5 Ways To Reduce Your Credit Card Debt
I’ve generally been skeptical of the many “solutions” that newspaper reporters offer to individuals struggling with credit card debt. Some of these solutions offer advice that those deep in credit card debt can’t possibly follow - such as the suggestion to pay off your credit card debt every month so that you don’t have to pay interest on the money that you have borrowed. Others ideas - such as the suggestion to transfer your balances to a lower interest rate credit card - tempt your bad spending habits with a new available balance. Others suggest that you should make a list of all your credit card debt and pay additional money on the credit card with the highest interest rate rather than spreading the money around - which is a great idea but doesn’t help when you find that you don’t have any extra money after you pay your bills on month three (after the novelty of saving has worn off and the itch to spend occurs again!). So instead of continuing to complain about bad lists on the subject of how to get out of debt, I’ve decided to put together my own list of how to reduce your credit card debt. It’s by no means a complete solution to debt problems, but I hope you find one or more aspects of it useful.
1. Pay yourself first. If you wait until the last minute to pay your credit card bills, you’ll probably find that there’s no extra money in your account (above the minimum payment) to pay down the debt. Instead, set aside the amount of money which you plan to use to pay down your credit card debt before you start paying your other expenses. There’s no rule that you have to wait until the due date in order to make a payment on a credit card. If you are living paycheck to paycheck, as many Americans are these days, then you may want to begin by setting aside one month of expenses before you begin paying down your debt. While many would recommend that you set aside three months of expenses, I think that’s unrealistic if you are already struggling to pay your bills. But one month of expenses can help you manage an unexpected period of unemployment or take advantage of a great balance transfer offer from an existing credit card.
2. Cut your expenses. Businesses around the globe are beginning to tighten their belts by reigning in spending and laying off employees to save money during the coming recession. It’s time to take a page out of the book of some of the nation’s best business leaders and do the same. I won’t go so far as to advocate a budget, since I believe that they are great planning tools but difficult to follow in practice. But I will point out that even saving $5 a week can really add up over the course of a year.
3. Ask for help. Weight Watchers operates on the principle that you will stick to your weight loss plan better with a support group then without one. Take a hint from the Weight Watchers book and enlist a group to help you deal with your debt management and spending control issues. Whether you do so by joining an online forum dedicated to debt problems, or following and commenting on the blog of another struggling to reign in their own debt, you are more likely to stick to your plan if you are in it with others. Identify your friends who enable your spending problems, and deal with the situation. Finally, ask your credit card companies to cut your interest rates. The worst that they can do is say no.
4. Get organized. A survey earlier this year found that an alarming percentage of people did not know whether they paid off their credit cards in full every month or if they carried a balance from month to month. Sticking your head in the sand will only make your problems worse. Make a list of your debts, your monthly expenses, potential areas for saving - and stay informed about your problem - and your progress toward eliminating your debts.
5. Follow the 90/10 rule. Follow your plan to get out of debt 90 percent of the time. And remember to live (a little) during the other 10 percent of your life. If you don’t allow yourself a bit of fun, you won’t be able to stick to your debt reduction plan. As long as you manage your spending when you cheat, there’s no harm in forgetting about your problems and enjoying life every once in a while. And reward yourself for successfully paying down your debt! There’s nothing like a little incentive to help you reduce your credit card debt.
