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Credit Card Debt: Avoiding Extra Finance Charges

Created: On June 18, 2010 @ 8:19 pm In

Credit card debt can seem like a fact of life, but carrying high balances on credit cards can be very expensive. Although credit card companies choose to emphasize low initial rates and other promotions, variable rates, penalty fees, membership fees, and newer fees including “processing fees” are like having piranhas in your wallet; your money is eaten up before you know what happened to it.

CARD Legislation: How it Helps (and How it Doesn’t)

Recent legislation under the CARD Act is intended to control skyrocketing credit card fees and costs, but it doesn’t limit the interest rates consumers can be charged. This loophole allowed credit card companies to hike interest rates before the law, which eliminates or reduces certain fees, became effective. The bottom line with credit card debt is that there is likely no way to completely eliminate paying finance charges unless you pay off your debt entirely.

Consumers can expect a new wave of correspondence from credit card issuers before the second phase of the CARD Act becomes effective on August 22. Late charges and other penalty fees on credit card accounts will be limited to $25; watch for notifications of interest rate increases or changes in benefits offered through credit card programs. If you cannot pay off your credit card balances, these tips can help with avoiding extra costs:

  • Set up automatic payments: You can arrange automatic payments to your credit card companies each month by specifying an amount and date you want funds transferred. These services typically provide email notification of payments.
  • Pay off highest APR accounts first: Although it’s wise to pay more than the minimum required payments, paying off the highest annual percentage rate (APR) account first can help you save money over time. The APR of all finance charges appears on your monthly credit card statements, and consists of all fees and interest charges expressed as an annual percentage of your current balance. Your APR can change from month to month, but comparing APR ratesĀ helps determine which accounts cost the most.
  • Negotiating with card issuers: If you have good credit and a solid payment record, contact credit card companies and ask them to reduce interest rates and eliminate membership fees.
  • Debt consolidation loans: If you have an established relationship with a financial institution, you may qualify for a personal loan to pay off credit card debt. The risk with [1] debt consolidation loans is continuing to use your credit cards after paying off balances; you may end up with more debt instead of less.

[2] Credit counseling and debt consolidation programs can help if you’re overwhelmed or uncertain about resolving debt problems.

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URL to article: http://www.debthelp.com/blog/2010/06/18/credit-card-debt-avoiding-extra-finance-charges/

URLs in this post:
[1] debt consolidation loans: http://www.debthelp.com/debt-consolidation/loan.html
[2] Credit counseling and debt consolidation: http://www.debthelp.com/debt-consolidation/credit-counseling.html