Job loss. Reduced income. A lingering recession. These are just some of the reasons why credit card debt reduction has been at the forefront of people’s minds. Even without these looming financial threats, looking at credit card debt reduction is a smart financial move. With rates on such credit being among the highest, folks really need to tackle this debt in order to become financially better off.

Taking a deeper look at interest rates, keep in mind that card rates have rising a full percentage point in the past 3 months (from 13.94% in May to 14.94% today). This means that credit card debt reduction is something we must now examine a lot more closely before rates rise farther and push us closer to insolvency.

Rates are not the only reason why we should place added emphasis on credit card debt reduction. In fact, revolving credit cards are often what cause the greatest financial stress on FICO scores (or other credit scoring systems). To illustrate, consider that over 65% of your score will be based on two simple principles: utilization and repayment history.

When credit card debt reduction is not a priority, people will be more likely to use credit to the maximum available limit. This is often okay because the payments are low or the full balance is not high. However, if a reduction in income cripples the ability to repay, the credit score will suffer because utilization is high. If the financial strain is substantial and a payment is missed, the late payment will also reflect in the credit score, thereby punishing the borrower with a much lower score.

Negative scenarios like these are never fun to explore. Still, we need to hedge ourselves against the three negative economic facts that are going on right now. Again, they are: card rates are increasing; the economy is tough right now and the end point has not been clearly set and; credit scores are more and more important to the lenders we want get credit from. Without question, we need to put a plan for credit card debt reduction in place sooner rather than later.

We have our own personal reasons for carrying debt on credit cards. Whether we are comfortable given a perceived job stability or we simply are not bothered by large debt, it does not matter. However, when it comes to dollars and cents (and most of care about that!) it is strongly recommended that we examine how credit card debt reduction can help us now and into the future, particularly as it relates to our financial well-being.

Chris has more than 16 years of financial services experience. He contributes to the Home Equity Loan Site, most recently articles about Interest Only Refinance options.

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