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Debt relief: managing your own “debt ceiling”

Created: On August 16, 2011 @ 7:06 pm In

Here are some debt management tips helpful for controlling credit card debt.

Debt management 101: Don’t increase credit limits

When you’re short of cash or have unexpected expenses, opening another credit card may seem like a good option. Instead, be realistic about how digging deeper into debt helps with your goal of effectively managing debt. Don’t fall for offers of deep discounts for opening a new credit card. Unlike the federal government, consumers can damage their credit by opening new accounts and maxing out credit cards.

Reducing finance charges: Can balance transfers help?

Finance charges, or the cost of using credit, are calculated as an annual percentage (APR) of the amount of debt you owe. Your credit card statements show your current APR for each monthly billing period. Take a deep breath and check out the APR for each of your credit cards. Variable interest rates, penalty fees, and card usage cause the APR to change.

Credit card companies promote transferring balances to their card in exchange for a low or no interest rate introductory period. Read the fine print; there is usually a 3 to 5 percent transfer fee tacked on to each transfer. This may be worthwhile under the following conditions:

You can transfer balances with double-digit APRs and pay them off within the introductory period. Failure to pay them off during the introductory period means that balances remaining after the introductory period expires will accrue interest at a new and usually much higher rate.
Controlling spending/card usage: If you practice retail therapy, or buy big ticket items that cannot be paid off in one billing cycle, please think twice about balance transfers, especially if you’re opening a new credit card account.

Consult a financial advisor or credit counseling and debt consolidation program for help with reducing and managing credit card debt.

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