Real Costs of Credit Card Debt

Credit cards are possibly the greatest financial tool and an integral part of American daily lives. If used properly, credit cards can be great in helping you budget your basic needs and desires.

If you live beyond your means with a credit card, however, having one can easily hurt your financial standing and may even lead to financially devastating debt. If you find yourself in that predicament, in order to get your finances organized, a debt consolidation plan might be in order but you should consult your accountant or financial adviser first on this matter.

Education and fiscal discipline are the keys to preventing credit card debt. For those new to the credit card debt epidemic, the following valuable information may help you decide on credit card consolidation.

Interest Rates

The average American has thousands of dollars in credit card debt on any given day. Since the average interest rate today is over 14%, simple math leads to the conclusion that these same people pay hundreds of dollars monthly for finance charges alone.

Interest rates today can range from 0% to an amazing 40% per year. By reading your credit card statements, you can find out what your credit card debt is really costing you. If you find that these rates are responsible for your debts, ask your current credit card company to have your rate lowered. If lowering your rates will not help or if the company is unwilling to work with you, consider a credit card balance transfer or a lower interest rate card.

Also, keep in mind that fixed rates are not always fixed. Credit card companies may change the current rate at any time, so long as they give you 15 days notice of the rate change.

Late Fees

Many people in credit card debt are aware that forgetting or being unable to pay for monthly minimum payments can lead to nasty "late payment fees." Late fees range from $15 to as high as $40. In addition, some credit card companies will boost your interest rate on top of charging late fees if you are late with your payment.

Many people are not aware that these late fees can be waived if you call and ask the credit card companies to do so. If you know that you will be late on a bill, make sure to call in advance and request a grace period. Ask the credit card company representative to document your customer record as proof that you called in advance and make sure to write down the name of the person you spoke to, as well as the date and the time of the call.

Annual Fees

Today, annual fees of credit cards range from nothing to as high $2000. The average annual fees range from $35 to $100. Some credit card companies, however, allow annual fees to be waived simply by calling and requesting it. If you're paying more than your average annual fee, call the credit card company immediately and question them about it.

Debt Consolidation

If you get behind on all these credit card fees, sooner or later you'll find yourself in a cycle of credit card debt. By consolidating credit card debt, you can set yourself on a realistic path toward becoming free of debt. This is an effective method for many people.

When you constantly spend out more than you earn with your personal income, your budget automatically becomes overburdened. As a result, your financial status becomes limited because you pay even more for everything you charge in the form or finance charges. In addition, credit card payments never seem stop for some because they keep adding more purchases to their balance every month.

Those who have maintained an upstanding credit rating but never being late with monthly credit card payments are the best candidates for consolidation loans, such as home equity loans. Another option for those in credit card debt who may not have a perfect credit rating, a balance transfer is another great option. Various options for credit transfers are available, with many offering a 0% introductory APR for up to one year. This makes it possible to get a head start in paying off debts. At the same time, it is important to pay off the balance by the end of the interest free period rather than adding more to it.

Otherwise, the vicious cycle will only continue.