Sunday, Dec. 21, 2008

Get a grip on credit card debt before it's too late

While consumers are being urged to spend this holiday season to help bolster the economy, those who do may face big credit card bills in January.

ByDesign Financial Solutions, a nonprofit organization offering personal finance counseling and education, is urging consumers to make "getting out of debt" their New Year's resolution.

"In tough economic times such as these, we expect even more people to resolve to work on lowering their debt in 2009," said Martha Lucey, ByDesign's president. ByDesign offers free and low-cost counseling, and it has offices in Modesto, Merced and Stockton.

Lucey cited statistics showing that 61 percent of Americans carry revolving credit card debt, with an average $10,678 balance. Atop that, she said, the average consumer expected to spend $832.36 on holiday merchandise.

"That cost, along with previously racked up debt, and an unstable economy creates the incentive to take active steps to address the problem as soon as possible," Lucey warned.

Here is what ByDesign's credit counselors encourage consumers in debt to do:

STOP CHARGING -- Adding to your existing debt will only make the problem worse and counteract any other steps you take to pay down your balance.

TRANSFER BALANCES -- Call your credit card issuers and try to transfer all of your balances to the card with the lowest interest rate.

If this isn't possible, make minimum payments on the cards with the lowest rates and pay as much as possible on the highest interest cards until they are paid off. Once you get down to one card, continue paying as much as you did to the highest interest rate card.

ASSESS YOUR TOTAL DEBT -- Once you determine the total, use an online debt repayment calculator to experiment with different payment amounts to see what type of realistic monthly payment you'll need to make to pay off the cards.

Try the free calculator at: www.bankrate.com/brm/calc/creditcardpay.asp.

INCREASE YOUR INCOME -- When you don't have enough income to have funds remaining after expenses, the only alternative is to increase your income. Use as much of that extra income as possible to make additional credit card payments.

Some income options include working overtime, seeking tem- porary part-time work and selling stuff on Amazon, eBay, Craigslist or through newspaper classified ads.

FOCUS -- This plan will work if you maintain focus. Paying off your debt must become a priority for the duration of your plan.

There will always be temptations to charge a vacation, buy a new car or do home-improvement projects. Being conscious of every spending decision will help you meet your goals.

For more advice from ByDesign or to arrange for free, confidential debt counseling, go online to www.ByDesignSolutions.org or call 800-750-2227.