September 01, 2010
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News: Help! Get Me Out Of This Mess
Statistics indicate that Americans have remained diligent in reducing credit card debt. Contrary to what some experts have said, it is not a short lived trend. It has also been reported that the increase in debit card use has replaced the credit card in a large number of American's pockets. For those cardholders looking for a way to accelerate debt reduction, available options may seem limited. Of course, the quickest path would be to consolidate or transfer all card balances to one credit card. If transferring all your card balances to one card is not an option, there is one way for you to accelerate debt reduction.
After taking a thorough review of all your credit card terms and conditions, make note of the current interest rate on each card. Your goal will be to pay down the highest interest rate card first. Begin by paying the minimum payment due on the lowest interest rate and apply any excess funds available to pay more than the minimum payment due on the highest interest rate credit card. In regard to making the minimum payment, lenders calculate min payments based off the previous months accrued interest plus a percentage of the balance which is typically 1 to 2 percent. At this rate, it could take you up to five years to pay the entire debt. New legislation requires that lenders clearly state the length of time it will take to pay the debt down if you only make the minimum payment due. For this reason, you will want to pay more than the minimum payment due.
Always consider the consequences of not paying your monthly bill on time. If you are habitually late making your payment, it is likely that your lender will raise your interest rate. With some lenders, it will take just one late payment to kick in a penalty interest rate. New legislation allows lenders to increase your interest rate if you have been late for 60 days. Secondly, if your interest rate goes up, less of your monthly payment is applied to the credit card balance. Also, you will pay more in penalties; money that could have been used to lower debt. Lastly, the fastest way to lower your credit score, late payments. Don't risk losing money and a good credit score; pay on time.