Secrets to Effective Debt Management
Lee is not a millionaire, not even close. He doesn't have a steady job, but manages to earn in the middle five figures most years.
Lee has eleven credit cards; seven are personal and five are for business. His balances have run as much as the high five figures and are currently in the low five figures.
Yet he has a credit rating in the 700s, and the majority of his credit card debt is at interest rates below 5%.
How does he do it? These are Lee's secrets.
1. Never, Never Pay Late
No matter what, never miss a credit card payment. Today's credit card agreements allow the issuer to hike your interest rates over 20% if you miss even one payment. Worse, most agreements allow them to hike your rate if you miss a payment on some other card!
Missed payments also drag down your credit rating, which in turn inhibits the card companies from offering you lower interest rates.
High interest rates just suck money out of your pocket. Keep those rates low. Never miss a payment.
2. Have at Least Three Credit Cards and Negotiate the Lowest Rate
The card companies have access to your credit file and they know which cards you're carrying. They want you to use theirs instead of the other guy's. When you have more than one card, you're in a better position to bargain for a lower interest rate.
Call each card issuer and ask for the lowest interest rate they can offer you. Some will come down and some may not. After you've called them all, however, you'll end up with one that you know is the lowest possible.
3. Use Only One Card for Financing Purchases
When you have a necessary but unexpected expense (such as a car or home repair) that you have to charge and pay off over time, use only the credit card with the lowest rate. Do not use this card for convenience expenses that you plan to pay at the end of the month.
By putting only the expenses you need to pay off over time on the card with the lowest rate, you keep your interest expenses at a minimum.
