Jeanette A. Tucker | 4/21/2005 9:37:44 PM
During the past holiday season, many Americans went on a shopping spree. "Now they’re paying the piper," says LSU AgCenter family economics professor Dr. Jeanette Tucker.
If holiday festivities over-extended your credit, the family economist recommends these tips for getting your credit 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, however, (such as 3 percent of the transferred balance) on transfers that can offset all of the interest savings.
• Before transferring balances, determine how interest is calculated. Interest calculated on the adjusted balance is most advantageous to you. Interest calculated on the two-cycle average daily balance is the 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 your local LSU Agricultural Center Family and Consumer Sciences agent for a PowerPay debt reduction analysis. This free service generates a cost-saving personal debt reduction plan that 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. A custom printout shows how much money can be saved by following the debt reduction plan and the reduction in debt repayment time.
• 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 2004 holiday expenses to eliminate holiday credit problems next year," Tucker suggests, adding, "One way to do this is simply to pro-rate savings over time. Saving $40 a week for the next 20 weeks will result in $800 of savings."
For local information and educational programs in related areas of family and consumer sciences, contact an extension agent in your parish LSU AgCenter office. Also, log on to the Family and Consumer Sciences section under the Louisiana Cooperative Extension Service at the LSU AgCenter Web site: http://www.lsuagcenter.com/.
On the Internet: LSU AgCenter: http://www.lsuagcenter.com/
Source: Jeanette Tucker (225) 578-1425, or Jtucker@agcenter.lsu.edu.