The first step toward beating credit card debt is to keep it from happening in the first place. But if you are already overwhelmed with monthly credit card payments, there are some simple steps you can take that will start to make a dent in your debt and get you back on a path toward personal fiscal responsibility.
- Scrutinize your statements. Paying off your debt won?t happen unless you get control of your credit card spending. Take a careful look at your credit card statements each month and make sure every charge is necessary. If you?re seriously in debt, stop buying things on credit ? right now. And when you get your debt paid off, make sure not to fall back into the same bad habit of charging for things you simply want instead of things you need, especially if you can?t pay off the full balance each month.
- Pay more than required. If you owe $5,000 in credit card debt and you pay only the minimum amount due each month, say $15 (or 2 percent of the balance, whichever is larger), it will take you more than eight years to pay it off. And, you?ll pay thousands of dollars in interest, depending on the interest rate. Simply doubling the amount you pay each month will pay off the debt in about two and a half years, and you will save a couple thousand dollars or more in interest.
- Ask for a lower interest rate. The higher your credit card interest rate, the longer it will take you to pay off your debt if you?re making monthly payments. Call the credit card issuer?s customer service department and explain your situation. Lenders want you to continue paying down your debt rather than lose you as a customer; or worse, see you default on the balance. You might be surprised at how cooperative they will be if you negotiate in good faith and you?ve been paying at least the minimum amount due each month.
- Pay the balance in full. Granted, if you could pay off the entire balance, you probably wouldn?t be in such serious debt. However, if you really look closely at your budget, you might be able to pay off the debt in a few large lump sum payments instead of dragging it out.
- Be wary of balance transfers. As a promotion, many credit card lenders will offer to let you transfer your high-interest credit card balances to their card at a low or zero interest rate for a specific period of time. Be careful; read the terms and conditions. Many companies will charge a percentage (typically 3 percent) of the total transfer as a one-time fee when you transfer.
- Pay off the highest interest-rate cards first. This is just basic math. The quicker you pay off your higher interest rate balances, the less it will cost you in the long run. Once you pay off one card, apply the monthly amount you were paying to increase the payments on your other card(s).
- Talk to a credit counselor. If you think you can?t manage your debt alone, then it?s time to get some advice. As a first step, consider contacting the nonprofit Association of Independent Consumer Credit Counseling Agencies for assistance. Through this organization, you can get connected to experts who will help you negotiate with credit card companies, set up a payment plan and other debt-dissolving solutions.
And Stay Out?
These simple debt-reduction steps can make credit card debt disappear if you are determined and persistent. Once your debt is paid off, be sure to use your credit cards responsibly and wisely to make sure you keep them under control in the future.