Managing your
Credit Card Debt
There is no doubt that credit cards have their use. It is a great quick fix solution to having a little cash shortage for when you pay your groceries or purchase that nifty camera that’s on sale. But a credit card is also the one financial instrument that is most susceptible to abuse. The credit card is almost as good as cash so the temptation to make purchases is very strong. Another thing that makes credit cards such a tricky object to handle is that when you buy something using a credit card, you do not use any money, this creates the false impression that the money that is in your bank is not being used, so you keep making purchases not realizing that you will have to pay for those charged items at the end of the month and every month therein if you forget to pay the credit card bills or if you did not pay the whole amount. Before you know it, you already have amassed a credit card debt so big that you really cannot pay it, and you do not have the savings to even just make a dent on the money that you owe. If this happens, well, then you are well and truly in trouble.
The best solution to eliminate credit card debt is to not make it happen in the first place by being very conscientious with each credit card purchase. Unfortunately, this is an ideal and the fact is that there are many people who are already deep in debt with their credit cards. The best solution in this particular case is to manage your credit card debt in order to slowly lower the total amount owed to the credit card company. It is going to take a lot of work, but with dedication the goal of reducing, if not totally eliminating, credit card debt is achievable.
There are certain methods in which you can eliminate credit card debt systematically. Below is one particular method that is effective and quite simple.
The first thing that should be done is to list all of your credit cards. In the list, include the balance for each, the interest rate imposed, as well as the minimum payment percentage and the minimum amount that can be paid on the most recent credit card bill. After writing down the appropriate information, try to sort the list so that the credit cards with the highest interest rates are at the top, while those that offer low interest rates are at the bottom.
When you have finished making the list put down all of the required minimum payments asked for each card and then add it all up. The resulting amount is what you need to come up with in order to pay the minimum amounts due for each particular credit card. Next, look at your finances and try to arrive at an amount that you are willing to use for payments aside from the total amount that you have put aside for the minimum amounts due for payment for the credit cards. If you have assessed that you cannot spare any more money for payments then you have to do drastic measures like becoming more budget conscious. It is imperative that you get to raise the extra money because this will be the key to eliminating debt. How? Simple, with the amount earmarked for the minimum payments for each card, pay all of them off. Now, the extra money that you have saved will then be paid to the credit card with the highest interest rate (refer to the list you made) on top of the minimum amount due. This will slowly lower your total debt for that particular credit card. When you have finished paying off the card. Use the whole amount that you use (the extra money plus minimum amount due for the closed credit card) and pay it to the next credit card on the list, on top of the minimum amount due you pay for that credit card.
The method explained above is an ingenious way of paying off your credit card debt because you essentially play with the money that you have already allotted for payments. By accumulating the “extra” money that you use to pay off your debt, the amount that is lessened from the total debt also gets exponentially bigger. The good thing here is that since you have already earmarked the money from day one, you essentially employ money that is now separate from your other budgets. When you have eliminated all of your credit card debt you are now aware of the fact that you can save that much money every month – which now leads you down the path of actually saving money.