Debt Management: Prioritizing Credit Card Debt
February 24th, 2010 | by Admin |Prioritizing credit card debt is useful when you eliminate your most costly debts first. Three important steps in debt management include determining annual percentage rates (APRs), debt consolidation options, and setting up a plan to reduce debt each month.
APR: The Painful Part of Credit Card Debt
Federal law requires the APR for consumer credit accounts to be clearly displayed on billing statements. If you’re paying bills online, you can access itemized monthly statements showing the APR on each account website. APR shows how much you’re paying for the “privilege” of owing money to creditors. Credit card companies woo consumers with “prestige”offers for cards named after precious metals, but what you really need to know is how much you’re paying for each account. The APR is calculated to include all applicable finance charges expressed as an annual percentage of your current balance. It includes the account’s present interest rate, membership fees, and applicable penalty fees . Your APR can change from month to month if an account has a variable interest rate or penalty fees are charged. Make a list of your creditors arranged from highest APR to lowest. Paying off high APR debts first can help you save on finance charges.
Debt Consolidation Simplifies Debt Management
Unsecured debt consolidation loans can be difficult to find in today’s restrictive credit environment. Credit card companies offer balance transfer options as a way of luring business away from competitors. These offers can help with debt consolidation if you consolidate multiple balances to one card without paying additional fees or increasing your balance on the card you use for transferring to more than 35% of its credit line. Otherwise, you can temporarily reduce your credit scores. Weighing potential savings by transferring to an account with a zero percent rate is worthwhile only if you can pay off the balances you transfer during the introductory period. Low interest debt consolidation is your goal. Debt consolidation help you clean up small credit card balances and reduce debt management chores.
Establishing Your Debt Management Plan
How you prioritize your debt management plan depends on individual preference, but here are some considerations:
- Paying off highest APR debt first helps save on finance charges
- Paying down near limit balances can help improve your credit
- Using debt consolidation to roll smaller balances into one payment streamlines bill paying, but is useful only if you can consolidate to an APR lower than those for the balances you want to consolidate
- Track your progress; this helps you stay on track
Congratulations on taking steps to get out of credit card debt. If you need help, please consider professional debt consolidation and credit counseling services.
Similar Posts:
- 5 Things to Remember About Debt Management
- False sense of security for consumers being asked for minimum repayments on credit cards
- Debt Management: Three Questions for Conquering Debt
- Financial Experts Recommend New Bankruptcy Option
- Are Americans Getting Smarter About Debt?
