Credit Card Debts carries high interest rates in comparison to other debts and you can save big money in the long run if you pay down your dues in time. Low monthly payment offers of credit card will cost you a lot of money because of the interest amount that you need to pay on your outstanding.
Here are 5 best ways to reduce your credit card debt.
Budget Your Monthly Expenses
While using credit card to purchase household items is not always a bad idea but using it regularly may result in overspending and crossing your budget limit.
Assessing your budget is the first step to take so that you can determine where to look in case of necessity. You have to develop a monthly budget by dividing your last month or last quarter’s spending into;
- Food Expenses
- Personal Care
- Paying off bills like telephone, mobile etc
Then try to find the expenses where you can cut back and gain cash flow to reduce your credit card debt burden in future. Determine how much money you need to spend each month by dividing it into the bills you must pay and the expenses you can avoid. The money you are saving out of it can be used in your credit card debt payment.
Cut up excess credit cards except one for emergency
Many people have a temptation of having more than one credit card from different banks without knowing that they increase the spending habit by having a temptation of using those for unnecessary things. You need to avoid this practice and start carrying only one in case of emergency.
Pay off highest interest credit card debt first
List down each credit card debt that you have and the interest rate charged to you. You will find that the interest rate for credit card is higher than other debt’s interest rate.
So, by reducing you credit card debt burden you save money by reducing the future debt burden. Higher interest rate debt means, more money in interest charges is being added every period to your balance by increasing your debt burden.
If you have two credit cards and one has 11.6% interest rates and another has 12.5% then by paying the balances of credit card carrying 12.5 % interest rate means a lower total payment.
If you have more than one credit card then find out the one that is carrying higher interest rate in comparison to others. Now your task is to pay off the credit card debt that is carrying higher interest and then put it towards the second highest interest rate.
If you haven’t paid your bills for some time then there are chances that, your credit card company might call you for a negotiation. Plan it before discussing this matter with them. Most of the time these companies are offering viable resolution by providing opportunity to make payment.
Increase your saving habit
Every time you save money, send it to you credit card Company for reducing your outstanding balance. By doing this you can avoid the compounding effect of your credit card debt burden. Avoid buying new products that you do not need.
If your income is significantly lower than the credit card debt then you can also try to get a part time job after your regular day job to get additional money for eliminating debt.
Payoff the lowest credit card debt balance first
When you pay off your lowest credit card debt balance, you are making your existing money to stretch further by removing an entire fixed debt burden of future. You can also follow the practice of selecting the lowest balance credit card first and start eliminating one by one until you have only one credit card with the biggest debt.