Few people would argue that credit cards make everyday life easier because they eliminate the need to carry cash and make it easy to shop online and over the phone.
But spending with a credit card can sometimes be too easy because it doesn't always feel like you're giving up cash. This means that you might be tempted to spend without giving much thought to the consequences, until you hear the ominous thud of a big credit card bill hitting the doormat.
If this happens to you, the size of your credit card debt may seem overwhelming, but don't worry. There are a few easy steps you can take to start getting your debt under control again.
Try to make a little more than the minimum payments:
Over time, the minimum payments that credit card companies have asked for have steadily gone down. Before, most people had to pay back at least 5 percent of their balance every month. Now, most people only have to pay back 2.5 percent or 3 percent. When your payments are this small compared to your debt, a big chunk of each payment goes to interest. Depending on your card's APR rate, this could mean that up to 75% of each payment is "lost." This means that it takes a very long time for your balance to go down much.
You can speed up this process by trying to pay more than the minimum, even if it's just a little bit. In the long run, you'll pay much less in interest charges if you do this.
Sort out your credit card debts:
If you have more than one card with different interest rates, it makes sense to focus on the one that charges the most interest. This doesn't just mean the one with the highest interest rate, but also the one that costs you the most each month. This could be a card with a lower interest rate but a higher balance.
Check your credit card statements to see which card is costing you the most in interest each month. Then, try to pay off this card first by making extra payments with any extra money you have while making only the minimum payments on your other cards.
Make a new card:
Rates have gone down over the last few years, and the credit card market is very competitive. You might have to use an old card with an old rate that is much higher than rates on newer cards. If you can get a new card with a lower rate and transfer your account balance to it, you could save a lot on interest charges, which would help you pay down your debt. If you can get a credit card with a low introductory rate on balance transfers, that's even better. You'll have a few months of interest-free credit that you can use to really pay down your debt, since every payment you make will go toward paying it off.
Debt consolidation:
If getting a cheaper card isn't possible or doesn't make you happy, you might want to think about getting a consolidation loan. If you get a loan and use the money to pay off all your credit card debt, you could get a lower rate because loans are usually much cheaper than credit cards.
The problem with these loans is that the length of time it takes to pay them back could be quite long. This means that, even though your monthly payments may be lower, you'll be in debt longer and pay more in interest. But if you do it right, consolidation can be a good idea if you can't get rid of your debt any other way.
Watch how much you spend!
All of the above ways to get your debt under control will only work if you stop adding to it, which means you have to stop using your credit cards. The best thing to do would be to cut them up so you can't use them again, but this might not be possible if you need to keep them in case of an emergency. In any case, the only sure way to get out of debt in the long run is to spend as little as possible while keeping your payments as high as possible.
