Carrying credit card debt is often extremely costly. This is because you will be compelled to pay for all of the interest charges and you will have to commit your future income towards paying for your past purchases. It is therefore imperative that you find ways of reducing your credit card debt, which would essentially allow you to retain more of your income while increasing your credit score. This would enhance your ability to borrow at low interest rates when need arises in the future. Below are some essential tips for reducing your credit card debts.
Avoid using cards
Your attempts to clear your credit card balances will be a vanity if you continue adding more charges to your card each month than the amount you pay off. It is therefore advisable that you take your credit cards out of your wallet and commit yourself to using debit cards, cash and checks for your purchases. In the event that you cannot afford something at any particular moment, you are better off not buying it.
Seek lower interest rates
In order to reduce your credit card debt, you will want to call each of your credit card companies and request for reduced interest rates. Lower interest rates will allow you to commit more of your monthly payments towards actually paying down your balance as opposed to paying finance charges. Most companies will often agree to lower your rate by at least a percentage or two upon request. This is especially true if you let them know that you are contemplating transferring the balance to a card having a relatively reduced rate.
Automate your entire minimum payments
Late fees will ultimately cost you money that you would otherwise commit towards reducing your debt. You should therefore avoid incurring unnecessary fees. This can be achieved by setting up automatic payments to each of your credit cards from your checking account each month. This will also save you substantial amounts of time since you will not have to make each of your payments individually.
Reduce your spending
It is possible to reduce your credit card balances if you decide to pay more than the minimum each month. This can be achieved through cutting your spending in other areas of your budget. For instance, you may select a luxury item and decide to give it up. Subsequently, you can use all that money to pay off your credit card debt. Some of the luxury options you could give up include eating out at restaurants, unnecessary clothing purchases, purchasing alcohol, books and going out for movies and live entertainment events among others.
Make extra payments
Every month, you should strive to make extra payments on your credit cards, especially the one having the highest interest rate. The larger the extra payment, the sooner you will be able to pay off your credit card. Beside, applying additional payment to the card with the highest interest rate will essentially maximize your efforts as it will reduce the amount of payable interest each month.
In the event that you get a windfall like a bonus at work, cash gift or tax refund, you should consider applying it as an extra payment on your credit card. This is especially easy as it's likely that you weren't expecting the money anyway, thus you are not really losing anything. If you can't afford to part with the full amount, you may elect to keep a small percentage, say 10% and use it to purchase an item that will keep you motivated.
Ensure that you track your progress
Tracking your progress will help you observe what you have accomplished. Keeping track of your dwindling balances on your credit cards can motivate you to continue. For instance, you can make a list of your entire amount of remaining debt each quarter or each month.
Compete with a friend
If you are contemplating trimming your budget and using that money to pay off your credit card debt, you will find that doing it with a friend is easier and more fun. This is especially true if you are competitive-minded; you can make it a game and observe who can commit more of their income towards paying off the debt, or who can successfully get out of the debt first. Beside, your friends can share with you the best money saving strategies they have found.
Reducing your credit card debts is your first step towards gaining financial freedom. When you are burdened with unmanageable credit card debts, you may feel intimidated or even humiliated to contact and negotiate with the credit card companies. However, you will find that working directly with the credit card company is among the best ways to work out a compromise. Ensure that you are honest with the credit card company, they will understand.