Shop for lower rates

In order to make your credit card payments count as much as possible and to get out of debt sooner, you can try to get lower interest rates. Sometimes card companies will offer a promotional balance transfer that is 1.99% for a six month period of time. Duration of the promotion and interest rates can vary greatly.

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Dont assume that every offer from the same credit card company is the same deal. The card companies will mail you an offer with different rates on the same advertisement. Some at full interest rates, mixed in with the lower rates. If you decide to use the checks that they mail you, you might use the wrong one and get the higher interest rates. If you call in for a promotional offer make sure you take notes of the day you called the rate, duration of the promotion, and who you helped you on the phone. It is extremely important to read the fine print and ask questions about the balance transfer fees and time limits.

If you have a card with a balance already on it, dont use it. Get a card without a balance because if you dont you will be still be paying a higher interest rate. The payments go to the low interest transfer first and the balance that existed already sits there adding up interest every month. Call the credit card company to check your balance on the card so that there are no charges on it at the time you do the transfer.

There are also offers for the life of the balance transfer that will lock you into a fixed interest rate for the duration of the balance. The interest rates will be higher, for instance the short term offer will be 1.99% and the fixed rate for the lifetime offer will be 3.99%. You have to weigh out the benefits and the downfalls of both types of offers. The short term offer can be good if you are diligent and confident that the rates will be low in the future and you are prepared to do another balance transfer or pay of the whole amount in a short period of time. Usually the short term promotions have a higher amount for the initial transfer fee. When shopping around for a good balance transfer check to see what the minimum and maximum balance transfer fee will be. The average is around $50 maximum; however some credit card companies will go up to $150 or more, seldom is there no fee on these short term promotions. The long term fixed rate until the balance is paid off will more often have no balance transfer fee at all. This can make up for the higher interest that you pay over the short term.

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If you have limited credit resources left you should try to get a fixed rate promotional so that you can lock in a low interest rate for the duration. It should be your goal to get the debt paid off as soon as you possibly can. The lower the rate in the long run the sooner you can pay off your debt.

Sometimes credit card companies offer the low interest promotional and when you get your first billing statement you may be in for a surprise that the interest rate is not correct. It is extremely important to verify that you got the correct interest rate on the statements. If it is not correct call the company to get it corrected as soon as possible. Always check your interest rates on every credit card statement. If at any time a card rate goes up you will be aware of the problem, and hopefully it will prompt you to shop around for a better rate or contact the card company to lower the rate if possible. Never pay your bill late on a balance transfer because you will lose your low interest rate and default back to very high rate of 19.99% (this interest rate varies too).

Having a good credit score can help lower your interest rates. It is important that you always pay your bills on time; this will help improve your credit score. Paying more than the minimum balance is also another good way to improve your credit score. If you have had bad interest rates in the past because of late payments, you can lower your rates by improving your credit score.

The goal is to pay off the higher interest cards first and pay the minimums on the lower interest cards. After time hopefully, the debt will decrease and you will be on your way to erasing the credit card debt.

Credit cards take bigger bites now Users who keep high balances may be hit hard in coming bill

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The new year is bringing with it bad news for an untold number of Americans mired in credit-card debt.

Many of the banks that issue credit cards are raising their minimum required monthly payments this month—in some cases doubling them—as a result of pressure from federal regulators worried about U.S. consumers’ deepening debt and its potential effect on the financial system.

Though some banks began phasing in higher minimum payments as long as two years ago, when the Office of the Comptroller of the Currency first raised the issue, as much as 50 percent of the industry just made the change.

That means the higher minimums will show up for the first time on many people’s January card statements—in the middle of what for many is a post-holiday credit hangover.

"To some people, that may not seem like much, but when you don’t have a lot, an extra $100 a month is going to put a big strain" on your budget, said Michelle Smith, 39, a mother of three in St. Cloud who is wrestling with about $3,500 in debt on three cards. "I try to pay a little more than the minimum, but I don’t ever pay double. I use the money for things like car repairs, gas, groceries and other household needs."

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Bank of America notified its customers in October that its change in the minimum required payment was effective Dec. 1. The new minimum is at least 1 percent of the cardholder’s monthly balance plus any fees and finance charges. The old minimum payment was only $10 plus fees and finance charges.

Many other banks used to require a $15 minimum payment or 2 percent of the account’s balance—whichever was less.

Post-holiday hit

Consumer-finance experts have long encouraged people to avoid making just the minimum payment on a credit-card balance, because it can mean paying thousands of dollars in extra interest. But they are also worried that a sudden demand for larger payments could break many cash-strapped Americans who have come to rely on the historically low minimums of recent years.

"Sure, the idea is that people will pay down their debt quicker and save money," said Doug Neway, a consumer-bankruptcy lawyer in Orlando. "But it’s a shame that this is happening to people now, with all their holiday spending reflected in the January bill. It will be the highest [balance] most will have all year long."

It’s not clear how many Americans with credit-card debt pay only the minimum monthly payment. Estimates range from as low as 4 percent, according to the American Bankers Association, to as high as 45 percent, according to a survey by the Cambridge Consumer Credit Index.

Millions just pay minimum

About 167 million Americans have at least one credit card, according to the Nilson Report, an industry newsletter. By that measure, 6 million to 75 million cardholders are paying the required minimum or close to it.

Bankers say the effect of the larger minimum payments has been overstated by some consumer advocates.

Consumers cash in on reward cards

Zero-percent balance-transfer offers for credit cards may be on the wane, but U.S. credit card companies are offering cash-back reward cards.

Since 2002, the number of U.S. households using a cash-back card has grown 38 percent to 32.6 million, and cash-back cards are considered the hottest segment of the credit card industry, the New York Times reported Saturday.

Discover, which pioneered cash-back reward cards, said it gave away $500 million in 2005, usually via a 1 percent pay-back in cash.

Discover`s Platinum card pays 1 percent for all purchases made on the card, but gives a 5 percent rebate on purchases at Walgreen`s, CVS, Rite Aid, LensCrafters and about 10 other merchants.

Credit card companies know that consumers use a reward card as their primary credit card—38 percent of reward cardholders said their cash-back card was their primary card, according to TNS, a global market research firm.

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