Credit cards are a necessary evil. An estimated 189 million Americans have credit cards. Unfortunately, it’s a slippery slope. Those small credit card purchases add up into more significant unmanageable debts. While some debts are avoidable, others are necessary. Here are some simple yet effective ways of chipping away at that mountain of debt.
1. Freeze Your Credit Cards
It may seem too obvious, but you may not make any headway if you are busy creating more debt. First, you should remove those cards from your wallet or purse. Carrying them around is how you got into a mess in the first place. Having them on you will only tempt you to spend on things you don’t need.
Resort to paying cash instead. Doing so will help you separate needs from your wants. There are two ways of going about this. You can either leave the cards at home, stored away until you settle your debt. If you are susceptible to temptation, you can freeze them out completely. All it takes is one phone call. You will have to call each lender separately to freeze each card. With that out of the way, you can now start reducing the debt.
2. Renegotiate for a Lower Interest Rate
Not many people fully understand the extent of their credit card debt. Reviewing the terms of your debts will help you understand just how much the card will cost you. It will also empower you to negotiate a better deal with the credit card companies. You should review the following information.
- The interest rate on each card.
- How long you have been a customer for each.
- Your payment history.
- If your credit score has improved.
- The national Annual Percentage Rates (APR) averages.
Armed with this information, you can call each of the creditors and negotiate for lower interest rates. You are likely to get a lower rate if you haven’t missed a payment, or your credit score has improved. Lower rates means you will pay off the principal amount faster and clear the debt. Companies will be willing to negotiate, especially if the lower rate will motivate you to settle the debt. Not all will agree, but it’s worth a shot.
3. Decide Where to Start
Most people have more than one credit card. On average, Americans have at least four credit cards per person. Settling one credit card debt is already hard enough, imagine trying to tackle four at once. In addition to spreading your finances thin, it will also make it hard to make a meaningful dent on any debt.
Experts recommend settling one debt at a time. It doesn’t mean you completely ignore the rest. You can pay a huge amount on one debt and make minimum payments on the rest. One way is beginning with the smallest debt. Smaller debts are more comfortable to settle. It will also give room to settle the others. The second option is to start with the debt with the highest interest rate.
4. Streamline Your Budget
Settling debt requires regular cash flow. This may be challenging as you require to significantly reduce your monthly expenditure. You may have to give up certain comforts. Statistics show only 67% of Americans stick to the budget. Start by making small cuts where you can.
The best way to find opportunities to cut costs is by tracking your spending. Begin with weekly audits then move to monthly reviews. You may be surprised at the things you don’t need. Of course, sticking to this financial diet will take every ounce of self-control. But it is better than other alternatives such as dipping into your retirement benefits. These changes will only be temporary while settling your debt.
5. Debt Relief Programs for Credit Card Debt
It would be nice to solve all your financial problems on your own. However, a particular situation may make that impossible. Fortunately, it isn’t the end of the road. There are debt relief programs you can look for assistance. The standard solutions include
- Debt Consolidation - It may be easier to settle your debts if you gather them into one monthly payment. With a good credit score, you can reduce both the interest and monthly payments.
- Credit Counselling - Sometimes, all you need is for someone to show you where to trim the fats. This service is recommended for those who have trouble sticking to a budget. Some credit counseling agencies also help negotiate a lower interest on your behalf.
- Debt Settlement - Some companies approach your lender and request the lender to settle the debt for a lower amount. Be cautious; some of these deals may be sketchy.
Bottom Line for Credit Card Debt Relief
Hopefully, these tips will help you get started on repaying your credit card debt. The journey to financial freedom will require patience and discipline. Successfully paying off credit card debt will motivate you to get to the next one. Get started today.