|
 |
 |
March 11, 2011:
Taking Control of your Credit Card Debt
|
|
Overview
Updated statistics are out for how we're doing as a nation with credit card debt and the news is mixed—as would be expected for a nation still trying to pull ourselves up from a trough couple of years.
- The average consumer owed more than $4,200 in credit card debt at the end of 2010, according to a report from credit reporting agency Experian. That is down a modest 4% from 2009.
- These are bank cards—Visa, MasterCard that type of card not store department cards.
- Most of us are carrying a balance over from one month to the next—which is understandable considering today's economy—the key is to ensure the balance is modest and doesn’t become a way to fund basic expenses.
- Consumers are carrying an average of 1.97 cards, down 23% since 2007. That's the good news. Unfortunately, with fewer cards in our wallets new statistics show Americans are utilizing more than 30% of the total available balance—up 10% from 2007—on the cards they do have.
- TIP: Did you know that using a significant portion of your available balance can lower your credit score because it indicates credit risk, according to credit reporting agencies like Experian.
Knowledge is Power.
If you have at least one credit card, it's a good idea to find out your utilization rate. This is important to know because it's one of the largest factors that make up your Credit Score.
- TIP: You can easily calculate your utilization rate by simply adding all your credit card balances and dividing that number by the total of all your credit card limits.
According to FICO, people with the highest credit scores have credit utilization rates of 7 percent or less—and as we’ve discussed in past Financial Friday segments, the higher your score the better for you.
Take Action.
If your utilization rate is significantly higher than average, take action! Here are some practical tips:
- Find out what it will take to pay off your credit card debt.
- TIP: Use this calculator from well-respected Bank Rate to assist you in crunching the numbers. It will also suggest a monthly payment to swiftly pay your debt in full.
- Focus on paying off the card with the highest interest rate.
- Get serious about paying it off. Even an extra $50/month can make a big difference. If you're not sure if you have any extra money in your budget to make a larger payment? Adjusting your budget in a few places may be easier than you think once you sit out and pencil it out.
- Keep it up! Maintain that amped-up payment amount month after month.
- Stay motivated and watch your credit card balance decline quickly.
- Avoid making new purchases with the card.
|
» VIEW ALL FINANCIAL FRIDAY SEGMENTS
|
|
