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Sunday, October 18, 2009

few steps for credit card tricks ! check it...

Credit cards usually charge a higher rate of interest than other loans. In the current economic times, paying high rates of interest just does not make fiscal sense. Many families are struggling financially, and credit cards with high interest just add to the problems. Here are three ways to reduce your credit card debt and to bring your finances back into the black.

1 – Reduce the Interest Rate
There are several options available to you to reduce the high rate of interest you are paying on your credit cards. Shop around for the best credit card deals. Many companies will offer a honeymoon period with extremely low or even non-existent interest rates for the first few months, when you transfer the credit card debt.

If you find a credit card with a lower overall rate than your current card, and a deal like 0% interest for the first six months on credit card transfers, you will effectively reduce your interest rate by transferring to the new company. Make sure you close the old credit card after you transfer the balance to the new card; otherwise, you just end up with two credit cards instead of one. Store cards usually have the highest rates of interest, so consider closing the store card completely and using a credit card from a bank or credit union with a lower rate of interest for your purchases.

If you have withdrawn cash from your credit card, there could be even more advantages in transferring the debt to another company. Many credit cards charge a higher rate for cash advances than for purchases. Find a credit card that treats the transfer balance as a purchase, rather than the cash advance to reduce your interest rate.

If you have several credit cards, all charging high interest, it may be worthwhile taking out a personal loan or a debt consolidation loan to cover the debt and closing all the credit cards. This way, you will only have one repayment and you only pay an overall interest rate. Ensure the interest rate of the loan is lower than your current credit cards to make the savings. Combine all the payments you were making to individual credit cards to pay off the consolidation debt each month.

If you have equity in your mortgage, another option may be available to you. Consider utilising a redraw facility on your mortgage and pay off the credit card debt in one go. Close the credit cards and pay the payments you were making on the credit cards back into your mortgage. Interest rates on mortgage loans are often the lowest available to individuals and this should mean a saving on the high interest payments of the credit cards.

2 – Stop Spending on the Credit Card
This may seem obvious, but the only way to reduce your credit card debt is to stop using it for more purchases. You may need to review your budget and make some decisions about your spending priorities, but you do need to stop adding to your credit card debt.

If you are committed to clearing the credit card debt, try locking the card away at home in a safe place. If you do not carry the card on you, you will be less likely to purchase spontaneously. If you really do need the purchase, you will need to go home, get the card out, and then go back to the shop, which at the least will give you time to consider whether or not you really do want to spend the money on the credit card.

Get into the habit of paying cash for items. If you cannot afford your purchase this week, save for it over a few weeks, rather than pay the interest on your credit card. A debit card is a good solution. A debit card is linked to an ordinary savings or check account, but can be used everywhere you normally use a credit card, including for online purchases. You only spend what is in the bank account on the debit card, so you do not go into debt with this option, nor are you left paying high interest rates for your purchase.

Before making any purchase on the credit card, decide when you would be able to pay this debt back. Add the interest payments on the debt to the price of the purchase in your mind, and consider whether it is really worth buying the goods on the credit card. For example, a $100 shirt you purchase on a 10 per cent off sale may end up costing you $50 in interest, by the time you pay back the credit card debt. Even if you had purchased the shirt at the normal price of $110 with cash, you would have paid less than the “bargain” shirt on the credit card.

3 – Pay Back More Than the Minimum Monthly Fee
Financial institutions love it when customers only pay the minimum monthly fee on the credit card, instead of making higher payments. This is because the minimum monthly fee may only just cover the interest on the account, and will not reduce your total debt at all. The financial institution can therefore continue to charge you high interest rates on your debt.

In order to reduce your credit card debt, you need to pay back more than just the interest, which means you really have to pay back more than the minimum monthly fee. Look at your budget and see where you can afford to make savings. Then channel those savings into the credit cards charging the highest interest rates to pay off the debt quicker. The sooner you pay off the principle in the loan, the less interest you actually pay over all.

If you have a high interest credit card and cannot find ways to reduce the interest rate as above, paying off the debt as soon as possible is the only way to reduce the interest rate. Increase your payments to reduce the debt quicker. Even paying off an extra $10 a week will reduce your debt by $520 in a year. Pay an extra $50 a week to reduce your debt by $2600 a year. The longer you have a credit card debt, the more interest you pay.

Reducing your interest rate and your credit card spend, and paying back as much as you can will effectively reduce your credit card debt. Do not get stuck paying high interest rates on credit cards, just to make the financial institutions richer. Take control of your finances today and reduce the credit card debt forever.

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