YOUR CREDIT CARD BILLS ARE ABOUT TO
DOUBLE.
HERE'S WHAT TO DO ABOUT IT!
If you’ve
just been scraping by, paying the minimum on your credit-card bills
from month to month, your bills may be about to double from 2 to 4
percent of the balance due. Complying with Federal guidelines, this
summer five of the top 10 card issues (Bank
of America, Chase, Citibank, Discover and Providian) have
already made the change, according to Cardweb.com. By the early part
of next year, nearly all of the credit-card issuers are expected to
follow suit.
The good news,
of course, is that this enforced higher payment will give you a shot
at paying off your debt eventually. Paying a mere 2 percent hardly
covers charges and fees and won’t make a dent in your principal.
However, the minimum-payment increase, combined with other
factors—such as shorter grace periods, higher interest rates and
late-payment fees, and a new, less forgiving bankruptcy law—adds up
to more reasons to get your debt under control. Here are seven steps
to take to help you do just that.
1. Make
a list of your cards, noting the balances on each, placing the ones
with the highest interest rates at the top of the list.
2.
Call
the card issuer of each and try to negotiate a lower rate. If you
don’t succeed, transfer your high-interest debt to the lowest-rate
card you can obtain. Read the fine print on the offers you’re
considering to be sure that low rate will hold for at least six
months, and be aware that if you make even one payment late, once
you accept the card, the rate may convert to a higher one.
3.
Now,
make a Superwoman’s effort to pay off the cards, one at a time,
starting with the one with the highest rate. Do this by paying as
much over the minimum as you can afford each month. Increase the
amounts you pay on the remaining cards as well. Take the time to
write down how you spend every penny for a week, and you’ll probably
find numerous ways to economize so that you have the extra cash to
put towards the debt.
4.
Even at 4 percent,
NEVER pay
just the minimum.
5.
If you have enough
money in a savings account or mutual fund to cover your credit- card
debt, consider using it, or part of it, to pay down your debt. The
interest it’s earning is likely to be far less than the interest
you’re being charged by the card issuer, so you’ll really be saving
money in the end. Once the debt is paid off, keep making
payments—back into your savings accounts.
6.
Borrow from
yourself; many 401(k) plans allow you to borrow a percentage of your
savings at a rate a few points above prime, and the interest you pay
goes back into your account. Or if you have life insurance policies
that have a cash value, consider borrowing against them.
7.
Own a home? Another option is taking out a home
equity loan, whose interest rate should be lower than the
credit-card interest you’re paying—and it's tax-deductible! |
