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Debt consolidation - Tips for Reducing Credit Card Costs

Jan 30, 2008
Literally billions of dollars are being used up on expenses that are only created because of the existence of the credit card industry. The most desirable customers for the credit card companies are the ones who make a payment on time every month but don't pay off the whole balance.

According to Herald Tribune for 2008 the President of European Central Bank Jean Claude Trichet told that another interest rate increase is possible because of inflation concerns. At the same time Ben Bernanke, the U.S Federal Reserve chairman, mentioned that he is ready to cut U.S rates so that he prevents a recession. He mentioned that all this downturn in the housing and credit markets in the U.S pose high risks to economy, therefore the consumer spending will slow down in 2008. Trichet said that he prefers to keep price stability. The Bank of England ignoring politicians, kept its interest rate at 5.5% in order to make easier the slowing growth.

The weight of the calculations, administration and marketing needed to support the industry is immense the average Briton or American gets at least one credit card offer in the mail every day.

Credit cards are called credit cards to avoid saying what they really are: debt! You will do much better in all things connected to credit cards if you always remember this simple mantra: credit cards are debt cards. Like anything convenient, though, credit cards have a flip side in fact, they have lots.

Whatever you do, though, don't spend a whole day applying for every credit card you can find, just to see if anyone will take you. Once you've got a credit card, you'll find that you can do more with it than just pay for things with the card. If you directly ask why you haven't been accepted, then they usually have to tell you.

In the West, though, the art of saving seems to be a lost one almost no-one is saving enough for their retirement, and banks are having to offer ever-higher interest rates to get people to put money anywhere near a savings account. Less than half of all the UK's credit card users pay off their bills every month and millions are now believed to be using plastic money to pay for everyday necessities, including super market, groceries etc. Lot's of people who are regular credit card users realise that debt consolidation can bring in several benefits. A loan can be taken for the sole purpose of debt consolidation and often it is at lower rate than what you might be paying to the credit card issuers. You can save money by clearing your credit card bills that might have been attracting very high interest rates.

You might think there's not that much difference between a card that charges 15% APR and one that charges 12% APR.

It is important to remember that what you owe is compounded that means you pay interest on the interest you owe from the month before. For higher interest rates, it only gets worse: there are cards out there where only making the minimum payments will actually cause you to owe more each month, not less! There are so many people who just look at the interest rates they're being charged, and don't understand the terrible difference it can make if you only ever pay the minimum payment.

Borrowing a lot before you start paying anything back will make you look like a very bad risk, and so will going all the way up to (or even over) your limit on a credit card. Your limit is just that: a limit, not a minimum! Whatever you do, don't get a card and immediately spend your whole limit.

If you have a problem, the last thing you should do is ignore it, because it will only get worse you have to try and beat it early. In all the technical discussion you hear about credit card debt, the best ways to manage it and pay it off and all the rest, one thing goes largely ignored.

A minimum payment is the absolute lowest amount you can pay back to the credit card company each month you should pay more, but you don't have to. When you have enough money to pay off your debt, there's absolutely no reason to keep it. Debt is for people who don't have the money, and need to borrow it. Debt costs money, and savings make money you want as much of your finances as possible to be savings, not debts. If your savings account and credit card are with the same bank, then you're effectively paying for the privilege of borrowing your own money from them. Why would you do that?

Pay attention to what kind of fees you'll be charged for a late payment, or if you take a cash advance, or if you accidentally exceed your limit on the card. Know Your Local Laws. Months can go by far more quickly than you'd think, and missing the end of the teaser period by even a day will mean that you'll end up paying interest at the normal rate.

Even if it'll be a long time before you get everything paid off, knowing that your debt is gradually going downwards can be an excellent cure for debt stress. It is especially important that you talk to your partner they are the number one person who can support you. You'll be less stressed about your debts, and your credit report will show that you were able to pay everything back getting you a much better interest rate if you ever need to go into debt again.

You should limit yourself to a maximum of three cards at a time any more starts to make you look over-committed in your credit report, and could get you turned down for a bigger loan. If you write them a letter and pay a very small fee, they have to send you the full credit report that they have about you.

Your grace period is the amount of time between when you spend money and when you start paying interest on it. Good cards can have a grace period of up to two months bad ones might not have one at all.

A consolidation loan is a loan that you can use to pay off all your debts, meaning that you can pay them off for less money without having to worry about lots of different bills. If you do take a debt consolidation loan, you need to read the small print as if your life depended on it (it does), and then be very, very careful.

Like anything, though, consolidation loans have their advantages and their disadvantages, and it pays to take a careful look at what they offer before you commit yourself.

In some countries, you might not have a legal leg to stand on your card issuer can do what they like to you. When it comes to Credit Card Issuers, getting it in writing also means that you can hold them to what they say later on.

They'll be able to lend you the money at a much better rate than a credit card would, simply because they know why you're taking the loan and can set regular monthly payments for you to repay it. Anyway, credit card lenders are devious, and there are plenty of things there designed to catch you out here's what you should be on your guard against.

Secondly, always pay more than the minimum if you can afford to. I know it feels like money for nothing, but isn't it better to pay it now and get it over with, instead of paying it for the rest of your life? Just remember: don't fall for it when they offer you a "new great credit card deal". The more you owe, the more that 'holiday' will cost you. Wouldn't you rather take your money and go on a real holiday, instead of spending it all on repaying credit card debt?

There are some credit card lenders out there who are trying to scam you. Be very careful if you're offered 'free debt advice'.

They are also a very useful way of proving to credit rating agencies that you can handle debt, and this will be taken into consideration when you apply for car loans or a mortgage.

Don't be fooled by any offers that give you a good rate for a limited time you're going to have this loan for quite a while.

Essentially, every company has a slightly different way of working out how much interest you should pay each month. A common trap is for a card to allow you to transfer your balance of thousands at 0% APR, only to charge you 20% or more on anything new you buy with it.

You might think that one card issuer won't know what you're doing with a competitor's card, but you'd be wrong. Be Always Aware of The Damage to Your Credit Report. Make sure you keep track: make a mark on the calendar. Apply for a Less Prestigious Card.

Finally, as ever, don't sign anything you haven't read! I know it's hard going and you're busy and all, but if you can't manage to read the terms and conditions then you shouldn't get the card.
About the Author
Christos Margetis is available for interviews and public speaking. The tips in this article were extracted from Chris's award- winning website. His lensesite offers best information and reviews for Debt Elimination and financial resources information. Videos are available too
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