Summer is quickly approaching, and unfortunately, millions of shoppers are probably spending more than they can afford.
Card issuers are adding to the debt problem. Mailboxes may have some attractive credit card offers as companies market their balance transfer and rewards credit cards, especially to Americans with excellent or good credit scores.
If the financial disaster of 2008 taught us anything, though, it is that consumers need to stop accumulating large amounts of credit card debt. Here are some tips for reducing your debt in 2023:
* Examine all of your accounts to make sure you know exactly what you owe on all of your credit cards. Then, create a debt summary for each loan that details the credit, monthly payment interest rate, balance due, due date and credit limit.
* Contact your card issuers to see if they can give you a lower interest rate. The less money you pay in interest each month, the more money will go toward your credit card balances and other bills.
* If you are carrying balances on your cards, stop using them, unless an emergency arises. When you carry a balance, you are paying interest for every purchase you make, including entertainment, dinners and clothing. You should factor this interest into your purchases. Strive to use cash instead, as it will save you money on interest, and it could reduce the amount you are spending each month.
* When possible, pay more than your minimum payment, which is usually 2% to 5% of your balance. If you only pay the minimum amount due, it could take years to pay off your credit card debt.
* When tackling debt, start with your card with the highest APR and try to at least double the minimum payment. While you are paying off this card, pay the minimum on your other credit cards. After that card is paid off, move on to your card with the second highest interest rate. When you pay off the balance of a credit card, do not close the account. If you close an account, it could lower your debt utilization ratio, which could lead to a lower credit score. It is especially important to keep your oldest cards open, as another part of your credit score is based on how long your accounts have been open.
* You may want to consider a balance transfer, if you can find a credit card with a lower interest rate. If your APR is higher than 20%, look for a card that offers 0% for at least a year. To make the most of the 0% APR, pay as much as you can in addition to the minimum every month.
* Even if you can only make the minimum, it is important to pay your bills on time each month. If you do not, you will accrue expensive late fees, and the negative information will appear on your credit report, which can result in higher interest rates and a lower credit score.
* If your financial situation is so dire that you are in danger of missing a payment or defaulting on your credit card, call your card company as soon as you can. They may be willing to work out a payment plan with a lower monthly payment or interest rate that will stop you from defaulting on your account.
* If your interest rates seem higher than they should be, check your credit report. There could be an error in your history that has lowered your credit score, which makes card issuers increase your interest rates. If you do uncover an error, report it to the credit bureau. They need to respond to your claim within thirty days or remove the incorrect or unverifiable information. You can file your dispute via mail, telephone or online. If your credit score goes up after you have fixed an error, call your creditors to alert them to this fact and ask for a better interest rate.
* Create a realistic schedule for repaying your debt. You did not accumulate the debt over night, and it will take time to repay it.