Credit Card Debt Causes and Prevention

Rising costs have created a trap for many people. In order to make ends meet, many of us are faced to putting emergency bills (car repairs, home repairs, etc.) onto the credit card and then praying that we can keep up with the bills.A year or so ago, the government gave the credit card companies far more freedom regarding interest rates and payment schedules. They also changed bankruptcy laws making bankruptcy harder to file. Suddenly, credit cards with rates of 20% or higher become a common sight. A person who was paying $100 a month suddenly discovered that the monthly payment rose by $50 or $60. While the intention was to get the mounting national credit card debt down, it actually has backfired by making it harder for families to pay their bills on time. This has led to late fees, over the limit fees, and a soaring number of foreclosures.Debt consolidation programs are swamped with applicants. While many have turned to these programs to help get them out of debt, you can save money and do the work yourself. If you receive pre-approved credit card applications in the mail, save them! They can actually help you save a ton of money and interest charges.

1. Photocopy the credit card offer, including the interest rate and terms. Create a letter to your credit card company/companies stating that you are thinking of switching to their competition because they are offering a far more reasonable interest rate. Credit card companies do not want to lose your business. Nine times out of ten they will match or even offer a lower rate than the competition has offered.
2. If you can afford it, pay double the minimum payment. The minimum payment usually pays just enough to cover the interest and a little more that pays down the balance. Paying extra will pay your balance more quickly.
3. Pay off smaller balances first. It is common for a person to try to focus on their cards with larger balances first. Pay off the smaller ones. It will take less time and you will feel a sense of satisfaction when you have actually completed your goal. This will boost your confidence and make it easier to tackle the higher balances.
4. Cut up your cards so that you are not tempted to use them. Save one card for emergencies.
5. If you have equity in your home, look into paying off credit card debt with a refinance or fixed-rate home equity loan. Do not use a home equity line of credit, the rates will rise as the prime rises and suddenly you may find it impossible to keep up with your bills.