Find out what your Debt is really Costing You

Thanks to the CARD Act, those who carry credit card debt are reminded on their monthly statements just how long it will take to pay it off in full. For many consumers, this is not a pretty picture. Most do not realize that by being in debt, purchases you make on those credit cards are actually costing more than what you pay the merchant. It’s a vicious cycle. Each dollar you do not pay over the fixed minimum payment ends up costing you much more in the end.

For example, if you have a $1,000 credit card balance at a 20 percent APR and you plan on making a payment of $20 a month until it’s paid off, it will take you just over nine years and you will have paid approximately $1,168 in interest. The key is to make more than just the minimum monthly payment. Even low-interest rate debts like student loans, which can be extended out 30 years, by making only the minimum payment you are increasing the time you carry those balances because of the compound interest.

Here’s some advice…
• If possible, start paying off the debt in full, beginning with those cards that have the highest interest rates. Also, paying off the smallest debts first can give you motivation to tackle the larger debts.

• Do not let purchases made on credit cards become invisible spending. Switch to a debit card and sign up for balance notifications and alerts on your phone and email.

• Consolidate credit card balances. If you qualify, consolidate your credit card balances to low-interest or 0% interest cards to reduce the cost of your debt. You may also want to consider a personal loan that offers a low interest rate.

• Avoid paying consolidation or consulting fees. Avoid paying fees to credit consolidators. Much of what they are doing for a fee, you can do yourself.

• Understand credit effects. There is a common misconception that carrying debt is good for your credit score. This is absolutely false. To achieve your best possible credit score, it is important to keep your debt ratio to under 30%, 10% is even better.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

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