How To Reduce Your Credit Card Debt

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How To Reduce Your Credit Card Debt

Tuesday, March 31st, 2009    Subscribe To Our Feed

For a while now, we’ve been a country driven by credit. So much so, that when we purchase items , we will without thinking offer to buy it with a credit card, even if we don’t have to. As a consequence of this we have been slowly drawn further and further in debt to the credit card companies. It often occurs so gradually that we’re unaware of it until one day we wake up and suddenly realize that we owe $5,000, $15,000, $20,000 or more in credit card bills. If not taken care of, we’ll soon find ourselves working the rest of our lives paying interest on items we bought years ago. If you don’t want to end up in that situation, you’d better come up with a plan to pay off your credit card bills today. Here are a few tips to help you.

There’s one thing that you can do immediately to get out of credit card debt. Stop adding to it.  Will Rogers once said in one of his more popular quotes, “if you find yourself in a hole - the first thing to do is stop digging”. A lot of people, if they were to stop and think before they buy something with a credit card will realize that it is something that they can probably do without. And if you are deep in depth, it’s probably best to do without or figure out some other way to pay for it. If you continue to charge non-essential items on your credit cards, you are simply digging yourself deeper into debt.

Secondly, you need an organized method of paying off your debt. One of the best ways is to organize your credit card bills by interest, highest to lowest, and concentrate on first paying off the balance with highest rates. The majority of people in this country lack a basic understanding of interest rates and how important they are. Depending on how much your credit card debt is, the difference in interest of only one annual percentage point can result in paying hundreds or thousands of extra dollars over the life span of the loan. But the situation is even worse than that because you are paying off the loan in after tax dollars. This means that if every month you pay $150 a month in interest on your credit card, and you are in the 25% tax bracket, you have to actually earn $200 of income to make that payment. The deadly combination of taxes and high interest rates are constantly working against anyone attempting to pay off a large credit card debt. That’s why it’s urgently important to pay off the highest interest cards first. If you do this faithfully and continuously every month, you’ll slowly begin to see the balance drop down off of that card.

It’s possible that with your current income, you discover that there’s no way that you can begin paying down your credit card debt. In this case, the best thing to do is to try to find a part time job with the intent of using all the money you bring in to pay off your credit card debt. It’s true that working a part time job for six months or so will definitely put a strain on your time but it’s a short term strain. The good thing, however, is that once you’re done with your part time job you’ll discover to your relief that your financial life has suddenly become far less stressful. With each card that you pay off you can breath a little easier because you no longer have to come up with the large sums of money to pay your monthly credit card bills.