Many of the credit card companies will reward you if you pay your statements when due or pay more than the requisite monthly payment. These rewards can be interest rate rebates or even cash back. Their purpose is to give you an good reason to pay off your credit card debt.
Be careful with rewards cards
With a rewards card if you carry forward a balance just two or three times a year, you will be charged higher interest. In fact, it will generally exceed whatever you’re accumulating in rewards.
Some credit card companies’ policies can actually make it too easy for you to lapse into unsafe habits. For example, if you have a problem paying your bill, you might be spared penalties and late fees. You would think this was a good thing but it may not be. The problem is that when you make a late payment, it will go into your credit reports. And this will probably lower your credit score.
How to make the most out of your credit card
There are some things that you can do to get the most out of your credit cards. First, before you sign up for a card evaluate its incentives. Second, if your card came with an interest-free introductory period, pay off your balance before that period expires. Third, make sure you pay your balance in full each month. As noted above, some credit card companies will reward you for good behavior. On the other hand, others may charge you a late fee if you do not pay your bill within 60 days. Even worse, if you exceed that 60 days, your APR might take a bad hit.
If you’re having a problem with credit card debt
Even if you’ve amassed a huge amount credit card debt, you do have options. For example, you could transfer your high interest credit card balances to one with a lower interest rate. If you’re carrying balances on more than one credit card, you need to add up the interest rates you’re paying and then divide this by how many credit cards you have. This will give you an average interest rate. If you find you have an average of 18% or higher, you might be able to transfer all those balances to a new card with an interest rate of 12%.
A 0% interest credit card
If you could qualify for one of the new 0% interest balance transfer cards, this would be an even better option. This is where you transfer all your balances to a new card and pay no interest for an introductory period of six, 12 or even 18 months – depending on the card you choose. All the money you pay each month would then go against reducing your balance. If you were able to heavy up on your payments, you might be able to become totally debt free before your introductory period expires.
Choose debt settlement
If you’re having a really, and I mean really, big problem with credit card debts, you might choose debt settlement. This is also often called debt negotiation because what it requires is for you to contact your creditors and negotiate settlements for less than what you owe. If you’re at least six months in arrears on your payments, you might find the credit card companies would be willing to settle with you. You would have to be a good negotiator to pull this off and you would need to have the cash available to pay for any settlements you were able to negotiate. This would leave a black mark in your credit reports but not as severe a one as if you were to declare bankruptcy.
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