By David Pilley on July 8, 2010
.jpg.aspx?width=75&height=75) Credit card debt is a risk that everyone with a credit card faces at some point. After all, debt is the essence of a credit card. Buy something now, pay for it later. If you’re not careful, you could run up a pretty high tab, and you might not be able to pay it off with one payment. And if you have multiple credit cards with due payments, the cost is only magnified. Whatever you do, don’t panic. Don’t sit there and pretend it doesn’t exist, either. You must take action. Here are some steps you can take to alleviate your credit card debt.
Stop using your credit card(s). This sounds like common sense, but this is an important step in slowing your growing debt. Interest rates will continue to put you deeper in the hole, and they do not need to be augmented by further purchases. Of course you still have to make purchases, so use cash, checks, or debit card. This is the most important step, as it will directly affect how well you can take on the next steps.
Gather information. Once you stop charging your credit card(s), you need to gather information. What is the balance on your card(s)? How about the interest rate(s)? You also need to know the minimum payment of each card, as well as the due date of your payment(s). If you know these numbers, then you can take the next step of paying off your debt.
There are a few different ways to tackle the balance. If you can’t pay it off in one payment, don’t fret. There is no 20-point shot in basketball or five-run home run in baseball. Teams in large deficits must hunt and peck their ways back into the game, and you can do the same when paying your credit card debt.
Interest. “APR” stands for annual percentage rate. This is another way of saying “interest,” or extra fees along with your payment. You can start paying off your debt by paying off the card with the highest APR. If you can pay more than the minimum for your monthly payment, do so. The higher the interest rate, the faster your debt grows, so you can try to pay off the card with the highest interest first.
Lowest balance. Another way to start paying the debt is by paying off the card with the lowest balance. If you have multiple cards, this is a good way to take baby steps and build up confidence as you take on the rest of your debt. A balance of $500 might take only two months to pay off, while a balance of $2000 might take a bit longer. Once you pay off one card, you might want to cancel the card to prevent further debt.
Consolidation. If there are too many cards and too many numbers, you could consider consolidating your payments into one card. Consolidating multiple balances onto one card also means one interest rate. One number is much easier to deal with than multiple numbers, but realize that, to make progress, you need to pay more than the minimum required monthly payment.
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Sources: "How to Get Out of Debt." http://www.themoneyalert.com/getoutofdebt.html.
Lazarony, Lucy. "Tips for Paying off Credit Card Debt." http://www.credit.com/credit_information/debt_help/Tips-for-Paying-Off-Credit-Card-Debt.jsp.
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