How To Manage Credit Card Debt

If you are currently carrying credit card balances that you don't expect to be able to pay off soon in full, consider transferring your balances to cards with lower rates. Some credit card companies are offering zero percent (0%) interest on balance transfers. Eliminating interest can help pay off debt much faster - even if you only have zero or low interest for a short period of time. For example: If you have a $10,000 balance with interest at 18%, and pay $250. a month, it will take 38 months to pay off the debt. It will also cost $3,200 in interest.  If the interest is 0%, you will pay off the balance almost one year earlier.

Before you make the transfer from a credit card with a higher amount of interest to another credit card, watch for the following:

• Balance transfer fees-fees charged for transferring a balance from another credit card. As a general matter, transfer fees range from 3% tro 5% of the amount being transferred. While it may sound like a no-brainer to switch from a higher rate of interest to a lower one, this may not be the case once you add in the transfer fee. Do the math.
• Expiration of the low "introductory rate" that most cards offer. This rate may be in effect for only two to six months. If you don't qualify for cards with low introductory rates, work on building your credit rating so that you might qualify in the future.

Set an alert in your calendar for when the rate will increase. If you haven't paid off your debt by then, consider switching once again.

NOTE: Keep your old credit card open even after transferring the balance to another credit card.  You may need the credit in the future to pay uninsured medical bills. While it is important to keep credit available if possible, the downside is that having too much credit and too many open credit lines can damage your credit rating.

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