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What to Do if You Have a Large Credit Card Balance

What to Do if You Have a Large Credit Card Balance

There are steps you can take to protect yourself from becoming a victim of abusive credit card practices. These steps are meant mainly for poor people or those struggling with too much debt who are much more likely to be victimized by credit card companies than those who pay off their credit cards each month. After all, if you owe them nothing, you can easily close out your account and go elsewhere. The credit card companies know this, and, as a result, they treat their customers accordingly -- financially sound customers are treated with respect. They're charged a much lower interest rate and if they happen to send in a payment late because they were on vacation, the $29.00 late charge is immediately reversed. Financially unstable customers (those who carry big balances from month-to-month) are treated with contempt. The credit card companies know these customers can't pay the account off any time in the near future, so they can treat them as they wish with no government regulation.

If you owe a significant amount of money to one or more credit card companies and can't pay it off quickly, there are steps you should take to protect yourself --

Step 1. Pay off your credit cards as soon as possible.

As long as you owe them, you are their slave. You must cut back on expenses and luxuries and do without so that you have extra cash to pay off your credit cards. Get a second job if you have to, but stop using your credit cards to live beyond your means and start paying them off. Click here for common sense tips on reducing your monthly variable and fixed expenses, such as disconnecting your cable service so you have an extra $60 each month to pay off your debt. And most people don't realize that if they pay as little as $10 more than the minimum each month they can reduce the time it would take to pay off a big balance from about 18 years to just four years. Stop using the card and start paying it off so you are no longer a slave. Once you get your debt under control, use the card only as a substitute for cash. This means you will pay the entire balance due on the credit card off each month and not use it to live beyond your means.

Step 2: Challenge the claim they received your payment late.

All the major credit card companies derive most of their profits from collecting late fees, so they have a strong incentive to trick you in to paying late. They love to prey on customers who carry big balances. A common tactic is to move your due date and hope you won't notice. And despite the fact that their paying processing centers operate 24 hours a day, seven day a week, most credit card companies won't post payments received after 1:00 p.m. or on weekends.

You can sidestep this trick by always examining the due date when your statement arrives and paying your bill electronically. Your bank probably offers an electronic bill paying service (but make sure its free), and you can also make payment directly at many credit card websites. We recommend using Paypal.com, which offers a free bill paying service. At the time this article is being written, you can pay Citibank, Capital One, Bank of America and hundreds of other creditors via Paypal just by clicking a button, and it costs you nothing. All you have to do is register with Paypal, confirm your bank account and you're set to go. When you pay electronically, you have an electronic receipt indicating the date the payment was sent and received as proof that the payment was made on time.

Step 3. Put all billing disputes in writing.

Credit card companies want to communicate with you exclusively by telephone so they can deny receiving your call later on, if necessary. Even if you write them a letter, they will respond by phone. If you have a dispute with them, it is very important that you don't call them, instead, put it in writing and send it certified mail, return receipt requested and request that they communicate with you only by letter. You need the written proof to fight them. Those who fight them with letters often get late fees and such removed. Click here for more information about billing disputes and view sample letters.

Step 4. Pay all of your bills on time.

Some of the major credit card issuers monitor your credit report for negative activity. If they find late payment notations or written off accounts, etc., they will boost your interest rate dramatically. Almost all of the major credit card companies use this tactic -- they raise people's rates from 7% to 28% just like that when they find a late payment or a high debt ratio on a credit report! If you don't want your interest rate quadrupled, keep your credit score high, pay your bills on time, and don't accumulate too much debt.

Step 5: Don't just pay the minimum due each month.

If you have a large balance and pay only the minimum on a credit card for many months in a row, some banks will raise your interest rate significantly. Try to pay at least $30 more than the minimum each month to avoid their wrath. Even if you're struggling with debt, it would be a good idea to make a few large lump sum payments at least twice a year to indicate that you do have some cash to pay down the debt -- send them at least three or four times more than the minimum required.

A warning to those struggling with debt -- Most debt counselors recommend that you focus on paying off one credit card at a time. They advise you to apply all your extra cash to one credit card while paying only the minimum due on all other credit cards. But this can have very serious consequences if those companies to whom you are paying only the minimum raise your interest rate because you have been paying only the minimum for a very long time. If your rate is raised from 15% to 28%, it's going to take you so much longer to pay off that credit card.

A better alternative is to pay down all the cards at once by sending in at least $10 more than the minimum due each month, but ideally, at least $30 more than the minimum due each month on each credit card to keep your rate from being increased. And, if you have any extra cash left over after that, you can use it to concentrate on paying off a specific credit card.

Step 6. Complain, complain, complain.

Credit card companies get away with all of the above because too few consumers complain to their state and federal elected officials. If your senator received hundreds of letters from consumers threatening to vote him out of office in the next election if he doesn't stop taking money from the banking industry and enact regulating legislation as soon as possible, you can be sure he would do something to keep his job and his fat salary and benefits.