Getting Rid of your Credit Card Debt
Credit card debt can add up quickly and it can be very difficult to pay down. One main reason for this is that credit cards typically have very high interest rates. This means that, if you can’t pay the entire balance every month, you’re going to end up spending a very long time repaying your debt and you’ll have to pay a lot of interest.
This is especially true if you only pay the minimum balance. While doing so is better than skipping a payment, it’s far from an ideal situation. If you only pay the minimum balance, it will take you a very, very long time to pay down your debt. In fact, in some situations, your bill could actually go up every month even if you pay the minimum and don’t add any new charges. This leaves you spending a lot of money for very little gain. You’ll still have a high amount of debt.
In order to get rid of credit card debt, you need to have a sound strategy and a goal in mind. It may require you to cut back on other expenses in order to handle your debt. Here are a few tips for getting rid of credit card debt.
Understand your Debt
Write down how much you owe on each card and the interest rate on each card. This will give you a better idea of your financial situation and make it easier for you to come up with a plan to reduce your debt.
Stop Adding on More Debt
If you have a high level of credit card debt that you’re finding difficult to repay, the first step should be to stop using your credit cards. This may be difficult, especially if you’re living paycheque-to-paycheque, but you’ll need to stop adding on new debt in order to pay down what you already have.
Budget and Use Cash
This goes with the point above. You’ll need to start using cash for all of your purchases. This means that you’ll need to create a monthly budget in order to make sure that you don’t run out of money before the month ends. Your budget should list all of your expenses, both fixed (rent/mortgage, car payments, etc.) as well as variable (food, clothing, entertainment, etc.)
Cut Where You Can
Once you’ve created a budget, look to see where you can make cuts. This will likely be necessary since you’re living on cash, but it’s also needed so that you can pay more than the minimum payments on your credit card debt.
Every cut helps. If you can save money each month by making coffee and lunch at home instead of buying it out, this is extra money that you’ll have for debt repayment. You can likely also save money on clothing, entertainment and various other areas.
Tackle your Highest Interest Cards First
There are several different strategies for paying down credit card debt, but one of the most common is to pay as much as you can on the cards that have the highest interest rates while still paying the minimum on the other cards. The theory is that this method will allow you to save money that would otherwise get eaten up by interest charges
Try to Consolidate
Another option is to transfer your balance from the cards with the highest interest rates to the cards with the lower interest rates. Again, the goal is to save money on interest. In order to do this, you’ll need to have credit available on the lower interest cards and you’ll need to have lenders that allow you to transfer your balance.
If these methods don’t work for you, you may need to turn to a financial professional for help. One person who is licensed and trained to assist people who are having trouble paying debt (including credit card debt) is a trustee in bankruptcy.
Most trustees offer a free consultation where they will review your financial situation and provide you with details on the options available to you. Once you have information on the possible options, you will be able to make a wise choice for your financial future.
Credit card debt can seem overwhelming and even impossible to pay off or eliminate. However, there are options out there that can offer help and put you on the path to becoming debt free.