Debts like credit cards and other consumer debts are wretched parts of the American households. Credit card companies put up attractive ads that promise to shower all sorts of freebies to their customers. According to the Federal Reserve, nearly 58% of the common people have outstanding credit card balance.
This shows that people need to start taking steps to get out of debt that is incurred because of unwarranted use of credit card.
Here are the steps to eliminate credit card debt endorsed by the financial experts:
Start budgeting – Budgeting is best way to know about your financial health. At the onset, this might be a difficult task for you, but with continued focus and dedication it will become easier to follow. Budgeting is important because it will help you to identify the reasons for your bad purchases.
You should keep aside a part of your monthly income for recreational purpose. This is because essential monthly expenses like mortgage payments, house rents, groceries, insurance and so on will take up the lion’s share of your salary.
Creating a monthly plan for your expenses can certainly help you to stay inside your budget and increase your capacity to repay all your loans.
Make a list of all your loans- Make a complete list of your outstanding balances, interest rates and charges and rank them. Mortgage payments and vehicle payments may take the loin’s share of your monthly income since they fall in shelter and transportation category.
You can also trim your monthly expenditures to accelerate the loan repayment process and find new ways of reducing your expenses. You can also monitor your expenses and save up each pennies.
Deal with one credit card at a time- If you cannot cope with multiple credit cards, then deal with one at time.
Refrain from more debts – You are already overwhelmed with the present debt amount, and it would be wiser on your part to stop adding any more debt and increase your burden. If you keep using credit card irresponsibly, then you are digging yourself deeper into debts. The biggest challenge would be at this time is to abstain from all kinds of loans when you are already struggling.
Pay the maximum amount- The more you pay down each month, the quicker you can free yourself from all the financial nightmares you have. Those who make the minimum payment, their loan may continue for lifetime.
Use cash frequently – You must start using cash frequently and avoid keeping those cards with you. You may tend to overspend, if you carry your credit cards with you. Therefore, it will be a lot helpful, if you use cash to pay for almost everything. This way you’ll feel the pinch, every time you take out the money to pay someone and eventually save some good money.
Request for low interest rates from creditors- You can get a reduced interest rate on credit cards if you have a good past track record of repaying loans or you are a long-term customer who makes payments on time. The creditors may spare you and ask for lesser interest rates which will help you to save thousands of bucks annually.
Make more debt payments – You must make good use of all the spare cash left with you. Add those extra cash to the debt payment amount to pay off your highest interest rate debt, faster.
Ask for loan from friends and family members- This could be a good option to get rid of credit card loans quickly. If they agree to help you, do not forget to use a written contract with an established schedule for repaying and interest rates. Pride and peer pressure could motivate you to repay your debts to them as soon as possible.
Once you start living within your means, follow a good budget and reduce the unnecessary expenses, then only you can eliminate all your debt problems.