Credit cards have many misconceptions associated with them. Most people fail to realize that a credit card is not extra money they get for free. It is rather a debt that you take from the bank and you will have to repay it later. Unfortunately most people regard a credit card as money won in lottery. They keep on spending until someone knocks on the door and hands over notices from the bank.
According to the numbers, the average consumer debt of an individual in the US is $8400. The use of credit cards for purchases is 112% higher than payments made in cash. Surprisingly, more than 40% of US families spend more than they earn.
23% of Americans in consumer debt think that their debt is unmanageable for them and they will never be able to pay it. However, with timely and proper measures, diminishing your consumer debt is quite possible. Here we share 10 valuable tips to help you diminish your consumer debt.
Stop Increasing the Debt – As soon as you realize that you are in a dangerous debt situation, stop making any more purchases. Chop up all your cards, shred them, burn them, do any thing you need to keep your hands off them. If you are not among the obsessive compulsive ones, you can save at least one of the cards for emergencies.
Transfer your balance – We have already told you to keep one of your cards safe. Let it not be a random choice. Rather, choose the one with lowest interest rates and charges. Remember, even if you are not making any credit card purchases, the debt may still increase due to interest rates. Therefore, it is wise to transfer all your balance in a low-interest credit card.
Consolidation loans – Consolidation is like a helping hand that many banks are offering to the victims of consumer debt. Also, the federal government tries to encourage people to pay their loans by offering debt relief programs. Debt relief programs can cut down the amount of your debt so that you are able to pay it back more easily.
Snowballing – Snowballing your debt means tackling with it one at a time. It is better to start with smaller ones which you can pay them off completely and easily. This will bring relief and encouragement to pay off all the debt eventually.
Pay twice a month – What many people don’t know is the fact that interest is calculated on a daily basis. The more you wait to pay the next installment, the more interest you will have to pay. By dividing the monthly minimum in half and paying after every two weeks, you will keep reducing the debt balance and interest rate more quickly.
Negotiate Your Debt – Banks and creditors are more willing to see you pay your debt rather than seeing you going bankrupt. You can negotiate to lower interest rates and the chances are that they will agree as long as you promise to pay them back.
Get rid of higher interest first – Despite snowballing, balance transfer and negotiation, there may be some debt with relatively higher interest rate. It is irrational to keep that interest amount increasing. Try to pay off such high interest debt first.
Snowflaking – Snowflakes refer to micro payments. By making micro payments whenever possible, you will substantially reduce the amount of interest. This will bring your debt is somewhat static condition. So, you won’t find it increasing at a faster pace than your payments.
Change Your Lifestyle – To pay off your debt, you will require a reasonable amount every month. The best way is to cut down on your expenses. For instance, if you are used to eating out, try cooking at home for a few months.
Find an extra source of Income – There are numerous home based work option these days. A little extra money can work wonders for you. But beware; you have to dedicate the entire amount to your creditors for few months.
Albert Harris, contributing writer at CreditDonkey wants all of us to reduce our debt. Find 0% balance transfer credit cards to help reduce your interest payments. Read credit card reviews to select the best credit cards while managing your personal finance.
- Ways to Negotiate Credit Card Debt (debt-consolidation-2u.com)
- Debt Write Off Services from Attorneys (2011taxes.org)