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Effective Credit Card Game Strategies For the Sub Prime Loan Crisis Climate

» Introduction
Banks have changed strategies because of the sub prime loan crisis, but there still are several effective strategies for people playing the credit card game to lower their payments and interest rates.
» Step 1
Banks have reacted to the sub prime loan crisis by increasing balance transfer fees, offering significantly higher interest balance transfers, and using tricky, even deceptive wording and terms to try to trick credit card holders to get out of low interest promotional rate deals pre-maturely.

While this temporarily takes away some effective tools for playing the credit card game – at least for the time being – there are still effective strategies.

The first strategy is to recognize that it might be necessary to lower your expectations in terms of receiving 0% or super low interest promotional offers from existing accounts. You may get balance transfer offers, but they will be designed toward locking you into terms where the interest rate is at least somewhat profitable for credit card companies. Beware therefore of offers with high balance transfer fees, or for 0% offers with no or low balance transfer fees on accounts where you already have a low promotional rate balance working.

The one exception is for new accounts. Despite the credit crunch, credit card companies still want new accounts if they can open them in the names of credit worthy customers.

Therefore, the best – and for the time being perhaps the only 0% promotional credit offers will come from new credit card offers. If you do not have too many existing accounts, opening a new account should be no problem provided you have good credit, and have not maxed out your current credit cards. If you have many credit cards with zero balances which are not sending you good offers, you might cancel a few of them, wait a month or two, and then apply for new credit with a 0% long term promotional offers. But beware, many of these 0% offers are accompanied by 3-5% up front balance transfer fees with no maximum. Be sure to read all the fine print before taking advantage of any offer which appears “too good to be true.”
» Step 2
A second strategy involves “life of the loan” offers that may come your way. Before the sub-prime crisis, these were often at 2-3%. Now however, these are usually being offered at 5-8% and often have a small balance transfer fee. While these interest rates are not as low as such offers have been in the past, they can offer a decent “holding” rate while waiting for the immediate credit crunch to ease. Recent drops in interest rates by the Federal Reserve accompanied with massive increases in the money supply by the Fed, enabling banks to more easily charge off losses will eventually lead to a loosening of credit, and the likely return of consumer favorable balance transfer offers.

A third strategy which is effective in this economic climate is to make changes in life style that can cut your monthly expenses. There are too many ways to accomplish that than can be easily covered in this article, and they vary significantly from individual to individual. That being said, even a $5 per day reduction in expenses which are then transferred to debt repayment can significantly accelerate your debt reduction.
» Step 3
A fourth – and almost always a good strategy - is to take a sharp pencil to non-performing assets and see what can be shaken loose to pay down debt. Start with your interest bearing accounts. It is frequently better to use those assets to pay off debt, especially if the interest you are receiving on your assets is lower than the interest you are paying on your debt. Another type of assets to review are non-interest earning assets, such as non-essential cars, trailers, furniture, electronics, sporting equipment or gold jewelry which can be sold, with the proceeds being used to pay down debt. This might be a particularly good strategy with items made of gold and silver as gold is currently at record highs near $900 an ounce, and silver near $16 per ounce.

Every dollar of debt you can pay down not only reduces your debt, but also reduces the cost of servicing that debt. No matter what strategy you may elect to employ, it is always a good idea to take a good hard look at your overall position, and develop a workable debt reduction plan that fits your situation.

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