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Got extra cash? Don't use it all toward credit card debt

Many Tennessee residents carry large amounts of debt. They wait for that right moment - bonus at work, inheritance, raise or other financial windfall - to dump a large sum of money toward a credit card with a huge balance or high interest rate. But contrary to what many consumers believe, paying off a card is not always the best idea.

Why not pay off the card? Depending on the balance, a person can save hundreds or even thousands of dollars a year in interest fees. In reality, though, wiping out a huge debt is only a temporary solution to a problem.

The underlying issue of credit card debt is often poor financial management skills. If these issues aren't addressed, the debt will just come back. So the consumer ends up spending their windfall and has nothing to show for it but more debt.

There are several ways to solve debt issues. The most obvious way is to stop using credit cards. Stick to cash or debit cards instead. Consumers should also take a close look at their expenses throughout the month and look for trends. Is the person spending $5 a day on mochas? Is the person eating out at a local restaurant for lunch every day? This review can help people realize how much they really spend - they may even spend more money than they earn and not know it.

Although it can be hard to make drastic changes to a person's budget, even small things can help keep debt from spiraling out of control. A person may need to turn to credit cards in emergency situations. Use them sparingly, and when they do need to be used, make a solid plan to pay down the debt. In addition, try to pay on time and make at least the minimum payment. This will help avoid costly late fees, which can add to an already-high balance.

Source: Forbes, "When Not To Pay Off Your High-Interest Credit Card Debt," Nancy Anderson, Oct. 11, 2013

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