December 23,2008
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Get Your Credit Rating Back, Pt. 2 –
– Organize.C) Look for ways to consolidate debt:
This is where the matrix comes in. Low interest is good and there may still be a remnant credit card offering left in the market from last year. Balance transfers on credit cards used to have a ‘Cap' on the max ‘Transfer Fee'. That is becoming scarce anymore. Look for them and calculate how much 3% of your transfers would cost you. Also, there were credit card promos that offered a little higher interest then the standard 0% for the first four months, maybe 3%. The good in this was the guarantee that the 3% would never hike. Zero percent APR is good while it lasts but the 21% APR that begins after the promo can eat you alive if the debt is still large. Check out this site to find best Balance Transfer offers.D) Pay highest APR first:
Back to the matrix. When total consolidation isn't feasible, prioritize payments by APR (Annual [interest] Percentage Rate). Sum up the minimum payments of all the other accounts combined and the most you can pay for that bundle. Pay the minimum on those cards and everything else you can scrape up over the minimums should go toward the account with the highest APR. If you have a credit card with a very low APR, charge ‘essentials' only, in lieu of cash on this credit card and immediately pay that cash toward the highest interest card. But remember, the main goal is to not owe anything in the end. You're simply moving existing debt to the lowest APR account.E) Secure the high APR card:
Store it where it can't be used any further. Remember, the first goal is to get out of debt before starting over. Temptations may abound, so place the card in an inaccessible location. This is the way to a better life.