Thursday, December 13, 2007
Thrifty Thursdays: Dreaded Credit Card Debt
So my hubby and I are tackling our credit card debt with efforts to eliminate it in the next few years entirely. This is no easy task and neither of us are too proud of having it, but there are ways to reduce how much you will pay everyone with credit card debt should at least investigate. You can often reduce your interest rate with just a phone call.
I have had this on my list of things to do forever and am embarrassed I didn't do it sooner. We have debt from our years in school and unexpected medical bills and it has added up for too long.
We have three major credit cards and we realized two of the cards had interest rates higher than 10.5 percent. Since we know our credit scores and know we have pretty high ones, we also know we are in a low-risk category to creditors. We always pay our bills on time and haven't missed a payment, which really helps us.
I called the company we've have two of our cards with primarily because the other card we have with them is the one we've had the longest time (10 years now). I simply asked if we could reduce our interest rate on our card so we can focus on paying it off quicker. We were also looking at consolidating our cards so one way or another, we were going to be getting a better rate.
The rate we had was 15.99 percent on that card and the other one we were paying at an interest rate of 22.74 percent, way above what we should. The fist card offered me a rate of 12.99 percent or a rate of 9.99 percent if I transferred the other balance (the one at 22.74 percent) and a promotional rate of 3.99 percent on the transfer amount until July. There are fees involved (make sure you always ask). The fees, however, add up to what we would pay in interest on our second card in two months.
I ran some calculations and realized, if we continued to pay the same amount we were paying on the two cards toward the one card with the one balance instead, we would save at least $1000 in the next year that could go toward paying off the cards quicker. That is even after subtracting the fee and adding up the savings from the different interest rates with the two cards,
Make sure you spend the time to know the conditions and terms of any credit card agreement though. I spent a total of 39 minutes on the phone to put this together and felt great when I got off because I worked at reducing our debt by negotiating the terms on our credit cards.
I do recommend to check your rates often because they can go up for a number of reasons and a lot of times you may not even realize it. Credit card companies are anxious to keep you in any way though because they make money off of you. Plus if you pay your bill son time, they don't want to lose your money.
Of course it is better not to get into credit card debt in any form, but it is too easy to just feel like you can never get out of it when you are in it. The reality is, with a little planning and tightening the spending in other areas, you can make your way toward paying them off.
We had eight cards altogether (including a medical one and a few department store ones) and are now down four, which is a great feeling. Another two will be gone in the next few months and then we have two. Those ones are the larger debt, but we are putting all the extra money toward them and they will be on the way toward elimination. They are also the ones with the lowest interest rates.
Lesson: all it took was a phone call and 39 minutes. I think saving the $1000 makes it worth my time.