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Debt consolidation may be option as consumers find payments apply to lower-interest amounts
By Oscar Monfort on Jul 6th, 2010
Recent increases in interest rates on credit card debt may have become more the norm for some consumers, as companies tried to protect themselves against the effects of the recession.
Many cardholders may have thought they would get some relief through the Credit Card Accountability, Responsibility and Disclosure Act. The new regulations give further stipulations on how card companies can raise interest rates.
However, in a recent report on her website, personal finance expert Liz Pulliam Weston noted that the final version of the Credit CARD Act that was passed did not include a provision that would require payments be applied to the debt with the highest interest rate. Rather, any payments made above the minimum required would be used to reduce higher interest amounts.
To avoid this problem, Pulliam Weston suggested moving balances onto credit cards that have only one interest rate.
"That way, you're the one deciding how your payments are allocated," she said.
Another option consumers may want to take a look at is debt consolidation, which may offer lower interest rates than people currently face on their credit cards.
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