Credit Card Reduction

Credit card reduction can mean either paying off some of the debt, or just re-arranging the existing debt in such a way as to improve your overall interest rate or reduce your monthly payment or just gain a few points on your credit score. Long term, the best plan is always to pay off your debts and be debt free -- but until that glorious day, you can gain other important benefits by cleverly reorganizing your debt. We mentioned above that there are some good ways to do this. Probably the absolute best way to accomplish credit card reduction is to get a home equity loan and use the cash to pay off some or all of your credit cards -- and then cut them up. The advantages of this plan (if you are a homeowner with equity) are a lower interest rate and lower monthly payments. In most cases you can get a tax benefit as well since it is a mortgage on your house. Check with your tax guy.

We also mentioned above that there are some really bad ways to do credit card reduction. By far the worst way is bankruptcy. This stays with you a minimum of seven long years. Next in line and not much better is one of the scam outfits offering to "erase your debt overnight". Even some of the less slimy ones will accomplish less than they say and will semi-permanently smear your credit reputation. These companies don't do much more than call up the credit card companies and tell them you are about to declare bankruptcy, and would they like to settle for a few cents on the dollar before it's too late. Don't go there!

If a home equity loan is not an option, look into getting a new lower rate card and transferring your balances. Often you can get 0% interest for several months as part of the deal. If that won't cut it, look into rearranging your total debt among your existing cards in such a way as to minimize your overall interest rates and also avoid having any one card very close to it's credit limit. A card that is very close to or over it's limit will slice a big chunk off of your credit score in a hurry. If all of this is not going to cut it, then we suggest that you look into one of the non-profit government sponsored credit counseling services. Not all such organizations are beneficial however. A good description of this industry can be found here. We strongly recommend that you choose a service that adheres to the standards set forth by the AICCCA .