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5 Surefire Ways To Eliminate Credit Card Debt
Do you have enormous credit card debt? You are certainly not
alone. According to research, the average family in the United
States has $7000 in credit card debt and pays about $1000 in
interest each year! Throw in a late payment or two, or an
over-the-limit charge, and that number skyrockets. Imagine what
you could do with that $1000 if it weren't being spent on
interest.
Let's imagine for a moment that you have $5000 debt on one
credit card that is charging you 17.5% APR. Let's also imagine
that you pay only the minimum due of $25/month on this card.
Guess what? You will never pay it off! The interest alone on this
card is $73/month!
That means that each month you get further and further into
debt. By the time you have been paying on this $5000 for 10
years, assuming you have not used the card during this entire
period of time, you will owe $20,385! That's over $15,000 in
interest. If you triple your payment to $75, it will take you
over 20 years.
So, what do you do? How do you get out of debt and use that
money towards other necessities, savings, and investments? Here
are a few simple methods that you can use without having to go to
an expensive financial counselor.
Tip #1: Cut Up Your Cards
The very best way to reduce your credit card debt is to STOP
using your credit cards! There is no need to have more than one
card, so pick the one with the lowest interest rate and cut up
the rest. The one you keep should be deemed an 'emergency card."
These are true emergencies, not mere inconveniences. For
instance, buying a new TV would not be an emergency, but renting
a car in order to get to the bedside of a dying loved one would
be. You can carry your emergency card with you, but don't make it
too easy to use. One good suggestion is to cover the card tape
and paper and write on it: For Emergencies Only.
Tip #2: Move Your Debt
If you have more than one credit card payment, you may want to
consider moving debt from a card with a higher APR to one with a
lower APR. This will lower the amount of money you are spending
towards the interest and get you out of debt faster.
Tip #3: Use the Snowball Principle
List all of your credit card debts, and the amount you are
paying each month. Pay off the lowest amount first. Then use that
money to start paying off the second lowest amount. And then the
next and the next. Let's look at an example.
If you have a $7000, $5000, and $2000 card with payments of
$150, $125, and $100, you will finish paying off the $2000 card
first. Once it is paid off, you take that $100 and put it towards
the $5000 credit card. That means you are now paying $225/month.
You have increased your payments which will pay off that credit
card sooner and will have you paying a lot less in interest. Once
that is paid off, you apply the $225 to the $7000 card, making
your monthly payment $375. This will greatly accelerate the
payment of this card, reducing your interest payments even
further. When everything is paid off, you now have $375/month
extra to put towards savings or investments!
Tip #4: Prioritize Your Debt Repayment
One of the best ways to pay off your debts is to get rid of
the highest interest payment first. Looking back at the snowball
example, you took the lowest and paid it first. If, however, the
$2000 card had the lowest interest rate, you would want to pay
off the card with the highest rate first. This will save you much
more in interest payments.
If the math gets too hard here, don't despair. There are many
places on the Internet where you can find good debt reduction
calculators. It is then just a matter of punching in your numbers
and reading the report.
Tip #5: Consider Consolidation
If you own a home, you may want to consider consolidating your
debt using a home equity loan. Since a home loan is a secured
loan (they can take away your house if you don't pay) you have a
much lower interest rate than you do on your credit cards. Paying
a lower interest rate is always a good thing! Not only that, but
the interest you pay on your home loan is tax deductible. This is
NOT true for credit cards.
By following these tips, anyone can take control of and
completely eliminate credit card debt.
Wesley Atkins is the owner of http://www.credit-cards-advisor.com-
which aims to get you fitted with the best credit cards to
suit your situation. With numerous credit
card articles and easy online credit card
applications you will never choose the wrong credit card
again.
MORE RESOURCES:
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