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By Wesley Atkins
Do you have enormous credit card debt? You are certainly not alone. According to research, the average family in the United States has $7000 in credit card debt and pays about $1000 in interest each year! Throw in a late payment or two, or an over-the-limit charge, and that number skyrockets. Imagine what you could do with that $1000 if it weren’t being spent on interest.
 Let’s imagine for a moment that you have $5000 debt on one credit card that is charging you 17.5% APR. Let’s also imagine that you pay only the minimum due of $25/month on this card. Guess what? You will never pay it off! The interest alone on this card is $73/month!
That means that each month you get further and further into debt. By the time you have been paying on this $5000 for 10 years, assuming you have not used the card during this entire period of time, you will owe $20,385! That’s over $15,000 in interest. If you triple your payment to $75, it will take you over 20 years.
So, what do you do? How do you get out of debt and use that money towards other necessities, savings, and investments? Here are a few simple methods that you can use without having to go to an expensive financial counselor.
Tip #1: Cut Up Your Cards
The very best way to reduce your credit card debt is to STOP using your credit cards! There is no need to have more than one card, so pick the one with the lowest interest rate and cut up the rest. The one you keep should be deemed an ‘emergency card.” These are true emergencies, not mere inconveniences. For instance, buying a new TV would not be an emergency, but renting a car in order to get to the bedside of a dying loved one would be. You can carry your emergency card with you, but don’t make it too easy to use. One good suggestion is to cover the card tape and paper and write on it: For Emergencies Only.
Tip #2: Move Your Debt
If you have more than one credit card payment, you may want to consider moving debt from a card with a higher APR to one with a lower APR. This will lower the amount of money you are spending towards the interest and get you out of debt faster.
Tip #3: Use the Snowball Principle
List all of your credit card debts, and the amount you are paying each month. Pay off the lowest amount first. Then use that money to start paying off the second lowest amount. And then the next and the next. Let’s look at an example.
If you have a $7000, $5000, and $2000 card with payments of $150, $125, and $100, you will finish paying off the $2000 card first. Once it is paid off, you take that $100 and put it towards the $5000 credit card. That means you are now paying $225/month. You have increased your payments which will pay off that credit card sooner and will have you paying a lot less in interest. Once that is paid off, you apply the $225 to the $7000 card, making your monthly payment $375. This will greatly accelerate the payment of this card, reducing your interest payments even further. When everything is paid off, you now have $375/month extra to put towards savings or investments!
Tip #4: Prioritize Your Debt Repayment
One of the best ways to pay off your debts is to get rid of the highest interest payment first. Looking back at the snowball example, you took the lowest and paid it first. If, however, the $2000 card had the lowest interest rate, you would want to pay off the card with the highest rate first. This will save you much more in interest payments.
If the math gets too hard here, don’t despair. There are many places on the Internet where you can find good debt reduction calculators. It is then just a matter of punching in your numbers and reading the report.
Tip #5: Consider Consolidation
If you own a home, you may want to consider consolidating your debt using a home equity loan. Since a home loan is a secured loan (they can take away your house if you don’t pay) you have a much lower interest rate than you do on your credit cards. Paying a lower interest rate is always a good thing! Not only that, but the interest you pay on your home loan is tax deductible. This is NOT true for credit cards.
By following these tips, anyone can take control of and completely eliminate credit card debt.
Wesley Atkins is the owner of www.credit-cards-advisor.com which aims to get you fitted with the best credit cards to suit your situation. With numerous credit card articles and easy online credit card applications you will never choose the wrong credit card again.
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