Carrying a balance on credit cards does not necessarily equate to debt, unless a cardholder is struggling to meet the minimum monthly commitment. Unless a zero percent card is used, interest is levied each month on the balance, which can quickly lead to compounded interest resulting in an inflated balance.
Card holders who have the foresight to consider clearing their balances down before they become problematic can best tackle paying off their credit cards by utilizing the best offers on balance transfer cards. If the cardholder delays until the balance is indeed problematic and represents debt, credit scores may have plummeted, leaving the best deals out of reach.
The best way to pay off credit cards is to use a low or zero percent balance transfer card. The current best available deals on the market are Citi Platinum Select Visa and MasterCard, that offers a massive 21 months at zero percent. Applicants will need to pay a balance transfer fee but this will usually represent an excellent saving compared to paying standard interest rates.
Discover More are offering zero percent for 15 months, whilst Chase Freedom Visa offers 12 months. The essential key to using balance transfer cards is to obtain them only with the express purpose of clearing down balances, and to use them for nothing else. Additionally, having cleared down balances from other cards, one should not be tempted to rack up further expenses and charges on them. Pen Fed is worth investigating as a balance transfer option as its cards have significanlty lower than average APR’s.
If a cardholder’s credit score precludes them from taking advantage of the best balance transfer offers then the next best step to consider is to approach the current card issuer directly. Some providers will consider reducing the current interest rate, particularly if one is familiar with more advantageous comparison rates.
Reducing the current interest rate will prevent the balance from escalating too much if the card holder puts all their resources into clearing down the balance. This can be achieved by discontinuing credit card usage and prioritising payments, even if it requires a more frugal lifestyle until the mission is accomplished.
Resorting to debt management companies and specific debt consolidation loans should be avoided at all costs. The associated charges and risk to ones credit score are not worth the price of passing the responsibility on. Equally it is very risky to obtain a home equity loan as a means of debt consolidation and should be avoided. Secured loans put ones home at risk and simply extend the term of the debt, whilst reducing home equity.
If a loan is required as the only option to consolidate debts then cardholders need to consider unsecured loans and investigate comparison rates, fees, penalty charges and repayment terms. Spreading the current credit card balances over the long term will eventually cost far more than tackling the problem at the source through aggressively paying down balances.
Once credit cards are successfully paid off then any future use of cards should be done in a responsible manner. This involves never carrying a balance and thus never incurring interest charges or fees. Instead of paying to service credit card interest, astute card holders allow their credit cards to pay them in cash backs and rewards.