Getting Back Control Of Your Finances With A Credit Card Debt Management
Credit Card Debt Management is essential in your quest of being debt free and getting back control of your finances.
It is very common for Americans to have more than one credit card to their name. The credit card is the most easy, convenient, and accessible kind of credit. 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 are one of the many who are deep in credit card debt, here are some credit card debt management tips that might help ease the burden.
1. Make a thorough assessment of your total credit card debt.
List down all your credit card accounts and the outstanding balance of each one. If you do not have them on hand, then check them online. All major credit card companies provide their clients with easy access to their online statements. You will find all the information you need in their designated websites.
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. Get all your debt into one account – debt consolidation.
See which of your credit card account has the lowest interest. Check also with other banks if they offer lower rates than any of your existing lenders. As much as possible transfer all your accounts with the company who offers the best deal. Many major credit card companies offer promotions that will give you not only a lower interest rate but also a full year of zero interest if you transfer your other credit card accounts with them.
Although not all creditors will allow balance transfers, try to transfer your credit accounts that have the highest interest rates. Imagine how much you can save in a year if you have lower interest rates to deal with.
3. Give priority to paying of credit card accounts with higher interest rates.
After you have consolidated your credit card balances into a few lower interest accounts, give priority in paying off loans that have the highest interest rates. With these accounts, pay more than the monthly minimum requirement. It is advisable that you pay double of the minimum payment each month.
But ofcourse, you should not stop paying your other accounts. Just consistently pay the minimum for those balances. Defaulting on a payment will automatically increase the rates of your account. Also, stop charging with the credit cards that have high interest rates. Use only the low interest rate cards if needed.
4. Now is not the time to save. Any extra cash should be coursed to reducing and eventually eliminating debt.
It may sound unorthodox, but if you are having debt problems, instead of setting aside savings for a rainy day, whatever savings you make should be channeled towards paying off your credit card debt. Let’s do the math. If you deposit your money, at most it can earn 2% but usually just 0.5%. per year. On the other hand, you pay as much as 20% interest rates on high interest balances per month. So if you leave your money in the bank and continue accumulating interest charges, at the end you will be paying 240% on interest while your savings would be giving you maybe 1% interest. 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 probably the most vital factor in a successful 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. Eliminating debt is quite difficult. You will need a good doze of discipline, commitment and some sacrifices to reach the goal. But being debt free and getting back control of your finances would all be worth it in the end.
