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Holiday Bill Blues

During the past holiday season, many Americans went on a shopping spree. Some people are still paying the piper. If you over extended your credit last year, here are a few ideas for getting things under control:

• Check your account statements to make sure all of the charges are correct.
• Contact credit card companies to negotiate a lower interest rate.
• Consolidate credit card balances onto the lowest rate card you have. Or, find a new lower rate card and transfer balances to it. Then close the older high-rate accounts. Beware of transaction fees (e.g., 3% of the transferred balance) on transfers, however, that can offset all of the interest savings.
• Before transferring balances, determine how interest is calculated. Interested calculated on the adjusted balance is most advantageous to you. Interest calculated on the two-cycle average daily balance is most expensive method.
• Pay the highest amount possible on the credit card with the highest interest while making minimum payments on lower rate accounts until all are paid.
• Contact Rutgers Cooperative Extension for a PowerPay debt reduction analysis. The cost is $2.50 and the computer printout shows how much to pay each creditor until the balance on all debts is zero. As soon as you pay off one debt, you apply its monthly payment to another, generally starting with the highest-interest rate first.
• Avoid unnecessary credit costs. Try to avoid credit cards that charge an annual fee.
• Pay your account on time, and don't go over your credit limit. Each of these mistakes can cost as much as $30 per month. In addition, some companies also raise interest rates. If a late payment fee takes your balance over the credit limit, you must pay a late fee, an over-the-limit fee, and increased interest.
• If you have a savings account earning a small rate of interest, use it to pay off higher rate credit accounts.

Once your credit cards are paid off, start a savings account and develop a spending plan to save for 2002 holiday expenses to eliminate holiday credit problems next year. One way to do this is to simply pro-rate savings over time. Saving $40 a week for the next 20 weeks will result in $800 of savings.

This message is sponsored by Rutgers Cooperative Extension. For further information about available educational programs and other services, contact your local Rutgers Cooperative Extension office.