In these rocky economic times, both banks and consumers are scrambling to protect themselves. Our credit card accounts can be an important aspect of our financial well-being, and proper handling of them, as well as lessening our indebtedness is critical.

Credit card companies, aggressively lessening their exposure, are reducing credit limits, closing down accounts without warning, and increasing interest rates (any of which can cause your credit rating to decline). Low credit ratings, late payments and high balances all trigger alarms for them, and could have serious repercussions for you. The best way to protect yourself from this is to pay off the balance. But there are some steps you can take to protect your credit rating, while you’re doing that.

First of all, stay away from debt consolidation loans. Even though your total monthly payment may be decreased, the companies that offer these loans are in it to make money for them. The actions they recommend will often leave you with a destroyed credit rating, which could take several years to rebuild.

Paying Off Credit Cards In Full

If you have sufficient cash available in your savings or retirement fund, simply make a lump sum payment, and retire the debt completely. Even paying a penalty for taking money out of a retirement plan can sometimes be more cost-effective than paying the accrued interest on the card balance.

If you can’t manage that, then first pay the balance down as much as you can, and then make double payments each month. NEVER pay only the minimum amount, as this has very little effect on the balance, and in fact, may even increase it.

It is advisable to avoid making the already nervous credit card companies any more so. For instance:

• Pay early, or on-time, NEVER late.
• Avoid seeking other cards – every credit check can affect your credit rating.
• Don’t signal your intention to pay off the balance – just do it. You can estimate additional interest since your last statement, and make any adjustment later.
• Always pay more than the minimum. The credit card companies are interested only in good risks, and paying only the minimum doesn’t inspire confidence.

As a footnote, NEVER cancel a credit card, until AFTER you have paid it off, as cancellation will almost always result in the card company raising your interest rate – usually to 30% or more.