5 Sensible Steps To Overcome Credit Card Debt

Overwhelming consumer debt is a serious problem that many Americans deal with on a daily basis. Outstanding credit card balances account for the largest percentage of revolving debt owed in the U.S. Many individuals are caught in a trap of making just the minimum monthly payments on several credit cards, without seeing an appreciable reduction in their overall debt. Typically, credit cards carry interest rates between ten and thirty percent, and the interest charged can add up in a hurry. When making only the minimum payment required on their monthly statements, cardholders may not even cover the accrued interest, and their outstanding balance will continue to slowly increase rather than decrease.

If you find yourself caught in this vicious cycle, you need to know that overcoming credit card debt is possible with the right tools and knowledge. If you want to get your debt under control, you also need to understand that there are no quick fixes to accomplish this task; it will take both time and determination. Here are some simple steps that can help you eliminate credit card debt sensibly and allow you to regain your financial footing:

1. The first step in the debt reduction process is to compile a list of all the active credit cards you have, their outstanding balances, the applicable interest rates, and the minimum monthly payment on each of the balances. Use the most recent statements you’ve received or the card companies’ online resources to obtain this information.

2. Begin your list with the card that bears the highest annual interest rate. Continue with each card that carries a balance, by decreasing interest rate percentages. The card with the lowest interest rate should be the last on your list. To avoid adding any additional debt, cut up all but the final card. Don’t cancel your accounts with any of your credit card providers, however, as this could negatively impact your credit score.

3. When the list is completed, add up all the minimum payment amounts. The total is what you need to budget each month to cover the bare minimum payments on all your credit cards. It’s not necessary to add up the outstanding balances owed in order to start paying off your debt, although doing so will help you understand your overall financial picture.

4. In order to reduce your outstanding card balances and begin paying off the debts, it will be necessary to do more than just make the minimum monthly payments. To find the cash to do this, you’ll need to take a serious look at your current spending habits to zero in on extras that you can eliminate; expenditures such as unessential travel, a daily coffee fix, and restaurant meals are good examples of where you might find an extra $20, $50 or even $100 each month.

5. Continue to make your usual monthly minimum payments on all your cards, with the exception of the credit card at the top of the list. Add the extra funds you’ve pared from your monthly living expenses to this card payment. Continue doing this every month, and increase the amount you pay whenever possible, until the top card has a zero balance. Then, repeat the process for the next credit card on the list, and so on, until all the card balances are paid in full.

The advantage of following the above steps is that your credit cards with the highest interest rates will be paid off first, reducing the amount of interest you pay out on a monthly basis. Keep in mind that while this process will take time, the satisfaction and stress relief that you’ll gain from paying off your credit card debts is well worth the effort and self-discipline required.

Sam Jones, the author, has been reading money saving tips at uSwitch and thinks that credit cards for bad credit can be a good option if you want to improve your credit score.

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