Okay, so I’m a week late in posting my suggested credit card resolutions for 2010, but by now, many of you have already given up on your original resolutions, so it may be time for a new one anyhow. Here is my 3 step checklist designed to (hopefully) motivate your belated New Year’s Credit Card Resolutions:
1.) Assess Your Credit Card Debt: Okay, this is a tough one. I remember a time when I had a thousand dollars on one card, a couple thousand on another, and then another and then yet another. The separate bills didn’t seem so daunting until the day I added up all my credit card balances. That’s the day of reckoning I encourage you to face. Add up your credit card bills and find out how much you really owe.
2.) Assess the Cost of Your Credit Card Debt: Here’s yet another tough one, but perhaps the most important thing to do. Look at each of your credit card statements and check out last month’s finance costs. This will tell you how much you are spending on interest each month. You’ll likely be surprised at just how much money you are wasting.
Perhaps you have five cards and pay $30 a month in interest on each of them. Well, that’s $150 a month and $1800 a year! That’s a lot of money when you add it all up. And hopefully, seeing this number will motivate you to find ways to save.
3.) Develop a Credit Card Debt Strategy: Once you’ve added up your credit card bills and figured out how much money you spend on interest every year, its time to take action. Generally, there are five options:
1.) Pay your debt down with cash or borrowings from family
2.) Transfer your debt to lower interest credit cards via 0% balance transfers
3.) Use home equity or a second mortgage
4.) Use a credit counseling service
5.) Speak to an attorney about filing for bankruptcy
Of the five options, I hope the last isn’t one you’ll have to explore. As to the others, the one I know best is using balance transfers, so I’ll elaborate on this option.
Basically, a balance transfer allows you to move the money on your high interest credit cards to a new credit card with a lower rate. Depending on the card you choose and factors such as your credit score, you can get a 0% rate for 6 to 12 months. If, for example, you have $10,000 of credit card debt on cards with average interest rates of 15%, doing a balance transfer will save you around $1,500 before fees. (Note: Typical balance transfer fees are 3-5%). After fees, you’ll likely save in excess of $1,000 during the 0% balance transfer period. This is money you can use to reduce your outstanding balances that would otherwise have been wasted on interest payments.
Getting your credit card debt under control with 0% balance transfers is a pretty simple task that can yield substantial savings. If you think you could benefit from a balance transfer, test out the balance transfer calculator on Smart Balance Transfers to get an estimate of how much you can save. Then, take some time learning more about balance transfer offers and develop a course of action that will help you reduce your interest expenses and your debt in 2010.
Wishing you the best for a happy 2010- Jeff
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