Dealing with Credit Card Debt

Credit card debt is a reality for a lot of people. I feel like it’s almost a little more common when it comes to people in the entertainment industry. Many people when the first start out end up having to put a lot on credit whether it be relocation expenses, personally funding productions or just plain living expenses between jobs. No matter how you go it, paying the minimum with a likely 18 to 20 percent interest rate can be downright depressing.

Now there are a lot of services related to helping people get out of credit card debt and I’ll be 100% honest, I know very little about them. Regardless, when it comes to your credit you need to be very careful. I’m NOT a credit expert, this article is based off of basic research I have done. Always do your own research and consult an expert or at least someone you trust before entering into any service or agreeing to anything that could change your credit. Always remember, if it sounds too good to be true, it probably is.

1. Call you’re credit card company

My grandmother always used to say “you can’t get anything unless you ask.” It may seem silly when it comes to creditors, but it’s the easiest place to start. The is usually a number on the back of your card or you can look one up on their website. You’re main goal here is to get them to lower your interest rate. If you don’t know what to say, give this a try.

“Hi, my name is ______.  I like using your service and I am a good customer, but I have received several offers from other credit card companies for balance transfers with lower APRs. I would like a lower rate on my card, or I will cancel my card and switch companies.”

Go online and research what other offers are out there. For example right now Capital One is offering 0% APR on balance transfers and that rate is locked in through April 2012.

It’s easiest to find an offer like that and ask them to match it. If they don’t ask them what they can do for you. Most importantly be persistent, don’t be afraid to give them a few calls and keep bugging them.

Balance Transfers

Unfortunately you can’t just go paying off credit cards with other credit cards. What credit card companies do allow you to do is a Balance Transfer. These are another option to temporarily reducing your interest rate.

There are some big things to look out for and consider when it comes to balance transfers.

1. Fees: Yup, that’s right there may be a balance transfer fee associated with your new card, always be aware of any fees and consider if they are worth it.
2. Promotional Rates: Almost every card offers some sweet looking promotional rate, but be sure to find out what the rate will be after the promotional period is over. It’s very easy to end up back in the same boat with an extra high interest rate.
3. Annual Fees: Always watch out for these

Bottom line, if you’re thinking about a balance transfer then you need to do some math first. Make sure you take into account any fees associated and plan on how you are going to pay off that debt during the low interest promotional period.

If we use Capital One’s offer for example (keep in mind I didn’t take the time to read their fine print…if you’re considering this, you should) if you have excellent you can do a balance transfer and pay a 3% fee. That means to transfer $5,000 you’ll have a new balance of $5150 at 0% APR until April 2012. That extra $150 bought you 14 months to pay off or drastically reduce your debt interest free.  Whatever you don’t pay off in that time is back up to 10-19% based on your credit score.

Social Lending

Now this is a relatively new phenomenon, so explore and try at your own discretion.

There are two main options when it comes to social lending: Prosper.com and LendingClub.com

Again, I haven’t tried these services, just read about them. Here a quick summary.

Instead of borrowing money from a company, you’re borrowing from regular old investors. Both online companies claim to offer relatively low fixed interest rates (5.9% or 6.78% to start with excellent credit) both do have a closing fee similar to a balance transfer fee. One big advantage over credit cards is that if your payment is late your interest rate will not go up (most credit cards skyrocket your interest rate), however you do pay a late fee and they have collection agencies on call to deal with delinquent borrowers.

This looks like it could be a good option for people with high interest credit cards who aren’t able to find a lower rate through other avenues. Keep in mind, this is still a loan you have to pay back and late payments and defaulting on one of these loans will negatively affect your credit score just the same.

At the end of the day the goal is to eliminate your credit card debt. At the very least always make those minimum payments and take some time to evaluate your spending. Drinking and eating out are some of the easiest ways to cut back, sad as it may be some other places to cut back are on cable and cell phone plans (do you really need HBO or all those text messages?).

Related Posts:

• No Related Posts