Add Up Your Total Credit Card Debt
Sit down and add up what you owe on all of your credit cards. Take a look at your interest rate for each card and the monthly amount due for each. If any of your cards have annual fees associated with them, such as rewards cards, make note of those, too. After you come up with the total figure, don’t panic. Remember, this is only the first step in getting back on your feet.
Assess Your Budget
Do you dine out four times a week? Is your cable bill ridiculously high because you pay extra for movie or sports packages? Are you paying a boatload of money for a gym membership that you haven’t used since you signed up for it? Some expenses are necessary. Many would agree the ones noted above are not. It’s important to make cuts where you can. Instead of dining out for breakfast, lunch and dinner, try grocery shopping. Do you really watch all 350 channels you pay for? The answer is probably not. Consider canceling the gym membership and working out at home. The more you save, the more you’ll be able to put towards your debt.
Negotiate New Rates
It all begins with a simple phone call to your credit card company. Even the slightest decrease in your interest rate can make the biggest difference. If you’re able to negotiate a point or two, it could save you hundreds. Your current credit score is a big determining factor in improving your rate. Even if your score isn’t great, it doesn’t hurt to try. If you’re able to lower any of your rates, take note of your new rates so you can adjust your budget accordingly.
If you have multiple credit cards, you have to determine how to attack paying them off. For example, say you have three cards. One has a high interest rate, one has a medium rate and the other has a low rate. Do you start paying off the one with the high rate first, while only making minimum payments on the other two? Do you pay off the card with the lowest rate, while only making minimum payments on the other two? If your goal is to pay off your debt as fast as possible, your best bet is to put as much as you can afford to the card with the highest rate and pay the minimum balance on the other two. Once you get the card with the highest rate taken care of, you’ll have more extra cash to put toward the other cards.
Pay with Cash
I get that this isn’t always possible. However, studies show that when a person is deciding on making a purchase, they’re likely to think twice about making the purchase if they’re paying in cash. With the easy swipe of a credit card and the ability to pay it off later, we sometimes forget that we still do in fact have to pay for the purchase out of our own pockets. In no way am I recommending that you cancel your credit cards – just use them in emergencies.
Debt Management Program
If you feel like you’re in over your head, consider taking part in a debt management program. Unlike when you negotiate a new rate, your credit score isn’t a factor when joining a program. You’ll enroll through a credit counseling agency under new terms with all your creditors. Once an agreement is made, you make one monthly payment, which is spread amongst your creditors.
Credit card debt can be stressful. However, if you follow the steps from above, you’ll be on your way to getting rid of some of your debt.
What other tips do you have for escaping credit card debt? Let us know in the comments below!
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