Credit cards are the worst kind of debt. You are paying high interest on stuff you probably didn’t need to buy in the first place. 18% interest on knick knacks that have long ago been thrown in the trash. No thank you.
The worst thing is that most people who have credit card debt usually have more than one card with a balance.
So what can you do? Here are the steps to take.
- Take an inventory of what cards you owe money on and what the interest rate is. It’s all on the statement you get each month.
- Prioritize the cards from high rate to low rate
- Pay the high rate cards off first to reduce interest payments
- Kill them off one at a time with focus. Pick the highest rate card and pay as much as you can on it each month while paying the minimum or a smaller amount on the other cards. Once this card is paid off, cancel it and move onto the next one. Rinse and repeat. When the card is paid off you can treat yourself to something small and nice like a bottle of champagne.
- Don’t use the cards you carry a balance on to buy things. You will automatically be paying that 18% on all your new purchases. No no! Pay with debit card or cash only or maybe a card that you pay off each month in full
Consider debt consolidation if you have a lot.
- Make sure there is no transfer or initiation fee of say 3%. There should be no fee
- Ask what the interest rate is
- Make sure there is no pre-payment penalty
- Get these from a reputable bank only
- There are lots of debt consolidation scams out there
- They will set up a five or ten year fixed loan for you.
- Still pay as much as you can each month as that extra goes toward principal. This means overpay.
- Make sure you can handle the payments
You may need to get a side job or sell things
If you want to make debt repayment go faster you need to increase cash flow. Do this by being very frugal. See the other posts on this site.
Consider a side job to bring in extra cash on the evenings or weekends. Use that money exclusively for loan repayment. Once the loan is paid you can quit.
Sell things you don’t need. This may not bring in much money but any bit helps.