The good news is that credit card debt in our country is way down from its pre-financial crisis high. Yet, the average household still owes more than $9,000 on their credit cards paying an average of 23% interest. Ouch! And, with interest rates expected to climb over the next few years, the pain will only get worse. Death by credit card debt (Yes, there are actual studies that show high debt can be a cause of fatal, stress-induced health problems) can be excruciatingly slow and suffocating. Now is the time to, once and for all, to get credit card debt relief.
While it may not be reasonable to expect a cold-turkey approach to kicking the credit card habit, there are some very reasonable and practical steps that can give you the upper hand. The more of these steps you can implement, fully, then the more quickly you can take control of your debt.
Just Say No
You can stop using credit cards. It?s easy if you apply your finances to a strict budget. Of course, the goal is to pay as many of your expenses as you can with cash. Budgeting means prioritizing your cash flow so that it covers all your essential expenses. If you don?t have enough cash flow left over for non-essential purchases, then they shouldn?t be purchased. Most people use their credit cards for these non-essential purchases, and they are often impulse purchases. By finding less expensive forms of entertainment, cutting out $3 coffee, and bagging your lunch you can easily save $100 to $300 each month that can be applied to debt reduction.
Formalize Your Debt Reduction Plan
Set goals and target dates for each credit card. Create a spreadsheet to track monthly progress, and then go to work paying off your high interest cards first. It is important to always make more than just the minimum payment on all of your cards, so make sure your budget (see above) is prioritized for that.
Shred Your Cards
It?s almost a good enough reason to go out and buy a shredder (purchased with cash of course). You?ll get a lot more satisfaction watching and hearing your cards pulverized into slivers instead of just snipping them in two. You don?t have to destroy all of your cards, but you certainly don?t need more than two, and those should just be used for emergencies. Getting rid of your credit cards entirely will help you reduce your debt potential and help you start moving into an improved FICO credit score range.
Trade Down
In many cases, people can trace their credit problems to those tempting 0% balance transfer offers. It typically resulted in more debt and more cards. If you can commit to a disciplined approach to them, you can consider opting in on a balance transfer offer on your high interest cards only (the ones that you shredded). But you need to watch the 0% interest expiration. As long as the permanent interest charge is lower than the card from which you transferred the balance, you?ll be in a better position.
Consolidate your Debts
If you are one of the few people who still have equity in your home, you could consider a home equity loan or line of credit to pay off your high interest debt. A disciplined approach to this would be to maintain, as best as you can, the same level of payments you were paying on the credit card accounts. This way, you will be able to more quickly increase your home equity to its original level. Also, it is important to consider whether a second mortgage on your home makes sense in the current housing market. If you?re not underwater now, you want to prevent that from happening.
Source: http://www.moneyedup.com/2011/09/credit-card-debt-relief/
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