4 Tips For Busting Credit Card Debt
While struggling with excess debt is a common problem, the knowledge that others face this issue isn’t much of a help in solving it. If you’re carrying debt balances that you’d like to get rid of, you may find that pursuing some of the strategies outlined below can help you purge yourself of excess credit card debt.
1) Concentrate On One Debt At A Time
Do you have outstanding balances on multiple credit cards? For a start, make sure you’re paying the minimum on each of them. Focus all the rest of your debt-reduction cash on paying down one card at a time. There are two schools of thought as to prioritizing which cards you pay off first:
* Interest rate: Check all of your credit card statements and identify the balance that’s racking up the highest interest charges. Use your resources to eliminate that debt first.
* Balance size: Concentrate your payments on the card carrying the smallest balance first. As you pay down debts, move to progressively larger balances using the greater amounts of money available to you.
2) Maximize Your Payments
Your credit card statements can teach you a lot if you examine them closely. For example, you should be able to see that paying only the minimum balance each month will actually take an extremely long time to pay off your full balance. The more you pay each month, the less interest will accumulate before the debt is fully repaid. Lenders have a legal obligation to make this clear in your statements, so the information isn’t that hard to find.
This suggests a very simple solution to your credit woes: Pay more than the minimum every month. Every extra dollar you can use to pay down your balance results in smaller overall interest charges.
3) Consolidate Your Debts
Debt consolidation of loans means combining multiple balances into one larger debt with a lower interest rate. This allows you to pay your debt off faster without increasing the total amount you pay month-to-month. There are two common paths to consolidation:
* Low Balance Transfer Offers. Transferring a balance from one card to another will require you to pay transfer fees, typically between three and five percent. A lower interest rate may deliver benefits that outweigh the cost of the transfer. Make sure you account for fees and interest rates in combination when considering a transfer.
* Home Equity Credit. If you’ve accumulated equity in your home, that asset can be used to pay down credit card debt. The interest you pay on the line of credit may be lower than the rates charged by your credit cards. Note that you’ll usually have to pay closing costs to open the line. An added benefit, though, is that interest payments against home equity are often eligible for tax deduction.
Note that effective consolidation requires you to keep your spending firmly under control to avoid generating any new debt.
4) Budget For More Repayment
Split up your monthly spending so you can tell where your money goes: groceries, housing, transportation, entertainment, and so forth. Your credit card statements may make this easier by categorizing your spending for you. Look for areas where you can reduce spending. Use the saved money to create a new category – debt repayment – and get ahead on your credit card debt.