Taking Control Of Your Credit Card Debt
The average American has over $8000 in credit card debt. Making minimum payments and not accumulating any more debt, it would take you 30 years to pay off the card and thousands more in interest. That’s why an important part of any family budget is to reduce and pay off that debt as soon as possible. Here are some ideas to get you on a road of no more credit card debt.
Fewer Cards
Your first goal in reducing your credit card debt is to avoid accumulating more debt while you work on paying the current debt off. After all, what good does it do you to pay $200 toward your credit card and then use it to make another $200 purchase. A good way to avoid using your cards is to get rid off most of them. If you have a current balance owed on the card and it isn’t feasible to transfer the debt to an account with a lower interest rate, simply cut up the cards to avoid using them again. Close the credit card account as soon as you have paid it off.
Your ultimate goal will be to only have one or two credit cards for online purchases and emergencies. You will only be using it for non-emergency purchases that you know you can pay off within 30 days.
Freeze Your Assets
Most of us like to keep at least one or two credit cards around for emergencies. The problem is we end up using the cards to buy a new pair of shoes, take our spouse out to dinner or buy that new TV we really want. If you are prone to these types of impulse buys on the credit card, try freezing them.
Yes, I am serious. Take a gallon sized Ziploc bag, drop your credit card in it and fill the bag with water. Stick the bag in the freezer. Within a few hours your credit card will be encased in a block of ice, making it less convenient to just grab it and buy something. At the same time you know you can thaw it out in a few hours if you really need it.
No More Impulse Buys
How many times to you go to the store with a particular item in mind and end up buying a few extra things you didn’t even know you couldn’t live without? I’m taking about impulse buys.
We go to the grocery store and are presented with all sorts of special deals and easy grab-and-go offers at the end of isles and at the cash register. We go to the mall to buy a white sweater and end up with a pair of earrings or new boots as well.
Storeowners have figured out exactly how to push our buying buttons and get us to purchase items on impulse that they know they couldn’t sell us if we took a moment to think about it.
Before you make a purchase, take a moment and consider if you really need this now. For larger purchases sleep over it. You’ll be surprised how many deals don’t look quite as good anymore the next morning.
$20 Is All It Takes
We’ve talked at length about how to cut down on spending and using your credit card, now it’s time to start paying off the debt you currently have. All it takes is $20 to get you started. Of course if you can come up with an extra $100 or even more, go for it.
At the very least I want you to come up with an extra $20 a month and add it to what you are currently paying toward paying off your credit card. Start with the card that has the highest interest rate. If you are currently paying about $100 a month toward that card, increase it to $120 until the card is paid off. Then use those $120 a month and add them to what you are currently paying toward your next card. Can you see how quickly this can add up and get you out of debt - especially once you have the first card paid off? By consistently doing this you can be out of credit card debt for good in a few years.
Susanne Myers
http://www.articlesbase.com/finance-articles/taking-control-of-your-credit-card-debt-89739.html
Comments
I have around $7,000 of credit card debt. I’m a full time student and I want advice to get it under control.
The debt is spread over 2 cards, the most on an American Express. I’ve used the cards for paying rent and other living and school expenses that my student loans didn’t cover. I’ve had the cards since 2005 and the balance has been increasing some each semester. I haven’t ever missed a payment due date, but I usually pay just a little over the minimum amount due (which for the Amex is now around $120, the Mastercard isn’t bad, it’s just $15). I stopped using both cards this summer because I didn’t want to add to the debt. I’ve tried getting a job at a bunch of places, but my school schedule makes it hard to get a decent one. Even after 3 or 4 months of making payments though since this summer, it doesn’t seem like the balances are decreasing much at all. There’s some finance fee around $80-$90 that takes away most of the payment I make each month. How can I get things under control? I need a job. I’ve stopped using the cards. But nothing seems to be going right so far.
Sounds like you’ve built up a good credit record. The problem as you’ve noticed is most of your payment is going to finance charges.
The best solution is to look for a lower interest card and transfer the balances to it. For that I have to suggestions:
1. Go to http://www.cardweb.com or http://www.bankrate.com and look for cards offering 0% balance transfer or low interest rate (like 3% to 5%) for life of the balance. Then do a balance transfer.
2. If you are a student, see if your school has a credit union available. Often schools faculty and workers are eligible, and so are students. Credit unions have much lower standard interest rates then commercial banks on their credit cards. Being a credit union member is a good idea anyway, as their services are much cheaper then a big monster megabank.
Then after finding a lower interest card, even if you make the same payments more will pay off principal each month.
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What else are you spending your money on? Start tracking your money and learn exactly what you spend it on. Even if its a 10 cent piece of gum make note of that.
Then see where you can cut back. Buying real food instead of fast food ect less trips to starbucks.
Now, take the extra saved money and start putting it toward your cards. Theres two ways to pay off the debt.
Some say tackle the bigger interest rate card first this way you pay less interest on the balance.
Others say tackle the card with the smallest balance and get it paid off. Then take the amount you were using on the smallest balance and put that toward the bigger balance along with payment you were already putting down on it.
the later is also called snowballing
either way would work, its up to you which to pick.
Keep working at it, you’ll get them paid off.
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You are in a common situation. Minimum payments required on most cards barely cover the interest due for that specific month. Thus, you don’t get ahead. You simply pay for the cost of using the money. The only way to get this under control is to find a way to make money and make substantially higher payments until the debts are retired.
You might also check around for deals on "zero balance transfer cards". With some of these cards, you can transfer your current balances to the new card and pay a zero interest rate for up to twelve months. If you do that, simply do not use the card, and use THEIR money free for twelve months. At least, for that year, every penny you pay will reduce your principal with nothing going to interest charges.
References :
http://www.credit-card-authority.com/Balance-Transfer-Cards-814052-page.php?link=202483&OVRAW=zero%20interest%20balance%20transfer&OVKEY=zero%20interest%20balance%20transfer&OVMTC=standard&OVADID=3729510022&OVKWID=33232677522
It takes a very, very long time to pay off your credit card debt if you only pay the minimum. Most card issuers set your minimum payment at 4% of your debt — so a $5,000 credit card balance with an 18% interest rate would start out with a $200 monthly payment. But if you only make that minimum payment, it will take 12.5 years to pay off your credit card debt, during which time you’ll pay the card company a total of $2,916 in interest — more than half the cost of the whole loan in interest payments. And that’s assuming you don’t make any new charges on the card! Credit card interest is wasted money that you could have used instead to help reach your financial goals.
First, if you have been paying on time call the customer service number for your card and ask them for a lower interest rate. This ten minutes could save you money. Nearly 70% of people who do this actually get a lower rate. Next, any extra money you have either pay to the card with the higher interest rate or the card with the lowest balance if the two balances are a lot different (I’m assuming yours are because of the large difference in minimum payments.) As soon as the first card is paid off pay as much as you can on the other card.
Many people have fallen into the easy credit trap, hopefully you have learned a valuable lesson early. Namely, you can’t live off a credit card.
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You are doing everything right! It took time to go into this mess and so it will take time coming out of it. Think of it as paying yourself to be free of this. It will work out. I say a year of this and it should be over. Focus on limit and success. You go for it!!! Success!
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Why can’t you live on campus? That is usually a cheaper alternative to living alone and you didn’t say anything about having roommates.
Once the balance gets so high, it gets very steep and hard to pay off, all you can do is keep paying them off or see if you can open up another credit account that has a 0% APR for 12 months or so and transfer the balance, but make SURE they are not going to charge you a transfer fee to do it (which can be as high as 3%).
You don’t really have a choice but to make some major lifestyle changes until you can get through school.
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If a person has accumulated a large amount of credit card debt due to multiple credit cards, the need for a proper counseling for credit card debt consolidation can’t be understated. Credit card debt consolidation counseling helps a person get vital insights into the facts that can help him get control over the credit card debt.
Credit card debt consolidation counselors are experts with a good knowledge of debt management, budgeting and behavioral patterns of credit card holders. These services are vital for those struggling to manage their credit card debts. Also called credit counseling or debt counseling the credit card debt consolidation counseling brings immediate relief to a credit card holder.
A person seeking credit counseling can get it from two types of organizations. The professional or commercial organizations, and the non-profit organizations. As depicted by its name or categorization, the commercial organizations charge money for their credit counseling sessions and consolidation help on the other hand the non-profit organizations offer free of charge services. Just because the non-profit organizations are free, it doesn’t undermine their quality of service. The persons associated with such organizations are thorough experts and have lived the trauma of being under credit card debt themselves and hence bring their vital experience to the credit card holder.
When a person approaches a credit counseling agency, the first thing it will do is to take stock of the situation and get various facts about the credit card debt. The credit counseling agency collects data about the income, expenditure and spending habits. It will guide the credit card holder about budgeting benefits and try to inculcate good financial habits. Read more from: http://www.credit-card-gallery.com/article/353,Credit_card_debt_consolidation_and_credit_counseling_great_tools_to_get_rid_of_credit_card_debt
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Call both cards and ask for a reduction in interest rates this will help payoff the cards sooner. Or you can always apply for a low interest card or a 0% card and see if you can transfer balance to pay it off.
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You don’t have such a hige debt, you should be able to handle it by yourself in no time. Here’s a great article on how to do so: http://www.usaindebt.com/2007/10/02/getting-out-of-the-debt-hole-part-one/
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