Eliminate Credit Card Debt: It Can Be Easy and Permanent
Credit Card Debt Help: Your solace in times of need
Too many credit cards create excessive debt? This can be easily solved with a little credit card debt help. As they say ‘a little goes a long way’ – the same way, with a little guidance on effectively managing debts, you can avoid bankruptcy in the future. Don’t you wish you could free yourself from existing liabilities and eliminate credit card debt? It can be fairly easy and you can actually get rid of it permanently – if you make some smart moves. I will show you how.
Steps to financial planning
There are some easy ways in which you can start planning your finances and take control of the situation. Life need not be an endless tug of war, trying to make ends meet.
Assess your budget
The first thing you probably need to do is to take stock of your finances, income, and expenses. Calculate how much income you get every month, then assess your monthly expenses. Finally, calculate how much savings you’re able to set aside if any. If you find you’re unable to keep aside anything for savings, then assess your expenses. Find out areas where you could possibly cut down on. For example, there are plenty of tips on the Internet that help you live frugally and on a budget. That doesn’t mean you compromise on the basic necessities. It just means cutting down on things you can do without. Also, remember this is only for some time – till your finances are a little better.
Analyze your spending patterns
This goes a long way in assessing areas where you could possibly cut down. There will, of course, be basic expenses such as home payment and maintenance, insurance, auto payments, child care, etc. Then there are others like food, clothing, gifts, and charity, etc. which we can surely eliminate the unnecessary frills. I am not saying ‘live like a pauper’ – all I’m saying is don’t buy things you don’t really need.
Know how long it will take to pay off your debt
You also need to understand how long it’s going to take you to pay everything off. For this, you need to calculate the interest rate, amount outstanding and the number of months it is going to take to pay it off completely. Also, take into consideration the annual interest rate hikes that happen.
Type of interest rate
Interest rates offered by credit card companies can be either fixed or variable. The fixed interest rates signify that you have to pay a fixed amount every month, irrespective of the market conditions. Variable interest, on the other hand, means that you’ll need to pay interest according to the market rate. This can work out as a cost-saver if the interest rates go downhill.
In order to successfully eliminate credit card debt, you need to assess every little detail. So whether it’s a loan you’re paying off each month or many credit cards at hand, you’ll need to sift through each of these. You need to find out:
- How much outstanding you have on each
- What’s the interest rate on each and
- When does the repayment period end
Start paying off:
Once you have the answers to these, it’s easy to start the planning. First prioritize payment according to:
- Repayment period
- Interest rate
- Outstanding balance
In that order. The reason being, that if the repayment period is ending soon, that liability deserves immediate attention. Else the bank will start calling you reminding you of payments. They will then seize your assets to recover costs. You want to avoid this as far as possible.
Once you have cleared the payment on these, check on the interest rates of remaining credit cards. The higher interest rates need to be paid off first. Higher interest means more liability.
Then look at the outstanding balances on the remaining cards. The ones with smaller outstanding balances can be paid off faster. Therefore pay off the ones with smaller balances. That will help you improve your credit rating quickly as well.
Consolidate your debts
This is the biggest step you’re ever going to take to get rid of debt. You will need to consolidate all credit cards, loans, etc. into one single account. Of course, this consolidated credit card is going to charge an interest rate and an annual fee. However, it will result in significant savings on the whole. The best part is that you get to track all your debts under one umbrella.
Nowadays many credit cards offer 0% rates on their balance transfers. This way you can transfer all outstanding balances on your current credit cards and loans into a new card. The lower interest rate will save you money. Plus having all debts consolidated into one single account helps you manage them much better.
Balance transfers can be one great way of reducing debt. Let’s say you have 4 or 5 credit cards with outstanding balances. Each of the cards might have a different interest rate. You could transfer each of these balances into one single new credit card that offers a zero or low-interest rate. This not only saves you money in terms of interest, but it also helps you consolidate your debts.
Don’t spend more than you can afford
This is the golden rule of thumb when trying to get rid of debts. You need to spend according to your means – at least till the time your finances start to look better. Else you risk incurring even more debts.
Pay a little more than the minimum amount due
It helps to pay slightly more than the minimum amount due on the credit cards every month. That way you’re steadily paying off outstanding balances. Start with the credit card having the highest interest rate and then proceed to the lower interest rate, and so on. Continue to do this, till all cards are paid off.
How to avoid getting into debt?
The above credit card debt help tips were to help you out if you were already in debt. These tips will help you avoid getting into debt.
- Pay it off every month:
It's essential to pay off your outstanding amounts every month in full. The standard interest most banks will charge is 12.5 to even 21%. It just doesn’t make sense to pay so much every month.
- Pay more than MAD:
MAD? That’s Minimum Amount Due. It helps to pay a little more than the minimum amount due, just in case you’re unable to afford to pay off the full amount. The bottom line is to pay off as much as you can afford.
- Ask for a lower rate:
If you’re really in bad shape and in real debt, you could contact your credit card company asking for a lower interest rate. Try it – it works most of the time!
The process to eliminate credit card debt purely depends on a positive mind, a good plan in place and cutting down unnecessary expenses.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2020 Jason Nicolosi