Discover Debt Freedom!

Many people are finding out that having a credit card is not quite as beneficial as they once believed.  With interest rates skyrocketing, credit limits being reduced, and people having trouble paying off their balances, many people are discovering that they got in over their heads with their credit cards and do not know how to extract themselves from the situation that they are in.  Here are some common problems facing people that own credit cards and some solutions that may help them solve their credit card related problems.

Problem 1 – Too Many Credit Cards
Open up the wallet of the average consumer and you will find multiple credit cards from different credit card companies.  Having multiple credit cards increases the risk of missing a payment date, which can result in a penalty fee of as much as $39 and increase the interest rates on all of your credit accounts to the maximum charged by the credit card companies.  If you have many different credit cards, including ones obtained by different retail stores, it is best to pay off each one and only keep the ones with the longest credit history and highest credit limits that can be used anywhere.

Problem 2 – High Balances On Multiple Credit Cards
If you have high balances on multiple credit cards, it can be difficult to pay the minimum balances of each one and keep track of how you are paying each one down.  If possible, you should transfer the balances of the credit cards to a single credit account so that you only have a single payment to keep track of each month and you can easily see the progress that is being made for paying off the balance.  Many credit card companies are still offering a 0% or very low interest rate on balance transfers, so transferring the balances to a single card may save you money in interest payments as well.

Problem 3 – Reduction In Credit Limit
Because of the credit crunch, many credit card companies are reducing the limits on some of their high credit limit cards.  This often occurs without much warning to the consumer and can have a negative effect on many areas of the person’s life, including decreased purchasing power and lower credit scores as credit rating agencies notice that you are using a higher percentage of your available credit.  The only solution to this problem is to attempt to pay down the credit card to less than 50% of the amount of credit available so that your credit score will return to its higher level and the interest rates on any other loan products that you own will not rise due to a lower credit score.

Problem 4 – High Interest Rate On Credit Card Balance
If you have a credit card that has a high interest rate, you may want to consider transferring the balance of that credit card to a credit card with a lower interest rate.  Another credit card that you currently own may be offering a deal on the interest rates for balance transfers or you may choose to get a new credit card, as many credit card companies are still offering attractive interest rates for new balance transfers.  If you are able to lower the interest rate that you are paying on your high balances by 5% or more, you will be saving hundreds of dollars on the interest payments of the balance.