Q: I just received my credit card bill and had no idea I’d spent that much. What should I do?
A: Review your budget to determine where you can cut costs so you can put additional money toward your credit card bills. As a motivation, check your credit card statement for the amount you can save in interest if you pay more than the minimum required. If you are struggling even to make minimum payments, consider seeking help from a consumer credit counseling service.
Q: I’m having trouble juggling my credit card payments and am afraid I’ll soon see late charges on my bills. I can’t seem to catch up since the holidays.
A: This can be one of those times it pays to be pro-active. Contact your creditors—the sooner the better. Ask your creditors if another due date can be arranged or if you can work on a new payment schedule with them. This works best BEFORE you fall behind.
Q: How can I avoid financial, after-holiday shock next year?
A: Start now. Review what you spent for the holidays this year. Be sure to include food, entertainment and decorations. Then allocate into your monthly budget one-twelfth of the amount you set aside in your holiday fund account.
Q: I used several credit cards to take advantage of “deals” stores were offering. I don’t know which to pay off first.
A: You need to make a plan. First, look at the finance charges for each card. Plan to pay as much toward the card(s) with the highest rates as you can. At the same time, don’t neglect to pay at least the minimum due on the other cards. Your plan should be to pay off the cards carrying the highest rates first, and then move to the next highest, and so on.
Q: Looking at the finance charges I’m paying on my credit cards, I wonder if a consolidation loan would be a good idea.
A: That depends on your answer to the following question: Do you habitually fall behind or carry large balances? If so, you may want to be cautious about what amounts to “trading unsecured debt for secured debt.” To refinance that credit card debt you’d probably have to take out a home equity loan. While that may be a viable solution, you need to be cautious before pledging the equity in your home. Credit counseling may be a better first step. A certified counselor will review your situation and advise you of the best course of action for your situation.
Law You Can Use is a weekly consumer legal information column provided by the Ohio State Bar Association. This article was prepared by Jay Seaton of Apprisen, formerly Consumer Credit Counseling Service.