| How to Manage Your Debt, Part 2 |
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Only borrow when you can get favorable terms. Home mortgages can present rare advantages like long-term fixed rates and interest payments that are often tax deductible. Loans for education may have similar features. Shop around for the best terms and rates. Use credit cards only if you can pay them off every month. Carrying credit card debt is the Achilles' heel of many a family's cash flow. Pay off the total amount on your credit card every month, so you won't get eaten alive by paying fees and interest charges. Don't miss any opportunity to reduce your credit card debt. If your total credit card debt stays at about the same level from month to month, you may have grown comfortable with a credit card balance of $500 (or $5,000 or $50,000). Be alert for, and take, small economizing steps that can help you pay down your debt, and thereby reduce the burden of interest payments with each passing month. Give yourself enough time to pay off your credit card debt. If you have credit card debt, you probably didn't accumulate it overnight. Give yourself time to dig out from under it. Many people take months or years to pay off their credit card debt. Pay more than the required minimum on your credit card. If you pay only the minimum amount required by your credit card company, a $5,000 balance on a typical card can take more than twenty-two years to pay and cost more than $11,000. Paying just 20 percent extra each month can knock this down to about fifteen years of payments, and can save over $2,000. Pay double the required minimum, and the card could be paid off in just under seven years, saving over $4,500. |
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