Are you used to using your credit cards to buy things you love and deserve, but really can’t afford? Even though you’ve always been told that this is what they are for, it is really bad advice.
Eventually, the harsh reality of having to pay your credit card bills sets in. When you realize that you can no longer keep up with the payments, it’s time to make some adjustments to your lifestyle and spending habits. You may only have to make short-term, temporary adjustments. But, nonetheless, you must do something. Living within your means can be painful if you’re used postponing payments by paying only the minimum balance due and maxing out your credit.
We understand what you’re going through. It’s not just you. Millions of Americans, are facing the same issues right now. Credit card debt is at an all-time high and many people have no hope of ever paying theirs off. If you’re ready to make the commitment to eliminating your credit card debt though, here are a few ways to do it:
Pay down one credit card quickly
If you would feel better just getting one card paid off, then attack the one with the lowest balance instead. It will be the easiest one to pay off and you will achieve that sense of accomplishment that comes along with getting one of them paid-in-full. You’ll may pay more in interest each month, but you will get it paid off faster.
Pay down the credit card with the highest interest rate
Even paying an extra five dollars every month, above what the minimum payment-due is, will help you bring down your principle balance faster. The more you can pay above the minimum on these high-rate cards, the better. Take any extra cash you have and make a payment, even in mid-month to avoid spending the money before your next bill is due. Keep making the minimum payments on the other cards until this one is paid off. Then do the same thing with the card carrying the next highest rate.
Pay down the card with the lowest utilization rate
This strategy will help your credit rating as well as help you pay down the balances. To determine the utilization rate for your cards, simply locate two numbers: the balance owed on the card and the credit limit on that card. Then divide the balance on the card by the credit limit. Do this for each card. For example, if your card balance is $90 and your credit limit is $100, your utilization rate is .9. The lower this number is, the better, for your credit score.
Stop using your credit cards altogether
Operate on a cash basis only. It is way too easy to justify to yourself that you can spend more than you have if you don’t really have to come up with the money at that time. Don’t spend money before you have it. Remember that your goal is to pay down your cards and not use them while you are trying to get rid of your debt. You will spend less and become used to budgeting for spending only what you have earned, not what you will earn the week after next.
Diagram or list your debt on paper
Visualize it and add it up. The best thing to do is make a good, old-fashioned list on paper or in a spreadsheet. List the card that you have, how much debt you have outstanding on each one, what the interest rate is and how much you have.
Set a budget
If you know what your income is and what your expenses are each month, you will have a better chance of successfully eliminating your credit card debt. Don’t forget to account for annually-billed expenses like property taxes or some insurance payments. Divide these expenses by 12 and save the money to pay them in a savings account. There are many resources available to help you to set up a budget and stick to it.
Request a lower interest rate on your credit cards
A lower rate will help you save money each month. You can put the savings toward paying down the principle. You will be surprised how often a credit card company will lower your interest rate, even by half a point, if you just ask them to do it.
Keep in mind that eliminating all of your credit card debt could be a long-term process. You’ll be chipping away at your debt and after a few months will start to notice that your self-discipline and efforts are paying off. You'll start seeing more of your monthly payment amount go toward paying down your actual balance, not just covering the interest and fees.
If you make a plan of attack that includes a coordinated strategy using several methods listed above, you’ll see faster results. With a commitment to not use credit cards until your debt is paid off and to live within your means, you will be able to eliminate your credit card debt.