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.
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.
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.
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.
Not following through on monitoring your accounts.
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:
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.
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.
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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