Credit card debt is some of the highest interest debt available to consumers today. In addition, the industry is full of aggressive marketing tactics and unethical lenders. Many consumers have realized that the high payments they make on their credit card debt is a burden to them and their family every month, and as a result have decided to make it a priority to get out of credit card debt. Fortunately, there are several ways to get out of debt quickly.
Before starting to get out of debt, a consumer has to start by educating the self and getting their personal financial data organized. Use a website such as payingpaul.com to learn about your options. Then, gather together the last statement from every credit card you currently have. Make a chart listing out each card’s minimum payment, total amount owed, and interest rate.
Next, set up a budget based on making just the minimum payments on your debts. Put in conservative estimates of your other bills and expenses. Using this budget, determine how much money you have left over at the end of every month after paying for all of your necessary expenses. Based on your circumstances, put some of this money aside for savings, and use the rest for debt repayment.
Look at your original list of credit cards, and search for any cards with a total balance that is less than this extra amount. In this case, use the extra money to pay off this card. Paying off small balances like this, even if they have a low interest rate, will enable you to quickly reduce the number of bills that come in every onto and make it easier to manage your other bills. Repeat this step every month, eliminating as many small bills as possible.
If you have no balances that are less than the total amount of extra money you can apply towards debt repayment, then the extra amount of money that you have every month should be put towards the loan with the highest interest rate. This will let you pay off the highest interest debts the fastest, saving you money on interest in the long run.
As you pay off a credit card, take the card out of your wallet and put it in a safe place. Do not close the account, since this will result in your credit score dropping by a few points. Keep in mind, however, that this drop is slight, and therefore it is rarely worth paying to keep an account open. As each credit card is paid, rework your budget to remove the old account. Redirect the money that was going towards the payment on the card to the extra money that goes towards debt repayment. As minimum payments go down on other bills, redirect the savings in the same way.
By doing this, a consumer will be able to quickly pay off his or her credit cards as long as she or he doesn’t continue to rack up more debt. While paying off your credit cards, limit your spending and use savings to pay for emergency expenses.