Economic dips and changes impact many areas of consumer finance. While home mortgage rates may drop, credit card interest rates could still be on the rise. Studies show that the average consumer has between five and nine open lines of credit, including revolving lines of credit. For consumers in New Jersey looking for the best strategies to reduce their credit card debt, here are some easy and effective approaches.
Start with the highest interest rates
When consumers are paying only the minimum payment each month, credit card debt will continue to mount. This is because a good portion of the monthly payment goes toward interest. It could take several extra payments to get to the principal balance. If you must carry a balance from month to month, try to make extra payments on the cards that have the highest interest rates.
Tackle the smallest balances first
If the interest rates across all retail and general lines of credit are about the same, a different approach may work. Some debtors like to see fast progress and are motivated when they see their balances diminish. Paying down the smallest balance first and then adding the amount of that payment onto the next balance will create a snowball effect. In essence, payments will likely be more than double the monthly minimum for the higher balances.
Consider debt management options
When there has been an impact such as the loss of household income, it can become difficult to address credit card debt. Aggressive collection tactics from some creditors only make matters worse for the borrower. There are several debt relief programs available depending on the individual situation.
Debt consolidation loans are an option if income has not been affected and if payments are still current. Debt settlement and bankruptcy may be the best option when several payments are in arrears.