ATLANTA, June 26, 2012 (GLOBE NEWSWIRE) -- While recent reports indicate that credit card debt had declined over the last year, much of this decline is due to financial institutions writing off delinquent debt and not due to consumers reducing the amount they owe. A study from Nerd Wallet indicates that the average household still carries $6,772 in outstanding credit card debt and paying down debt is an ongoing struggle for many consumers.
"Many consumers use credit cards without considering the long term impact it can have on their finances," said Mechel Glass, vice president of community outreach for CredAbility. "Interest and finance charges add up fast, and for consumers making only minimum payments or who have even a single late payment, rising balances can quickly outpace their ability to pay."
A person with $6,500 in credit card debt at an 18 percent interest rate will take 25 years to pay off their debt if they only make the minimum monthly payments. In addition to the $6,500 principal, cardholders will pay an additional $9,173 in interest, meaning that your $6,500 in purchases will cost you $15,673. And that assumes that you don't use the card to make any additional purchases. (This example includes a payment equal to interest plus 1% of the balance).
Just like every other resolution on your list, eliminating credit card debt requires focus and commitment. CredAbility offers the following tips to help consumers:
Stop using credit cards. Cutting up your credit cards is one way to ensure you won't use them. Another would be to secure your cards in a safe deposit box at your bank or other hard to reach location to make impulse purchases much harder. Before you make any purchase, ask yourself "Do I really need this? Can I pay for it with cash?" If you answer no to either question, skip the purchase. Ideally, only use credit as you would cash, when you know you can pay the bill off on-time and in-full.
Resist the temptation of credit card offers. Open your mailbox on any given day and there is likely to be another offer for another credit card. Shred these offers without opening them and you will be less likely to be tempted by teaser interest rates or offers to consolidate your credit card bills. You can further reduce these offers by requesting that your name and credit information not be provided to financial institutions. You can do this by calling 1-888-5-OPTOUT (1-888-567-8688) or online at http://www.optoutprescreen.com.
Create a repayment plan. You might choose the card with the highest interest rate as the one to pay off first. Perhaps you have a small balance on a couple of cards. Paying those off first may provide you with a sense of accomplishment and help keep you on track. Document your plan to help you stay focused and as each balance is paid, redirect the money you were spending on that card to reduce the balance on another.
Pay more than the minimum. Using the example above, increase your payment to $200 per month and you will pay it off in just 3 years, 9 months and pay $2,479 in interest. Use bonuses from work or other unexpected gifts of money to reduce your credit card balances. Your credit card statement is now required to include how long it will take you to pay off your balance making the minimum payment.
Can't give up credit cards altogether? If you can't give up using credit, be sure to use it wisely. Limit yourself to two or three cards and choose those with the best terms, including low rates, no annual fee, and reasonable interest terms, such as a 25 day grace period before you begin paying interest on a purchase.
Don't hesitate to seek help—Remember, you don't have to solve your financial problems alone. CredAbility has trained and certified credit counselors who offer budget and credit counseling confidentially – and free. CredAbility is a nonprofit, community-based organization and a member of the National Foundation for Credit Counseling (NFCC). For more information, call 1-800-251-2227 or visit us online at http://www.CredAbility.org.
About CredAbility
CredAbility is one of the leading nonprofit credit counseling and education agencies in the United States, serving clients in all 50 states plus the District of Columbia, Guam, Puerto Rico and the US Virgin Islands, in both English and Spanish. In addition, we provide in-person counseling at offices in five states in the southeast.
Founded in 1964, CredAbility is a family of Consumer Credit Counseling Service agencies that includes CCCS of Greater Atlanta, CCCS of Central Florida and the Florida Gulf Coast, CCCS of Palm Beach County and the Treasure Coast, CCCS of East Tennessee, CCCS of Central Mississippi and CCCS of Upstate South Carolina.
The nonprofit agency is accredited by the Council on Accreditation and is a member of the Better Business Bureau and the National Foundation for Credit Counseling (NFCC). Governed by a community-based board of directors, CredAbility is funded by creditors, clients, individual donors and grants from foundations, businesses and government agencies. Service is provided 24/7 by phone at 800.251.2227 and online at www.CredAbility.org.
The CredAbility logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11910