5 Surefire Ways To Eliminate Credit Card Debt
Do you have enormous credit card debt?
You are certainly not alone. According to research, the
average family in the United States has $7000 in credit
card debt and pays about $1000 in interest each year!
Throw in a late payment or two, or an over-the-limit charge,
and that number skyrockets. Imagine what you could do
with that $1000 if it weren’t being spent on interest.
Let’s
imagine for a moment that you have $5000 debt on one credit
card that is charging you 17.5% APR. Let’s also
imagine that you pay only the minimum due of $25/month
on this card. Guess what? You will never pay it off! The
interest alone on this card is $73/month!
That
means that each month you get further and further into
debt. By the time you have been paying on this $5000 for
10 years, assuming you have not used the card during this
entire period of time, you will owe $20,385! That’s
over $15,000 in interest. If you triple your payment to
$75, it will take you over 20 years.
So,
what do you do? How do you get out of debt and use that
money towards other necessities, savings, and investments?
Here are a few simple methods that you can use without
having to go to an expensive financial counselor.
Tip
#1: Cut Up Your Cards
The
very best way to reduce your credit card debt is to STOP
using your credit cards! There is no need to have more
than one card, so pick the one with the lowest interest
rate and cut up the rest. The one you keep should be deemed
an ‘emergency card.” These are true emergencies,
not mere inconveniences. For instance, buying a new TV
would not be an emergency, but renting a car in order
to get to the bedside of a dying loved one would be. You
can carry your emergency card with you, but don’t
make it too easy to use. One good suggestion is to cover
the card tape and paper and write on it: For Emergencies
Only.
Tip
#2: Move Your Debt
If
you have more than one credit card payment, you may want
to consider moving debt from a card with a higher APR
to one with a lower APR. This will lower the amount of
money you are spending towards the interest and get you
out of debt faster.
Tip
#3: Use the Snowball Principle
List
all of your credit card debts, and the amount you are
paying each month. Pay off the lowest amount first. Then
use that money to start paying off the second lowest amount.
And then the next and the next. Let’s look at an
example.
If
you have a $7000, $5000, and $2000 card with payments
of $150, $125, and $100, you will finish paying off the
$2000 card first. Once it is paid off, you take that $100
and put it towards the $5000 credit card. That means you
are now paying $225/month. You have increased your payments
which will pay off that credit card sooner and will have
you paying a lot less in interest. Once that is paid off,
you apply the $225 to the $7000 card, making your monthly
payment $375. This will greatly accelerate the payment
of this card, reducing your interest payments even further.
When everything is paid off, you now have $375/month extra
to put towards savings or investments!
Tip
#4: Prioritize Your Debt Repayment
One
of the best ways to pay off your debts is to get rid of
the highest interest payment first. Looking back at the
snowball example, you took the lowest and paid it first.
If, however, the $2000 card had the lowest interest rate,
you would want to pay off the card with the highest rate
first. This will save you much more in interest payments.
If
the math gets too hard here, don’t despair. There
are many places on the Internet where you can find good
debt reduction calculators. It is then just a matter of
punching in your numbers and reading the report.
Tip
#5: Consider Consolidation
If
you own a home, you may want to consider consolidating
your debt using a home equity loan. Since a home loan
is a secured loan (they can take away your house if you
don’t pay) you have a much lower interest rate than
you do on your credit cards. Paying a lower interest rate
is always a good thing! Not only that, but the interest
you pay on your home loan is tax deductible. This is NOT
true for credit cards.
By
following these tips, anyone can take control of and completely
eliminate credit card debt.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Wesley Atkins is the owner of http://www.credit-cards-advisor.com-
which aims to get you fitted with the best
credit cards to suit your situation. With numerous
credit card articles
and easy online
credit card applications you will never choose the
wrong credit card again.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
|
