Taking Care Of Your Credit Card Debt

In this economic environment where interest rates are at 0.25% no one should have to pay 24.9% APR on credit card debt specially since interest rates will stay low until 2014.  As a consumer and a financially responsible individual you should be concerned at the amount of debt you hold and at what rate you repay that loan.  When reducing debt your first step should be to put your plan of repayment on a piece of paper so you will stick to it.  Your second step should be to call your credit card company to negotiate a lower APR by stating that you want to pay off your debt quickly.  If a credit card company has you at a high interest rate while you have good credit you should not be holding any debt on that card. 

If you cannot get your current credit card company to lower rates shop around to see if you can strategically transfer your balance.  Try not to apply for too many credit cards as this will lower your credit score.  Even if you transfer the balance to only one credit card issuer this will result in a small drop on your credit score but it can be worth it if it frees up some of your credit, the small drop will disappear within 6 months.  Remember the less available credit you use the higher your credit score will be.

If you have an outstanding balance of $10,000 at a current APR of 24% you should look to transfer that balance at a zero introductory rate for 15-18 months and a lower rate after the introductory rate expires. The national average APR on new card offers is currently 14.91%.  Read the fine print, these offers might have ways of hurting those suffering from less than optimal credit scores.  Credit card issuers can change the terms after the introductory rate has expired.  Watch out for balance transfer fees they are usually 3% and they may not be capped.  If you have excellent credit take advantage of the limited time offer some banks are promoting: zero balance transfer fees.

A credit card balance transfer should be used strategically and not often, this can hurt your credit score and it may affect the way lenders see you.  It should be used to get rid of old debt at a lower rate and not to give you room to breathe as you continue to purchase recklessly.  I would only recommend a balance transfer for those trying to eliminate debt within the introductory zero rate time frame and not to add any other purchases within that time period.  Credit card issuers know that the odds are against the debt holder and that most likely they will continue to make purchases on this new card. They also know that the debt holder will have a hard time repaying their balance in full within the zero introductory time period.  If you know you have a problem get free help and counseling before you consider transfer balances or consolidating.