Friday, December 5, 2008

Simple Rules Can Help Prevent Credit Card Debt

Credit Counseling Service has one simple consideration: whether you can manage your credit card properly.

As the CEO of the nonprofit group that helps consumers break free from debt, Richard Skaggs has seen a lot -- including individuals carrying as much as $200,000 in credit card debt.

However, the Consumer Credit Counseling Service's chief executive said following some easy steps can keep consumers from falling into the pit that is credit card debt.

Skaggs urges credit card users to establish a budget and then to follow that budget exactly. In other words, don't be tempted to charge that plasma TV to your credit card on a whim when you haven't budgeted for it this month.

Also, he tells consumers not to carry a balance on their credit cards for longer than six months. Skaggs explains that beyond that point, the compounding of simple interest can produce a very expensive balance to pay off. If it helps, think of your credit card balance as a snowball that grows larger as it rolls downhill.

Furthermore, reward credit card holders might end up spending more than the reward itself is worth if they don't pay attention to the fees and interest associated with their credit card. Visitors to can view such information for a specific credit card by clicking on the "apply here" button, then selecting an underlined link for "pricing and terms" or "terms and conditions."

The CEO also recommends looking for a low interest credit card if your credit card's interest rate is excessive. Still, he tells consumers to be aware of the normal interest rates on any balance transfer credit cards once the low introductory rates expire.

Overall, Skaggs stresses the importance of consumers taking responsibility and managing their finances.

And, should credit card holders get in over their heads, many card issuers will work with customers who take the initiative to call with the goal of working out a payment plan.

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