Reducing or eliminating credit card debt should be a priority for families who want to move beyond financial survival. The first step should be contacting the credit card companies and requesting a lower rate, especially if you have a good payment history but your rate is higher than 13%. This is a simple suggestion, but it works. Even if the rate is lowered only 2%, this extra money can be used to pay down the balance. If the credit card company turns down the first request, be persistent and call again in a month or two.
Another option is transferring your balance to a card with a lower interest rate. “If you expect to receive a tax refund or a bonus in the next year, transfer your balance to a card with 0% APR on balance transfers for 12 months. Extra money from tax refunds, gifts and bonuses can help significantly in paying down the balance.
Paying more than the minimum balance due, even an additional $20 per month, makes a big difference in paying down credit card debt. Paying off a $2,200 balance with a 13% APR and $55 minimum payment will take over 14 years and an additional $1,500 in interest. Increase the monthly payment to $75 and it will take only 36 months (3 years) to pay off the card and only $461 in interest.
Almost 25% of U.S. households say their spending is now less than or equal to their income.This is a large group of people who are one late payment away from receiving punitive default rates of almost 30% on credit cards and other loans. If you are at the edge, default rates will be devastating. If your credit card bill comes at the end of the month when there is no money left, contact your credit card company to change your billing schedule to fit with your pay schedule.
