The Finance Blogger

Credit Card Debt

Credit Card DebtCredit card debt is probably one of the most expensive kinds of debt that most people will deal with in their lives. Credit card debt carries a high interest rate that can really rack up huge cost quickly if you are not careful. Cards such as Visa and MasterCard usually carry an interest rate of approximately 18% to 19%. Store based credit cards are much more expensive and carry rates as high as 28% to 29%. With rates as high as these customers will have a difficult time and it will take a long time to repay credit card debt if you only pay the minimum each month.

What to do About Credit Card Debt

The best approach to credit card debt is to first of all pay your balance off on the due date. Never carry and unpaid balance past the due date. If you do, interest will be charged from the date that your items were first charged to the card. This may be a surprise to many users, however that is the way most credit card companies calculate interest charges. When this occurs many clients are very surprised at the amount of interest and how little of their payment actually goes towards paying off the principle. All additional charges are also factored into the calculations as well and the interest charges can become almost overwhelming.

If you cannot pay your credit card debt off at the end of the month on the due date using your own sources of funds, then the next best thing is to arrange for a low-interest personal loan and consolidate all of your credit card debt into the personal loan. You will still be paying interest charges, but it will be under 10% at today’s rates instead of being up in the high teens or high twenties. Once you consolidate your credit card debt with a low-interest personal loan, the next step is to get control of how you use your credit cards. Always make sure that you read the fine print and understand what the APR is for your loan. Some less than scrupulous lenders are charging upwards of 300% on loans. Car title loans are among the worst and consumers should stay clear of these types of loans.

Budget Your Money and Avoid Debt

If you do not have the cash, we suggest that you should not spend the money. If you do not have the cash this will mean that you will have an unpaid balance at the end of the month. An unpaid balance means paying high interest rates again.

Focus on repaying the personal loan you used to pay down your debt. Avoid using your credit cards as much as you can. The cost for debt is just too high. The real danger is that consumers will build up their credit card balance yet again. They still have to repay the personal loan they took out previously. Now what do they do when they have exhausted their credit limits?


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