Credit cards have many advantages, such as money-back rewards and the convenience of not needing to carry cash. They also allow consumers to pay for emergency expenses at a later date. For instance, if you have to make an unexpected car repair just before payday, you can ensure your car keeps running even if you don’t have the cash on hand.
The ability to make purchases without cash on hand is a double-edged sword. If you’ve been buying more than you should, that pile of credit card debt can start to look insurmountable. You can overcome it though, with some discipline and a few simple strategies.
The first thing to do is create a budget. Figure out how much you make and how much you spend each month, then focus on eliminating or reducing any unnecessary expenses. For even better budget tracking, organize your expenses into categories that make sense to you. For example: rent, car payments, food, entertainment and childcare. Categories can make it easier to see where you’re spending more than you should.
Make more than the minimum payment on your credit card bills. Because of how interest works, if you only pay the minimum amount the items you purchase end up costing much more than the ticket price. If you buy a $300 television set and your minimum monthly payment is $10, with an interest rate of 16 percent (the national average), not only will it take you 38 months to pay off the TV, it’ll end up costing $379!
Pay off the card with the highest interest rate first. Take a look at the legal agreements for each of your credit cards and determine which has the highest interest rate and make larger payments to that card rather than the others. This will reduce the total amount of interest you end up paying. It also allows you to eliminate your debt faster, because you can pay more per month to any remaining cards after the highest interest card has been paid off. Even with a higher balance on a lower-interest card, it will end up costing you less overall to pay off the higher-interest card first and you’ll reduce your total credit card debt faster.
Using your debit card will help you stay within your budget. A great way to maintain your spending budget is to use a debit card. This will help keep you aware of your budget and how much you truly have to spend.
If you feel you cannot eliminate the debt on your own, the final strategy is to seek credible professional help. Avoid taking out a payday loan or using a check cashing service. Remember, when reducing debt, slow and steady wins the race.