Don’t let credit card debt ruin your mood, relationships or life. You can reduce your credit card debt by following a few simple steps. The process won’t be easy, but it can be simple. To fully rid yourself of credit card debt takes a lot of determination and willpower. It is very easy to fall back into old habits and start charging everything. Just remember what got you into financial trouble to begin with! The ability to learn from past mistakes is very important to your financial future.
Two Simple Steps to Credit Card Debt Relief
Step One: Stop acquiring new debt. Stop using your credit cards for unnecessary items and cancel all recurring payments. These automatic charges can range from a monthly gym membership to automatic bill pay or even online gaming accounts. If any of the companies you deal with require a credit card to be on file for automatic payment, consider using a checking account debit card instead. Your debit card doesn’t charge interest.
Step Two: Contact your creditors and try to negotiate lower payments and interest rates. In some cases they may even waive late charges. Many companies are willing to work with you because they would rather receive some of the money owed rather than none of it. After negotiating with your creditors you may find it beneficial to consolidate all of your credit card debt into one credit card. This can be accomplished by transferring all balances to the card with the lowest APR.
Another option for consolidation is to apply for a low interest, unsecured personal loan that will allow you to pay off your credit cards in full. In some cases you may also be able to borrow against investments like stocks, your mortgage, health insurance or even your 401K. If you find it impossible to consolidate all of your balances to one card or if you are unable to obtain a loan, your best course of action is to pay more than the minimum payment each month. The industry standard for minimum payment is 2 to 3% of your balance. If you continue to only make the minimum payments, you will be paying off a small debt for many years to come. Don’t fall victim to paying hundreds of dollars on a $15 purchase.
Before you start paying more than the minimum it’s a good idea to create a savings account. This will allow you to have an emergency fund and you won’t have to resort to using your credit cards if unexpected expenses arise. Once you’ve established an emergency fund you should gather all of your monthly bills and figure out how much can be paid toward your credit card debt each month. At this point, you have two options for repayment:
Option One: Pay the minimum amount due on all cards except for the card with the highest interest rate. For the high interest rate card, you should not only pay the minimum balance but also put the rest of your monthly allotment towards this card. Paying off the card with the highest interest rate will keep you from repaying hundreds of dollars in interest in the long run.
Option Two: Put extra funds towards the card with the lowest amount of debt. Paying off the card with the lowest amount of debt will ultimately free more funds from your monthly budget. That money may then be applied to the cards with the highest interest rates or used to pay off another card with a relatively low balance.
The option you choose should be based on the total amount of money that you will end up repaying. You should also take into consideration how quickly your credit card debt can be eliminated by each method. Every situation is different. Each individual must choose the method of debt repayment that benefits their lifestyle the most.
Once the first card is paid off, do not change your monthly allotment for credit card debt. Simply continue to put all extra money toward your other credit cards. When your credit card balances have been paid in full, keep your cards locked away, but do not cancel them. This can have a negative impact on your credit score. Simply putting them away in case of emergency or learning to use them responsibly can increase your credit rating and save you from bankruptcy.