Credit cards provide some of the highest interest debt that is available to consumers. This industry is also known for its aggressive marketing tactics and unethical lenders. Fortunately, a lot of consumers have come to the realization that the high payments they make every month on their credit card debt is hurting their family’s finances. As a result, many people have made the decision to prioritize getting out of credit card debt. Fortunately, for these consumers, there are several ways to go about getting rid of their credit card debt.
Before starting the process of getting out of debt, a consumer must start by getting his or her personal financial data organized. Gather together the most recent statements from all of the credit cards the consumer currently has. Make a spreadsheet listing out the cards’ minimum payments, total amount owed, and interest rates.
Next, a consumer will need to set up a budget that is based on making only the minimum payment on their debt. After doing this, enter in conservative estimates of the consumer’s bills and other expenses. Then, using this budget, determine the amount of money that will be left over at the end of each month. Based on the consumer’s circumstances, put a small portion of this money aside for emergency savings, and then use the rest for debt repayment.
After assembling the budget, look at the original list of credit card accounts and look for any cards that have a total balance less than the extra amount left over. If there is an account that fits this description, use the extra money that is found at the end of the month to pay off this card. By paying off these small balances even if the bills have a low interest rate, a consumer will be able to quickly reduce the amount of bills that he or she receives every month. This will make it easier to manage their other bills. As a bill gets paid off, more money will be left over at the end of the month. By repeating this step every month, it will be possible to eliminate the small bills quickly.
If a consumer has no balances on their cards that are lower than the total amount of money that he or she can apply to their debt repayment, then the money can be put towards the credit card with the highest interest rate. Using this method will let a consumer pay off their highest interest debts the fastest.
As the consumer pays off each of their credit cards, take that particular account’s card out of his or her wallet. If possible, do not close the account. This will cause the consumer’s credit score to drop. Try to keep in mind that this dip in score is very slight, and therefore it is very rarely worth paying money to keep a credit card account open.
As each one of the credit cards is paid off, the consumer should rework his or her budget and remove the old account from the budget. Then try to redirect the money that was going to the payment on that card to debt repayment. As the minimum payments drop on other bills, redirect the savings from them in the same way.