Tips to Handle Higher Minimum Credit Card Payments
A new federal law requires credit card companies to make sure that consumers start to make at least a tiny dent in their debts, by making sure that minimum payments on credit cards at least cover interest charges, fees and some of the principal on your outstanding debt. Because of this new law, many banks and other financial institutions are raising the minimum due on your cards – from 2% of the outstanding balance to 4% of the outstanding balance. This new law couldn’t have come at a worse time. Scores of individuals and families have a “debt hangover” from their holiday shopping in December. Higher energy prices nationwide are driving up home heating costs, as well as gas prices at the pump. And to top it all off, a safety net has been removed for millions of Americans because of recently-enacted bankruptcy reform legislation that makes it tougher to wipe out your consumer debt in bankruptcy court.
If those higher minimum credit card payments have you wondering how you’ll make it, try implementing these tips:
Put everything in writing … and keep a list of all your credit cards
Create a written list or a spreadsheet itemizing each creditor you owe. For some people, this step will be a big eye-opener. You may find out that you have way more debt than you thought. For others, putting all your obligations in black and white will be a relief ... you’ll discover things aren’t as bad as you’d imagined. Either way, having everything in writing gives you a realistic look at where you stand, and let’s you start a plan of attack to pay off your debts.
Don’t add to your debts
Some of you may get so depressed at seeing those holiday bills rolling in – along with the higher minimum payments due – that you may be tempted to go out and spend some more, just to make yourself feel better. Don’t give in to that temptation. You’ll only create additional problems for yourself down the road.
Start building up your cash cushion
Ideally, you should have three months’ expenses set aside for emergencies — like job loss, disability or divorce. For example, if your bills are $3,000 a month, you should have a $9,000 cash cushion. I know that’s a lot of money. You won’t accumulate it over night. Just go ahead and start saving a little bit of money each month, and consider that money untouchable.
Get financial help
Consider retaining a financial planner to help you strategize about the best ways to improve your finances. Hiring financial help isn’t just for the rich, and it doesn't have to be that expensive. Go to the Financial Planning Association (FPA) for a certified financial planner in your neighborhood. The FPA can be reached toll-free at (800) 647-6340 or on the Web at http://www.fpanet.org. You can also receive affordable group coaching or one-on-one individualized financial coaching from The Money Coach (http://www.themoneycoach.net).
Call up your creditors and negotiate.
Many consumers don’t realize that they can call up their creditors and ask for lower interest rates, or request that late charges or annual fees be waived. Often, credit card companies will lower your rate on the spot, simply because they don't want to lose your business. It’s a competitive market — credit card companies send out nearly five billion offers to consumers each year — and most credit card issuers know that customers will switch cards if their interest rate is too high. So using your list of bills you created in the previous step, call up each creditor and start negotiating. If you can knock down the interest rate on a card with a 21% interest rate, and get it down to 12% or so, you’ll be saving yourself a lot of money. Your minimum payments will also be less each month.
Consider borrowing money from an insurance policy.
Many of you have life insurance policies that allow you to borrow from them if you’ve accumulated a certain cash value. While I wouldn’t recommend this as a first step in eliminating your debt, it can certainly help you deal with a cash crunch if you find that you can’t make your new minimum payments.
Adjust your W-2 withholdings at work
For those of you who routinely receive tax refunds, instead of giving the government an interest-free loan, get your money now. You can walk into your Human Resources office at work and adjust your W-2 withholdings so that your employer takes less money out of your paycheck. This way, you’ll have more money coming in every pay period, and you can use that extra money to knock down your debts.
Even though higher credit card payments will make many of you more financially-strapped than ever, just try to remember: It’s kind of like you’re taking castor oil or some nasty medicine. Doling out more money to your creditors sure tastes bad going down, but by taking your medicine now and paying off a larger amount of your debts each month, you’ll feel much better off in the long run – because that debt “monkey” will be off your back sooner, rather than later.
Thanks Lynette - your advice is always worth following!
Credit Guide
www.badcreditovercome.com
If those higher minimum credit card payments have you wondering how you’ll make it, try implementing these tips:
Put everything in writing … and keep a list of all your credit cards
Create a written list or a spreadsheet itemizing each creditor you owe. For some people, this step will be a big eye-opener. You may find out that you have way more debt than you thought. For others, putting all your obligations in black and white will be a relief ... you’ll discover things aren’t as bad as you’d imagined. Either way, having everything in writing gives you a realistic look at where you stand, and let’s you start a plan of attack to pay off your debts.
Don’t add to your debts
Some of you may get so depressed at seeing those holiday bills rolling in – along with the higher minimum payments due – that you may be tempted to go out and spend some more, just to make yourself feel better. Don’t give in to that temptation. You’ll only create additional problems for yourself down the road.
Start building up your cash cushion
Ideally, you should have three months’ expenses set aside for emergencies — like job loss, disability or divorce. For example, if your bills are $3,000 a month, you should have a $9,000 cash cushion. I know that’s a lot of money. You won’t accumulate it over night. Just go ahead and start saving a little bit of money each month, and consider that money untouchable.
Get financial help
Consider retaining a financial planner to help you strategize about the best ways to improve your finances. Hiring financial help isn’t just for the rich, and it doesn't have to be that expensive. Go to the Financial Planning Association (FPA) for a certified financial planner in your neighborhood. The FPA can be reached toll-free at (800) 647-6340 or on the Web at http://www.fpanet.org. You can also receive affordable group coaching or one-on-one individualized financial coaching from The Money Coach (http://www.themoneycoach.net).
Call up your creditors and negotiate.
Many consumers don’t realize that they can call up their creditors and ask for lower interest rates, or request that late charges or annual fees be waived. Often, credit card companies will lower your rate on the spot, simply because they don't want to lose your business. It’s a competitive market — credit card companies send out nearly five billion offers to consumers each year — and most credit card issuers know that customers will switch cards if their interest rate is too high. So using your list of bills you created in the previous step, call up each creditor and start negotiating. If you can knock down the interest rate on a card with a 21% interest rate, and get it down to 12% or so, you’ll be saving yourself a lot of money. Your minimum payments will also be less each month.
Consider borrowing money from an insurance policy.
Many of you have life insurance policies that allow you to borrow from them if you’ve accumulated a certain cash value. While I wouldn’t recommend this as a first step in eliminating your debt, it can certainly help you deal with a cash crunch if you find that you can’t make your new minimum payments.
Adjust your W-2 withholdings at work
For those of you who routinely receive tax refunds, instead of giving the government an interest-free loan, get your money now. You can walk into your Human Resources office at work and adjust your W-2 withholdings so that your employer takes less money out of your paycheck. This way, you’ll have more money coming in every pay period, and you can use that extra money to knock down your debts.
Even though higher credit card payments will make many of you more financially-strapped than ever, just try to remember: It’s kind of like you’re taking castor oil or some nasty medicine. Doling out more money to your creditors sure tastes bad going down, but by taking your medicine now and paying off a larger amount of your debts each month, you’ll feel much better off in the long run – because that debt “monkey” will be off your back sooner, rather than later.
Thanks Lynette - your advice is always worth following!
Credit Guide
www.badcreditovercome.com
posted by Fiona at 5:43 AM
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