Bankruptcy & Foreclosures

In a recent blog post at The Motley Fool, Elizabeth Brokamp reminds us that with the holidays quickly approaching, many Americans will be forced to rely upon their credit cards. There is hope; however, as she presents considerations on how your credit cards can help you sail through the holiday season with your finances relatively intact. Planning early will help you stay on top of your expenditures, give you better buying power, and lower your overall debt.

Here’s her step-by-step plan for getting your credit cards ready for December’s heavy use:

1. Check your current balances and APR. Before you can figure out how to best approach your holiday spending, you’ll need to get a handle on how much you currently owe your credit card company, and how much it’s costing you. Odds are there’s a lower rate out there somewhere, perhaps with a special 0% promotional rate on balance transfers. Find out how to win the balance transfer game and owe zero interest while chipping away at your balance. You’ll also get a sense of how much you can afford to spend on this year’s gifts.

2. Ask your credit card company for a better interest rate to keep you as a client. Your card company knows that it generally costs them more to secure a new customer than it does to keep an old customer happy. Don’t be afraid to test out this theory by asking your issuer to sweeten the deal in order to keep your business. Lowering your rate, waiving an annual fee, raising your credit limit, or crediting a late fee are all fair game.

3. Shop for a better card, preferably one with a 0% interest promotion for six months or more. Six months interest free will allow you to not only make all of your holiday purchases, but budget to pay them off. Check out LowCards.com, a consumer resource that can help you find the best card for you.

4. Develop a buying strategy. Traveling this holiday season? Then make sure to use a credit card that offers rewards for travel, gas purchases, or hotel stays. Have a card like Upromise that pays down your student loans? Then buy all of your holiday gifts with it, so your retail frenzy will have some positive side effects. Already carrying high balances? Resolve to keep it simple this year with homemade gifts and thoughtful acts of kindness.

So let’s say you have decided to take the steps toward managing your debt but you aren’t seeing immediate results. While frustrating, realize that debt reduction can be a long, slow process. Sometimes the measures we implement today aren’t seen for weeks or even months. The following are some well proven practices to get things rolling.

Take a long hard look at what’s truly necessary in your daily life, and be willing to make some sacrifices. Cable or satellite TV, satellite radio, iPods, and eating dinner at restaurants are simply not necessities. Can it be hard to let go of some of these luxuries? Absolutely but the savings in doing so will be noticed almost immediately.

Make a budget but better yet track your expenses in a software program like Quicken. Categorize your expenses so that you can clearly see how much you spend in each category. Once you can easily spot your problem areas (eating out, clothes, gas), you’ll find it much easier to target them for reduction.

Know exactly how much money you have in your checking account at all times! It sounds simple but bouncing a check is a good way to incur a pile of unnecessary fees.

Stop borrowing money – Be strong about this one! This means no more credit cards, no more car loans, no more cash advances, no more home equity lines, no more personal loans, etc… If you can’t afford to buy something with cash, you can’t afford it. Walk away and save up until you have enough.

Keep the long term in mind. So often I deal with clients who give up on their plan because they don’t see instantaneous results. Keep focused on where you hope to be not only tomorrow but in five (or ten, or fifteen) years from now. Getting out of debt takes time and mistakes (or improvements) you make today will have an impact on your life far down the road.

In a recent posting, MoneyInstructor.com presents 5 reasons it may be time to consider consolidating your credit card debt into a single loan.

1) Because interest rates are high

The principal reason why most people consider switching credit cards and consolidating all of their outstanding credit card debt into one card is because the interest rates on their existing credit card are just too high.

2) Because of annual fees

Credit card issuers now know they’re in a fight to get new customers and so some of them are offering use of their credit card without requiring you to pay any annual membership fee and not asking members to pay an annual membership fee is a second worthy reason why you may want to consolidate your credit card debt.

3) Personal Loans Sometimes Offer Better Rates

As a way to source debt at a lower cost many of us turn to the option of consolidating all of our outstanding credit card debt as a personal loan (from a bank or credit union) which can then be paid back monthly.

4) Because Consolidating can save Your Credit Rating

Making a single larger payment you can afford is a much more financially sound solution to a bunch of smaller payments that you cannot pay on time.

5) Because some companies will pay you to do it

The last reason to consider consolidating your credit card debt into one loan is because the credit card issuer may pay you to do it! Believe it or not, the credit card industry has now become so competitive that issuers are fighting among themselves to get people to sign up to their card. Here, when the card issuer knows you have an existing credit card, they’ll sometimes offer you the option of transferring the balance of your outstanding existing credit card debt to them, in return for which they’ll reduce some of the debt from your outstanding balance. As always, be careful though, those warning signs regarding interest rates and fees still apply.