Credit card jumping (or rate surfing) is becoming more widespread as people struggle to keep on top of the mountains of debt they have amassed. It's called credit card jumping because people jump from card to card, taking advantage of the best deals on offer.
How Credit Card Jumping Works
It works like this. Suppose you pay for your new car, DVD recorder or stereo using your old card. After the interest free period of around 56 days (less on some cards) you will have to pay interest on the outstanding balance. This can range from under 8% to well over 23% depending on the card you have. And most of the money you pay back each month will pay off interest rather than reducing the principal.
Credit card jumping offers a solution. Most card companies offer reduced interest rates to new customers. This can be a long term low interest rate or a 0% interest rate for a period of up to 12 months. This means that during this period credit card customers are reducing the principal when they make repayments. This will help to reduce their overall indebtedness.
Shopping For A 0% Credit Card
To get a 0% card, consumers just need to shop around. They can visit one of the many comparison websites to find the best deal. Many card companies also offer other incentives such as money-off vouchers, cash back rewards and discounted insurance.
The 'jumping' part comes when the 0% offer runs out. Canny consumers will apply for a new card about a month before the old offer runs out. This leaves plenty of time to get the new card and transfer any balances on to it to take advantage of the new offer. Consumers can do this any number of times.
What About My Credit Rating?
The key to keeping a good credit rating is to always pay at least the minimum amount that is listed on the statement. This must also be paid on time and consumers should never exceed their credit limit. It is also important to keep the old cards even after the balance has moved to another card. Old cards show people's credit history and improve their credit rating.
How Companies Protect Against Card Jumpers
When 0% interest offers first appeared, credit card companies did not realise the implications. They lost hundreds of thousands of pounds of potential interest. Now there's a strategy in place to make card jumping less attractive. This is the balance transfer fee.
The balance transfer fee is a new charge imposed by credit card companies whenever consumers transfer a balance to a new card. The rate for this is around 2%. This means that card companies get their money up front. There are still some cards that do not charge a balance transfer fee, so it's worth shopping around while they last.
Showing posts with label Card. Show all posts
Showing posts with label Card. Show all posts
Saturday, July 14, 2012
Monday, July 9, 2012
How To Refinance Credit Card Debt
As anyone deep in credit card debt will be quick to confirm, it is not an easy task to pay off debts. Many people despair ever being able to pay off mounting credit card debt that seems to grow with every passing day. But there are ways to tackle even the most stubborn debt burden, one of which is to refinance credit card debt.
Refinancing credit card debt does not always mean taking out another loan or incurring more debt. It means tackling your commitment to repay credit card balances with an intelligent action plan which steadily gets you out of debt without destroying your lifestyle or forcing you to give up all enjoyment and leisure.
Make Your List
The first step in getting out of debt is to know exactly where you stand. Make a list of all your credit cards. Take particular note of the outstanding balance on each of them, and the interest rate that you are being charged on that balance. Other relevant factors to note down are your minimum monthly payment due, and the minimum payment percentage on your bill.
While it may initially seem scary and nerve-wracking to acknowledge the extent of your financial woes, the fact is that without a realistic idea of where you stand, it is impossible to work out a refinancing plan that can succeed.
Calculate Your Minimum Payment
Total the minimum payments due on all your credit cards. If you have 5 cards, each with a minimum due of , this means you'll have to come up with 0 every month at least in order to salvage your credit standing.
Decide If You Can Pay It
Drawing up a budget can help you evaluate your current financial status and see if you will be able to pay off your minimum balances and reduce credit card debt. A budget tells you exactly how much income you are earning and what it is being spent on. You must list out all items on which you are spending money, and see how much you'll have left after meeting those expenses. This extra cash is what will go towards paying your credit card debt without refinancing.
If you have enough left over to meet the minimum payments on all credit cards, and then begin paying off outstanding balances on the card debt, then you will not require other options. The more you have left to pay the balance on expensive credit cards, the sooner you will get out of debt.
But what if you don't have enough money to meet the minimum commitments, or start paying down the existing credit card bills? Your next option is to consider refinancing options that involve taking out another loan, but one with lesser interest rates than your existing debt. For instance, you can take a home equity loan where you will borrow against the equity of your own home. In effect, you will be pledging a part of the ownership in your home to the bank, in exchange for a loan which you can use to pay off costlier credit card debt.
The advantage in refinancing your credit card debt lies in the different rates of interest that you'll pay. Typically your credit card interest rate will be twice as high as from a home equity loan, which can save you a considerable amount of money depending upon the size of your existing debt. The risk or downside comes from the fact that you now own less of your home, and any default on paying back that loan will result in the creditor taking possession of your asset.
But even if it is not a decision to be taken lightly, a home equity loan as a short term refinancing option to get out of overwhelming credit card debt can be very rewarding. The key is to avoid slipping back into bad spending habits. So once you are out of credit card debt, make sure you remain in good financial standing by getting rid of those cards you no longer use, and shifting over to a credit card company that offers you the most competitive interest rates.
Refinancing credit card debt does not always mean taking out another loan or incurring more debt. It means tackling your commitment to repay credit card balances with an intelligent action plan which steadily gets you out of debt without destroying your lifestyle or forcing you to give up all enjoyment and leisure.
Make Your List
The first step in getting out of debt is to know exactly where you stand. Make a list of all your credit cards. Take particular note of the outstanding balance on each of them, and the interest rate that you are being charged on that balance. Other relevant factors to note down are your minimum monthly payment due, and the minimum payment percentage on your bill.
While it may initially seem scary and nerve-wracking to acknowledge the extent of your financial woes, the fact is that without a realistic idea of where you stand, it is impossible to work out a refinancing plan that can succeed.
Calculate Your Minimum Payment
Total the minimum payments due on all your credit cards. If you have 5 cards, each with a minimum due of , this means you'll have to come up with 0 every month at least in order to salvage your credit standing.
Decide If You Can Pay It
Drawing up a budget can help you evaluate your current financial status and see if you will be able to pay off your minimum balances and reduce credit card debt. A budget tells you exactly how much income you are earning and what it is being spent on. You must list out all items on which you are spending money, and see how much you'll have left after meeting those expenses. This extra cash is what will go towards paying your credit card debt without refinancing.
If you have enough left over to meet the minimum payments on all credit cards, and then begin paying off outstanding balances on the card debt, then you will not require other options. The more you have left to pay the balance on expensive credit cards, the sooner you will get out of debt.
But what if you don't have enough money to meet the minimum commitments, or start paying down the existing credit card bills? Your next option is to consider refinancing options that involve taking out another loan, but one with lesser interest rates than your existing debt. For instance, you can take a home equity loan where you will borrow against the equity of your own home. In effect, you will be pledging a part of the ownership in your home to the bank, in exchange for a loan which you can use to pay off costlier credit card debt.
The advantage in refinancing your credit card debt lies in the different rates of interest that you'll pay. Typically your credit card interest rate will be twice as high as from a home equity loan, which can save you a considerable amount of money depending upon the size of your existing debt. The risk or downside comes from the fact that you now own less of your home, and any default on paying back that loan will result in the creditor taking possession of your asset.
But even if it is not a decision to be taken lightly, a home equity loan as a short term refinancing option to get out of overwhelming credit card debt can be very rewarding. The key is to avoid slipping back into bad spending habits. So once you are out of credit card debt, make sure you remain in good financial standing by getting rid of those cards you no longer use, and shifting over to a credit card company that offers you the most competitive interest rates.
Subscribe to:
Posts (Atom)