GET PERSONAL
How to Avoid a Credit Card Collision
FYI
Review Your
Credit Report
It is tempting to just pull out a credit card to pay for every item your
heart desires. And some people do it everyday. But as we all know,
credit credit card interest rates are high. One of the smartest ways
to trim credit card costs is to find alternatives to credit card debt,
including the following strategies:
Pay cash for purchases. For some people, seeing the amount
of physical cash allotted for a specific time period can prompt
them to reevaluate their spending habits. Besides, when the
cash runs out, many people start spending less.
Consolidate debts. Homeowners may be able to obtain a
home equity loan with a lower interest rate to consolidate
debts. However, remember that you are borrowing against the
equity in your home, so it is generally best to use an equity
line of credit for long-term assets rather than consumables,
such as vacations and everyday items.
Use low interest or rate of return savings to pay off higher
interest debt. Suppose you have a $1,000 certificate of deposit
(CD) that matures at 4%. Instead of rolling it over into another
CD, consider using the money to pay off $1,000 of credit card
debt carrying 18.5% interest. You will forgo $40 of interest income
but save $185 of credit card interest, for a net savings of $145.
Comparison shop for credit. You may be able to trim credit
card costs by using low rate and/or no-fee credit cards.
Consumer websites regularly publish lists of economical cards.
Your credit report is an
accumulation of information
about your bills and loans,
your repayment history,
your available credit, and
your outstanding debts.
These reports are typically
used by lenders when
deciding whether or not
to accept a loan or credit
application. A healthy credit
report can help you secure
the funding you need to
purchase a new home
or car, fund a child’s
education, or start your
own business. Reviewing
your credit report on a
periodic basis not only
helps you monitor the
health of your finances,
but it also helps you
identify and mitigate the
effects of identity theft.
According to the Fair
Credit Reporting Act,
you can request a free
copy of your credit report
from each of the three
major credit bureaus
(Equifax, Experian, and
TransUnion) once a year.
For your convenience,
you can access all
three agencies through
a single website,
www.annualcreditreport.com.
It can be easy for consumers to forget that credit costs money (interest). By keeping
your borrowing costs low now, you may have more money for building your future.
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