Trying to Reduce Expenses? Sweat the Big Stuff! – Credit Cards

photo credit: danesparza

This is a continuation of our series on reducing the largest areas of your spending. As I have said before, initially it can be overwhelming to try and cut every area of spending in your life.

Making your own laundry detergent, cutting back on your paper towel and toilet tissue usage, cutting open tubes of toothpaste to get the last little bit and putting water in your ketchup are not the kind of tips that you implement at the beginning of your financial journey!

In our first two articles we looked at reducing your auto expenses and cutting the amount you pay for your cell phone and other utilities.

Today we will take a look at ways to reduce your credit card expenses.

Credit card debt represents a large portion of many American’s financial obligations. Many people pay hundreds of dollars a month on credit card interest alone!

• Negotiate a lower rate – This can be one of the quickest way to save thousands of dollars! Using the Negotiate My Rate tool at DebtGoal.com, you can calculate your potential savings based on the average reduction for each bank. They also give you tips and a script to follow when you make the call. You are also able to read statements from other customers who have negotiated with the same company that you are about to call.
• Use a balance transfer offer – Another quick method to save thousands is to take advantage of a balance transfer offer. Not everyone is eligible, but if you are, consider using it. If you have credit card accounts with high interest rates, moving those balances over to a card with 0% interest can save you tons of money! Here are a few things to keep in mind:

1. The 0% offer is probably for a limited amount of time. Most last for about a year or so.
2. If you are not able to pay if off by the end of the introductory period, your balance will now be charged at a higher rate. Be sure to factor this in to your calculation.
3. Most balance transfer offers charge a fee for this service – usually between 3-5% of the total transfer amount. So if you think you can pay off the balances in a short period of time, figure out if the interest will be more or less than the balance transfer fee.

• Get a personal consolidation loan – Another option if you have good credit is to get a consolidation loan from your bank. The benefit of this – besides the lower interest rate – is that you will only have to make one payment each month to pay off your debt.
• Participate in P2P lending – P2P stands for Person to Person (or People to People, or even Peer to Peer depending on who you ask) and is a great way to consolidate your debt. Instead of a bank lending you the money, individuals are the ones who evaluate your credentials and decide to give you the loan. Each individual is able to determine if they are willing to take the risk, and if you get enough people to invest in you, you’ll get the loan. You can use a service such as Lending Club or Kiva.

Two notes about the options listed above.

1. The last three options will all clear up room on your credit cards. This does not give you a license to go on a spending spree. You must be careful not to start charging liberally, as you could end up in the same position you started, or worse!  If you don’t address the real problem (usually a lack of financial discipline and trying to live above your means), you will fall back into credit card debt!
2. Since you have already saved money on your auto, cell phone, cable, internet and utilities, take that money and use it to pay off your debt! First, be sure to build up a cushion in your checking account. Then take every extra dime that you have and eliminate your debt. Doing this will accelerate your debt repayment and increase your savings.

What are some of the ways that you have cut your credit card expenses? Do you have any experience with balance transfers or consolidation loans? Anyone ever use P2P lending – either as a borrower or an investor?

I look forward to your comments!

To receive updates from KNS Financial, enter your email address below:

…or Subscribe to our RSS Feed here: http://knsfinancial.com/feed