Help! I moved out of my parents' house six months ago, and I've run up balances of over $90,000 on three credit cards since then. I had to buy things for my apartment, and I think I went overboard. I can now only afford to pay a few thousand dollars every month on the cards, and it seems like it's taking forever to reduce the balances. What can I do? - Maxed out

You're not alone in your credit card crisis. News reports have indicated that credit card use in Jamaica has grown significantly in recent times. The resulting increase in credit card debt has left many customers feeling desperate for solutions to get rid of this seemingly endless liability.
Credit cards are not necessarily bad - they can be an extremely convenient way to pay bills, or to provide funds in the case of an emergency. However, a credit card can be like an out-of-control racehorse that has thrown its rider if proper money management skills are not used. In the coming weeks, we'll learn more about how the credit card companies charge you interest, and ways you can use credit cards to your benefit.

Let's look at some strategies to get you out of this debt:

Pay more than the minimum required

Paying only the minimum required by the credit card company is a recipe for debt disaster! You'll incur interest costs many times your original debt and extend the life of your loan for several years. Adding even a small amount extra each month can make a huge difference.

For example, if you owed $40,000 on a card with a 40% interest rate and paid $2,500 per month, it would take you 16 years and five months to pay off the debt. In that time you would have paid more than $45,000 in interest. However, if you paid just an extra $1,000 per month, your debt would be paid off in only two years and three months, with only one-third the interest - just over $15,000.

Visit www.genus.com to calculate your credit card payoff time.

Figure out which card you should pay off first

If your credit cards have different interest rates and outstanding balances, it would be useful to calculate which one you need to pay off first. If you are putting the same amount on each credit card every month, you could actually be extending the life of your overall debt.

Here are some steps to calculate the debt priority of each card:

1. List all the outstanding balances on each credit card account.

2. Put the monthly minimum payment required beside each card balance.

3. Divide each outstanding balance by the minimum required monthly payment to get the priority number.

4. Pay off the debt with the lowest priority number first.

5. Put an extra monthly payment on the card ranked priority one.

6. Make the minimum payments on the second and third priority cards.

7. When you have paid off the first priority card, put the entire amount that you used to pay on card #1 to your second-ranked card, along with your regular previous payment.

8. Continue this strategy until all cards are paid off.

Lower your interest costs

Credit card interest rates are very high, as they are charged on unsecured debt. Here are a few ways to try to reduce your interest costs:

1. Cancel the cards and negotiate with the credit card companies to stop charging interest on the outstanding balances. If the debt is long-standing, or if you are in financial difficulties, they may grant your request.

2. Ask the banks if they would transfer the debt to other kinds of loans with lower interest rates.

3. Try to consolidate your debt with a credit union loan or ask a relative or friend to use their accounts as collateral for a low-interest, cash-secured loan.

As you reduce your debt over time, it's important to change your spending habits to ensure that you don't get into debt difficulty again. Use a budget guide to plan for your monthly expenses, establish an emergency account, and save regularly so that you can afford to outfit your home in style.

Send questions or comments to info@financiallyfreenetwork.com. A free budget planner is available on request.

Feeding the multitude

DANGEROUS PETS

Pepper Pot