The national credit card debt problem, enthusiastically cheered on by the credit card companies, has exploded into a completely out of control catastrophe. Having happily added on every sort of fee that they possibly could – late fees, pre-payment fees, over-limit fees, and so on – they’re suddenly surprised and shocked that many credit card holders have fallen behind in their payments.
In fact, they were seemingly caught so unawares that the credit card companies charged off over 5% of their debt – billions of dollars – last December. Now, it seems, they’re finally getting a taste of their own medicine, as they start to default on their own debt obligations and try to get help from policy makers.
Unfortunately, while it may feel good to see these companies suffer a bit, this doesn’t help the millions of credit card holders who have over extended themselves and are struggling to pay their credit card bills. So, if you’re in credit card debt, what should you go?
The first thing you need to do is to face the music and take stock of your current credit card debt situation. Take all of your credit card statements, lay them on the table. On a piece of paper or in a spreadsheet, write down the account name, account phone number, and the total amount owed on that credit card. Then sum all of the amounts. This is your total credit card debt. If you’re like many people, the amount may surprise you. But at least now that your conscious mind has been forced to take notice of the debt, you can begin the process of putting together a plan to pay it off.
On your sheet of paper, next to each account name and dollar amount, record the annual interest rate, followed by the minimum monthly payment. Call each card company and try to negotiate a lower percentage interest payment. If you have great credit, this probably won’t be a problem. If you have so-so credit, but have been relatively consistent in making your payments, you can probably get a better rate as well. If you have poor credit, they may not offer you a better deal, but it doesn’t hurt to try anyway. On your sheet of paper, replace the old interest rate with whatever new rate that you managed to negotiate.
Now, you’re going to hit the phones again. But first order the account names, top to bottom, by annual interest rate with the card having the lowest interest rate on top. Then working your way down the list, call each credit card company and determine if you can transfer the balance from another credit card to them – and, of course, you’ll want to retain the low interest rate. If they will allow you to transfer it, transfer the largest dollar amount that you can from the bottom card on your list. Continue down the list, calling each credit card company, until you have reallocated your credit card debt into the accounts most beneficial to you.
Lastly, begin to pay off the debt. Re-order you list again, from top to bottom, but this time sort it so the cards with the highest interest rate is on top. Every month, as you pay your credit card bills, pay the minimum monthly amount on every card except the first one. On that one card – overpay. Overpay as much as you possibly can and continue to do that every month until the debt is paid. Then go on to the second card, third card, etcetera – and do the same. Eventually, if you keep at it, and if you can manage to keep yourself from adding new debt to your credit card, your debt will magically disappear.