We visit lots of places and talk to lots of people about their financial concerns. From the financial literacy presentations that we deliver at the high schools to the budgeting classes we teach during Money Smart Week, it seems that the one thing we always end up talking about is debt.
People have lots of debt-related questions:
- How do I know how much debt I can afford to take on?
- What if I didn’t know how much I could afford and now I have too much debt?
- How do I avoid falling into a debt trap next time?
- How will I ever pay off all this debt?
The questions go on and on, and most of the time, the answer can be broken down into a series of action steps that goes like this:
- Stop creating debt – don’t charge up anything else
- Figure out how much you owe, including all the interest charges and the total amount of each debt (not just the monthly payments)
- Sell something – to raise cash that you can use to pay down your debt
- Refinance and/or consolidate your debt
- Use credit wisely – not just because it’s convenient
- Develop a plan to pay off your debts
- Set realistic goals – to be debt free in 1 year? 3 years? 5 years?
A certified credit union financial counselor can help you with an individual plan that’s tailored to your specific situation, but if you’re ready to start right now, consider consolidating your debts.
If you’re carrying balances on high-interest credit cards, that’s a great place to start. Just look for a balance transfer program that will let you move your high-interest balances to a safe, fixed-rate credit card with a lower annual percentage rate (APR).
Be sure and read the fine print, because balance transfer programs can be tricky. Watch out for low teaser rates that are only good for a few months.
When transferring balances, you’ll want to look for a card that offers:
- $0 Balance Transfer Fees
- $0 Annual Fees
- a safe, fixed rate APR
You can usually find an even lower APR on the balance transfer amount, but you’ll want to make sure that the lower rate is good for 6-12 months, so you’ll have plenty of time to pay off the balances that you transferred at the super low promotional rate.
No matter where you are in the debt cycle, you can become debt free. It’s a process, though. Be prepared to work through your situation with a certified financial counselor, commit to a plan, and make some sacrifices in order to achieve your goals.
Remember, here at MICU, we want to help. To start relieving the pain caused by high-interest credit cards, click here or call us today.