Credit card debt has the tendency to collect and grow quickly without your being aware of it. Of course, it is extremely easy to charge purchases to your card, pay the minimum balance each month, and go on with your life. The trouble starts when the interest starts to build up and you realize that you owe more interest than the actual purchases you made.
Is there any way to get out of that vortex of bills and more unpaid bills?
Actually, there is. Follow these simple steps, and you’ll soon be free of credit card debt.
1. Make a List of Your Income from Various Sources
Make a note of all the income coming into the family starting with the wages earned by you and your spouse. Not sure what that amount is? Check your bank statement and pay stub. You’ll also get a clear view of the actual amount you earn after subtracting retirement fund payments, taxes, and any other mandatory deductions.
2. Make an Estimate of the Expenses
Start recording all expenses beginning with the 1st of the month. Note down every little expense from the drive-thru’ coffee and donut you buy on the way to work to the soda at lunch. Use your credit card statement for a better view. Or, better yet, download a phone app where you can record every purchase as you make it. Pay special attention to the fixed expenses you pay each month such as mortgage repayments, utilities like electricity, water, and phone, internet, cable, and any other.
You could also consider recording your expenses over a period of 60 days for a clearer picture. At the end of this time, you will know exactly what you earn and spend.
3. Time to Take a Good Hard Look at the Situation
If you find that you earn more than you spend, then your battle against credit card debt is already half won. But, if you’re spending more than you earn, then that additional expense is coming out of the credit card. And, it’s time to take some serious steps to cut them back.
- Take a good hard look at the fixed major Is there any way you can lower them? Like, maybe, move your mortgage to a low-interest loan provider. Or, cancel a cable subscription if you aren’t really using it. You could also move to a cheaper plan.
- Identify the essential costs that are necessary for day-to-day living to maintain health, hygiene, and working abilities.
- Identify the non-essentials that you can comfortably remove from your budget even if it is for a short while. For example, that weekend movie and dinner. Could you rent a DVD and get takeaway for a few weeks?
- Get a clear view of the repayments you’re making towards the credit card debt or any other loans you’ve taken.
4. Assess the Interest You’re Paying on Your Debts
Compare the interests levied by different credit card companies and other loan providers. You might just find a loan source that carries a lower rate. See if you can transfer your loan to the lower interest card or loan. For instance, most credit cards carry an interest rate of 19.99% or more. Is this the rate you’re paying?
With a bit of scouting around, you might just find a credit card issuer that levies an interest rate of 5% or lower. See if you can transfer the debt, and find out about the additional perks and incentives available that can help you make payments sooner.
5. Take Advantage of the Promotional Periods on New Credit Cards
Various credit card companies provide you with promotional periods when you first transfer a balance to their cards. They may levy 0% interest for a time of between 6 to 12 months. By taking advantage of the 0% interest, you can clear the credit card debt. That’s because you’ll only make payments towards the amount you owe. However, you may want to check with the company about the maximum debt you can transfer without incurring penalties or interest.
6. Try Negotiating with the Credit Card Company
Given that you owe a credit card debt, your credit score may not be adequate enough for you to qualify for a new credit card. If you find that getting approval is not possible, consider contacting the existing credit card provider. Talk about the situation and ask if you can get a lower interest rate or any other terms that can help you clear your debt. Chances are that you’ll have to talk to a few agents or higher ranking official. However, if they feel that you’re keen on paying back the sum you owe, they might give you some leeway.
7. Consider Tapping into the Home Equity You’ve Accrued
As you make payments towards the mortgage on your house, the amount you’ve paid is the equity you accrue or the ownership on the home. For instance, if you’ve paid $200,000 of the $500,000 value of your home, the equity is $200,000. You can tap into this asset by getting a Home Equity Line of Credit. However, you may want to borrow against this equity with care. Typically, the interest rates on such loans are 3% to 4%. Make sure this move helps you reduce the total debt you owe and does not add to it.
8. Try Making the Maximum Payments You Can
One of the major contributing factors to credit card debt is the term, “minimum payment.” It lures users into thinking that they’re okay while a large debt accumulates. The trick to getting free of the debt is to focus on making the “maximum payments” you can. Here’s what you can do:
- Let your boss know that you’re available for picking up extra hours at work so you can earn some additional wages. Offer to work from home over the weekends.
- Pick up a second job that is completely unrelated to the work you’re doing now. Of course, you may want to check with the company’s policies for working secondary jobs.
- Consider picking up some remote jobs that you can do from your home out of work hours. There are several internet portals out there that connect you with clients from any corner of the world. The best part is that you’re free to choose the hours that are most convenient for you.
- Use your savings to clear the credit card debt. The logic behind this idea is simple. You’ll earn a maximum of 0.4% to 2% on the balances you carry in a savings account. However, you’ll pay 19.99% interest on the credit card debt you owe. It makes perfect sense to save to stop paying that interest. Further, the interest you earn on your savings will incur a tax of around 30% leaving you with hardly anything in hand.
Credit card debt is not really the scary gargoyle looking to devour you. All it takes is some smart thinking, determination, and a lot of self-discipline. And, in no time, you WILL be debt-free.