The credit card’s monthly use statistics keep rising. In today’s instant gratification culture, it’s far too simple to rack up mountainous debt.
However, it may feel like you have few choices; perhaps you believe it is impossible to reduce your debt with only your wage. Credit card debt can be overwhelming, but you shouldn’t let it. Whether you run up credit card debt because of an unexpected expense (like a car repair) or because you aren’t good with money, there are ways to get a handle on it and get it paid off (without asking your boss for a 50% pay hike)! Best practices for consolidating credit card debt are outlined below.
If you continue to make purchases on your credit card, you will never be able to pay off your balance. If you put away your credit cards and use your debit card for everyday transactions, you’ll quickly find that you’re staying within your budget.
* Limit your indulgences. How often do you grab lunch on the go? Is the $4 latte necessary for you to function every day? These kinds of amenities are just that: luxuries. You must cut back on some extravagances to pay off your credit card balances. Think about bringing your lunch or coffee to the office. The relief of paying off your debt will be well worth the effort.
If you’ve got a big credit card load, you might as well be flushing money down the drain. Instead, consider a balance transfer. The mounting cost of paying interest on a credit card balance makes monthly minimum payments difficult. If you’re having trouble paying off your credit card debt, transferring the balance to a card with a lower interest rate could help you save hundreds of dollars in interest throughout the loan’s repayment period.
Many people benefit from balance transfers but be wary of falling for initial offers when considering this strategy. Seeing your credit card bill suddenly increase after the balance transfer offer period finishes can be a big kick when you’re down.
Many banks provide private debt consolidation loans to assist you in getting out from under your credit card debt. But while you’re paying off the consolidation loans, don’t add anything new to your credit card balances.
Many people make only the minimum payments on their credit cards, which extends the total time it takes to repay the debt and wastes hundreds of dollars in interest payments. It’s essential to make payments greater than the minimum required each month, if possible. In a short amount of time, your debt will decrease.
Another way to reduce credit card debt is to use the money you would have spent on frivolous things to pay it off. For instance, if you spent $4 daily on your great coffee for a month, you’d spend $120; for some, that’s the same as making a new credit card payment! Extra payments might be made if you prioritize needs over wants when creating your monthly budget.
If you’re over your head with credit card debt, it can be worth it to take a bite out of your savings to dent your balance. However, if possible, you should hold off on withdrawing money from your 401(k) or other retirement accounts.
If the cash worth of your life insurance policy may be borrowed from, you should do so. This advice may surprise you, but you should pay off your credit card balances. If you cannot repay the loan in full, a portion of your policy can be used to settle the balance. This may not seem like much now, but it will mean a lot to your mourning loved ones.
If you own a home and have built up equity over the years, you may be able to use a home equity loan (HEL) to pay off your credit card balances. You can consolidate your credit card debt by switching to a home equity loan, which often has a lower interest rate (16% vs. 6%). This strategy will help you create more money to put toward debt reduction.
But be sure you’ve paid off all your credit card debt before applying for a home equity loan. Don’t rack up more debt by getting a loan and using your credit card to purchase.
* Contact your credit card issuers: They share our humanity! If you feel like you’ve exhausted all other options but still can’t seem to bring your debt under control, it may be time to talk to your credit card issuers. Inform your creditors of your current predicament. You should bring up the topic of bankruptcy, whether because you’re still struggling to get back on your feet after that accident or because you made a significant, unexpected purchase. To safeguard their financial resources, credit card firms will frequently renegotiate your interest rates and debt balance.
If you have a lot of credit card debt, it’s in your best interest to get advice from a credit counselor; they can reduce your debt by half. Many people try this as a final resort before filing for bankruptcy, and it often works.
Don’t worry if you feel over your head with debt; there are ways to get out of debt without taking on three jobs or declaring bankruptcy. If you stick to the advice in this article, you should be able to pay off your debts quickly. You’ll fall into the same financial trap if you haven’t learned your lesson.
Richard Greenwood writes financial articles. He started a network of websites, including click4credit.com.au (http://www.click4credit.com.au) and compareyourbank.com.au (http://www.compareyourbank.com.au/bank-accounts.html), after working in the finance and research industries after earning a degree in Business Economics.
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