Managing Credit - Made Simpler ... Provided by the BBB

You knew that credit cards could be great tools to help you manage your money, but now your outstanding balances are over whelming. The bills keep coming but you’re missing payments because your cash flow does not meet your payment obligations. Perhaps creditors are now trying to reach you and you just don’t know what to do next.

Emergent Funding wants to help you get out of this mess and will post solutions provided by the Better Business Bureau.

This is entitled TWO STRATEGIES TO PAY OFF BALANCES FASTER:

Strategies to reduce your interest payments can help you reduce your balances faster, even if you’re nowhere near able to pay your balance in full at this point.

1. Make the highest possible payment you can each month.

The faster you pay off your balance, the less you’ll pay in interest charges. Increasing your monthly payments by even a few hundred dollars can help you get out of debt much faster (see the case study below).

2. Find a lender that will give you a lower APR.

A lower APR translates into lower interest charges as a percentage of your outstanding balance.  Switch to a lower rate card and benefit from balance transfer offers. Introductory or “Teaser” rates must last for at least six months and the rules must be clearly disclosed.

BBB Tip

“Teaser” Rates

Watch the calendar carefully, and pay as much of the balance as possible

in the first few months.  Most “teaser rates” last only six months, and then the interest rate will jump after the introductory offer expires.

Case Study

How to Pay Less in Interest

Situation — You have a $5,000 credit card balance and your lender requires

a minimum monthly payment of 4% of your balance. This translates to a $200 minimum payment in the first month.

Problem — If your card charges 18% interest and you make only the minimum

monthly payments, it will take you 11+ years to pay off the balance. By that time, you will have paid the card company more than $2,800 in interest even if you never make any new charges on the card. That means that $5,000 balance actually cost you $8,000.

Solution 1 — Pay more than the minimum each month and pay off your balance faster. Even if you can’t pay a huge chunk of the bill, you can still accelerate the payoff process, which will minimize your out-of-pocket costs from interest charges.

Solution 2 — Transfer your outstanding balance to a card company that will offer you a lower interest rate, and boost your monthly payment a bit. If you switch to a card that gives you a 6% interest rate and increase your monthly payments to  $500 each month, you’ll pay off your balance in 11 months and pay only $142 in interest — that’s a whole lot less than the $3,000 interest out-of-pocket described above!

As soon as you stop paying those high interest rates, you’ll free up a lot of money to cover your other expenses!

http://www.bbb.org/credit-management/Managing-Credit-Made-Simpler_Overwhelming-Obligations.pdf