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Eliminating Credit Card Debt Using Disposable Income |
By Arthur McCall on July 9, 2010
.jpg.aspx?width=75&height=75) In order to get manage and rid yourself of credit card debt, you must first learn about the policies of each card issuer. Different cards usually charge a different monthly minimum payment, usually applied toward interest only on the debt you owe rather than the principal, and different cards will also have different penalties for late payments. With your credit cards, if a percentage of the interest owed on the debt is not paid down by the required date, a penalty charge will be added to the money you owe to the credit company. With some cards, the payment of this newly added penalty must be paid along with the already extended credit granted when the dictated portion of the original debt was not paid off in time. What this means is that you have to take care of the debt you already accumulated on top of a penalty fee and often a higher interest rate charged on all of this debt. With this in mind, it is easier to understand why so many individuals fall into credit card debt that spirals out of control and the importance of making timely payments.
The first thing you need to do once the penalty fees and the APR—“Annual Percentage Rate” which is the yearlong interest rate the credit company charges—have been determined is to establish which cards have the highest APR. Those with the highest APR are costing you the most money. Also, determine the minimum payments you must make for each card, and total this number. Make sure you allot enough money to make all of your minimum payments each month; this way you won’t have any of the damaging penalty fees. It is crucial that you have enough to make the minimum payments—they are of the highest priority because if payment is missed, the penalty fees can cause a lot of unexpected damage. Next, subtract from your total disposable income this minimum payment amount, all of the remaining disposable income should go towards paying off the credit card with the highest APR. Following this routine, you will have soon paid off the most costly credit card, and you can move on to the others until your debt is eliminated.
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