It's a new year and a new you! We're highlighting 12 helpful tips to start off the year right, from quitting your caffeine addiction to mastering time management. Here's another way to start afresh in 2012.Americans are currently facing credit card debt worth $798 billion, according to November statistics from the Federal Reserve. Don't be another statistic — for a fresh start this year, resolve to pay off your credit card debt. To get started, follow these tips:
- Negotiate a lower rate with lenders. Call your lenders and ask them for a lower rate. Make it clear to them that you are ready to switch to another lender who's willing to offer a lower rate. Talk to the supervisor if the representative is not budging.
- Consider transferring balances. You can opt to move your balance to a credit card that offers zero percent interest, but this is a tricky move because the zero percent APY may only last for a brief promo period. Check the details of the credit card offer to make sure you'll be able to keep on top of your payments.
- Don't add charges. Now that you have a lower rate (hopefully down to zero!), make sure you're not tacking on additional charges just because you saved money by lowering your interest rate. Practice discipline and live within your means.
- Pick your card. Eenie meenie miney mo . . . which card should you pay off? There are a couple of ways to do it. You can pick the card based on the balance or interest rate. Although it seems the most efficient to pay off debt with the highest interest rate, it may be better for you psychologically if you pay off the lowest balance. That's because you'll feel like you're making some leeway when you're done paying off each debt. Another method is to pay off the debts that bother you the most, such as debt owed to family or friends.
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- Do some calculations. To figure out how much is needed to pay down a credit card within a year, check out Bankrate's credit card calculator. The calculator factors your credit card balance, interest rate, and monthly payments.
- Create a budget. Now that you've figured out how to pay off your debt, make some changes in your spending and saving so you can be more aggressive while paying off your debt. For budget cuts, the most efficient saving method is the top-down strategy. This means you should start cutting down on your biggest expenditures, such as rent and transportation, before you work your way down to the less costly ones.
- Dealing with your account. Once you're done paying off a credit card, you're faced with the decision of closing the account. You might want to keep that card open because closing it will raise your credit utilization rate, which is the balance to limit ratio. This ratio heavily affects your credit score. Now, this doesn't mean that you have to keep your account open forever. You can choose to compensate for closing your account by requesting a higher limit on an open account.