your credit card debt. HELOC’s typically carry an interest rate of Prime +1%, which though may seem high at the moment, is still significantly less than 20%. A Second Mortgage may also be helpful, depending on the size of your debt. Talk to a Mortgage Professional to assess your debt situation and determine if consolidation is the right approach for you.
There are no shortcuts and it may require a lot of sacrifice depending on how much debt you have, but the mental burden that is lifted when you see a big zero under “balance due”, will absolutely be worth it!
– Published by my DLC Marketing Team