If you have credit card debt, you’re not alone. The average household had more than $6,800 in credit card debt in September 2014, according to Marketwatch. Whether your debt be near that amount or considerably less, if you want to reduce credit card debt, there are some ways to go about doing it that are better than others. Figuring out how much debt you have, the interest rate on your cards, and where you stand financially will help you make a plan for bringing down your debt.
Know Where You Stand
Taking a close look at what you owe may not be something you want to do, but it’s the best first step to reduce credit card debt. Look at the balance due on each of your cards, as well as the interest rate on each card. Tally up the total amount due so that you have a figure to work with. You might also want to tally up the minimum payments due each month, so that you have an idea of the smallest amount you’ll have to pay each month.
Get on a Budget and Switch to Cash
Once you know what your credit card debt amounts to, it’s time to look at where you stand in terms of the rest of your finances. Creating a budget for your expenses and income allows you to see how what you earn compares to your spending. At this stage, you might want to work with a credit counselor, who can look at the big picture of your finances and help you build a budget that meets your needs.
If you want to reduce and eliminate credit card debt, it’s important that you stop accruing debt. Switch to a cash only system. If you are going to purchase something, use cash, not plastic. Using cash not only means you won’t add to your debt. It can also cut down on what you spend, since you can only spend as much cash as you actually have available.
Weigh Your Options
When it’s time to actually start tackling your debt, you might find that you have a few options. One common recommendation is to focus on paying the card with the highest interest rate first, and to continue to make the minimum, or slightly more than the minimum payment, on the others. Try paying at least twice the minimum due on the card with the high interest rate. Paying down the card with the highest interest rate first means you will most likely pay less over time. Once you’ve paid off the high interest card, you can increase the amount you pay on the card with the next highest rate, and so on, until your debt is gone.
Another option is to pay off the card with the smallest balance first. You won’t necessarily save any money with this option, unless that card has the highest rate. But you will be able to quickly knock out the full debt on one of your credit cards, which can be fulfilling.
If you are struggling to make ends meet and paying down your credit cards and other obligations proves too much of a burden, another option to consider is debt consolidation. Consolidating your credit card debt can mean a lower monthly payment and perhaps a lower interest rate, so that you pay less each month and can potentially pay less over time.
Whatever option you choose, the most important thing is to stick with it. The right option for you is one that will significantly reduce your debt and allow you live your best life.
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