How to Effectively Reduce Credit Card Debt?




How to Effectively Reduce Credit Card Debt?

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According to research findings by, over 45% of Americans have credit card debt at one point or another in their life. These statistics are a proof that millions of Americans are in deep financial trouble considering how credit card debt can balloon if not controlled, and strategically eliminated.Sadly,a lot of people people fail to pay off their debts, thus end up living a life of misery for the rest of their lives.Regardless of your current financial situation, having huge credit card debts can be disastrous.

As such,finding ways to eliminate your debts can have a big impact on your personal finances.Also debt reduction improves your credit ratings or FICO score.But reducing your credit card debts does not mean that you have must now live on bread and water alone. It just means that you have to change your lifestyle in some way so that you give yourself leverage in cutting down what you owe the credit companies.You just have to be disciplined in following your debt repayment plan each month for you to be successful.

Why You Should Reduce Credit Card Debt?

Credit card debt can put you in serious financial trouble if you don’t pay off your balances on time. Typically credit card interest rates are much higher compared to car or mortgage interest rates, meaning if you cant pay your balances in time, then the interest rates will continue to shoot up. But such debts also have a provision that allows you to lower your interest rates if you are able to pay your debts sooner.

Experts advice that you should always be diligent with your credit card repayments if you want to reduce your financial burden in the long run. Such a move can free up money that you can use for other purposes like setting up an emergency fund, and saving for your future.

How to Strategically Reduce Debt

As mentioned earlier, credit card debt can cripple you financially if you don’t have a strategic repayment plan. As such, doing the math on your monthly finances can help you to understand your current financial state. Conducting an audit on your monthly budget helps you know how much you owe credit companies, and what adjustments you can implement to free up more cash for repayment of your credit card debts. 

You could be spending lots of money on food, entertainment, personal care, and other expenses each month. Knowing what to cut back so that you have more cash at your disposal to pay off your debt is the most important decision you must make. It’s also critical that you take a keen look at each of your debt to understand what how much you need to pay so as to be financially free at some point. 

You can use a debt calculator to find out the precise amount that you are supposed to pay to various credit card firms. Once, you know the numbers, it becomes easy to set up a plan to pay all your debts. Ideally, you should try to eliminate your debts by focusing one card at a time. Continuing to pay the the minimum amount for the rest of the cards that you own.

Methods For Reducing Credit Card Debt

If you own multiple credit cards, then its prudent that you approach your payment plan strategically. Paying off your debts by footing the same amount to each card will not give you any advantage. Rather, it’s advisable that you craft a plan to eliminate your debts one card at time while remitting the minimum amount required for the other cards you own. Generally there are main methods on how to effectively reduce credit card debt. you can decide to pay off your debts by choosing any of the two methods below:

Pay off the Highest Interest Card First

Here you ideally want to start paying off your debts by targeting the card with the highest interest rates. Eliminating such debts can free a lot of money that you can use to pay off the other remaining debts. A high interest rate credit card eats into the majority of your repayment money, so it should be given the focus. eliminating such debts from from your list will give you the boost you need continue your journey towards becoming financially free.To achieve this, you must be willing to follow the following steps

  • Identify the card with the most expensive interest rate
  • Remit minimum payments to the rest of the cards that you own
  • Look for extra money from other sources to increase you repayment amount to the identified card.
  • Commit the funds to the second one with the highest interest rate.Once you’ve completed paying off the debt for the card with the highest interest rate.
  • Repeat the process with the other remaining cards until you pay off all your debts.

The second method that you can also use rid yourself of credit card debt involves starting to pay off your debts by focusing on the credit card with with smallest balance. If you are one of those people daunted by the prospect of tackling cards with the highest interest rate first, then this option suits you perfectly.

Starting your debt repayment plan by focusing on card with the lowest interest rates can give you more financial reprieve as you work your way up. It doesn’t matter if it’s the card with the lowest balance, if you eliminate it from your list, then you are certainly going to free up more cash to use to pay off for the other cards. That way you’ll continue to reduce your credit card debt until it becomes manageable.To achieve this follow the simple steps below

  • Find the credit card with the lowest balance
  • Make minimum payments for the other cards you won
  • Pay an extra amount for the identified card
  • Once the debt is eliminated, use the free cash to pay for the next card with the smallest balance.
  • Repeat the process outlined above until you eliminate your debt for all the cards
  • Tips For Reducing your Credit Card Debt

The two methods mentioned above can only be practical if you are able to a adopt a disciplined repayment plan and general lifestyle .Otherwise, you may easily veer off from you debt repayment goals if you are not careful. The following are some of the things you can do to ensure that you eliminate your credit card debt within the set limit.

Some additional options to consider when coming up with your debt reduction strategy are as follows.

  • Set a strict monthly budget and stick to it. Start by going through your monthly expenses and determine which are necessities and which are optional. Cut the optional expenses and set rules and consequences for not sticking to the budget.
  • Be sure to stop using all credit cards. Continuing to use credit cards will only add to the problem and will cause you to just “tread water” in your attempt to pay down your unsecured debt.
  • Credit Counseling Agencies can offer help and advice in addition to resources that can assist you in your efforts to pay down your credit card debt. Find a credit counseling agency in your area and begin working with them to come up with a plan and creative solutions for paying down debt.
  • If possible, avoide check cashing outlets and short term loans as they are extremely high risk and can cause individuals to become over-extended. Its best to avoid these if possible and focus on cutting back lifestyle expenses where possible.
  • Check to see if you qualify for the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and other similar forms of refundable tax credits. Tax credits are a great way to keep more of your earnings or to receive a larger tax return each year. This reduced tax liability can then be used toward quickly paying off your remaining debts.
  • Apply for Food Stamps; WIC, SNAP, LIHEAP, and other programs such as child care subsidies; and other programs. If you qualify for these programs they will greatly assist you in covering some of lifes major expenses which will free-up income that can then be used to further pay down credit card and other unsecured lines of debt.

Set Achievable Goals

Setting an achievable debt repayment plan is critical to keeping your stress levels down.While you are going to make certain lifestyle changes, it does not mean that you’ll now start living on water and bread alone. It basically means that you are going to cut down on things that will have minimum impact on the quality of your life. Being too hard on yourself can only increase more pressure; so it good that you set achievable targets that you can realistically meet.Remember, debt repayment should be viewed as long term strategy not short one.

Research has shown that the average consumer pays up to two times more for products or services when using a credit card. Meaning you have to stop using your cards when buying stuff, and instead pay your bills in cash. Therefore do not use your cards to pay off for stuff; otherwise you’ll be sabotaging your own debt repayment plan.

Take stock of your Finances

It very critical that you have your math right when trying to pay off your credit card debts. This means that you should conduct an audit of your finances to understand your income, expenses and debt in a better fashion. You can use various online calculators to establish your financial situation. For expenses, calculate all the money you spend on food, entertainment, personal care etc. For You debts, take out all your credit and calculate your balances one by one. Having accurate figures on your income, expenses, and debt is the first step to taking responsibility for your personal finances

Freeze Your Cards

Research has shown that the average consumer pays up to two times more for products or services when using a credit card. Meaning you have to stop using your cards when buying stuff, and instead pay your bills in cash. Therefore do not use your cards to pay off for stuff; otherwise you’ll be sabotaging your own debt repayment plan.

Change your Budget

After you’ve established the amount of debt that you owe the credit card companies, it’s essential that you set up a new budget that’s flexible enough to allow you to stick with your repayment plan. For instance, you can cut down on going out for dinner every weekend and save the money to your debt repayment fund. Also you can also free up more money by downgrading your cable subscriptions service.There plenty of other lifestyle adjustments you can make to free up more funds for your debt repayment. The key is to create a new spending plan that cuts down on some the activities that eat into your budget each month.

Get A Lower Interest Rate

Most people are not aware that one can actually reduce the amount of interest paid to the credit card company. If you are one of those people, then it’s prudent to know that you can actually request your credit company to lower your interest rate. Though, this is only possible if you can be able to convince the company that you have a good credit history or that you’ve been offered a great rate elsewhere.Although, this strategy doesn’t not guarantee that the credit card company will yield to your demands, it has worked on many occasion- so its good to try it out. Lower interest rates typically mean the amount you pay off as debit will be less

Make Payments Twice A month

If you can manage to free up more funds by adjusting your lifestyle, then you can be able to make two payments each month instead of one. Such commitment wil help you eliminate your debt in the fastest time possible. Additionally, such a commintent will increase your credit score in a major way.

Debt Refinancing

Paying off your credit card debt debt requires discipline, and financial commitment. Sometimes you debt could be to big to be sorted by your lifestyle adjustments, meaning you have to look for other viable sources of financiers to settle your debt. Some of the sources include borrowing money from banks with lower interest rates and using the money to clear your debts. Aside from your local bank, other financial institutions that you can rely on include private lenders or peer-to peer lenders serving your region. When take this option, make sure that you pay all your debt at once, so that you can focus on repaying the new loans.

Retain your Cards

Once you’ve been able to clear all your credit card, a good card to retain your cards for credit score purposes. Your cards provide financial institutions with a lengthy financial history that show your credit ratings. 

Find Community Support

The fact that over 45% of Americans have credit card debt, means that you are not alone in the struggle. As such, experts recommend that you find a community that shares the same problem with you, and become part of them.That way, you can be able to support one another in your journeys to becoming debt free. And the good thing is that there are so many communities online so you won’t feel isolated at all.

Track your progress

Finally, it critical that you track your progress every few months to ensure that you are on the right path to being debt free. It important that you don’t get consumed mentally by the debt you owe the credit companies.So long as you follow your payment plan to the latter, then there is no reason why you wont eliminate your debt.Remember it probably took you along time to be in kind of such debt, and it will also take you sometime before you can get out of such debt; so you shouldn’t worry too much.

In the end it vital that you create a workable credit card repayment plan that you can easily follow. Doing so paying your debts wont b a tough call. by following the above laid ideas you are going to settle all your debts easily

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