Getting Out of Credit Card Debt
Credit card companies want your money. They have got very good over recent years at achieving that goal. Few people realize the true cost of owning a credit card and that's the way the credit card companies like it. They rely on consumers being ignorant of the real costs and too lazy to change if they did. They spend millions each year soothing consumers into a false sense of security about their credit cards.
Many people get into serious credit card debt, generally bringing credit card debt back under control is a fairly straightforward task if it has not got too far out of control. The bigger challenge will be facing up to any issues around money because invariabley debt has more to do with issues and fears around money than with money itself.
If you find the prospect of having to deal with your finances just too much, take a look at the articele taking back control of your Money, this article explores the many emotional issues that are often at the root of financial problems and provides some guidance as to how to deal with them.
Credit Card Debt Strategies
Below are some of the common strategies that are effective for paying off credit card debt. These work and can be the first step to true financial freedom. Only those who learn from the financial mistakes of the past and can adopt some of the principles in Mastering Money into their lives will benefit in the long term. Others who simply repeat the financial patterns and mistakes of the past and who refuse to change, are likely to find themselves back in debt and struggling. The choice is always yours.
Stop Using Credit Cards
Credit Cards do have a few uses but are really not suitable for everyday purchases, use a debit card instead. To break free of credit card debt the first step, no matter which approach you use for paying off your debts is to stop using your credit cards. Cut them up, leave one for emergency use if you must, have a look at choosing the best credit card to help you decide which one to keep.
Failure to do this will result in you failing to permanently eliminate your credit card debt, the result is likely to only be a brief reprieve before the debt and the bills reappear.
Consolidating Credit Card Debt
A common and effective way of paying off your credit card debt is to consolidate all of the debt into one loan. If the loan can be achieved at a good rate this often is a great solution. It is important to select a loan based on a good rate and terms, not the repayment amount alone. Avoid loans with any form or pre-payment penalty. you will want to repay this loan off as quickly as possible.
With a consolidation loan in place, apply all the payments that would have gone to pay your credit cards, to paying off the loan and never miss a payment. This way you will not only pay-off your debt, you will also be building a good credit record.
Paying-Down Credit Card Debt
Consolidation loans are not always available or the best option. It is often possible to transfer balances at zero-rate for up to 12 months. And whilst there is normally a fee attached to this, it is often an effective way of finding some breathing space.
The following is a well-known technique for paying down your credit card debt. Remember though there are often many other things you can do to reduce your debt burden - See Breaking out of Debt.
- Cut Up Credit Cards
- List all credit cards by interest rate, highest first.
- Calculate your monthly disposable income. Use the Income & Expenditure calculator to work out.
- Keep reworking the budget, find assets to sell, try to maximise your available funds
- Add up all the minimum payments plus $10 for each card. If this is more than your disposable income you are going to have to find additional savings. Otherwise the balance is what you have to paydown your credit cards.
- Each month pay the minimum + $10 on each card. For the card at the top of the list apply your paydown balance as well.
- As each card is paid off, close the account and start applying all of the available funds to the next highest card.
This is the most effective way of paying down credit card debt. Here are a couple of other tips for speeding up the process and keping your credit clean.
- Call the credit card company and try to negotiate a lower rate or switch.
- If you have negatives on your credit report associated with a credit card, try to negotiate its removal in return for a well managed account & not switching.