Credit Card Debt Options - 5 Tips to Reduce Credit Card Debt
With the current level of consumer credit card debt being higher than ever before, you may find yourself struggling to pay your credit card bills, barely covering the minimum payments each month. There are many reasons why we get into debt ranging from illness, redundancy, divorce etc and it is extremely stressful trying to ensure that everybody gets paid their due amount. The credit card debt options available to you will depend on the amount of your debt and whether debt collectors have been called in. Here are 5 tips that can help you reduce your credit card debt:
1. Pay more than the minimum monthly amount
If you have a large amount of credit card debt but you're still making payments (i.e. your account is in good standing) then we highly recommend paying more than the minimum amount each month. This can make a substantial difference in the length of time it takes to repay the debt and to the overall amount of interest you will pay. For example if you pay just the $60 minimum payment on a $3,000 credit card balance, it would take eight years to pay off and cost you a whopping $2,780 in interest. By paying an additional $50 a month, the debt would be paid off in three years and save you $1,800 in interest charges. So it's definitely worth doing if you can find the extra money.
2. Compare interest rates
The next step is to check the interest rate for each card you have and start paying more off the higher rate card. As in the example above, this can save you dramatically in the long run in interest costs. Alternatively, if you have 3 cards or more, and a couple of them have smaller balances, you might want to pay one of the smaller balances off first, as this will help you feel like you have made progress by eliminating an extra bill once it's paid off.
3. Balance Transfer option
You may have thought about looking to transfer your balance to a lower interest card or a o% interest rate for a fixed period of time. This can give you some breathing space but you do need to read the small print and check out how much the transfer fee is (this can range from 1-3% of the amount being transferred) and check what the interest rate (APR) will revert to once the transfer period ends as this may end up being higher than your current card. Also you may not be able to transfer all your cards to the new card as the limit may be smaller, meaning you could end up with even more cards and a temptation to use the freed up limit from the old card. Proceed with caution is what I would say here.
4. Stick to your plan to get rid of credit card debt!
It sounds silly but you need to work out a realistic monthly budget and stick to it! A good way to do this is to write down all your outgoings for a week/month and look for small ways to cut down on luxuries or non-essential items. When you see it on paper you will realise just where all that extra money goes that could be better spent reducing your credit card debt. Taking your own lunches to work, or cutting out the Starbucks twice a week will soon make a difference when combined and even an extra $20 a month will make inroads when you channel this into paying off one of your cards.
5. Credit Card Debt Program
If you are already in arrears with your credit card(s) and the amount of your debt is $10000.00 or higher then it may be time to consider a credit card debt program. This is preferable to bankruptcy and involves either a Debt Settlement Program or a Debt Consolidation Program. Either option is handled by an expert in debt relief who will negotiate with your creditors for you to try and get lower repayments or a reduction in the amount owed and can save you between 40-80% of the amount outstanding, even with any fees included. When you have the credit card companies calling you at home, or worse maybe a debt collection agency has been instructed, then it can be a relief to know that all your debt problems are being handled by a professional. Also once you are in an approved debt program then no further action will be taken by the credit card companies provided you stick with the new plan.
If you need to know more about credit card debt programs and how they can benefit you, please
read our review of the top 3 debt relief companies [http://www.creditcardcounselling.org/creditcarddebtprograms] of 2010 to see which company may be able to help you.
1. Pay more than the minimum monthly amount
If you have a large amount of credit card debt but you're still making payments (i.e. your account is in good standing) then we highly recommend paying more than the minimum amount each month. This can make a substantial difference in the length of time it takes to repay the debt and to the overall amount of interest you will pay. For example if you pay just the $60 minimum payment on a $3,000 credit card balance, it would take eight years to pay off and cost you a whopping $2,780 in interest. By paying an additional $50 a month, the debt would be paid off in three years and save you $1,800 in interest charges. So it's definitely worth doing if you can find the extra money.
2. Compare interest rates
The next step is to check the interest rate for each card you have and start paying more off the higher rate card. As in the example above, this can save you dramatically in the long run in interest costs. Alternatively, if you have 3 cards or more, and a couple of them have smaller balances, you might want to pay one of the smaller balances off first, as this will help you feel like you have made progress by eliminating an extra bill once it's paid off.
3. Balance Transfer option
You may have thought about looking to transfer your balance to a lower interest card or a o% interest rate for a fixed period of time. This can give you some breathing space but you do need to read the small print and check out how much the transfer fee is (this can range from 1-3% of the amount being transferred) and check what the interest rate (APR) will revert to once the transfer period ends as this may end up being higher than your current card. Also you may not be able to transfer all your cards to the new card as the limit may be smaller, meaning you could end up with even more cards and a temptation to use the freed up limit from the old card. Proceed with caution is what I would say here.
4. Stick to your plan to get rid of credit card debt!
It sounds silly but you need to work out a realistic monthly budget and stick to it! A good way to do this is to write down all your outgoings for a week/month and look for small ways to cut down on luxuries or non-essential items. When you see it on paper you will realise just where all that extra money goes that could be better spent reducing your credit card debt. Taking your own lunches to work, or cutting out the Starbucks twice a week will soon make a difference when combined and even an extra $20 a month will make inroads when you channel this into paying off one of your cards.
5. Credit Card Debt Program
If you are already in arrears with your credit card(s) and the amount of your debt is $10000.00 or higher then it may be time to consider a credit card debt program. This is preferable to bankruptcy and involves either a Debt Settlement Program or a Debt Consolidation Program. Either option is handled by an expert in debt relief who will negotiate with your creditors for you to try and get lower repayments or a reduction in the amount owed and can save you between 40-80% of the amount outstanding, even with any fees included. When you have the credit card companies calling you at home, or worse maybe a debt collection agency has been instructed, then it can be a relief to know that all your debt problems are being handled by a professional. Also once you are in an approved debt program then no further action will be taken by the credit card companies provided you stick with the new plan.
If you need to know more about credit card debt programs and how they can benefit you, please
read our review of the top 3 debt relief companies [http://www.creditcardcounselling.org/creditcarddebtprograms] of 2010 to see which company may be able to help you.