How to Avoid Credit Card Debt
The holidays are just around the corner and with that comes stress and apprehension of impending credit card bills. It's not an easy time of the year since gas and electric bills are usually higher. Many parts of the United States are experiencing above average snowfall and below average temperatures -- which leaves us looking for the fine line to draw when buying gifts and planning Christmas parties.
Some of us have a tendency to go overboard and it's difficult to control with all of the sales and store ads. If this is a recurring problem every year, don't begin shopping too early because when you finish, you'll keep reading the ads and keep on shopping. This leads to overspending and extra credit card bills come January. If you manage your money carefully, you can buy all of the gifts that you need and not go in the "red."
To give or not to give? You'll need to change your habits. Buy gifts only for close relatives and friends. For more distant relationships, opt for sending a Christmas card instead. Everyone's trying to cut costs, so give them a call and set new boundaries. This will take a load off of both your shopping list and bank account.
You can also be creative and make some homemade gifts, cookies and treats for neighbors, teachers, and service personnel. They'll appreciate the time and thoughtfulness put into the gifts and it will help them out in a pinch when they don't have time for baking.
Store Credit Cards
Don't apply for every store credit card. Sure, you will get a discount, but in the long run, you may end up with higher interest rates. Keep in mind that popular chains offer incentives to their employees to get as many sign-ups as possible, particularly during the holiday season when everyone's shopping for gifts. They're not doing you a favor. The retail business is about making money and their research shows that they will offset their initial loss (usually about 10% of the sale) and show a profit after you have the card in hand because you will shop there more often and pay interest on unpaid balances after the first of the year.
So, you've racked up the credit card debt and don't know what to pay first? Look for the companies that charge the highest interest rates and pay on them first. Make larger payments than the minimum due to eliminate these debts and move on to the next. For companies with lower interest rates, you can stick to the minimum payments if it means lowering your overall interest costs. Sure, it would be nice to pay them all off at once, but that's unrealistic. Bottom line, calculate the interest and get rid of those debts first.
Try using credit cards only when necessary to avoid spending too much. As a rule, they're best used only when shopping online, over the phone, or when traveling. If you find yourself in over your head, take action. Look in the yellow pages for consumer credit counseling services. They'll meet with you and offer advice for settling your debts. In addition, they will negotiate with your credit card companies and set up a reasonable payment plan. This will not only save you money, but can save your credit rating too.