5 Surefire Ways To Eliminate Credit Card Debt
Do you have enormous credit card debt? You are
certainly not alone. According to research, the average family in the United
States has $7000 in credit card debt and pays about $1000 in interest each year!
Throw in a late payment or two, or an over-the-limit charge, and that number
skyrockets. Imagine what you could do with that $1000 if it werenít being spent
Letís imagine for a moment that you have $5000 debt on one credit card that is
charging you 17.5% APR. Letís also imagine that you pay only the minimum due of
$25/month on this card. Guess what? You will never pay it off! The interest
alone on this card is $73/month!
That means that each month you get further and further into debt. By the time
you have been paying on this $5000 for 10 years, assuming you have not used the
card during this entire period of time, you will owe $20,385! Thatís over
$15,000 in interest. If you triple your payment to $75, it will take you over 20
So, what do you do? How do you get out of debt and use that money towards other
necessities, savings, and investments? Here are a few simple methods that you
can use without having to go to an expensive financial counselor.
Tip 1: Cut Up Your Cards
The very best way to reduce your credit card debt is to STOP using your credit
cards! There is no need to have more than one card, so pick the one with the
lowest interest rate and cut up the rest. The one you keep should be deemed an
Ďemergency card.Ē These are true emergencies, not mere inconveniences. For
instance, buying a new TV would not be an emergency, but renting a car in order
to get to the bedside of a dying loved one would be. You can carry your
emergency card with you, but donít make it too easy to use. One good suggestion
is to cover the card tape and paper and write on it: For Emergencies Only.
Tip 2: Move Your Debt
If you have more than one credit card payment, you may want to consider moving
debt from a card with a higher APR to one with a lower APR. This will lower the
amount of money you are spending towards the interest and get you out of debt
Tip 3: Use the Snowball Principle
List all of your credit card debts, and the amount you are paying each month.
Pay off the lowest amount first. Then use that money to start paying off the
second lowest amount. And then the next and the next. Letís look at an example.
If you have a $7000, $5000, and $2000 card with payments of $150, $125, and
$100, you will finish paying off the $2000 card first. Once it is paid off, you
take that $100 and put it towards the $5000 credit card. That means you are now
paying $225/month. You have increased your payments which will pay off that
credit card sooner and will have you paying a lot less in interest. Once that is
paid off, you apply the $225 to the $7000 card, making your monthly payment
$375. This will greatly accelerate the payment of this card, reducing your
interest payments even further. When everything is paid off, you now have
$375/month extra to put towards savings or investments!
Tip 4: Prioritize Your Debt Repayment
One of the best ways to pay off your debts is to get rid of the highest interest
payment first. Looking back at the snowball example, you took the lowest and
paid it first. If, however, the $2000 card had the lowest interest rate, you
would want to pay off the card with the highest rate first. This will save you
much more in interest payments.
If the math gets too hard here, donít despair. There are many places on the
Internet where you can find good debt reduction calculators. It is then just a
matter of punching in your numbers and reading the report.
Tip 5: Consider Consolidation
If you own a home, you may want to consider consolidating your debt using a home
equity loan. Since a home loan is a secured loan (they can take away your house
if you donít pay) you have a much lower interest rate than you do on your credit
cards. Paying a lower interest rate is always a good thing! Not only that, but
the interest you pay on your home loan is tax deductible. This is NOT true for
By following these tips, anyone can take control of and completely eliminate
credit card debt.
About the author:
Wesley Atkins is the owner of
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