But don’t fret. It is easy to reduce credit card debt, if you have the required discipline and commitment to do it.

One of the very obvious steps is to cut-down your expenses. It may sound quite apparent, and repetitive. However, most of us aren’t ready to reduce our cost of living even when we are buried in debt up to our noses. And that includes me too. I owed credit card debt of around $28,000, yet I didn’t bother to repay the amount until it became $43,500. I started cutting down few things. However, it took much longer time for me to adjust with my new lifestyle.

One needs to understand it’s not only about cutting down expenses; it’s a behavioral change we are planning to inculcate. And it takes time. However, this is probably the only method to reduce credit card debt when you don’t have any additional income sources. Once you become habituated to this kind of living (not exactly frugal), reducing credit card debt is not difficult.

Stop Using Credit Cards

Sounds obvious? It is. Yet many people cannot give it up since they are addicted to using credit. Only when you completely eliminate the usage of credit you would be able to get out of debt.

Change Your Priorities – Repay Your Debts First

Instead of spending money on entertainment, you can make payments toward your debt. You cannot have a debt-free life unless you make it your priority to repay your debts.

Have a Budget

If you still don’t have a budget, it’s time to have one. Having a budget helps you recognize your spending habits, and reduce expenses considerably. Besides, it can help you repay your debts quickly.

Debt Consolidation

If your debt is too huge and complicated to manage, you must consider seeking help from debt consolidation companies. They can help you reduce your debt by around 50-60%, and offer flexible repayment options.

Note that credit card debt elimination is not an easy task. It takes continuous effort and discipline to have a debt-free life.

Debt Settlement

You can settle your debt amount by around 60% negotiating with your creditors. When the payable amount is reduced, you credit score takes a hit and looks miserable for a while. One you, however, start repaying the left-over amount, you score improves gradually. This is, therefore, considered to be one of the best credit card debt relief options. This helps people to stabilize their financial condition after a while.

Bankruptcy

Although you don’t have to pay off your debt after you file for bankruptcy, it has some grave impacts on your score. For a period of 7-10 years, your creditor will show bankruptcy status, which wouldn’t help you to get a loan, job, or accommodation. Hence, for the next decade, you lead a miserable life.

It’s clear from the above argument that going for debt settlement is a better option than filing for bankruptcy. Temporary problems are better than life long resentment.

According to the Federal Reserve Board, the new credit card law obliges credit card providers to inform customers about any major change in the terms, at least 45 days in advance. Overdraft facility, which was initially provided by default, will now be optional and not automatically assigned. Hence, if you shop for something that exceeds your credit limit, it would be denied. And obviously you won’t be charged any fee.

However, this new rule wouldn’t keep you safe from the clutches of these plunderers. Hence, here is a list of few tips that you will need after the rule is applicable.

1. Go for Fixed Rates :
   According to the new credit card law, companies cannot change or increase the interest rate of your card without prior notice. However, the law wouldn’t protect you if your card comes with a variable rate conditions or if it is an introductory offer for few months. If possible, try to avoid such cards and stick to the ones that offer fixed interest rates.
2. Understand Reward Programs:
   With a curb on their most reliable income source, credit card companies are now deriving various other methods to earn profit. Award programs and other such services can actually benefit them more than it will to you. I am not restricting you to avail such services. However, make sure you understand everything before you go for such programs.
3. International Use :
   This new credit card law has been introduced for American population and is applicable with the premises of the US. However, it wouldn’t stop card providers from levying stiff fees, if the card is being used for international transactions. This can happen with or without traveling physically out of the US. If the item you bought only is provided by an international vendor, you will be charged with some additional fees. However, not every company will levy such fees. Hence, learn these policies before you go for a credit card.

Perhaps these are just three things I am aware of, that can be a reason for additional fees. However, there may be numerous other ways that a credit card company might use to exploit you and the new credit card law as well.

Recently President Obama introduced the largest Federal Stimulus Package for the Credit Card Debt holders of USA who have bottomed down in the financial lives. Here are some of the major points of this package.

Credit card debt Settlement

The biggest Credit card debt relief is tried to provide with the weapon of Debt Settlement with the company. Major part of this Federal Stimulus Package has been allotted to the Credit Card companies who are having huge amount of debt receivable from millions of individuals. After this package, the individuals will now be able to get their debt settled with the Credit Card companies in quite negotiable terms.

The Financial Institutions have managed to make these loans offset and to make the people’s debt to minimum level. The simplest way of coming out of this vicious circle of debt is to have approach of the Debt Settlement Company who is having better approach and contacts to solve the issue of Credit Card Loans. These companies are having better Debt Negotiation Department who offer better mutual settlements.

If the debt is over $10,000 the debt negotiations can be easier with the Financial Institutions, Medical Institutions, Banks and any of the Government officials by the mediators of Debt Settlement Company. These settlement personalities bring down the debt to almost 50% by using their better relations and legal terms. Then they charge some of the fixed percentage on the amount they have saved from the Debts. These negotiators should never be paid in advance.

The Obama Credit Card Debt Relief Plan makes the people enriched with the facilities of settling the Debt to minimum by paying huge amount of money to the institutions who are having larger debt.  This policy is having both the views from the people. Let us check the aspects and views of the economists.

The Pros

Debt Relief to the roots

The basic theme of this Debt Relief Program is to have the working with the roots of financial bankruptcy. The Government has not offered money to the individuals or smaller sections of economy which doesn’t make big deal to the entire economy. But, the entire economic reforms are attached with the soundness of the big financial institutions and they all are offered relaxations and relief practically by compensating money to them. Previously the authorities used to ask the institutions to forget their money which were the worst ever steps but this could well reform the structure from the roots.

The Cons

Although the Obama Credit Card Debt Relief program is viewing large scale benefits, it has no orientation of Personal Finance criteria. There are many of the critics saying that the loyalty of the institutions whom the amount is paid is quite uncertain and this will not eliminate the Debts, only will reduce them and more of the chances are there that they will again increase rapidly. So, the actions taken are truly not the concrete ones.

So, these are the Pros and Cons of Obama policies. Bu, if you are an individual with Credit Card Debt on your head, you can definitely boost yourself towards Personal Finance progress.

The Conclusion

Credit Card Debt Relief program of Obama is announced but are they really Personal Finance boosting or not?” this is the question popping up in all of our minds. There are pros and Cons of this issue but we would suggest having the relief from your debt if you have any of the Credit Card debt. Get negations and earn financial stability of yours which is base of financial growth for the entire economy.

Basics

Be prepared before you call the company

Before you call the relevant credit card debt relief company, it’s important to keep all the required documents handy. This would include –

• Your recent bill,
• A copy of letter from creditor accepting / proposing settlement,
• An approximate figure you can manage to pay.

Calling the creditor

Before calling the creditor, bear in mind that they wouldn’t be friendly or cordial if you account is past due by 5 or 7 months. Most of the collectors are professionally trained to extract your personal information like mailing address, phone number, employment address and other information. Don’t get frustrated.

In many cases, you may find creditors may offer a settlement. However, you many also find that many are not willing to negotiate. They just want money. Explain them that you are ready to repay but with a negotiated amount.

Dealing with rejection

If the creditor is not ready to offer a settlement, you can do either of these three things:

• Hang up the phone without using profanity. Remember that every call is recorded. Do it politely because the agents are not rejecting you offer purposely.
• Ask them to transfer the line to a supervisor or a manager. They are the one who take decisions. So, if you can reach them, it’s more likely that you will receive good settlement options.
• Write a short, precise letter to the manager or the president of the company. Explain you plan of repayment. Be precise about the accurate dollar amount and dates of payment.

Positive Settlement

Settlement means negotiating an amount that you can pay. Ask for removal of finance charges, late fees, and overlimit fees. Generally, these three charges amount to around 35-40% of the total repayable amount. So, if the creditor is willing to waive off these fees, you have cracked a great deal. If they are refusing to settle within the range of 35-40%, tell them you can’t make an arrangement immediately and decline the offer. It is very much likely that you will receive a settlement letter after around couple of weeks of talking to them.

Don’ts

There are few things that you need to avoid while dealing with credit card debt relief companies.

• Don’t forget to keep a record of all the communication that took place between you and the creditor. This should include all the details like name of the agent you spoke with, date, time, etc. This information is very significant if a dispute arises later.
• Don’t abuse any agent over the phone. It’s being recorded. Moreover, using profanity obviously reduces your chances of getting a settlement.
• Don’t accept verbal agreements. When the creditor agrees upon a settled amount or payment arrangement, get it I written. Courts of most states do not entertain verbal agreements.
• Don’t be ignorant. Learn more about the consumer rights. Many firms may take undue advantage of your ignorance and try to coerce you.

Conclusion

Getting a settlement on your own is not quite easy and requires being responsible. While, you are involved in negotiating with credit card debt relief companies, it’s very essential to keep your cool. Getting aggravated will worsen the conditions.

Okay, I’ll be clearer and explain in detail.

The New Credit Card Legislation

The introduction of new legislation is quite beneficial to the consumers, but extremely dreadful to the providers, diminishing their profit margin. Commencing from February 2010, this rule will enable consumers to repay the minimum balance of higher interest first, then the lower ones. The providers won’t be allowed to hike the interest rates unexpectedly (currently, a common practice) except under few circumstances, like after the promotional period ends, or late payment by the card holder. If they wish to hike the rates, in any case, they will be required to send a 45-day advance notification to the consumer/s.

The introduction of legislation erases the term ‘Universal Default’. From Feb 2010, there won’t be any hike in interest rates due to irregular payment of your utility bills. The providers will lose the ease and advantage of compounding new, higher interest rates with the transferred, lower rates. The providers cannot change your billing dates, and the due dates should be 21 days after the bills have been mailed or delivered.

Currently, you can exceed the credit limit of the card with an over limit fees. All the cards come with an excess to overdraft facility, by default. However, the providers won’t be able to take advantage of consumer’s negligence from Feb 2010 because the new legislation will introduce a law that will compel the providers to ask consumers to ‘opt-in’ for such facility.

Fear of Debt

There are several sever drawbacks and downsides of the current recession. However, it has essentially induced people to shrink their spending and start saving. The accumulated amount in their saving account lasts longer. This facilitates banks to provide business loans, and capital lending to corporations and government, which is quite healthy for the economy in long run. This saving habit is helping consumers to borrow less and repay more.

According to the figures declared by Federal Reserve, the revolving debt is decreasing considerably every month and emphasis on saving has augmented. Instead of indulging in substantial spending, this Christmas, people insisted on repaying their debts.

Death of Credit Card Providers

With the introduction of new legislation and saving habits of American population, the profit curve of credit card companies will witness a slump in the coming months. Although people can effortlessly own multiple credit cards today, they are not willing to. The fad of using cash to shop seems to be returning and will stay for a longer time. Is it an end of the Credit Card Era?

Step 1 – Stop using cards

Bury your cards. And I mean it. Do not, at any cost, try to shop further with your credit card. You are already laden with heaps of debt. Why do you need more?

Step 2 – Pay low interest

Try to save some interest please. Get a card with lower interest rate and transfer your balance immediately. I know it’s next to impossible to get a new card with such a credit score, but aren’t you trying everything? Give it a shot. Be very cautious while applying for a new card. Ensure that it benefits your rather than adding to your debt.

Step 3 – Negotiate with your card provider

Ok. So you didn’t get a new card. Now what? Call up your card provider and tell them that other companies are offering you a lower interest rate but you want to stay loyal to their company. Try to convince them for a lower rate politely but quite firmly. Also, try to sound practical. You cannot ask them come down from 16% to 3%. 12% is fine. If they refuse to do so, try after a month or so.

Step 4 – Smaller debts first

It’s logical to pay the bigger debts first. However, if you triumph over your smaller debts, your psychological power can help you to get on with the bigger ones. Keep paying the minimum amount of your bigger debts and give whatever you have to repay the smaller ones.

Step 5 – Pay in parts

It doesn’t really require you to live a monk’s life for paying your minimums. Split the minimum amount in two halves and try to pay every two weeks. This wouldn’t complement you with the stress of continuous and bigger saving.

Step 6 – Budgeting

Keep a written track you what you are doing. Of course, financially. It’s very important to set a budget for your expenditures. Set a target of how much you will save every month or how much you will invest. If you don’t know where you are going, you will reach nowhere. So set a target first.

Step 7 – Debts first, food later

Debts first, food later. Ha! That’s an exaggeration.
Your target is not just paying the minimums every month. Keep paying whatever you can to get out of the debt. If getting out of debt seems quite a long destination and kills your motivation, think of it this way: the more you pay today the less you have to pay as interest tomorrow. If your gandma grants you some money, pay your debts. If you win in a casino, pay your debts.

Step 8 – Account closing

If you have paid off the balance of even one card, close the account. However, ensure that you close only the ones that are quite new. Keeping the older accounts open will improve your credit score as it brings the average age down.

Step 9 – Cash please

Trade in cash. This will make sure you don’t create another heap of debts for yourself. Don worry, it’s not necessary to carry cash with you always. There is another card known as ‘debit card’.

Step 10 – No more debts

There are companies that will offer you huge loan at low interest rates to repay your debts emerged from credit cards. Wow, that’s a great deal. Isn’t it? Not at all. Such loans require a security to process. Ok, let me put it simply for you. You just successfully secured an unsecured debt. That means, if you fail to pay back the loan, not only your credit score is wrecked, you lose your house, your car, and other belongings.

Step 11 – Debt Management

You can turn towards a debt management company or credit counselors. However, it’s very important to do a thorough research about the history and existence of the company. If someone has already dealt with the company, seek advice. While dealing with them, don’t forget to the conditions mentioned in fine prints.

Step 12 – One for each

Why do you want to make your life miserable by having 18 credit cards? Is it one for every day in a month? Keep it short and simple. Keep 1 card. Ok, may be you need to divide your personal and professional expenses. Get 2. Isn’t it simple remembering two due dates than eighteen?

Step 13 – Check your score

So now you are getting back on track gradually, know your score. This is a proper device to gauge your financial condition. However, it’s better to sign up for a monthly monitoring service rather than keeping a check on your score everyday.

Step 14 – Rectify Errors

Mistakes in your scores are more frequent than you assume. Scan the report for trivial errors, because even a minor one can cause a major effect on your score. And if you do find one, immediately contact the credit reporting agency to correct it. And remember, this is not a one time event. Keep checking regularly.

Step 15 – Old is Gold

Want to know a super secret to hike you credit score? Start paying the bills that you left unpaid 6 years ago or even older. Start clearing all the old dues and bills to witness a drastic improvement in your score. It may feel inane to call up and pay the bills after so many years, but don’t you remember what situation you are in and how frantically you want to improve? Oh, and it’s not important to explain them the reason why you are paying off the bill. Just tell them it’s a good deed.

Step 16 – No Settlement

There are chances that credit companies would offer you a settlement on your debts at a lower amount. One more good deal, isn’t it? No my friend. It may seem like a temporary relief from your burden, but it accounts to loss in the long run. It has a devastating effect on your score. C’mon, you have settled the debt at a lower amount that clearly means you don’t have money to pay them. How can you expect improved statistics to turn up? And these ruined numbers will just help you to get loans with higher interest rates, wherever you go.

Step 17 – Keep it low

Here is a simple way to show the credit agencies that you’re doing well financially. Use only 30% of the available balance on the card. Never exceed this limit. Now, if you have just one card and you can use only 30%, how will you survive? Read step 9 again, trade in cash.

Step 18 – Auto-pay

Remembering to pay all the bills is quite complex and you can easily miss some of them. However, you can’t afford to miss any, especially when you are trying hard to improve your score. So use automated services to pay the bill. Ask your bank to auto-pay some bills every month and don’t forget to regularly keep a check on your bank account balance to avoid some other charges like overdraft and late fees.

Step 19 – Oh my Score!

For some, credit scores are just figures. But you should not make this blunder. This score is a major factor affecting the interest rates of the loans that you might need in future. A few more points can save thousands of dollars.

Step 20 – Realization of Nirvana

What is the targeted credit score? I cannot suggest you 850, as it the uppermost limit and nearly impossible to reach. However, have a score greater than 775 is equally good for loan providers. You can negotiate the lowest interest rates on any kind of loans. You will get a job soon, and a partner as well. What else do you want? Isn’t it nirvana?

Last Minute Interest Hikes

As customers say, in the last 8 months of this year, it’s been observed that the credit card interest rates have been hiked rapidly (by about 20 %) without sufficient convincing reason. Pew Trust and New York Times have got some interesting reports on consumers complaining about the interest being made almost double in the last few months.

Compulsory Enforcement of Overdraft Fees

An overdraft fee is the fee you pay for crediting more than your balance amount. According to the CCARDA 2009, the overdraft fee is not charged by default. A customer has the option of choosing it. A customer who does not choose it cannot credit more amount than his balance. This seems to be fair enough. Banks and crediting companies make a lot of profits with overdraft fees. So, now in the last few weeks before the enforcement of the law, they have hiked up the fee by about 35 %. Now they are compulsorily extracting overdraft fees from customers in every possible way because a few months later they will not be able to do so under the enforcement of the new law.

Altering Due Dates Without Notice

Due dates are being altered by many credit card companies to extract high late fees. Money Under 30 has got the report on how a leading credit card company is changing due dates without notice. The customers have to pay up a big amount of late fee and also have to pay an increased interest rate permanently after they miss out on their due date of payment. The CCARDA 2009 makes it mandatory that bills should reach the customers at least 21 days before the due dates.

Lowering Consumer Credit Limits

Banks are lowering the consumer credit limits as they can charge higher interest rates. But this lowers the credit score of many people who’ve maintained a good track record of credit payments.

Universal Default Credit Implementation

One of the most irrational penalties of credit card payments is that if you miss paying out on one of your credit cards, the penalty will be reflected on an other credit card of yours. For example, if you forget to make a monthly payment on your Visa card, the monthly interest rate of your MasterCard  credit card will go up.