Paying down credit card balances can improve financial position

Prioritizing debt can help to identify which debts must be paid off first. Paying cards off in the order of their interest rates is a useful strategy, and experts say that those with savings might be better off paying down debt, particularly if the savings are in a low-yield instrument.

• It's becoming more important than ever for consumers to take control of their credit lives and start paying down debts.
• Those credit card balances -- topping $9,000 per household, according to CardTrak.com -- are about to become even more expensive to carry than they already are.
• Bankruptcy laws are about to change, making it harder to wipe out debts in the event of a family emergency.
• And a number of problems have surfaced recently in the credit counseling industry, long thought of as a relief valve for over-indebted consumers.
• -- If you're spending more than 25 percent of your take-home pay just paying credit card bills.
• Unless you're in the midst of a family health or unemployment crisis you expect to see resolved soon, there is no good reason to carry balances on credit cards.
• They're just too expensive, and it's not good for a family budget to pay interest on consumable items like nights out, clothing, and kids' sporting goods.
• The better agencies offer complete financial advice and education; the worst don't even follow through on their promises to clean up your credit.
• Many charge hefty fees, and the ways in which they dole out payments to your creditors can bypass some creditors or cause your credit score to fall.
• If you're at the point of desperation, choose a credit counseling firm -- carefully -- suggests the National Consumer Law Center, a rights group that has done a lot of research on these agencies.
• Look for an agency that offers a full complement of services, including credit education and budgeting help.
• Stay away from agencies that pay their representatives bonuses or commissions for signing up customers for debt management plans.
• If that's not possible, put your cards in interest-rate order, and pay minimums on all but the highest rate card.