New Hampshire Credit Union

In your best interest

In today’s world filled with plastic, it is difficult to fight the urge to use credit.  As a late 20-year-old, I grew up with the mentality of a carefree “swipe and spend” world of credit cards.  Don’t get me wrong, I love the convenience of not carrying cash and the quickness of the swipe and go transactions.
Unfortunately, with all the conveniences that credit cards offer, they also carry an array of problems if they are not managed with care.  Spending more than you can pay every month is very easy with credit cards. If you are not careful, they can snowball very quickly leaving you with a feeling of how did this happen? With rising balances and high interest rates charged by the credit card companies, it can leave you feeling like you are in over your head. 
Don’t fret though. I have amassed a few ways to help reduce or eliminate your credit card debt.  After helping many people climb out of debt both personally and in my line of work, I want to share some of my tips with you.
This week I will talk about ways you can reduce your interest you are paying or eliminate your credit card debt entirely.  Next time, I will share some helpful tips on reducing your debt and ways to keep you debt-free.

Ways to combat Credit Card Debt.
There are many ways you can fight back the overwhelming fees charged by credit card companies and save your hard-earned money in the process.

1.If you own your house and have some equity you could take out a home equity loan or refinance your mortgage. Equity is the difference in what you owe compared to what your home is worth.  Here is and example, you owe $150,000.00 on your mortgage and your house is appraised at $250,000.00. Your equity in your home is $250,000.00 – $150,000.00 = $100,000.00.
A Home Equity Loan is a fantastic option for two major reasons. The interest rate you pay will be considerably less than the rates you pay on your credit cards and the interest that you pay on the Home Equity may be tax deductible. This could save you money when you do your taxes.  Another benefit of doing a Home Equity loan is the flexibility of setting fixed payments. You can do this by determining the term in months or years that you want to repay the loan. Many Home Equity loans can go up to 15 years before they need to be paid off, but I would suggest 5 to 7 years if you can afford the payments. 
There are some minor drawbacks to Home Equity loans as well. If you decide to get a Home Equity Line-of-Credit, you have the option of interest only payments which will save you money short term, but it will never reduce your debt.  You may not want to spread out your payments over too much time because it may be counterproductive.  If you are considering a Home Equity loan to pay off your credit cards, I would not recommend a line of credit since they are more geared toward home repairs and planning for unexpected expenditures.

2.Here is another little known fact that I would like to point out. Your car may also be a source of equity.  If you own your car and it is less than 10 years old, you can use that as collateral for a loan. Car loans usually have a higher interest rate than Home Equity loans, but the rates still are lower than most credit cards. If you only have a little credit card debt ($5,000.00 to $10,000.00 depending on your car’s value), this could be a better option than a Home Equity loan. Auto loans are typically easier to apply for due to less paperwork and a faster turnaround.  If you are concerned about tapping into your home equity, then maybe an auto loan would be right for you.

3.If neither of these options are available to you, I would then recommend transferring your balances to a lower APR card.  During this economic crunch, credit card companies are scrambling to lure potential customers to use their cards in efforts to generate income.  This is great news for you!  There are many card issuers that are offering low introductory rates when you transfer balances to them.  This will save you on interest and will pay down your principle faster.  Just remember that this is a short-term fix (most cards offer these low promotional rates for only 6 to 12 months)and you must be diligent in paying your principle down.

4.The last way you can reduce your credit card debt is calling up your current credit card issuers and asking them to lower the APR that they are charging you.  You may be pleasantly surprised when you talk to your current credit card company about lowering your rate.  From time to time, certain credit card companies run promotions that are not offered publicly.  They even may want to keep your business by offering a lower rate if you can get a better deal with a new card. As my mother used to say, “It never hurts to ask!”.

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