Ways to Start Reducing Credit Card Debt

Steps You Can Take To Become Debt Free

If you are a typical American consumer, you probably are carrying around numerous credit cards in your wallet. In the past decade, credit was very easy to obtain and sometimes you didn’t even have to request it. A pre-approved application was sent to you in the mail and all you had to do was fill in a few questions, return it to the issuing bank, and in about a week you had a brand new card. It’s not unheard of for people to have 5, 10, or even 15 different credit cards open at one time.

The days of shopping with cash have come and gone, too. While credit cards previously were used for special purchases (such as a television or other appliance) they now are used for everything from a cup of coffee to airline tickets. The convenience of using credit cards for everyday purchases, even ones as small as a soda or sandwich, has caused many Americans to become overwhelmed with credit card debt, to the point that many owe thousands of dollars on many different cards.

When you shop with cash, you tend to think more about your purchases and are more careful with managing your money. When you use a credit card, it’s sometimes hard to realize how all those small purchases add up. That is, until your monthly statement arrives and you see how much you have added to what you already owe.

One thing you should always remember is that the banks don’t want you to pay off your credit card balances. If you pay the minimum amount due every month, plus add on new purchases, you are never going to get out from under your credit card debt. To the banks, this is billions of dollars of revenue each year- all generated from the interest charges they bill their customers. This doesn’t even include the billions of dollars they earn each year from late payment and over limit fees. The last thing banks want is for their customers to reduce and pay off their credit card balances.

So how do you start to tackle all those bills? The first thing is to get a pair of scissors and cut up all of your credit cards. Keep one card on hand for emergency situations, but it is not to be used except in extreme circumstances. (This is where you learn the difference between “need” and “want”. They are not the same thing.)

You will also need to establish a household budget. It is impossible to take control of your credit card debt without having a reasonable budget and learning to live on it. You will need to determine your income and also all of your expenses. To be successful in reducing your debt, you have to be aware of how much you actually owe.

Cutting your credit card debt is a slow, and sometimes painful, process. It will most likely involve sacrifices on your part. Determination is so important! Remember to stay focused on your ultimate goal- to be debt free. Constantly remind yourself of what you are working towards and how wonderful it will feel not to always be worrying about your debt. There is more to life than just paying bills.

How should you handle $3,000 worth of credit card debt?

A credit card with a $3,000 spending limit is fairly typical in today’s market. With people using credit cards to pay for nearly everything, it is easy to use up your available funds very quickly. Interest rates are at record highs with 20% being average. This can add up to costly interest charges every month ($30-$40).

Most people struggle every month with their credit card bills. If you are only making the minimum payment that may not even cover the interest charges, so you will fall further and further behind. The key to managing debt is not spending more than you earn. It also means not taking on new debt.

Put your credit cards away and pay cash for your purchases. Consumers tend to be more careful with their money when there is no credit card to fall back on. A good rule to follow is if you can’t afford to pay cash for something, you probably shouldn’t buy it anyway.

Try to pay as much as possible each month on your credit card account. Paying the minimum will keep you in debt forever. And just as importantly, STOP using the card.

What do you do with $10,000 worth of credit card debt?

With most people having at least 3 or 4 different credit cards, it’s very easy for many of them to quickly become submerged in $10,000 worth of debt. Most of these people have little or no money management skills and have used their credit cards as a way to live well beyond their means. A debt load of this size can seem overwhelming at first, but it is possible to get relief. It will take determination and patience, but it can be done.

Many people in this situation turn to a debt relief specialist for help. This person will go over all of the financial information (your income, your assets, your total debts) and then determine an amount you can afford to pay to all of your credit card companies. This normally involves settling your debts for a significantly smaller amount. While this does reduce your overall credit card debt, it also has a negative impact on your credit rating. You accounts will all be cancelled with this process, too.

What are your options to handle more than $10,000 worth of credit card debt?

Unfortunately, most people are not very good at either money management or debt management. Put these two attributes together and you have a perfect recipe for financial disaster. If you have credit card debt of more than $10,000, it will take serious effort on your part to manage and reduce this debt successfully.

Credit scores play a large role in determining what type of loan you will get when trying to borrow money. The higher your credit score, the more favorable the terms of your loan and the lower your interest rate will be. This can add up to hundreds or thousands of dollars in savings to you over the life of the loan.

Credit scores are negatively impacted when you have high balances on credit card accounts, late payments, or charged off debt (bankruptcy, debt consolidation). The ideal situation is to only use about 20% of your available credit at any one time. Payments should always be made on time, every month. No exceptions.

Try not to apply for any new credit. Each time an inquiry is made into your credit report, it negatively affects your score.

High interest credit cards should be paid down first. Making minimum payments on high interest credit cards is pointless. These cards are purposely designed to keep the consumer in debt forever. Pay as much as possible on these outstanding balances and don’t make any new purchases with the cards.

The key to reducing your credit card debt is to pay more than the minimum amount due each month and stop using the cards. Success will come only when you learn to manage your money, reduce your debt, and live within your means.