Ways To A Successful Credit Card Debt Management
Credit Card Debt Management is essential in your quest of being debt free and getting back control of your finances.
Most of us in America have multiple credit card accounts. This plastic card has been so accessible to almost anybody and it has been considered as an easy to acquire, hassle free type of loan. Sad to say though, most of us have abused its convenience. Because of it, we are now experiencing a credit crunch which we never expected to happen in our life time.
All citizens of the US should remember that if credit of any sort is not managed properly, it will ultimately lead to spiraling interest charges, which will cause seemingly insurmountable debt woes. If you find yourself in this dilemma, here are some simple yet effective steps in credit card debt management.
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 them on hand, then check them 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. Apply for a debt consolidation.
See which of your credit card account has the lowest interest. If you think credit companies other than your current creditors offer a lower interest rate, it would be worth your while to check on that too. Once you have chosen which company will give the best deal, transfer all your balances into that account. 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 consolidation, you might still be left with multiple credit card accounts to your name. In this case, it is advisable to prioritize paying off credit card debt with the higher interest rates. With these accounts, pay more than the monthly minimum requirement. 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. Prioritize paying off the balances of those with higher interest and try as much as possible not to make use of those cards. If absolutely needed, make use of the card with the lowest interest.
4. Now is not the time to save. Any extra cash should be coursed to reducing and eventually eliminating debt.
If you are deep in debt at this point of your life, you simply cannot afford to save for a rainy day. Every extra cash you have should be used to pay of your existing loan. This may seem to be an unusual advice but there is some logic to it. Think of it this way: if you leave your money static in the bank, it earns an interest of about 0.5 to 2 percent per anum. 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. Start making it a habit to pay with cash instead of charging with plastic.
This is the most important step in credit card debt management. The best way to be able to afford to pay the total balance of each credit card each month is to have a balance of zero. It might not be easy to just totally stop using plastic, which is such easy credit, but imagine how it would feel like to receive your statement one day with a 0-balance account. With ample discipline, determination, and a little bit of sacrifices here and there being debt free may not be a distant dream after all.
