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Thursday, September 08, 2005

5 Surefire Ways To Eliminate Credit Card Debt
by: Wes Atkins

Do you have enormous credit card debt? You arecertainly not alone. According to research, the average family in the UnitedStates has $7000 in credit card debt and pays about $1000 in interest each year!Throw in a late payment or two, or an over-the-limit charge, and that numberskyrockets. Imagine what you could do with that $1000 if it weren’t beingspent on interest.

Let’s imagine for a moment that you have$5000 debt on one credit card that is charging you 17.5% APR. Let’s alsoimagine that you pay only the minimum due of $25/month on this card. Guess what?You will never pay it off! The interest alone on this card is $73/month!

That means that each month you get further andfurther into debt. By the time you have been paying on this $5000 for 10 years,assuming you have not used the card during this entire period of time, you willowe $20,385! That’s over $15,000 in interest. If you triple your payment to$75, it will take you over 20 years.

So, what do you do? How do you get out of debtand use that money towards other necessities, savings, and investments? Here area few simple methods that you can use without having to go to an expensivefinancial counselor.

Tip #1: Cut Up Your Cards

The very best way to reduce your credit carddebt is to STOP using your credit cards! There is no need to have more than onecard, so pick the one with the lowest interest rate and cut up the rest. The oneyou keep should be deemed an ‘emergency card.” These are true emergencies,not mere inconveniences. For instance, buying a new TV would not be an emergency,but renting a car in order to get to the bedside of a dying loved one would be.You can carry your emergency card with you, but don’t make it too easy to use.One good suggestion is to cover the card tape and paper and write on it: ForEmergencies Only.

Tip #2: Move Your Debt

If you have more than one credit card payment,you may want to consider moving debt from a card with a higher APR to one with alower APR. This will lower the amount of money you are spending towards theinterest and get you out of debt faster.

Tip #3: Use the Snowball Principle

List all of your credit card debts, and theamount you are paying each month. Pay off the lowest amount first. Then use thatmoney to start paying off the second lowest amount. And then the next and thenext. Let’s look at an example.

If you have a $7000, $5000, and $2000 card withpayments of $150, $125, and $100, you will finish paying off the $2000 cardfirst. Once it is paid off, you take that $100 and put it towards the $5000credit card. That means you are now paying $225/month. You have increased yourpayments which will pay off that credit card sooner and will have you paying alot less in interest. Once that is paid off, you apply the $225 to the $7000card, making your monthly payment $375. This will greatly accelerate the paymentof this card, reducing your interest payments even further. When everything ispaid off, you now have $375/month extra to put towards savings or investments!

Tip #4: Prioritize Your Debt Repayment

One of the best ways to pay off your debts isto get rid of the highest interest payment first. Looking back at the snowballexample, you took the lowest and paid it first. If, however, the $2000 card hadthe lowest interest rate, you would want to pay off the card with the highestrate first. This will save you much more in interest payments.

If the math gets too hard here, don’t despair.There are many places on the Internet where you can find good debt reductioncalculators. It is then just a matter of punching in your numbers and readingthe report.

Tip #5: Consider Consolidation

If you own a home, you may want to considerconsolidating your debt using a home equity loan. Since a home loan is a securedloan (they can take away your house if you don’t pay) you have a much lowerinterest rate than you do on your credit cards. Paying a lower interest rate isalways a good thing! Not only that, but the interest you pay on your home loanis tax deductible. This is NOT true for credit cards.

By following these tips, anyone can takecontrol of and completely eliminate credit card debt.

About The Author
Wesley Atkins is the owner of which aims to get you fitted with the best credit cards to suit your situation. With numerous credit card articles and easy online credit card applications you will never choose the wrong credit card again.


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