Reduce Your Credit Card Debt

According to the American Banker’s Association, the average American family carries $8,000 in credit card debt. While a lot of companies claim they can magically make this debt disappear, there’s no substitute for formulating a realistic plan to get it paid off. High interest rates and late fees can complicate matters, so it’s important to make a plan and commit to it. There is no quick fix – paying down any debt takes time – but there are several viable options and techniques that can help.

* Prioritize

Make the payment of your credit card debt a priority. Without this basic first step, you will likely find it only too easy to keep running from the situation or accumulate more debt. Unless you address your debt head-on, it will continue to eat away at your family’s budget and even your relationships – according to PRLog, excessive credit card debt may be a leading cause of divorce.

* Create a family budget

This is not as daunting as it may seem. First, gather the family’s financial records: bank statements, utility bills, etc. Then, list your family’s total monthly income followed by its total monthly expenditures, such as a car payment and mortgage. This way, you will have concrete numbers to work with in regard to your credit card debt.

* Pay the debt with the highest interest rate first

Lay out all your credit card statements in order of highest to lowest interest rate, and focus on paying off the highest interest rate card first. On the highest rate card, pay as much over the minimum payment as you can each month. When that one is paid off, move to the next highest interest rate card.

* Work with the credit card company

Because they are unsecured creditors, credit card companies tend to be willing to negotiate the interest rate or other aspects of your credit agreement. When you explain that your intent is to get your debt paid, most creditors are willing to listen and work with you. When you call, have your household budget and latest credit card statement from that company handy.

* Think outside the box – do you really need to spend money on that?

What if you can’t find that extra $20 or $100 every month to dedicate to your debt payment? It never hurts to get creative. Go back to your budget and detail all expenditures – even those for which you don’t have a paper trail, such as a daily cup of coffee on your way to work or eating lunch out. Make your coffee at home and bring it to work in a travel mug, and save up to $3 a day – that’s $60 a month you could put toward paying off a credit card. And that’s just coffee.

Brown bag it for one week a month and save the $10 a day you were spending on lunch out. In one week, that’s another $50 saved. And that waiter or waitress who brings you your lunch might be working to pay off his or her credit card debt – waiting tables is a viable option for bringing in some extra cash with flexible hours.

Often, we just don’t realize where our money is going. Taking the time to sit down and evaluate just how much we have and where it’s being spent is not magical, but with commitment it can bring relief and eventual freedom from debt.