Eliminate Credit Card Debt

Eliminate credit card debt...it's something you owe yourself if you carry balances on credit cards especially if those balances are high.

If your credit card debt has gone out of control I'm sure you have noticed that it can take over your life. It can squeeze out your time and resources for the more pleasurable things in life.

eliminating credit card debt

Taking back the control is essential to quality of life and of course in the long run will repair your credit.

The first thing one needs to do when you are serious about eliminating credit card debt is to stop using those cards.

That may seem obvious but often times it's easier said than done.

Whatever it is that you need to do to stop using those cards.

  • Put them away; out of sight,hopefully out of mind.
  • Give them to a trusted friend or family member.
  • Or just cut them up though this action will not close the account.

One way to help the situation in eliminating credit card debt and hopefully motivate you toward putting a halt on using those cards is to get a good assessment of what you are doing.

This is more for those who take that card out often without enough thought behind it.

If you still get paper bills and you've filed them......you do file paperwork right??

I know it's ugly but it's a must. Anyway 3, 6 or preferably 12 months of review of what you charged may help you recognize a pattern of spending that you can change.

If you don't get paper bills many times you can usually access as many months of activity as you would like and some cards will even send you a quarterly statement. This is very helpful to get that broad view of your spending that is needed to make changes.

If your company doesn't do either it wouldn't hurt to ask for a statement of expenses for whatever period of time they will allow.

Looking to make the change

Identify trends and group the expenses into similar categories when attempting to eliminate credit card debt.

Impulse shopping (we all do it), car expenses, medical expenses everyday household shopping.

Once you get this list compiled use it to develop a budget.

If you are serious about the need to eliminate credit card debt from your life you will develop a cash only life style to get a hold of this situation.

We're not talking about actually using cash for payment in all situations, but acting like your credit cards were no longer available for use. Though using cash as much as possible for things like groceries, gas and possibly your utilities at a pay station instead of online.

What you will be doing is making yourself much more aware of your spending habits. Making you more in control.

This will give you the ability to see where in your life you can tighten the belt and change the way you live. It should result in a stretching of the cash making way to eliminating credit card debt.

After assessing your situation if you find that you are not as motivated as you'd like, maybe the new disclosures that the Card Act states must be included with your credit card statement will help motivate you.

These disclosures are part of the Truth in Lending Act.

It states how long the balance on your statement will take in years to pay off if only the minimum balance is received each month on your account. Painful to look at!

It also should state how much extra you will be paying in interest if you ONLY pay that minimum amount. (Usually it's enough to use on a small vacation!!)

That should be a motivation to eliminate credit card debt!!

In the same way that a person decides to lose weight or stop smoking, learning to pay cash for the things you formerly placed on a credit card should be looked at as a new way of life. This is how it should be looked at when the goal is to eliminate credit card debt.

Things to avoid til you are more regimented in your new way of life.

    Raising your limits on your accounts

    Although this may help in repairing credit and raising your score, if you do not have the discipline to control its use, all this ends up being is a raising of temptation.

    Not following through on monitoring your accounts.

    Just because you are not using your accounts in the same manner (only paying balances down) that account still needs to be monitored.

    Interest rates could change (but shouldn't), fees that you weren't aware of charged (and should be disputed). These things can happen if you become negligent of the activity on those accounts and can slide by without your notice.

    Late payments

    You will add to your debt load, not working toward a plan to eliminate credit card debt.

    Not seeing your credit as valuable.

    Even if your debt is out of control and your credit is shot, it does not take very long to rectify the situation. Putting a plan in place is the best way to change all of that. More and more your credit is used to determine rates of all sorts upon you. So keeping that score maintained and at it's best is a valuable resource.
    Part of that maintenance is to eliminate credit card debt and keeping it under control as best as possible.

eliminate credit card debt: it's implementation

Once you have that new way of life structured into your life and hopefully found ways to cut the budget down you should have found some extra cash to help you eliminate your credit card debt.

One method I will discuss that most debt management companies use is something called debt stacking.

You do this by making a list to use as a plan. The list includes:

  • each of your accounts
  • their balances
  • the percentage rate
  • the minimum payment
  • the payment you make

Usually you list them from the highest percentage rate and continue down to the lowest.

Basically, you pay the minimum payment on all your cards from your list each month but the first one. That one you pay much more aggressively. As much as you can afford to do.

It is usually advised to use your budget to decide on a pre-determined figure added to the minimum payment that you are able to easily and regularly apply.

This is why the need to tighten the budget and wean out more cash is important to eliminate credit card debt. Although another option if possible some may choose is to add another income source to the mix (meaning a second job and not a business opportunity that will cost money).

Usually a debt management company helping someone to eliminate credit card debt will choose the account with the highest percentage rate as the one to work on first. Most financial advisers will echo that advice.

The idea here is to get rid of the one costing you the most first.

As good as that advice is, there are some that might need the emotional lift of working on an account with a smaller balance first as it will go fast and give you the feeling of accomplishment quicker.

What ever way that works best for you is how it should be done as long as you stick to your program once it is in place.

Once that first card is paid off you will then apply the full payment you were making to that first account in addition to the minimum you were already paying to the next card on your list. Now things heat up and go faster!!

At the same time you are still paying the original minimum payment amount listed on the rest of your cards. Though as your balances go down on each of the other cards you will have a new minimum balance that will be lower, if you want this to work well you will ignore that new minimum and use the old higher one from the beginning of this plan that you put into place.

So... if you were paying $100.00 to Card A and $15.00 to Card B, and $25.00 to Card C after the balance is gone on Card A you will now be paying $115.00 a month to Card B and still $25.00 to Card C till the balance on Card B is exhausted.

Most likely Card B and Card C will be listing a minimum that is less than before. That lower minimum payment is how credit card companies keep you paying them forever.

That is why you will continue with your plan as originally put in place. As you can imagine if you have several cards the last few cards will get big payments and eliminating credit card debt will go fast.

After you finish eliminating credit card debt

The added bonus to this situation is that when that final balance is paid you will have the structure in place to use that amount and start saving cash instead of spending it.

If you didn't have an emergency fund in place it won't take long for that to accumulate to the advised level of six months of house expenses.

Retirement is something we never seem to plan for well enough. You will thank yourself later if you take the time to work on that now.

Other ideas to eliminate credit card debt

If your debt isn't astronomical and you just need a bit of reigning in, a consolidation loan may work for you.

Usually it is recommended that if you need a loan to get your debt under control that it is necessary to close the accounts that are being consolidated.

Many times if you go to the bank looking for a loan to consolidate they will require you to do this. What good is a loan to consolidate if you just go back out and charge up the balances again.

You don't need that temptation!!

Then there are balance transfers (though you should tread carefully here), they can be a valuable tool to eliminate credit card debt. The new account should be willing to extend credit large enough to cover 2 or more of your balances and the rate should last for a time sufficient to make it worth your while. Weigh your options carefully.

Even if it doesn't cover many balances it should at least lower your rate on one that makes it worth the transfer.

Also check the transfer fees. You may not be even making any head way with fees that are too high. Yet this may still be worthwhile if you are able to consolidate several balances just to take stress out of an already over active financial life style coupled with a busy life style that can lead to late payments.

This can happen and is a good idea if you have too many accounts and balances to keep track of.

Life can be simplified if you consolidate many balances to just a few. If the balances are consolidated by way of loans it may be a bit easier to figure how long it will take to pay the balance off as interest is included.

Then either way you can accelerate the pay off in the same way of debt stacking, paying as much extra as possible to get that debt down faster.

So put that plan in place and eliminate credit card debt today!!!

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