Eliminating Credit Card Debt |
By Jeff Miles on March 26, 2010
.jpg.aspx?width=75&height=75) Credit card debt is a major problem for many American families. According to Cardtrack.com, the median amount of credit debt carried by the average American household is $6,600. That same site estimates that the average American household spends $1,500 on credit card interest.1
So how do you stop this problem? First, you should come up with a budget. Writing out all your income and expenditures for the month can really be an eye-opener and might show you that you’re living beyond your means. Also, adding more debt to the pile obviously isn’t going to help. It will probably be best to cut out credit cards altogether and just use cash, that way the temptation won’t even be there.
Next, it’s important to see how large your problem is. You should start out by sitting down and figuring out how much you actually owe for each card. Once you do that, you should make payments in proportion to how much debt you have. So, you should make the largest payment to the card you owe the most on and the smallest payment to the card you owe the least on.
If possible, try to get a lower interest rate. Low “teaser” rates will often only last for six months or a year, but if you know that you can aggressively pay off your debt in that time, a balance transfer might work out well.
Throughout the process be realistic. While it’s good to aim high and try to eliminate your debt as quickly as possible, you need still need money to live. Also if you set your goals too high and don’t reach them you might become discouraged and want to quit. Remember that although it might hurt to pinch pennies in the short run, it will ultimately save you a good amount of money in the long run.2
As a final note, try to recognize that credit cards are very useful tool if you use them responsibly. They essentially can provide you with a free loan from the date of purchase to the date of billing.
Sources:
1“Escaping Credit Card Debt” by Gregory Bresiger on Forbes Magazine’s website
<http://www.forbes.com/2007/11/27/credit-debt-cardtrak-pf-education-in_gb_1126investopedia_inl.html>
2“Five Steps to Eliminate Credit Card Debt” by Emily Starbuck Gerson and Ben Woolsey
<http://www.creditcards.com/credit-card-news/5-steps-eliminate-credit-card-debt-1267.php> |
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