Ways To A Successful Credit Card Debt Management
Without effective credit card debt management, it would be impossible to rise from overwhelming debt problems and get back control of your finances.
It is very common for Americans to have more than one credit card to their name. The credit card is the most easy, convenient, and accessible kind of credit. Unfortunately, many have succumbed to the temptation of using this card carelessly. Because of it, we are now experiencing a credit crunch which we never expected to happen in our life time.
Each and everyone of us should know by now that if credit is abused and used irresponsibly, interest charges will accumulate fast. This will lead to debt that may be uncontrollable. If you are one of the many who are deep in credit card debt, here are some credit card debt management tips that might help ease the burden.
1. Make a thorough assessment of your total credit card debt.
Gather all of your most recent credit card bills and statements. If you do not have a hard copy, surely you can get one online. It is usually included in creditors’ services to provide their clients with online credit card statements. These statements have complete and detailed information about your past and present balances and transactions.
Include in your list each account’s outstanding balance, minimum requirement, interest rate, annual percentage rate, maximum spending limit, and how much credit you have left.
2. Get all your debt into one account – debt consolidation.
Among all your creditors, check which of them offer the lowest interest rate. Check also with other banks if they offer lower rates than any of your existing lenders. As much as possible transfer all your accounts with the company who offers the best deal. Be advised that there are many credit card companies who provide clients who wants to consolidate credit card debt with special offers. Offers such as 0 interest rate for the first year you open a balance transfer account.
If it is not possible to transfer each credit card account, try at least to transfer those with the highest interest rates. Imagine how much you can save in a year if you have lower interest rates to deal with.
3. Prioritizing your monthly credit card payments.
After you have consolidated your credit card balances into a few lower interest accounts, give priority in paying off loans that have the highest interest rates. Make it a habit to set aside at least twice the amount of its minimum payment monthly. Preferably twice that amount .
But ofcourse, you should not stop paying your other accounts. For those balances, you may pay the minimum payable amount monthly, but pay consistently. Defaulting on a payment will automatically increase the rates of your account. Also, stop charging with the credit cards that have high interest rates. If absolutely needed, make use of the card with the lowest interest.
4. If you have savings set aside, these should be geared towards paying off your debt.
It may sound unorthodox, but if you are having debt problems, instead of setting aside savings for a rainy day, whatever savings you make should be channeled towards paying off your credit card debt. Let’s do the math. If you deposit your money, at most it can earn 2% but usually just 0.5%. per year. On the other hand, you pay as much as 20% interest rates on high interest balances per month. That is a total of 240 percent money lost compared to 0.5% money earned. Surely, you can compare how much you save if you put all extra cash you have into paying your loan instead of depositing it in a bank for a measly interest.
5. Stop using plastic and pay with cash instead.
This is probably the most vital factor in a successful credit card debt management. If you do not charge with your card, then you do not end up owing any of your creditors. Since you are already knee high in debt, it is probably wise to put a halt in further debt accumulation. It is not that easy, who said it was. But imagine how it would be like if one day you get your credit card bill in the mail and in it would be written “you have 0 (zero) balance to pay”. That would surely be an achievement. With ample discipline, determination, and a little bit of sacrifices here and there being debt free may not be a distant dream after all.
