Cardtrak. reported on May 2009 that about 90 million households carry credit cards, with an average debt load of more than $10,500 totaling to $945 billions.
About one third of the total credit card companies are charging interest rate of 20 per cent or higher. President Barack Obama signed a bill designed to protect consumers from surprise fees and sudden increases in card interest rates.
Observers say that most of the changes will take effect for nine months. Ronal Mann, a professor at Columbia Law School said that the such changes won’t help consumers escape from the “sweatbox” of credit card debt. Looking at the history statistics, it showed a pattern of relatively low monthly payments that mean the balance never gets completely paid off.
Here are some tips to cutting the credit card debits
- Write down the debt – and the interest rate – on every card you have.
- Call up each credit card company and request a lower interest rate. There’s no guarantee you’ll succeed; it doesn’t hurt to try this, perhaps annually. A good credit score is a big factor, but not the only one, in landing a lower rate.
- Study up to a year’s worth of credit card bills and bank statements to get an accurate sense of your monthly spending. Track your expenses with a notebook or financial software.
- Make a concerted effort to pay down debt quicker, and avoid adding to credit balances. Making the minimum payment – plus as little as $25 – can bring down your balance more quickly than you might think.
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- Create a budget. Write down three ways you can cut back immediately, and cancel or downgrade some services. Divide your monthly discretionary budget into weekly allotments so you’ll have a better handle on whether you’re staying on track.
- Choose your payoff strategy, then rank cards in the order you’ll pay them off. The fastest way to lower debt: Plow all your extra cash into the highest-interest card while paying the minimums on the others. Once the first card is paid off, apply extra cash to the card with the next-highest rate, etc.
- Store your credit cards where you won’t have easy access to them – but don’t cancel them, because that will reduce your credit score. Plan to pay in cash whenever possible.
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