Summer vacation is just around the
corner and you're still trying to
pay off that holiday buying spree.
Your credit cards are just about
maxed out. Is there anything you can
do? Yes. Here are tips to help pay
off credit card debt.
It may seem
extreme but the first thing you need
to do is to put those credit cards
away where you can't get at them
easily. Only carry one card with you
and use it only for emergencies. A
café latte isn't an emergency even
if you're tired and are having a
caffeine attack. Either is being low
on gas. An emergency means that
you've had an accident and need
medical care. Or your roof caved in.
Now drag out the most recent
credit card statement for each
account you have. If you have a
student loan, store credit, bought
furniture on time, or other
unsecured loans get those statements
out as well.
Make a chart listing the name of
the account, interest rate, minimum
payment, outstanding balances, and
payment due date. Add all the
minimum payments together to see
what your total debt payment is each
month. And add all the outstanding
balances together as well. You might
be shocked to see just how much
money you owe and how much you have
to pay each month.
Let's say for example that you're
like the average family with $10,000
of credit card debt. If you only
make the minimum payments it could
take you up to 20 years to pay off
that $10,000 because of the very
high interest rates credit cards
carry. If you have 5 cards each with
a minimum payment of $50, you'll be
paying $250.00 every month and not
making much progress towards
whittling down your balances.
Your next step is to set a target
amount of money that you can pay in
addition to the minimum payments.
Without getting all tangled up in a
complicated math explanation just
keep in mind that for every $100
over the monthly minimum payment,
you'll be erasing $1200 a year of
debt. It will still take about 10
years to pay off the $10,000. But
$100 a month isn't that much money
if you break it down. If you eat
lunch out every day at work that's
$100 right there if you switch to
brown bagging your own lunch. And
that's what you'll have to do next.
Figure out where you can find some
extra cash.
If you rent movies two or three
times a week, get them from the
library for free instead. Switch
from department store clothing to
big box stores. Use coupons to save
on groceries. Have vegetarian meals
like pasta twice a week instead of
meat. Use chicken instead of beef.
Once you get started on where you
can cut your budget you'll come up
with lots of ways. Some of them
entirely painless.
Put any cash gifts toward your
credit card debt. If you get an
income tax refund pay down the debt.
Use your raise to pay off even more
debt.
Some people are so overwhelmed by
their debt that even if they
implement the above steps, getting
all that debt paid off isn't really
possible without some help. If
that's you, you still have a couple
of options.
Debt settlement is using some of
your cash and getting your creditors
to agree to take the lesser amount
as payment in full. That will hurt
your credit rating and there may be
some income tax consequences but the
debt and the monthly debt payment
will be gone.
Credit counseling is
a possibility. The counseling
service will set up a reasonable,
although tight, budget and use every
extra dime to go towards debt
payment. They'll negotiate with each
creditor to adjust the interest
rate, waive late fees, and sometimes
decrease the amount owed.
Consolidation loans are another
option. In most cases you'll use the
equity in your home to secure the
consolidation loan. Each of your
creditors will be paid and you'll
have a fresh start.
No matter what you do, at least
do something. That credit card debt
won't go away by itself.
