Organizations Step Up To Help Consumers Reduce Credit Card Debt

Despite budgeting and best efforts to avoid paying for the holidays with plastic, this is the time of year when many Americans struggle to pay down credit card debt accrued over the holidays. Paying down debt as soon as possible, however, may not be the best strategy.

The Connecticut Better Business Bureau and Equifax, one of the companies known for tracking credit scores and debt, both recently provided information that could be invaluable to consumers who are looking to shed this taxing financial burden in the new year.

According to Connecticut Better Business Bureau President Paulette Scarpetti, reducing debt involves a balancing act between paying down the balance, keeping enough money for monthly expenses, and saving money for emergencies.

“Consumers need a strategy to pay down debt to avoid running out of money at the end of the month and getting stuck in a cycle of increasing debt because of a lack of planning,” she said in a release January 11.

Connecticut BBB offers the following tips to help consumers reduce credit card debt without creating further budgetary problems:

*Calculate monthly expenses. Consumers working to lower debt do not require an elaborate budget; however, it is vital to get a handle on your total monthly expenses in order to calculate how much money can be put aside for debt reduction and savings.

*Pay down highest interest rate cards first. If you have spread out your debt on more than one card, focus on reducing the debt that costs the most. Interest rates are listed in monthly credit card statements.

*Feed the savings account or pay off the debt? When paying down debt, there is less money for discretionary spending and savings. The interest paid by a savings account is considerably lower than credit card interest rates, therefore paying down debt takes priority. Nonetheless, consumers should try to save at least $50 per pay check to build up a savings account cushion of $1,000 to $2,000 for emergencies such as car or home repairs.

*Amalgamate debt. Contact your lender about amalgamating your debt. Many people find it less stressful to make one monthly payment rather than several. You also may find a more favorable rate if you shop around at several financial institutions or credit card issuers.

*Put away the plastic. Store your credit cards where you will not have easy access to them, but do not cancel them as this may have a negative effect on your credit score. Use a debit card when possible. You may want to use a credit card for certain purchases to protect yourself in the event of a dispute with a vendor. After the purchase however, pay off that extra amount right away to prevent increasing your debt.

*Finally, track progress. It takes time to get into debt and it can take considerable time to get out of it. Consumers may also may want to seek the services of a financial counselor to help you balance your books.

On the same front, Equifax recently launched a new pay-as-you-go service that also aims to help individuals chart a course as they work to get out of debt.

Equifax offers a product called Debt Wise that provides a step-by-step plan consumers can follow to pay down debts more quickly and save money on interest. Prepopulated and automatically updated by your Equifax Credit Report, a consumer creates a Fast Play Plan. As consumers follow their plan, Equifax tracks the progress and provides tips and tools to help them stay on track.

For a $14.95 monthly fee, the program can help consumers set up a pay down schedule in as little as ten minutes with the Fast Pay Plan Wizard. This flexible Fast Pay Plan lets consumers choose debts from their Equifax Credit Report, add debts not in the credit report and easily updates the plan if necessary.

Automatic tracking of progress occurs as new changes are reported to the Equifax Credit Report

Spend Right tools and tips to help consumers stay on track, including four Equifax Credit Reports along with four credit scores per year including detailed explanations, comparisons with national averages and graphs of how lenders view the individual consumer.

It also offers an interactive score simulator to show how actions might change a credit score, and daily monitoring of the Equifax Credit Report for key changes, while providing email/wireless alerts.

The system is supported by customer care 24 hours a day, seven days a week.

According to a report on themoneypuzzle.com, the Equifax service is helpful for some people, but not everyone. People with no debt, one large debt, or only common debt like a mortgage and school loans will not benefit from the program.

Since consumers get four copies of their credit report when signing up with Equifax Debt Wise, it can be an excellent value. It typically costs about $160 for obtaining four credit reports individually.

For more information on managing your finances and credit, visit: bbb.org/credit-management. And to learn about the Equifax product, www.equifax.com/debtwise.