December 24, 2009
-
Surviving the 2010 CC Crunch, Pt.2
Pay down quickly.Tip# 2 -- Get those existing credit card balances paid down:
If you haven't yet been slammed to the hilt with high credit card finance charges, don't feel like you're the unlucky one when it happens. You'll just be typical. So, if you're still in a position where you can pay that credit card down, by all means, prepare to do it soon. If your current APR is way-low still, count yourself not only lucky but, ‘hanging out there'.
Once that APR jumps (nearly all credit card accounts have been switched to variable rates by now), your options become very limited if you don't have a secure job with good pay. With an APR of just 19.9% (pretty typical, now) your principle balance not paid down will more-than double every five years. This can put a serious crimp in your lifestyle. Don't expect to escape the turmoil by simply paying the minimum suggested by your credit card issuer. They're more than happy to keep you paying on the same balance for 20 years, so long as they're profiting from it.
Come February, again, there is some relief in sight. When phase II (of III) of the CCARDA regulation goes into enforcement, we will all be granted honest disclosure warnings explaining all these details: How long it will take to pay off a debt with minimum payments; how much you will have paid in finance charges and how much you would have to pay each month in order to pay off the existing balance within 3 years (36 months). Most people are shocked when they see these figures for the first time. They really are dramatic. Be aware that the earliest advance credit card payments (over the minimum) will have the greatest impact, by far. Waiting till later to double your payments won't help you nearly as much as earlier ones.