How to reduce credit card debt
Reduce Credit card debt now
Using a credit card is an important responsibility. A good credit record can help you get a job, make major purchases, and accomplish many short and long-term goals. A poor credit history can make it harder for you to rent an apartment, buy a car, or fulfill a dream.
It is important to know how credit can change your spending power and how you can recognise the danger signs of credit and avoid serious problems. The greatest disadvantage of credit use is losing financial flexibility in managing your own money. For example, if your credit card debts take 10 percent of your after-tax income, you can’t spend those dollars for something else. Credit cards can reduce your future buying power if you carry a balance and let finance charges build up.
How can you get rid of your credit card debt?
The first thing to do is get all your credit card bills together. For each account, write down the total balance and the minimum monthly payment required.
Prioritize repayments.
The next step is to be sure you can make the minimum payments on your credit cards. Look at your spending and make cuts where you can to find the money to pay your credit card bills. If you have trouble doing that, the National Foundation for Credit Counseling(1-800-388-2227)
or Myvesta.org (1-800-698-3782) can help reduce credit card debt
Credit card companies require a minimum payment each month .
If you pay only the required minimum payment, it can take a very long time to clear your balance. For example, if you have a $2500 balance at 21% interest and you pay 2% of the remaining balance each month (a typical minimum payment), it will take you more than 63 years to pay off your debt. It would cost you $14,699 in interest charges.
Plan to do more than just pay the minimum
If you pay $50 each month for the example above, it would take you 10 years to pay off your $2500 balance and cost you $3493 in interest charges.Choose strategies to reduce credit card debt as soon as possible
Pay high-rate cards first to reduce your credit card debt
At higher interest rates, more of your monthly payment goes toward finance charges. Quickly paying off balances on cards with high rates can free up cash to pay other bills.
Pay off cards with the smallest balances first.
Paying off cards with small balances gives you extra money to pay on the bigger balances and help you reduce credit card debt. Once you pay off a bill, next month add the amount you’ve been paying to the check you write your remaining creditors. For example, let’s say you pay $35 a month on your J. C. Penney’s account. Once it’s paid off you can start adding $35 to the check you write to pay your VISA account. Then when you’ve paid off your VISA, add that amount, including the $35 from the Penney’s account, to the check you write to pay your MasterCard account, and so on until all the accounts are paid in full.
Stop making new charges.
If you have to, cut up your cards, hide them, or lock them in a drawer.Stay flexible.The key to sticking to your credit card debt repayment plan is to stay flexible. If you find that you set unrealistic spending limits in the beginning, revise your spending plan the next month. This will also help reduce credit card debt
Get a cheaper credit card.
Find one or two low-rate cards and cancel all the others. Switching from a high-rate credit card to a low-rate card can easily save you $200 or more a year and help reduce credit card debt
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