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Raymond James A column by James Kruzan


Credit card relief



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December 07, 2011 - Recent economic reports have observed that Americans reverted back to the credit-dependent trends of the eighties. Apparently, the nation's populace hasn't heeded the warnings regarding carrying too much debt.

Unfortunately, this statement could be applied to the federal government as well.

For families grappling with swollen credit card balances, professional financial advisors offer a three-step strategy for coping with year-end bills and avoiding future troubles. The International Association for Financial Planning (IAFP) recommends understanding the credit terms of card issuers; learning how, and whether, cards should be used; and developing an aggressive plan for paying off debts.

Consumers should find out the conditions and policies of their lenders, such as length of grace period, whether the interest rate is fixed or variable, and how much is charged for cash advances.

Most consumers only need one major credit card that is universally accepted. For people who have the cash flow to pay off balances each month, a charge card – rather than a credit card – is a better choice. If credit is needed, choose a card with the lowest available interest rate. Often, people with one or more credit cards should look for a card that charges less interest and transfer all of their debt to that one card.

Ultimately, the way to bring credit card debt under control is with an aggressive play to pay off existing balances. After consolidating as many credit card bills as possible, tackle the card with the highest interest rate first. Pay as much as possible toward the principal each month, while paying the minimum required on any other cards. As you eliminate the balance, begin paying more toward the principal on the others.

Credit cards sometimes make sense for smaller or short-term needs, but for major purchases, a home equity line of credit might be a better choice since the interest is lower and is usually tax deductible. Understanding the proper use of credit cards is an important part of the overall financial planning process. Be sure to check with your financial advisor to see what alternatives are available to you.

This material was prepared by Raymond James for use by James B. Kruzan, CFP®, CRPC® of Raymond James Financial Services, Inc. Member FINRA/SIPC.

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