Credit cards have provided many people a convenient way to make purchases without using any cash. In fact, many cardholders have credit limit that are twice that of their monthly income. This feature alone has cause many people to go into credit card debts. Some of them have even declared bankruptcy, as they are unable to pay back the debt they incurred.
If you are one of those people that carry a credit card balance each and every month, it is advisable to consider transferring the balance to a low interest rate credit card. A typical credit card usually carries an interest rate of more than twenty percent. Some may go up to more than thirty percent. You have to check with your current credit card company to determine the actual interest rate you are incurring on your card.
A low interest rate credit card usually has an interest rate of ten to twenty percent. A few of the credit card companies may offer an interest rate as low as seven percent. This is usually applicable for customers that have excellent credit rating. Even if you do not have an excellent credit rating, you may still be able to obtain an interest rate that is lower than what you have now.
Many credit card companies offer a zero percentage interest rate for the first six to twelve months if you transfer your balance from your credit cards to their low interest rate credit cards. A one-off administration fee is usually chargeable. This fee range from two to five percent of the balance you want to transfer. Consider the fact that you can stop incurring extra interest for six to twelve months, this fee is worth paying for. You can make use of this grace period to pay off your balance as much as possible.
Once you transfer your balance to your new low interest rate credit card, you must stop charging more purchase to your existing credit cards. Once you have consolidated the outstanding balance for each of your other credit card to your new low interest rate credit card, terminate and cut up the rest of your credit cards. Use only your low interest rate credit card for all your purchase. At this stage, you need to cut down on all your unnecessary expenses and focus on repaying the debt.
Besides cutting down expenses, you should also start improving your knowledge on managing your personal finance. You can visit the library and read up on books that teach you how to manage your expense, setting up emergency fund and other methods of growing your wealth.
You have to be responsible for managing your debt and using a low interest rate credit card is just your first step to eliminating your debt. Cultivating good money management habits will go a long way in helping you clear your debt as well as stay out of debt troubles.
Stephen Chua is the founder of CreditFavors.com where you can compare the details of a wide range of low interest credit card offers. Visit his blog today to learn three ways to consolidate credit card debt.
