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If you’re running a balance on your credit card, paying the minimums is about to get a lot harder! The new credit card minimum regulations might leave you with a monthly minimum payment that’s double what you’re currently paying. There’s no need to panic, just take this as a sign that it’s time for a change. Erin Burt of Kiplinger’s offers us some tips to help get our credit card balances under control.
How to Control Credit Card Dept:
“Step 1: Put your credit cards away, at least until you’ve paid them off. Out of sight, out of mind. Remove the temptation and take your cards out of your wallet. Try the bottom of your sock drawer, or entrust them to a friend or relative for safe keeping. You could even place them in a bag of water and throw it in the freezer — you’d have to wait for it to melt before you could use it, which would hopefully be long enough for your impulse to pass.”
“Step 2: Dig for loose change. To make those larger minimum payments — or to pay extra toward your principal — you’ll need to come up with more cash. The couch cushions are a prime target, but think bigger. Take a good look at your spending and find areas that you can cut back. “Everybody has 15% to 20% of fat in their budget,” says Dvorkin. For example, forgoing that $4 latte every day would save you about $120 a month. Dvorkin also suggests re-shopping your car insurance, using a lower grade of gas or reading your newspapers online.”
“Step 3: Consider a balance transfer. Many credit card companies offer 0% or ultra-low interest on balance transfers for a limited time — usually four to six months. If you qualify, such a deal will help you wipe out your debt faster because all or most of your payments would go toward your principal, not the interest. It could also buy you the time you need to pay off your purchases entirely.”
“Step 4: Pay off cards with highest rates first. You should always pay at least the minimum on all your credit cards each month to avoid late fees and damage to your credit rating.
- But if you have some extra cash, put it toward the card that charges the highest interest rate, says Dvorkin, and keep doing that until the card is paid off.
- Then, put the excess cash toward the card with the next-highest rate, and so on until your debt is wiped out. You basically get a return on your investment equal to the interest rate.
- Put $20 extra toward your credit card charging 18% interest, for example, and you just got an 18% return on your investment. Not too shabby.”