Your Guide to Managing your Credit Card Debt

Loves,

As much I’d love to not use the word “inflation", I have to because it is the reality that we’re in, and we must pay attention to it. And as someone who’s been helping people with their credit since 2012, I’ve seen a rise in credit card debt in the past year. Hence, I’ll be sharing a few things that’ll help you with managing your credit card debts a bit. One of the steps to get on track with your personal finances and achieve financial freedom is to reduce/eliminate your bad debts. Oh, let’s not forget, it also increases your credit scores since your utilization will be low! Your Credit Utilization accounts to 30% of your credit scores.

So, here's three (3) options to consider....

Balance Transfer

If you have several credit cards with high interest rates, a balance transfer can tremendously help you if you have a clear plan in place and pay attention to the terms. You’d basically transfer your current balance to a new card with a lower rate or 0% introductory interest rate, which will allow you to pay back your balance way faster- be sure to make more than the minimum payment. Again, have a clear plan and budget that you can stick to.

I’m sure you may have a few questions and may not have ever heard of balance transfer before. So, let’s learn about it…

What is a balance transfer?

A balance transfer is when you transfer the balance from one or more cards/loans to a new or existing account. It helps with saving money on interest and pay off debt faster with a great and solid plan of action.

When should you consider a balance transfer?

If you’re making payments on your existing balances, but you do not see a difference because your interest is high, then you might want to look into a balance transfer. This will help you save on interest, so you’ll see a huge difference on your principal balances.

Does a balance transfer affect your credit?

There are pros and cons in almost everything, but sometimes the pros outweigh the cons. So, a balance transfer can affect your credit score based on many factors. If you do not have any offers on an existing account, then you’d probably have to apply for a new card which will result to a hard inquiry (10% of your score) and a new account (10% of your score) on your credit report. By adding a new card to your credit profile, it will affect your length of credit and will temporarily lower your scores. BUT, adding the new card will also reduce your overall utilization (30% of your score), and will positively impact your scores. Overtime, the pros will outweigh the cons since you will be eliminating your credit card debt way faster. Nothing beats being credit card debt-free. Think about all the extra money you’ll have once you no longer have to pay monthly credit card bills!

Remember:

• The introductory rate expires

• The combined balance on the new card should not exceed 30% (40% at the maximum) of the available credit limit

• Some creditors charge fees for balance transfers- between 3%-5% of the balance

• Have a Plan of Action and create a budget. Use my Personal Finance Planner

Interest Rate Reduction

Interest rates are always changing, and you can request a lower interest rate from your lenders. Let’s say your credit score has increased and your financial situation has improved since you’ve applied for the high interest card, you can then contact your credit card company to request a reduced rate. They usually look at your credit use history, your payment history, and some do a soft pull (inquiry that does not affect your credit scores) to consider the request. If they do agree to reduce your interest rate, then, you’ll pay less in interest when you make your credit card payment; therefore, more of your payment will go towards your principal balance.

Even when you don’t have a high balance on your cards, you should take some time to contact your creditors to inquire about interest rate reduction if you don’t usually pay your balance in full monthly.

Read this blog about Financing/Annual Percentage Rates to learn about the cost of borrowing money: APR: ALWAYS Pay Attention to This Number

Credit Counseling

If you find yourself in a position where you don’t know what to do or where to start, you might want to consider Credit Counseling. Dealing with a professional to aid with your personal financial situation can help you get to your goals a lot faster- especially if you’ve attempted to do it on your own and have been unsuccessful. A professional can help you with goal setting, financial recovery, budgeting, and more. There are several nonprofit agency and financial institutions where you can work with a professional-often called credit counselor to help you with the best options for you. Credit counseling also helps you with better money/spending habits and money management skills. Remember, we were not taught money management and wealth building in school, so we must teach ourselves and use the resources available.

My universal Plan of Action for Debt Management:

• Create a budget and stick to it.

• Set automatic payments to avoid unnecessary fees. Missed/forgotten payments cost.

• Personal Finance Guidance and be open to feedback.

If you’re ready to take the first step, and wants to pick my brain, I have the best service for you where you’ll be able to ask me all your questions, whether you have questions about your credit reports, stuck at a score and don’t know what to do, have been unable to open a bank account, the Private Zoom Session is for you.

This session will last approximately 90 minutes. We will be covering and highlighting:

• Explicit feedback on your three Credit Reports and Banking History (Chex Systems/Early Warning Services (EWS)) for areas of improvement

• Targeted suggestions for each area to strategically improve your chances of improving your credit reports/scores, getting approved for car/home/dream credit cards, etc

• Your own PERSONAL Plan of Action (POA)

• The first FOUR (4) rounds of letters to the credit bureaus

• The First (1) round of letter to the Collection Agencies

• We'll send the Plan of Action and the letters to you via email after our session.

• You also get an up-to-30 minutes follow up session within three (3) to six (6) months of our initial session for a complimentary audit and feedback of your Credit Reports

Remember, it is never too late to take control of your finances!

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.