News From the Front

We've moved to your TV! Our own Editorial Director (the heppest of hep cats) Josh Glenn hosted an eight part series on CNNfn's IT'S ONLY MONEY. The Tripod segment was called "News from the Front."

Don't let the your credit card debt be the straw that broke the camel's back. Beth Kobliner and Josh give you some tips before you take the plunge into, what can be, for some, the plastic pit of no return.

Credit Card Smarts: Reduce Your Debt

How many credit cards do you own? The average American household has 5.5 credit cards, and the national average interest rate is 18%. This is a prescription for overspending. Unfortunately, easy and convenient access to credit allows you to borrow against your future earnings and spend more than you can afford. CNN has even reported cases of college students being forced to quit school and work full time in order to pay off their accrued debt.

Don't let this happen to you, my friend! Here's Tripod's guide to reducing your credit card debt and finding low rates.

PAY OFF YOUR DEBT!

You may think that it's advantageous to make only the minimum monthly payments on your cards. But if you pay just the minimum amount due (usually 2-10% of the full amount), interest continues to accrue on the bulk of your balance. You'll never get the card payed off if you keep charging on the cards and paying the minimum.

A common misconception is that having cash in a savings account is more valuable than than reducing your debt. But in order for you to earn more on your savings than is being eaten up by your credit cards, you'd have to take substantial risk. If you have a balance on a card with 18%, paying them off is like finding an investment with a guaranteed tax-free return of 18%. To justify not paying your 18% interest card, you would need to find an investment that yielded even more -- around 24% -- to net 18% after paying taxes! (But hey, if you find one, let us know!)

But don't just take our word for it: Go to the FinanCenter: Credit Card Department to use a great credit card calculator. To find out what it'll take to pay off your balance, simply enter the amount you currently owe, and your estimated future monthly charges and payments. At the click of a button you'll have various payment plans charted before your very eyes. But come back! We're not done with you yet.

What if I can't pay off my debt right away?

Don't despair. Try following these seven steps:

1. Reduce your credit limit.
2. Get rid of extra cards, especially retailers' such as a department store. These cards typically charge very high rates and duplicate VISA and MasterCards.
3. Stop charging on cards with outstanding balances. Grace periods (the time during which interest does not accrue for new purchases on a card without a balance) do not apply when you already carry a balance on a card. Interest starts to accumulate immediately when you make another purchase.
4. Use a charge card which requires full payment each month and accrues no interest.
5. Use a debit card which immediately deducts the payment from your bank account. It's the same as paying by check.
6. Use cards with lower rates. (See below.)
7. I fall else fails, try requesting a lower rate from your current card companies. You'd be surprised at how often this works! (See below.)

How to Find Low Rates and Request Lower Ones for Your Current Cards

Two sites which list the banks presently offering the lowest interest rates are Bank Rate Monitor and RAM Research Group. One strategy for lowering the interest rates on the cards you already have is to call your issuer and say that you're considering switching to a competitor that offers a lower interest rate (and if you're feeling particularly plucky you could throw in that there is no annual fee either). The company may choose to match these terms rather than lose your lucrative account. (Yes, lucrative: Not because you're so rich, but because you're paying lots of interest each month. You're a gold mine!)

So don't be the slave of your credit cards. Take advantage of the system, instead. Your savings account will thank you for it...

The Tripod Guide to Banking: offers a primer on the different types of credit cards and the various costs of each one associated with fees, finance charges, and cash advances.

FinanCenter: has great calculators with easy to understand charts and payment schedules. It also has a good definitions list of credit card terms and advice on selecting a card.

Bank Rate Monitor: features a weekly 70 city survey of the best rates, credit card tips updated weekly, and online applications for VISA cards.

RAM Research Group: is an independent banking research organization with links to the banks making the best card offers, the latest card industry news and statistics, and a consumer knowledge bank. It's also got a great card locator which finds you a low rate card for your region.

BankCard Holders of America: is a privately sponsored credit card information bank dedicated to protecting the rights and interests of consumers. It also monitors current economic trends to determine how they are likely to affect credit card holders.

GetSmart: has a card finder which allows you to rank the card features most important to you, after which the site searches for cards meeting those criteria. It also gives advice on how to get a secured card and will locate ones offered in your area. (Secured credit cards ask you to establish "collateral" --usually in the form of a bank deposit equal to the credit limit you've asked for-- to back your credit spending. They help you to reestablish a tarnished credit rating.) GetSmart also lists the 100 largest card companies and offers online applications for over 90% of all the cards used in the U.S..