Max'd Out, No Problem!
by Herb Larrondo, CreditWorks,
LLC.
The holiday season is an extremely dangerous time to use
credit cards, the temptation is just too much, the majority of us do not have
the discipline or will power to not use the cards to the max. Now that we have
incurred this new debt, there are a couple of different approaches to paying it
down. One method will have you paying the lowest balance card first. The idea is
to sit down and figure out how much you are going to pay towards credit card
debt. Let say you owe $10,000 to 4 different credit cards and that you can
afford to make $800 in payments every month. The balances on the cards are card
1, $1000 card 2, $2000 card 3, $3000 and card 4, $4000. You would make the
minimum payment on cards 2, 3 and 4 of say $100 for a total of $300 leaving you
with $500 to pay card 1. This method has a psychological advantage of seeing the
number of bills reduced quickly. Once you have paid off card 1, you should still
continue to pay $800 a month, but now apply most of the money towards the new
lowest balance card. I prefer to get rid of the highest cost card. Still using
the example above, list the cards in order of interest from highest interest to
lowest interest. Make the $100 minimum payment to the 3 lowest cards and make
the $500 payment to the highest card, continue until the highest card is paid
off. I do not recommend getting into further debt to pay debt off, but the post
holiday season is usually a good time to make use of those "teaser
rates". Use them to lower your borrowing costs. Balance transfer to those
high interest cards whenever you have a chance. Not only will it help you lower
your costs, it will also exercise your credit, allowing you to make it
grow. Hope this helps you start off the new year on a positive note.
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