Pay down debt before possible credit card rate increase
AUSTIN, Texas (4/28/15)--Some financial experts forecast that as the strength of the economy improves, credit card rates might rise. That means that minimum monthly credit card payments could increase as well (CreditCards.com April 21).
For those already having a tough time paying off credit card debt or struggling to pay even minimum payments each month, this could mean additional financial stress. To prepare for a possible rate increase or even just to get rid of credit card debt once and for all, here are things to consider:
Pay off your balance monthly. Be ruthless about trying to pay off your balance in full each month. If you can't, look at all of the cards you carry and develop a plan for paying the balances off. Maybe you'll strive to pay off the card with the lowest balance first, or maybe it makes sense to pay the card with the highest interest rate off first. Your credit union can help guide you with this decision and might have a calculator on its website to help with this decision;
Develop a spending plan. Examine your spending plan and look at where you can cut costs. Your first step should be to not make any new purchases with your credit card. To help keep spending in line, ask yourself if you really need to make the purchase, if the purchase is a need or want, if the purchase still will have value by the time you pay it off, and if you can pay for it by your next billing cycle;
Get a different card. If you don't already have a credit union credit card, now's the time to get one. Credit union credit cards generally have lower rates and fees than cards from other financial institutions;
Negotiate your rate. If you prefer to keep your current credit card, request a rate review. Call your card issuer to see if it's willing to help reduce your rate or lock you into a fixed rate. Some card companies might be willing to do this and some won't. You have nothing to lose by asking; and
- Ask for help. Ask the professionals at your credit union for help paying down debt. Your credit union may have counselors on hand who can help. You also can find a nonprofit, accredited credit counseling agency by visiting the National Foundation for Credit Counseling, or by calling 800-388-2227.
For related information, read "20% Rely on Credit Cards to Maintain Lifestyle" and use the "What Will It Take to Pay Off My Balance" calculator in the Home & Family Finance Resource Center.