A large number of Americans today are slammed by credit card debts. Personal bankruptcies have doubled in the past decade and the average house in America carry some $8,000 in credit card debt!
Dealing with your credit card debt can be nerve-racking. In such a stressful time, choosing the wrong method to come out of debt can push you further into the hole. Therefore, it is very important that you choose the right option for yourself that will help you to shed your debts successfully. Here are some tips to consider:
- Limit your number of cards: To avoid excessive debt, it is very necessary to limit the number of credit cards that you carry. More cards mean overspending and increasing your chances of getting into debt. Limit the number of cards, especially the high interest cards and make a determination to control your spending.
- Use low interest card: Transfer your balances from high interest rate cards to the one with the lowest interest rate. Now make a single monthly payment towards this card. This way you can consolidate your credit card debts into one affordable payment, eliminating the need to manage too many payments at a time. Prior to balance transfer, see if the lower rate card has a reasonable introductory period so that you will have enough time to pay off your entire balance at the lower rate. While you are transferring your balance, do not close your cards all at once as this may affect your credit score.
- Double your minimum payment: When you start paying down your new consolidated balances, double the minimum payment you were paying on the old balances. Take advantage of the lower interest rate and pay more each month to reduce your total debt.
- Use the snowball principle: List down all your credit card debts and the amount that you are paying each month. Now concentrate on clearing the lowest amount first. When that is cleared, move to the next one. Since you have one debt less than before, you can put the extra money to eliminate it faster. This way you can clear your debts one after another, gradually tackling the ones that come up higher in the list.
- Prioritize your repayment plan:
It is wise to first get rid of the debt that has the highest interest payment. Pay off the card that has the highest rate first. That way you save more on your interest payments.
All’s well that ends well. But to make sure that you do not fall into credit card debt in future, keep the following points in mind:
Control your expenditure: Overspending is the root of all financial problems. Plan out a budget for yourself and determine to stick to it. This will also help you to avoid a default while you are in a credit card debt consolidation program.
Build up an emergency fund:
Emergencies can arrive anytime in any form. Your emergency fund will help you in bailing you out of unexpected emergency situations. Keep aside a part of your income for emergencies.
Avoid using credit cards: If you cannot buy with what is there in your wallet, you better do not buy it all. Use cash to make your purchases. Using credit instead of cash may push you into debt, especially when you cannot pay your dues in full each month.
Author-bio: The above was a guest post by Jack Reed. He offers advice on various debt related issues.