Reduce Credit Card Debt

Credit cards are a great tool for many people offering them more convenience, security and other benefits over alternative forms of payment. However, with their benefits come problems. Credit cards offer both some of the easiest ways to borrow money and some of the highest interest rates. However, with careful use, consumers can avoid or eliminate credit card debt and take greater control of their financial destiny.

An ounce of prevention
Since credit cards often have the highest legal interest rates many consumers will ever encounter, they should never be used as a form of finance, even in times of need. Prices for most goods are high enough before adding any extra fees. With this in mind, why increase prices further by buying them on credit?

Just pay in full
Before making any purchase, stop and calculate if enough money will be on hand at the end of the month to pay for it when the credit card bill comes due. To enforce this rule, payments should be setup to be deducted in full from a bank account automatically every month. If the product cannot be paid for in full at that time, it is not going to be any easier paying extra for it with high interest later.

Do not trust the system
Companies that issue credit cards have designed the system to encourage people to pay just enough to stay in debt and keep paying them interest. Remember that with compounded interest people are eventually paying money to finance borrowing on borrowing. With this in mind, never settle for paying the minimum balance.

How to reduce credit card debt
For those who have already fallen into the credit card trap, there are ways to get out. It starts by examining all credit card statements as well as any other spending and looking for things to eliminate, economize on or any other savings that can be found.

Make a plan and chart progress
Once one has a good idea of how much savings can be wrung out of a budget, it is time to set goals and track progress. It takes motivation to stick to a debt reduction program and watching progress is a good way to find it. If possible, use a good software program to track how things are going. To stay motivated, charts and other references tracking goals and progress should be posted in places where they can be seen repeatedly throughout the day.

Create a virtuous cycle
Paying off debt should always start on the card with the highest APR. Also, paying off one is no reason to sit on one’s laurels. Use all the money freed from paying off one card on the next and a virtuous cycle will continue until all cards are paid off.

Track balances and limit the number of cards
One should always have a good idea of how much they have charged on their cards. Make it a daily habit to check these balances online and remember that what is charged on credit cards is very real money. To simplify the process and reduce the temptation to overspend, eliminate any unnecessary cards as soon as they are paid off. Those unable to control credit card spending should try living with only very low limit cards or none at all.

Consult with the card issuer
The issuers of credit cards can sometimes be persuaded to reduce interest rates or take other steps to lessen a customer’s debt load. They are not surprisingly the most receptive to such requests when they feel they may lose a good customer to another company or when a customer may not be able to pay at all without some relief. Those with some leverage with their issuer can call them up and try their luck.

While different tactics work better for different people, eliminating debt needs to be something everyone does. Always remember that paying interest is an expense continually taking money from the person that gives nothing in return. Once debt is eliminated from one’s life, paychecks will always go that much further and credit cards can be the useful tools they should be.