Managing Your Debt
There are several ways to consolidate your bills . The first and most common approach for debt elimination is using the services of Consumer Credit Counseling. Also known as CCCS, this involves putting your debts on a repayment plan with reduced interest rates.
Another increasingly popular and innovative choice involves negotiating and settling your credit card bills. This is one of the fastest ways to eliminate your debt, and other than bankruptcy, it is the cheapest credit debt help option.
Before one can truly discover the best route for consolidating their credit cards, however, they must first understand their bill and the nature of the debt .After all, if you don't understand your credit card statement, how much you owe, what your payment is, whether your debt is from a cash advance or how your interest is calculated, how can you possibly make an intelligent financial decision?
Annual Percentage Rate (APR)
This is the interest rate you are being charged on an annual basis, and for credit cards it typically ranges between 7 and 29 percent. Since it is an annual interest rate, the amount you will be charged is actually your APR/12 (months in a year). It is also important to note that APR is only one factor that will determine how much you actually pay on a monthly basis. Of course your balance matters as well, but an often overlooked factor is how your balance is computed because credit card companies will employ different methods for doing this.
Average Daily Balance
This is the most common method for calculating your balance. With this approach the credit card company will compute your average daily balance and then apply the APR to the average to calculate the exact amount of interest you will owe.
Adjusted Balance
Another common method is to take the total amount you owed at the beginning of the billing period and subtracting any payments from that amount.
Previous Balance
The opposite of the adjusted balance approach, this involves taking the total amount you owed at the beginning of the billing period and not subtracting any payments you made.
Cash Advances
A cash advance is basically a loan taken out from the credit line of your account. The difference between this and making purchases on your credit card account is the interest rate is normally much higher for this transaction. The interest will start accruing immediately (no grace period), and the credit card company will make you pay a fee for doing this type of transaction.
Should I Consolidate or Settle My Bills?
This question depends on the nature of the debt. For example, it is highly unlikely that you will be able to settle your credit cards if the majority of the outstanding balance is from recent cash advances. Credit card companies treat a cash advance much differently than a regular purchase, not only from the standpoint of how interest and fees are accessed, but also from the standpoint of whether they will be willing to negotiate down the balance. Cash advances are also treated much differently in a bankruptcy filing as well, and under the new bankruptcy law , credit card debts with cash advances totaling more than $825 that were made in the last 70 days no longer qualify for bankruptcy , and you can bet that they won't qualify for a settlement if you have not made at least three to six payments.
Along the same lines, the same can be said of luxury purchases or balances transfers. In the case of luxury purchases, any charges greater than $525 made within 90 of filing bankruptcy are presumed to be fraudulent and are therefore not eligible. With cash advances, one should make at least three to six payments before even attempting to enroll in a settlement program, and you will most likely be better suited for using a traditional consolidation service .
Interested in speaking with an expert about debt management ? Fill out a form and let PayingPaul.Com get you in touch with a reputable company in this field. Start now!