Reducing Credit Card Debt

1. Identify the debt you owe.

Identify the debt you owe.Make a list of all your debt, including four items: the name of your creditor, the total amoun you owe, the rate of interest you are being charged and the amount you pay each month towards this debt, if any.

2. Stop Creating Debt and start reducing credit card debt
The first step in successfully paying off debt is to stop creating debt.

reducingcreditcarddebt

A. Create savings strategies for non-monthly expenses. For example, car insurance or water
bills may be paid quarterly. Set 1/3 of the quarterly bill aside each month.
B. Increase income and decrease expenses so you have more money for unexpected expenditures.
C. Develop a strategy to decrease impulse spending.
i. Do not carry your credit cards with you.
ii. Make a plan before making a purchase. Make a list of items you intend to purchase, identify an amount you intend to spend, and if you are going to charge these items develop a plan for how you will repay and start reducing credit card debt .
iii. Discuss your intent to use your credit card with another person to help you brainstorm other alternatives.
iv. Give yourself a 24-hour “cooling off” period before making a purchase.

3. Determine how much money you have each month to put towards debt repayment. Once you develop your spending plan, you can determine the amount you have to put towards debt repayment by subtracting the amount needed for total monthly expenses (not including debt) from your total net monthly income (income after payroll deductions). If you have additional monthly saving goals subtract this amount also from the total net monthly income. The remaining amount is the monies (money?) you have available for debt repayment.

4. Apply one or more of the following Debt Repayment Strategies

Strategy #1 The Power of Negotiation will be very effective in reducing credit card debt

Find an alternate creditor that offers a lower rate. Not just 6-month offers, but also a permanent rate, for the life of the loan or credit card. Then call your creditor and tell them you are tempted to transfer your balance to another creditor
and ask them if they would consider decreasing your interest rate to keep you as a customer. It doesn’t hurt you to make the call, even if they say no.

reducingcreditcarddebt

Strategy #2 Maintain Level Payments
The strategy of maintaining level payments is to maintain the same level of payment even when the total amount due decreases. So if your debt payment is $80 a month, you keep paying $80 a month toward your debt evencwhen minimum payments decrease to $65 a month.Here’s how this works. If you paid off a credit card debt of $3200 with an interest rate of 14.9%, using the traditional minimum payments the credit card requested, it would take you 18.5 years to pay off this debt and you would have paid $2919 in interest. Using the strategy of maintaining level payments you would have started your payments at $80 a month and maintained paying $80 even when the minimum payment decreased. You would pay off your loan in 4.8 years and only pay $1259 dollars in interest.

Strategy #3 Consistently Pay More Each Month will impact reducing credit card debt
Consistently paying a little extra each month, over time, can make a big impact on your debt. If you have a mortgage for $70,000 at 8% for 30 years and you pay $50 more a month, you will pay off your mortgage 8 years sooner and save yourself
$36,000 in interest.

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