Tuesday, June 30, 2009

Torching your credit cards won't make you rich, but it might help

Credit cards begin melting at 360 degrees Fahrenheit, but don't actually start burning until 455 or higher. Never mind how I know.

I thought of that recently when Jim Wang at Bargaineering.com shared a nifty illustration from Mint.com, an online budgeting help provider, that tracks the descent into credit card hell. It's only funny if you haven't been there, however.

The bad news is that while new credit card legislation is changing some of the ways you want to manage your credit cards, which Leslie McFadden outlines at Bankrate.com., there aren't any new shortcuts out of a jam once you are in it. In fact, some once instinctive moves, like stashing away a card you don't use much, requesting lower interest rates, or bailing out of a card contract if the issuer offers an unwanted change in the terms, all can backfire now, she writes.

Basically, you have three ways to work your way out of a credit card pit. You can take out a consolidation loan. You can start using a secured card --on which you set the credit line with your own money until your records improve. Or if you have a decent low rate card on which you aren't maxed out or you can get one, you may be able to transfer some balances around to save a few dollars.

In any case, you need a systematic plan to pay down the debt as soon as possible. It probably will look a lot like this rolling down plan DePaul University once suggested.

You also may think at some point that credit cards seem tougher to deal with than the mortgage. That may be true. As Ray Bradbury vividly told us years ago, paper burns at Farenheit 451.

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