Stretching Your Dollar: Managing credit card debt
COLUMBIA - How many of you have been caught off guard by how much you put on your credit card when you saw your monthly statement? Or how much you ran up because of life events you didn't predict or plan for.
Here's the quickest, proven way to pay it off:
First, figure out what your credit score is.
Mary Beth Storjohann, a certified financial planner, said, "Your credit report is basically your financial report card, but there's no getting rid of it after college. So knowing this number and how it impacts you is a great way to kick off the year."
You can get a free report every year from each of the credit reporting agencies by going to AnnualCreditReport.com.
if you have good credit, a score of about 650 or better, you can likely transfer your high interest card balance or balances to a low or no interest card.
Most credit card companies charge 3 percent of the you're transferring. By eliminating that fee, you can save $300 on a balance transfer of $10,000 and have a low or zero percent interest rate while you're making payments.
Here are 3 credit card offers that don't have any balance transfer fee:
The best card is the Slate card from Chase. It has no balance tranfer fee, zero percent annual precentage rate for 15 months and no annual fee.
You'll pay nothing in fees or interest and have 15 months to pay it off. It's the best card for a balance tranfer by far, but you can't move a balance from another Chase or Citi card account so that's going to knock it out of the running for a lot of folks.
If you can't use the Slate card, check out the Pen Fed Promise Visa.
It also has a no balance tranfer fee, but has a 4.99 percent APR for 12 months and no annual fee. So you'll pay about 42 dollars in interest per month if you transfer $10,000 in credit card debt to the Pen Fed card.
You do have to be a member of Pen Fed Credit Union, but you don't have to be in the military. Anyone can join the National Military Family Association and then you can apply.
Another great card for a balance tranfer is the Barclay Ring Mastercard.
It also has no balance transfer fee, you'll carry an 8 percent APR. That's still a lot lower than the usual 22-29 percent most cards carry, and there's no annual fee. You'll end up paying about $67 per month in interest on $10,000 in credit debt.
if your credit score isn't good enough to qualify for a balance transfer, then here's what you need to do:
Pay more toward the highest interest card. It's called laddering. the most money should go toward the highest interest credit card and less, or the minimum, to the other cards.
Keep it that way until the card with highest-interest is paid-off, then you move onto the next card. But don't close any of the accounts, that only hurts your credit score.
Stop using any of your credit card. If you want to get out of debt faster, you have to stop using debt to pay for your lifestyle. This means no more financing furniture, no more signing up for credit cards, no more test driving new cars you don't have the cash to pay for. This will help you focus solely on the debt you already have.
Also, make half-payments twice as often. Mark your calendar every 14 days and send your payment that day. Making a half-payment every two weeks equals one extra month's payment at the end of the year.
Storjohann advised "doing a debt inventory, understanding the balances that you owe, the interest rates on them and the minimum payments due."
Finally, start an emergency savings account. Even a tiny one.
For most people, credit cards are the source of needed money for emergencies. If you are trying to get out of debt , you need to put a buffer between you and more debt; that's exactly what an emergency fund does.
For more information, visit the National Federation of Credit Counselor's webpage or call 1-800-388-2227 to find a local affiliate office near you.