Credit card debt stinks.
Most of us aren’t immune to the evils of credit card debt.
We experience it at some point in our lives.
We typically find ourselves in credit card debt when we don’t know any better (and don’t understand the cost of high interest debt) and/or when we’re struggling financially for some reason.
When you finally wake up or get back on your feet and realize you need to pay down this credit card debt, depending on how much you have, it may seem like a pretty daunting task. Here are a few tips (in no particular order) to help you reduce your credit card debt and to help you avoid going into more debt in the future.
Note: I’m anti-bankruptcy, bail outs, consolidations, short-cuts, etc. I think the ideal way to go is to just total up your credit card debt, own up, pay it off, and get on with your life.
1. Create a credit card debt reduction plan. Credit card debt is typically the worst kind of debt we have in our liability portfolio. But there actually may be something worse in there. It’s good to have an overall debt reduction plan and see where your credit card debt falls into priority. Should you be attacking this debt first?
2. Put the cards on ice. Literally put your credit cards in a cup or bowl of water and place it in the freezer. You’ll still have the card(s) for emergencies, but you won’t have it with you at the store or have it readily accessible for online shopping.
3. Think twice before you cut up the card. Cutting up the card and swearing off credit for good works for some people, but not me. I’ve found a positive side to credit cards. And really think hard before cancelling your credit card account. This can negatively affect your credit score.
4. Know which credit card to payoff first. Should you pay off the card with the lowest balance first or the one with the highest interest rate? Take the time to understand the difference and make the decision for yourself. If you only have a little bit of credit card debt it’s not going to make much difference. But for big balances this can be worth your time.
5. Consider the debt snowball. A popular debt reduction plan is the debt snowball, made famous by Dave Ramsey. There’s a big psychological advantage to using this plan of attack.
6. Track your debt reduction progress visually. Once you have your plan in place, put it to paper and put it up somewhere in your house for you to see every day. Be sure to reflect your progress as you start to pay off your credit card debts. You might also want to put something in your wallet with your cards if you haven’t already put them on ice.
7. Use extra income to pay it off quicker. If you get an extra bonus at work or find some unexpected money somewhere, use those funds to help pay off your debt quicker.
8. Call your credit card companies and negotiate a better rate. By lowering your interest rate, you’ll be lowering the amount of money your credit card company is adding to your debt each month. All this takes is a few minutes of your time. The worst they can do is to tell you no.
9. Take on a second job to make more money for debt reduction. If you’re serious about reducing your debts, take on a second job or find a way to make extra money. Use the extra funds towards reducing your credit card debt. Once you’re done, you can drop the second job.
10. Sell your junk.Odds are your credit card debt is made up of things just lying around your house that you are using anymore. Get a Craigslist account and start listing your stuff for sale. Use the funds to pay off your credit card debt.
What are your tips for reducing credit card debt??