Not Just the Minimum

The credit card companies lure people with easy options of monthly repayment by allowing minimum repayment of 2-3% of the amount outstanding. This way the high interest debt burden goes up till it reaches the unmanageable level. The longer time allows the lender to gain more profit whereas the debtor suffers by way of more cash outgo.It is therefore always better to pay as higher than the minimum as possible rather than pay less and prolong the agony. There are many ways to curtail normal expenses and pay what is saved to square off credit card loans. The additional dollars spent to repay these debts make their liquidation quicker and in effect save a lot more dollars that would have gone into servicing a high interest debt like credit card loans.

Snowballing

One can transfer the outstanding dues from the higher interest credit card to lower interest card unless the credit limit against the latter is exhausted. A 12% debt becomes easier to repay than the one at 16%. However the low interest credit card may not accommodate the entire high outstanding of the higher interest rate cards.In such a situation, while minimum repayment required can be made in respect of all other cards, maximum amount should be spent for the higher interest rate credit card so as to liquidate the same at the earliest and reduce the debt burden.This repayment method should be applied in order of lower interest rate starting with the credit card loans charging the highest interest rate so that the high cost debts are removed earlier. This repayment method is known as ‘snowballing’. Decreasing debt means more dollars to repay more debts.

Promotional Offers

Often Banks offer very low rate of interest on their credit cards as a business promotion method for a short span to entice customers to go for their credit cards. This is a good way for the debtor to convert the high interest rate loan to a lower interest rate loan.