If you ask a friend what they resolved to do for the new year, they'll probably say, "Pay off my credit cards." If you ask them how they plan to reach that goal, many of them won't be able to give you a clear answer.
The most obvious way to start paying off credit card debt or reducing it is to stop using your credit cards or use them less. This first step is often the hardest for some people. If you're used to spending freely with credit cards and worrying about the results later, it can be hard to get out of this "buy now, pay later" mindset.
Some people cut up their credit cards so they can't use them. This helps them get a handle on how much they spend without thinking. Others lock up or hide their credit cards and promise to only use them in an emergency.
The second step to paying off credit card debt is to pay more than the minimum balance due. Most credit card companies ask for a minimum payment of 2.5% of the balance every month. For example, if you owe $1,100 on a credit card with an Annual Percentage Rate (APR) of 18.9%, the least you could pay each month would be $27.50. If you only make the minimum payments, it will take you 66 months, or 5.5 years, to pay off your $1100.00 balance. By you using their credit card, the company will make $676.94 in interest.
Credit card companies keep monthly payments low on purpose so they can make as much money as possible from the interest rate you pay. If you only make the minimum payment, you'll be stuck in the credit web for years and years.
If you've only been paying the minimum each month, ask yourself, "Do I have an extra ten dollars I could put toward this month's payment?" Most of us could probably find a way to get an extra ten dollars for the month. Try skipping a few cups of coffee or lunches at fast food places near you, and you'll have the extra money you need in no time.
"The Simple $10.00 Debt Elimination Solution" is now ready to be shown. Add that extra $10.00 to the above minimum monthly payment, which makes a payment of $37.50. By adding just $10 to your minimum payment each month, you can pay off your credit card debt 23 months faster, which is almost two years. Plus, you'll save $277.00 just in interest! You can save that money or use it to pay off other debts. Think about how much you could save if you used this simple method to pay off all of your credit card debts.
Paying off credit card debt doesn't always mean making big payments each month or giving up things. To make it work, you just need to do some basic planning and come up with a simple but effective plan.
