Tips for Carrying a Credit Card Balance

Posted on June 11, 2007

The first rule is to not carry a credit card balance. But let’s say for whatever reason you got yourself into a situation and now have an American average of $8000 of credit card debt. You are not alone. Six out of ten credit card users carry a balance from month to month according to Beth Kobliner, author of Get a Financial Life: Personal Finance in Your Twenties and Thirties. Here are seven tips that will help you manage that credit card balance until you have it paid off:

Stop spending on the card. This is self explanatory, but for some of us so hard to do. Make it a commitment to pay in cash until the debt is eliminated.
Pay more than the minimum. The first step to eliminating the debt is to pay more than the minimum. Even if you have to start out small, just pay a something more than the minimum.
Pay your bill on the day you receive it. You do not want to run into a situation in which you are not sending the check in on time. Pay immediately and reduce the risk of forgetting. A high credit card balance is harmful enough to a credit score without the added damage of a late payment.
Never skip or miss a payment. Late fees have gotten out of control, and most companies now charge very high fees for being late. This is something you never want to add to an already high balance.
Understand how your interest is calculated. There are two basic methods of calculation: Average daily balance method and Two-cycle average daily balance. The first, average daily balance method, works by dividing up the year in billing cycles. On the last day of the billing cycle a bill is sent. If you pay the bill in full you owe no interest. If you do not pay the bill in the full by even the smallest amount then interest is charged on the next bill. The other method of billing, two cycle average daily balance, allows the company to charge interest based on the last two billing cycles which can be even more costly.
Never opt in on “skip a payment” offers. This is just a way for the credit card companies to charge you interest for a longer period of time.
Write a letter or call requesting a lower interest rate. It never hurts to ask and if you are carrying a large balance even the slightest drop in interest will help long term. There are many form letters already written out there to help request a lower interest rate.