Debt is something that is all too easy to fall into, and extremely difficult and time consuming to get out of. If you are someone who has fallen into the credit card pit and are ready to dig your way back out of that debt, here are a few solid suggestions to get you back on track.
Interest rates are one of those sneaky financial elements that in many cases cause debt, (such as revolving department store cards, or credit card debt) to spiral out of control. If you are not paying attention your debt could be increasing without your even having to use the card. That is one of the reasons interest rates fall first on the list of things to look into and take care of.
When looking at your interest rates, look to see which cards charge the most interest, and what the balances on those cards are. Use a ledger or pad of paper to write this information down so that you can compare your information. The idea is to pay off the cards with the highest interest rates first, either by transferring the balance to a lower interest rate card or making larger than minimum payments until it is paid off. If you do transfer the amount, cut up the old card and have it canceled to avoid annual credit card fees being added to the account. This is a good idea anyway for anyone with more than three credit cards, as it helps your credit rating in the living within your means category.
Monthly Minimum Payments
Compare your monthly minimum payments for each card. Look to see which cards have the lowest monthly minimum requirements, as well as what their interest rate is. If you are only making minimum monthly payments and your interest each month falls higher than your payment, you are never going to get that card paid off. When figuring out your budget, make sure that you are making large enough monthly payments to cover any interest charges or fees along with at least a small portion of the principle on the card; that is of course if you cannot pay off the balance completely at the end of each month. This will help you avoid going deeper into debt even when you are not currently spending.
Credit Card Elimination
Once you have credit cards, it is difficult to get rid of them unless you have kept your spending habits well under control. It is good to have one or two cards available for unforeseen large expenses, booking travel arrangements, and emergencies. However it is critical to a debt free life to eliminate as much of this type of debt as possible, limiting yourself to a maximum number of cards, and the amount that you allow yourself to charge on these cards at any given time. By getting rid of the cards with the highest interest you maximize your cash flow while minimizing your debt accrual.
Learning to Save
Saving for large expense items and the future are the best way to live a debt free life. It is difficult to save when you have too many cards or monthly payments; that’s why it is so important to pay down current debt, cut back spending, and start saving where you can as soon as possible in order to establish your debt free life.