Action Line: Credit card debt reduction takes a plan
BY PHIL MULKINS World Action Line Editor
Tuesday, January 22, 2013
1/22/13 at 6:55 AM
Dear Action Line: My New Year's resolution is to get out of credit card debt - just like last year's resolution. This year I resolved to ask you how. - H.M.P., Tulsa.
Tips for paying down debt in 2013 are offered by Bill Hardekopf, CEO of LowCards.com.
Total owed: Round up each of your bills with outstanding debts, including credit cards, mortgage, student loans, auto loans, personal loans and bank loans. Create a list of all the creditors with the monthly payment amount, balance, interest rate and credit limit for each. Verify the payment due dates and the status of the accounts.
Pay cash: If you carry a balance on credit cards month to month, stop paying for purchases and daily expenses with cards. You pay a high interest penalty on every purchase made. If you charge meals, entertainment or clothing, you will still be paying these off years later. Put away the credit cards and use cash for such purchases.
Seek lower rates: Credit card issuers don't act on this as often as they used to, but it doesn't hurt to ask. If you have received an offer for a card with a lower rate, ask your issuer to match it. Tell them you will be shopping around for another card if they don't lower your rate. If your rate is lowered, add the amount you saved to your payment so you can pay down your balance faster.
Pay over minimum: Pay more than the minimum every month. Minimum payments are set at 1 percent to 5 percent of your monthly balance. While it makes your monthly payment smaller, it takes longer to pay it off and you will pay much more in interest.
Singular focus: Paying off multiple credit cards with high balances seems overwhelming, so pick one and focus on paying it off. Start on the card with the highest APR and pay as much over the minimum amount as you can to bring down your balance.
Transferring balance to lower rate card: If your rate is above 15 percent, it could pay to transfer the balance on that card to one that offers 0 percent APR for at least 12 months. Take full advantage of 0 percent interest by paying as much as you can above the monthly minimum while you aren't paying interest. Use this card for balance transfer only, not for additional purchases, because you'll be charged interest on the purchases. Most cards charge a 3 percent fee for balance transfers, so you need to calculate if the interest you save in making this transfer is greater than the fee.
Micropayments: Instead of one monthly payment, make higher-than-minimum payments every two weeks. As long as you pay the minimum payment by the due date, you can make multiple payments during the billing period to help pay your balance faster.
Prioritize bills to pay first: If you can't pay off all your monthly bills, pay the bills that are a necessity for health, shelter, basic groceries and basic transportation. Then pay the secured loans, such as car loans. Payments on unsecured loans (most credit cards) should come last in these critical situations.
Original Print Headline: Pay down credit card debt with smart steps
Submit Action Line questions by calling 918-699-8888, emailing phil.mulkins@tulsaworld.com or by mailing them to Tulsa World Action Line, P.O. Box 1770, Tulsa, OK 74102-1770.
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