Why You Keep Falling Farther Behind
Of the people who carry a credit card, about one-third do not pay off their balance each month. If you're one of these
people, you may have noticed that, even though you pay the minimum payment each month, your balance either stays the same or
it continues to grow.
Just why does this happen, you may ask? Well, Ill let you in on a little secret the credit card companies hope you wont
figure out for a long time. The amount of your minimum payment is usually equivalent to the interest that is due on your
balance. It may even be less. So, even if you're making your minimum payment on time each month, none of that payment is
going to reduce the principal. At this rate, you'll never pay off your cardthats the idea. So, let's go over a couple of tips
that may help you put a dent in your balance.
How To Pay Off A Balance
First, quit using your card. If you need to make some changes in your lifestyle, then bite the bullet and do it. Except in
cases of dire emergency, do not use your card for anything. Continuing to use your card will only keep you caught in the
vicious cycle.
Pay more than the minimum payment due. For reasons stated above, this is critical to eliminating credit card debt. If you
can, transfer your balance to a card with a lower interest rate. These applications come in the mail all the time. Just
remember, this new card isn't for charging. It's to be used only as a tool to pay off your balance.
Payment Agreements
When you apply for any credit, there are several different payment agreements you can choose from. The first is the
revolving agreement. This allows you either to pay off the card each month or make only partial payments. If the balance is
not paid off, though, you will be charged interest on the balance. This is the most common form of payment agreement.
The second kind is the charge agreement, which requires you to pay off the balance in full each month. The third agreement
is the installment agreement. This allows you to pay a fixed amount of the balance each month until the balance is paid in
full.
Choose a payment option that you can live with, and proceed with determination. Remember, nothing ruins your credit score
like a bunch of late payments!
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