Here’s how to fight credit card debt

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Credit card debt got you in trouble? Here are some tips to remember to help you climb out of the hole.

1. Want to keep card debt to a minimum? Keep rates low by avoiding ‘risky’ credit behavior
A few bad moves:

  • Applying for multiple credit cards.
  • Charging more than 25 percent to 30 percent of your limit (even if you pay it off every month).
  • Multiple balance transfers.
  • Late payments.

2. That falling Fed rate won’t necessarily decrease the annual percentage rate on your plastic
If your credit is good, and you carry a prime-based, variable-rate card, you’ll likely see lower rates. But with tightening credit standards, many institutions have raised the bar. So even if interest rates are dropping and your credit score has remained the same, you could see higher APRs.

3. Planning on getting what Bankrate experts have rated as our best balance transfer credit cards? Read carefully and pay attention to the fine print.

  • What’s the APR and how long does it last? And then what?
  • What’s the rate for balance transfers? Will payments go first to new purchases or balance transfers?
  • What’s the transfer fee? What other fees could you encounter?
  • Have you actually qualified for that low rate or is it subject to further review?
  • Can you make your payments early or on time? (Teaser rates often vanish with a late payment.)

4. Teens don’t need credit cards or expensive cell plans
If your kid is spending your money, put him or her on a budget. If a teen can’t seem to manage, switch to prepaid credit cards and phone plans. That way, $0 = stop.

5. Fight rate increases
If your rate goes up, call and ask why. You may have to work your way up the chain of command. Stay calm and take names and notes. You can also reject the new rate. Notify the card company (in writing, with proof of delivery) that you won’t be using the card for new purchases and are opting to pay off the balance at the old rate.

6. Getting into danger with plastic? Here are some of the signs:

  • Using the card as a source of income, not a payment option.
  • Can’t pay the monthly balance.
  • Taking cash advances (even worse if you’re using the cash to pay other cards, according to debt guru Howard Dvorkin).
  • Putting off needs (not wants), like medical care, to meet the bills.

7. Stop the bleeding
If your credit card debt is growing faster than your ability to pay it, get off the merry-go-round. Put the cards on ice for a while, and live out of your check book. It may mean making cuts or reductions (bye-bye premium cable), but that’s easier than debt stress, foreclosure or bankruptcy.

8. One way to work your way out of credit card debt: craft a spending plan
Total the monthly income and bills. Determine how you can slash the latter and decide how to steer your monthly income. Some free tools to make the job easier: Bankrate’s home budgeting tool, plus work sheets and calculators.

9. Develop a payoff strategy
With your new budget, develop a plan for attacking those credit card balances. Test it out with the Debt calculator.

10. Finally, when that card’s paid off, don’t close the account
Credit scoring formulas compare the amount of credit you’re using to the total that’s available to you. The higher that percentage, the worse it is for your credit score. When you close an account, you shrink the amount of available credit, which raises the percentage of credit you’re actually using.

— Updated: June 16, 2008
Written by
Dana Dratch
Personal Finance Writer
Dana Dratch is a personal finance and lifestyle writer who enjoys talking all things money and credit. With a degree in English and writing, she likes asking the questions everyone would ask if they could and sharing the answers — along with smart money management tips from the experts.