Blonch

Many people need to reduce their credit card debt. If you are ready to take control now and reduce or eliminate credit card debt before it threatens your financial health, you are to be commended. Here are some tips and steps you may find helpful in reaching your goals of reducing and then eliminating credit card debt. .

Step 1 – Get a handle on how much you owe

Make a list of all your credit accounts (I love Excel spreadsheet for this kind of thing). Include information like the credit limit, current balance, interest rate, and minimum payment due now.

• I use the credit limit to calculate the percentage of credit used (overall and for each account), because one of the dings on your credit rating can be for maxing credit (over 50% of the limit) on one or more accounts. Sometimes the card to pay down first is not the card you want to pay off first.
• Sort the list by interest rates (again, electronic spreadsheets are the way to go) , so you can see which balances are costing you the most interest. You may want to consider transferring some high-rate balances to low-rate cards, but keep the first point in mind. I used to recommend that folks contact their lowest rate card company to request an increase in your credit limit or ask the higher-rate cards if they can lower your rate. These days, I hear from folks who called the credit card company only to have their limit lowered. Staying under the radar may be a better plan during the current credit crises.
• Total the minimum payments due.
• Figure out how much money you can spend each month to pay down your credit cards and compare that to your minimums. You have to total more than the minimum even if it means reworking your budget. You are going to pay at least the minimum to each company. The additional amount is where you can get creative.

Step 2 – Make a plan

There are several different approaches to paying off credit cards. If you need motivation and have a card with a low balance, you can apply the additional amount you have beyond the minimums to pay that one off first. Or, if you are just plain practical, target the highest rate card until it is gone.

Step 3 – Carry it out

Whichever account you choose to go after first, make those payments every month until it is gone. Then, the minimum that had been due on that one can be used to increase your payment on the next one. It is a great feeling of accomplishment when you have an account paid off. The process can snowball from there with the result that the more you pay off, the more you have available each month. Sort of sounds paradoxical, doesn’t it.

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Credit Card Debt by PecosJack