Credit Card Addict » Debt Reduction http://www.creditaddict.com feeding your credit card addiction... Mon, 26 Sep 2011 17:03:25 +0000 http://wordpress.org/?v=abc en hourly 1 Help for the New Year’s Credit Card Hangover http://www.creditaddict.com/archives/credit-card-hangover-help/ http://creditaddict.com/archives/credit-card-hangover-help/#comments Fri, 15 Jan 2010 22:51:49 +0000 admin http://www.creditaddict.com/?p=662 If you tightened your belt and cut down on your spending last year, it seemed to make sense to cut loose in December and buy holiday gifts, decorations, and other goodies with your credit card. Now, you have a post-spending hangover. Wincing won’t make it go away, though, and come the first week of February you’re bound for more pain when you receive your credit card statement. You may have to apply some new discipline this year if you want the ache to go away.

Take heed; it’s not a catastrophe. But here are things you should consider:

  • Paying more than the minimum balance on your credit cards. Consumer Credit Counseling Services reports that paying a $60 minimum payment on a credit card balance of $3,000 will end up costing you $2,780 in interest before you can retire it all. But if you pay $110 per month, you can eliminate the debt five years sooner and save yourself $1,800 in interest.
  • Finding a low-rate credit card and transferring your debt. You’ll need good credit to do this and, with new credit card laws in place this year, you may find higher transfer fees than in 2009. Depending on your debt, however, a transfer may still save you thousands of dollars in interest charges.
  • Negotiating with your credit card company. There’s no reason to be rude when you call, but hold your ground. If they learn that your next step is to apply for another company’s card at a lower rate, they may try to keep you by reducing your interest rates or fees.
  • Signing up for a nonprofit debt management program. Consumer credit counseling companies can negotiate with credit card companies on your behalf to reduce interest on your debt. Typically, you’ll need a hefty outstanding balance to attain services, but it may stave off a potentially disastrous bankruptcy. Please be careful when selecting a debt management service.

While you’re at it, create a high interest savings account and put away money for next December’s shopping so you can avoid this pain next year. ;)

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]]> http://www.creditaddict.com/archives/credit-card-hangover-help/feed/ 0 Using 0% Balance Transfers to Dig Yourself Out of Debt http://www.creditaddict.com/archives/using-0-balance-transfers-to-dig-yourself-out-of-debt/ http://creditaddict.com/archives/using-0-balance-transfers-to-dig-yourself-out-of-debt/#comments Wed, 20 Aug 2008 10:25:06 +0000 admin http://www.creditaddict.com/?p=136 While it’s true that you can’t borrow your way out of debt, that doesn’t mean that you can’t use credit cards to help dig yourself out of a financial hole. The trick here is to apply for and use balance transfers to reduce your interest rate, ideally all the way to zero.

How it works

Start by applying for one of the many 0% balance transfer offers that are out there floating around. These cards come with promo periods as long as 12-15 months, so they can save you a ton of interest. After approval, simply transfer your higher rate debts to your new, lower rate card.

Next, get serious about paying down your balance before the promo period expires. If you can’t get your balance completely paid off before the promo period ends, you can always rotate your debt to a fresh 0% credit card offer. Even if you can’t find a suitable offer, you’ll have saved 12-15 months worth of interest payments, so you’ll be way ahead of the game.

One nice thing about this approach is that it’s not limited to credit card debt. Because many card issuers provide balance transfer checks, you can use this strategy to consolidate debts from a variety of sources, including car loans, home equity loans, and student loans.

The downside

While this strategy can save you a ton, it’s not without its pitfalls. For example, the days of the no fee 0% balance transfers are rapidly coming to an end. Nowadays, pretty much all of the 12-15 month offers have a balance transfer fee that can eat into your savings. While these fees often top out at $50-$75, sometimes they’re not capped, so be careful.

It’s also important to stop adding to your debts when using this strategy. Since most credit card issuers will preferentially apply your payments to the 0% portion of your balance, any new charges will incur finance charges until you get your balance down to zero. If you can’t control your credit card spending, then you’ll need to work on that problem before using this strategy.

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]]> http://www.creditaddict.com/archives/using-0-balance-transfers-to-dig-yourself-out-of-debt/feed/ 2 Carnival of Debt Reduction #135 http://www.creditaddict.com/archives/carnival-of-debt-reduction-135/ http://creditaddict.com/archives/carnival-of-debt-reduction-135/#comments Mon, 14 Apr 2008 12:00:58 +0000 admin http://www.creditaddict.com/archives/carnival-of-debt-reduction-135/ Good morning and welcome to the 135th Carnival of Debt Reduction.

Before we jump into the carnival itself…

If you’re new to Credit Addict then welcome! If not, then welcome back!

For those of you that aren’t familiar with Credit Addict, this site is an outgrowth FiveCentNickel. It was launched just three and half months ago, during which time I have been slowly (but surely!) building up content. If you’d like to get a feel for what Credit Addict is all about, I encourage you to poke around the archives.

You might also be interested in subscribing to the site feed (via RSS or e-mail). It’s a full-text feed, so you’ll get every single word delivered straight to your desktop.

With that said, let’s get to the Carnival…

Editor’s Choice

Jim presents “Curb Spending by Writing Goals on Credit Cards.”

paidtwice presents “I’ll Do What I Want With My Economic Stimulus Check.”

The Happy Rock presents “Debt is the Symptom – Fix the Problem.”

PT presents “How to Prioritize Your Debts for Payoff.”

broke grad student presents “An Illustration of Why Saving Money is Harder Than Spending Money.”

Personal Perspectives

Madison presents Rearranging Our Finances to Refinance the House.”

Meg presents “Winning the War on Debt.”

Nathaniel Scott presents “Our Progress: Month 3.”

S presents “$6,000 Per Year to Save.”

bluntmoney presents “Financial Motivators.”

Chic Saver presents “To Reflect.”

General Debt Reduction

Rio Rivas presents “How to Pay Off Your Home in Half the Time.”

Mark Butler presents “3 Powerful Reasons to Earn an Extra $16.67 Per Day.”

Jessica Donnovan presents “Turning Debt Into Wealth – One of Life’s Great Challenges.”

Alex M presents “Find Out How to Pay Off High Student Loans.”

Macroeconomic Perspectives

Lisa Spinelli presents “The Dope on National Debt.”

Jonathan presents “Why America NEEDS a Recession.”

hank presents “Should the Government Save Folks Facing Foreclosures?”

And… That’s it! Thanks for stopping by. Don’t be a stranger!

If you’d like to submit an article for possible inclusion in the next edition, please use the handy submission form.

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]]> http://www.creditaddict.com/archives/carnival-of-debt-reduction-135/feed/ 8 Beware the Promise of “Interest-Free” Purchases http://www.creditaddict.com/archives/beware-the-promise-of-interest-free-purchases/ http://creditaddict.com/archives/beware-the-promise-of-interest-free-purchases/#comments Wed, 09 Apr 2008 12:27:43 +0000 admin http://www.creditaddict.com/archives/beware-the-promise-of-interest-free-purchases/ Have you ever been tempted to take advantage of an interest-free offer from a retailer? Just think… You’ve saved and saved for that new bedroom set, and now they’re offering you a chance to leave that money in your high-yield savings account so you can keep earning interest for 12 (or more) months while enjoying your new furniture. Sounds great, right?

Well… Maybe. While these “same-as-cash” offers can be a great way to save a few bucks on your purchase, you have to be very careful not to trigger an avalanche of interest payments. As it turns out, most of these offers have an extremely high interest rate (upwards of 20% or more in many cases) that is simply being waived if you pay it off during the interest-free period. But if you don’t kill off your debt, you’ll likely end up on the interest that has been accruing over the full period.

Consider the following… You make a $3,000 purchase under a 12 months, same-as-cash offer. At the end of twelve months, you’ve nearly paid off the full amount. You only owe another $200. No big deal. Even though it’s 20% interest, your balance is only $200, and it won’t take long to kill it off. Right? Wrong.

In most cases, failure to pay off the debt in full during the interest-free period means that you’ll wind up paying back interest equating to 20% on the full amount. Not such a good deal now, huh? Moreover, in many cases this interest avalanche can be triggered by a single late payment during the interest-free period. Thus, even if you fully intend to pay it off before the interest kicks it, it’s still possible to get caught unaware and wind up paying through the nose.

As with anything, be 100% sure to read the fine print.

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]]> http://www.creditaddict.com/archives/beware-the-promise-of-interest-free-purchases/feed/ 3 Dealing With ‘Debt Hangover’ http://www.creditaddict.com/archives/dealing-with-debt-hangover/ http://creditaddict.com/archives/dealing-with-debt-hangover/#comments Fri, 04 Jan 2008 11:03:20 +0000 admin http://www.creditaddict.com/archives/dealing-with-debt-hangover/ ‘Tis the season… To start paying off your holiday bills, that is. According to a recent AP news article:

Even before the 2007 holiday spending season began, Americans added more than $50 billion to their credit cards in the first 10 months of the year to reach a record total of $928.5 billion in October, according to the Federal Reserve. The additional spending in November and December undoubtedly pushed balances even higher.

It should thus come as no surprise that a recent poll revealed that the the top financial goal for 2008 is to pay down debt.

So how do you do it?

Obviously, spending less than you earn is the key to freeing up money for debt repayment. But what’s the best repayment strategy?

You may want to consider setting up a ‘debt snowball‘ of some sort… List your debts from lowest to highest balance or from highest to lowest interest rate, and then attack them from the top of the list down. Pay the minimum amount due for all cards, which is where you’ll direct any extra money that you can come up with. Once you’ve knocked out the first one, add that monthly amount to what you’ve been paying toward the next debt on the list, and so on. Before you know it, your debts will begin to melt away.

Another trick would be to apply for one or more 0% credit card offers and then transfer your balances to them while paying things off. Doing so effectively shield your debts from further interest charges, allowing you to pay things off faster than would otherwise be possible.

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