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Seven tips for reducing dependence on payday loans

[Dec 23, 2010.]

 

Even if you occasionally take out a payday loan to solve a short term emergency need for cash, you may want to review these suggestions from the FDIC (Federal Deposit Insurance Corporation) for strategies to save when you need to borrow money.


Seven tips for saving money on payday loans and credit cards



  1. 1. Pay bills on time. Payday advance loans typically carry a hefty penalty for late payments and for rolling them over into another pay period. If you generally pay other bills late, you incur late fees that increase your debt. In addition, you could end up with a higher interest rate and a lower credit score that can impact your ability to obtain new credit.

  2. 2. Always pay more than the minimum required on credit card bills. Most credit card statements now show you what a difference it can make to up your payment by even a few dollars above the minimum. Making only the minimum payment will keep you in debt longer.

  3. 3. Check your credit card limit. Fast payday loans are sometimes the only option for people with maxed out credit cards. Do your best to keep some available credit on one card for emergencies.

  4. 4. Don't carry too many credit cards. Credit card offers are sometimes hard to resist, but consumers can easily find themselves with multiple cards and multiple bills. If you have a lot of credit cards now, look into transferring balances to the one with the lowest interest rate. Another option is to cut up the cards you want to pay in full so you are not tempted to use them, or put them in a plastic bag in the back of your freezer to make them harder to access.

  5. Review your credit card statements. Always make sure all charges are legitimate and check to see how much you are paying in interest. Call your credit card company to see if you can lower your rate, especially if your credit score has improved.

  6. Check your credit report. One way to make sure you qualify for additional credit at lower interest rates is to keep track of your credit report. Every consumer can get a free report each year from www.AnnualCreditReport.com. Check the report for mistakes. It can also be an incentive to improve your credit when you see what your creditors see about your financial history.

  7. Develop a personal debt reduction plan. If you rely on payday loans because you have too much debt and cannot pay all your bills, it is time to create a budget and find places to reduce your spending so you can pay down your debt. Building a small emergency fund should be your first priority so you can stop relying on credit for unexpected expenses.


Making small changes to reduce your dependence on payday loans and credit cards can start you on the road to financial independence.


http://www.fdic.gov/consumers/consumer/news/cnsum07/strategies.html

 

About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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