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| Cathy
Howell |
Avoid
Credit Card Hangover
This Holiday Season
- Holiday shopping
has never been easier. You visit your favorite stores,
pick out the perfect gift and show them your plastic -
painless, easy and convenient. Until the bill arrives.
If you are a convenience
user of credit cards, you pay off your balance
in full and feel no pain. But for nearly two-thirds
of us, credit card use means bills we can't pay
right away and a loss to our pocketbook because of the interest
we pay.
So what can you do
to avoid credit card hangover? Here are a few tips that
take little time and no extra money.
TIP #1: Know
the cost of credit
Use low-interest-rate bankcards to charge most gifts. Department-store
cards usually have much higher interest rates
and shouldn't be used unless you know you can pay the bill
off when it becomes due (which means no interest costs).
TIP #2: Reduce
the interest you pay
Credit card minimum payments are sometimes as
low as two percent of the balance due. At this minimum payment,
it takes a long time to pay off the balance. Always pay
as much as you can afford and you'll save a lot of money
in the process by paying less interest in the long run.
Start by paying down the higher interest rate cards
first and here's a quick example of why (all paid
using set minimum payment for each card):
Balance
owed |
14%
interest rate |
17%
interest rate |
19.8%
interest rate |
$1,000 |
Takes
80 months |
Takes
89 months |
Takes
100 months |
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Interest
Cost: |
Interest
Cost: |
Interest
Cost: |
| |
$455.05 |
$628.80 |
$843.05 |
Source:
The Banker's Secret Credit Card Software
If you have multiple cards and limited
money to pay each month, pay the minimum required
on the lowest interest rate card and put all additional
money towards paying off the card with the highest interest
rate. You'll save money by reducing the amount of interest
you pay! Once that card balance is at zero, use the money
to pay off the next card with the highest interest.
TIP #3: Transfer
your balance to a lower interest rate credit card
This can be a good deal but there are tricks and traps so
you must be extremely careful. Check the fine print for
transfer fees. Some cards charge as much as 4%
on the total transferred. Look for transfers that cap the
transfer fee at around $25. Start by transferring to a card
with a zero balance. Make sure that if you use a balance
transfer check provided by your credit card issuer that
it would not be considered a cash advance with high fees.
Before you transfer money owed from one card to a new card,
always call to confirm the terms.
Credit card
companies have lots of ways to make more of your money their
money. Arm yourself with knowledge so you can avoid creating
more wealth for the credit card companies. Instead, build
your family wealth by paying less interest on your debt!
Take advantage of the best credit card deals and avoid a
credit card hangover this holiday season!
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