The Book Fiend Info Center

May be due to your vanity, you may have enmeshed yourself into credit card debts. But you should correct the situation by first understanding how credit card companies earn their profits. They are after all in this business to earn and these earnings come disguised as interest rates. And how they adjust your payments is key to understanding how they earn off your propensity to charge purchases to your credit card.

The factor that blunts all your financial decisions is the belief that the credit card debts will decrease since you’re religiously meeting your monthly dues. Wrong. To understand, read the terms in the “payment allocation provision” that they send you. The provision simply states that they can decide which of your debts to settle first.

These credit card companies adopt a clever strategy of adjusting your payments towards low interest debts, leaving your high interest debts unsettled so they can earn longer from it. That’s the reason for your credit card debts not getting reduced though your payments are being regularly remitted.

Since you know the fact, you can now negotiate with the credit card companies to match your payments towards the high interest debts first and only after these are liquidated, low interest debts must be focused upon. Typically, student and car loans have this facility.

If you transfer all your high interest credit card debts to a zero interest credit card, you can also save much on interest payments. You should also not add your debts on the zero interest credit card by charging new purchases to it. This may add to your debt burden and you’ll be back to your precarious financial situation.

The finest solution is to make efforts to wipe out your credit card debts as fast as possible so that you can focus your energy and attention in improving your living standard.

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