I know many people that are struggling to get themselves out from under the rock known as credit card debt. What most people don't know, is that you can effectively tackle these debts much like anything else.
- Make sure that every pay period, you PAY YOURSELF FIRST, ALWAYS!! If you can afford $50, or $100 every 2 weeks and put it into a savings account you will save $1,200 (based on a $50 deposit) or $2400(based on a $100 deposit) per year. If you are paid weekly, try to deposit $20-25 a week into savings. The reason is that you eventually want to start adding more and more into this account and your goal of eliminating or eventually paying down your debts significantly enough will be your motivator.
- You will want to pull out all your credit card statements, even better log into your online account and get the latest information. Don't cover your eyes, you will want to take a look at the current interest rate, balance and minimum payments that are due.
- Next you will want to see how much you bring in monthly, seriously sit down and work this calculation out. Set aside fuel costs, food costs, housing costs(rent/mortgage), car payment/insurance and so on. Once all the major bills are accounted for, look at what is left at the end of the month before your credit card payments. It should be pretty significant.
Lay out the card information in order of interest -> total balance -> minimums due.
Interest is KING in this plan and you want to tackle it fast and hard. Take your credit cards, and either cut them up or put them somewhere far away from your wallet/purse or ease of access. If you don't have the card on you, you are less likely to use the card. Now if your minimum is $50, pay $75 or $100 on it. Pay more than the minimum, accelerate the process of making a dent into the principle balance on the card.
As you are paying the card down and improving your credit score you can try a few things to help speed this up from a efficiency perspective.
- Call the credit card company and see if they will lower the interest rate. Be calm, but assertive. Explain you have been paying on time, paying more than the minimum and would like the interest rate to be lowered.
- If you have a great deal of self control and can keep a promise to yourself that you won't use the credit card again, then you should try to apply for another credit card that has a balance transfer with a 0% offer for 12-18 months. You will make significant decreases to the principal balance without the pesky interest. Keep the card you did the transfer from open, but DON'T USE IT! You can also negotiate the balance transfer fee, or have it waived out-right.
Keep the lower interest cards fed with the minimums until you can eliminate the high interest card. Once the card is paid off, keep the account open, but again cut the card or make sure you do not touch it. You want your debt/credit ratio to be reporting a positive change.
Follow this with each card until you are back from the red. You will have accrued a pretty decent emergency fund in savings and will be adding more to it. Whatever you do, don't try to rush things. Pace this out, its going to be a long and drawn out process but you will and can do it. If you are feeling unmotivated, look at your savings account and think of what you want to do with it, and how you want to add to it.
