- Shut down your credit card accounts, especially the new ones. Obviously, the more credit card accounts you have, the higher the ‘opportunities’ for you to get into debt. That’s why it’s a great idea to close off some of those accounts. In my case, I have about 7 credit cards of which I only use two or three (yes I know, way too many visa and master cards. Average number of credit cards held by American credit card holders is 3.5, according to a survey and I have twice that number). So it actually won’t hurt me if I close off those 4 other credit cards. But then the question is, should I close off my older cards or newer cc accounts? Well, one of the components at least of the FICO score calculations is the length of credit history. The FICO score is negatively affected every time a new account is opened. Therefore, a great tip would be to close off those newer credit card accounts while hanging on to the older ones. This tactic effectively makes the average age of your credit history older.
- Pay off smaller debts or larger debts? Most of us with credit card debt have debt with more than one company. The Average credit card debt per household with credit card debt is calculated to be approximately $16,000. This $16K may not necessarily be equally divided among the different credit cards. Let’s look at a highly theoretical example. Say my Chase Visa card has $7,500 of debt, my Bank of America master card has $5,000, my Citi card has $2,600 of debt and my Discovery card has $375 of debt. That’s approximately $16,000 of credit card debt from four of my credit cards. If I start off by paying the $7,500 on my Chase card, I probably won’t be able to finish paying it for a while. Why not start with the $375 on the Discovery card? I will probably be able to pay it off in one or two months and that way, one of the three debts I have will be completely paid off in no later than two months. Therefore, in most of our cases, it is probably advisable to continue paying the minimum payments on the larger debts while trying to pay off the smallest one first. Once you pay off that first cc debt, you will get a tremendous psychological boost and confidence in paying off the other bigger ones. Bringing the balance down to zero in at least one credit card is better than bringing down the balance of all three accounts bit by bit.
Wednesday, May 23, 2012
Credit card debt relief – two easily implementable tips
Earlier we discussed some basic tips on how to get rid of credit card debt. Here we discuss several more tips and tricks that you can use to reduce your credit card debt. Complete debt elimination is not something you can achieve overnight, but is certainly something you can achieve within several months to a couple of years depending on how much you owe to your credit card company and your monthly income.
