Tuesday, December 30, 2008

Eliminate credit card debt: about credit card debt [Part2]

After you stop spending, you need to start paying. here’s how I did it. I didn’t make much money in my credit card debt days. I lived from paycheck to paycheck. When my credit card bill came, sometimes I didn’t have much money to send in, so I sent what I could. At other times of the month, I occasionally bad extra money. In the old days, of course, I would have spent it! Instead, I began sending money to my credit card company even when I didn’t have a bill due. I preaddressed and stamped several envelopes so I had them ready. Anytime I had extra cash in my checking account, I popped It in an envelope and kissed it good-bye.
Your savings account is another source. Sound sacrilegious? I get Into this argument with people all the Lime. I know lots of smart people who have a savings account and credit card debt. It’s ludicrous! I know, I know, you feel it’s important to save for emergencies. Trust me, credit card debt is an emergency. But here’s my less flippant explanation If your savings account yields 3 percent interest and your credit card charges 19 percent interest, you can instantly “makes a 16 percent profit” by using your savings account to pay off your credit card debt .That would be an impressive gain in the stock market! Then, instead of pulling out your credit card to make impulse buys, you can fall back on it in emergencies—a much sounder use for it.
If you’re deep in debt, try calling your creditors and asking if you can negotiate a more manageable payment plan. Some credit card companies may be willing to lower the interest rate for you. Others will let you make smaller monthly payments. This is exactly what a credit counseling organization would do for you, but it is possible to do it yourself.
You could also look for a debt consolidation loan, but don’t count on It. Reputable banks don’t make debt consolidation loans to people with no collateral. Crooked lenders may offer you a consolidation loan, but the interest rate will probably be higher than what you’re already paying on your credit cards. They’ll try to trick you by offering you a lower monthly payment than what you currently pay, but the loan will last so long that you end up paying far more money than you should have
If you own a house you may be able to take out a home equity loan to pay off your credit cards. This option sounds great because you can then deduct the Interest you pay on your tax return. But beware! Home equity loans come with closing costs, which just add to your debt. And if you miss payments, you could lose your house. LI you miss a payment on a credit card, you just lose your good credit rating.

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