Credit Card Debt - How To Avoid Unnecessary Fees - Part 2

Number Two - Future Interest Charges

A recent study by Consumer Reports into credit card fees shows that card companies are communicating more. So if you're late with a payment on one card, your other card providers will use this as an excuse to charge you a higher rate of interest.

And if you're almost up to your credit limit on one card, you may see a rise in the rate of interest charged on your other cards.

So if you want to reduce your debt, make sure that you avoid these two traps.

First, make sure you never miss a repayment date. Set up an automatic payment from your bank account to your credit card account to cover the minimum monthly payment. It's also a good idea to select a regular payment date that falls just after your paycheck arrives in your bank account.

This will help you to avoid late payment fees and the subsequent interest rate increases. You can then make extra repayments whenever you have cash available to reduce your credit card debt as quickly as possible.

Second, make sure that all of your credit cards are comfortably below their credit limit. There are a number of ways to achieve this.

a) Reduce your credit card debts as soon as possible.

b) Repay all your credit card debts with a consolidation loan

c) If you have a number of credit cards and some are their credit limit while others carry a low balance, consider spreading your debt equally across all your credit cards. Just make sure that the interest rate on each card is as low as possible.

Any of these options will help you to avoid the increase in interest rates that can happen when you reach the credit limit of one of your cards.

Whatever happens, don't give any of your card providers the excuse to increase your interest rate.

Number Three - Balance Transfer Fees

The zero percent balance transfer offer was one of the favourite marketing tactics used by the credit card industry. You could transfer your credit card debt to another provider at no cost. And even better, they would then give you 6 or even 12 months interest free credit on the amount transfered.

This led to millions of people around the world becoming "rate tarts". They were willing to keep shifting their credit card debt every 6 or 12 months in order to take advantage of "free money".

But these deals are becoming increasingly rare. Lenders have increased the cost of switching a balance from card to card. Many credit card providers now charge an upfront transfer fee of perhaps 3% of the balance being moved.

If you want to move your credit card debt from a provider who charges a balance transfer fee, there's not much you can do to avoid it. If you want to shift the balance to secure a lower interest rate, you'll have to work out which would cost less;

Keeping the balance on the existing card and paying it off as fast as you can at the higher rate of interest.

OR

Accepting the balance transfer fee and repaying the balance as fast as you can at the lower rate of interest.

Next: How To Avoid Unnecessary Credit Card Fees - Part 3

Previous: How To Avoid Unnecessary Credit Card Fees - Part 1

  Del.icio.us      Digg      Newsvine      Reddit