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Credit Card Debt Management Advice

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Credit Card Debt Management Advice

Having credit card debt can be an endless cycle. You want to pay it off, but you find yourself using credit cards because there is never enough cash for necessities or emergencies. Eventually your debt is so high that you use most of your money to make the minimum payments. Then you have to continue to use credit cards to buy the items you need. So, how do you break the cycle and begin paying them down?

Decide and plan

Pay Credit Card BalanceFirst you have to want to pay down your credit card balances. You have to commit yourself to reducing the debt and not adding to it. This is the most difficult part, especially if you are used to buying whatever you want thinking you will pay for it later. Now is the time to pay it off and get yourself out of debt so you can finally afford the items you want.

Next you need a plan. Understand how much debt you have and learn what options you have for paying it off. Make a list of all your credit cards, their balances, the minimum monthly payments and the interest rates you are paying. Once you have this list organized you can decide what your options are.

Consolidate your debt

  • Home equity loan/line of credit Paying off credit card debt with a home equity loan or line of credit may be an option. The interest rate is usually much lower than credit card interest and the higher monthly payments will make paying off your debt faster then minimum monthly payments on credit cards. This is a good idea depending upon your finances and how much debt you have. Securing a home equity loan puts you at risk of losing your home if you cannot make the payments. It is also tempting to many people to begin using their credit cards again while they are paying off the loan. It won't take long before you not only owe on your loan but also owe on the credit cards again. Be careful of this option and use it only if you are committed to settling your debt.
  • Credit cards with 0% interest - If you have good credit you have probably been offered credit cards with an introductory 0% interest rate on balance transfers. These introductory rates can last anywhere from 3 to 12 months. If you are able to transfer some or all of your balances onto one of these card services you will not pay any interest for the time stated and be able to pay down the balance faster. If you don't receive these offers, then check credit card services that offer the best rate. A great free resource that outline these best credit card offers may be found right here.

    Remember, the less interest you pay, the faster you will pay off your balances. So, if you do choose this option make sure to close credit card accounts that you no longer have balances on. Not only will this take away the temptation of using them but will look better on your credit report. The more cards that you have open on your credit report the higher risk you are for loans.

  • Pay down high interest debt first - You should always pay as much as you can each month on the card with the highest interest rate. Budget more money for this card and continue to pay the minimum monthly payment on the other cards. Once you have paid the first one off you can begin making higher payments on the second and continue this way until your debt is paid off.

Stop accumulating debt

Student Credit CardOf course while you are trying to pay off your debt, life goes on and emergencies occur that you may not have money for. If you have been committed to paying down your credit card balance then hopefully you are no longer using cards for impulse items you don't need and raising the balances. But how do you get out of the credit card trap while paying them off?

  • Designate a credit card for emergencies Use the card with the lowest interest rate for those times when you absolutely need to use a credit card. Car repairs, medical emergencies or home repairs cannot be planned so you will need to use your credit card occasionally. Using a card for emergencies will help keep your credit card debt down.
  • Stop using credit cards for shopping Yes, you may acquire miles, gifts, rewards or even a cash back bonus, but no matter how you look at it, you are not gaining more than you are paying out in interest. Just stop using credit cards and pay cash or use your debit card whenever possible. You will be amazed at how quickly the credit card debt goes away when you are not adding to it.
  • Begin a small savings account Even though you will not earn as much interest on your savings as you pay on your credit cards the only way you are ever going to get ahead of the game is by having a little cash put away. Try putting 5 to 10% of each paycheck away in a savings account towards a credit card free future. The money will add up faster than you think. Once you have some cash stashed away you may actually be able to stop using credit cards for those emergencies that crop up. Once your credit cards are paid off you will not only be debt free but also have extra money put away to help you stay free of credit cards.

Sometimes credit card debt seems so overwhelming that you feel there is no way to escape it but with a little self-control and careful planning you can pay down your credit card debt.

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