Since the great recession of 2008 many of us have had to rely on credit cards and other forms of unsecured debt just to get by. The heavy burden of too much debt can be overwhelming. Although it may seem that debt is a mountain too high to scale, it can be overcome. By following a few simple rules anyone can “erase” credit card debt forever.
The first step on the road to debt freedom is to reduce one’s consumption by evaluating and changing your spending habits. It is a concept that is almost too obvious. Many people get into debt because they spend what they do not have. Of course, there are many people who make less than their bills add up to. So how can these people reduce their expenses? The obvious answer is to find a way to lower the amount of money you owe every month by cutting expenses down to the bare necessities, or by finding a way to supplement your income.
Most of the time, it is not because bills are higher than income that cause people to start relying on credit cards. Most of the time, people simply cannot seem to wait for that big ticket item which they want so badly. It may be a television, a computer, a gaming system. The truth is, most people who find themselves in credit card debt are not using their cards to cover their bills. So to come full circle, it’s imperative to stop spending money on the things you want, and instead only leverage a line of credit out of necessity.
The second step is to pay more than the minimum monthly payments, which are designed to keep the cardholder in debt for as long as possible so that the balance can keep accruing interest. Three years is a long time to wait to pay off a small sum like $300. There are credit card calculators online which can be used to figure out exactly how long it will take to pay off the card if the minimum due is paid each month. They also show how much is ultimately spent on paying off the card.
A good rule of thumb is to pay as much as possible each month. If bills are cut to the bare minimum and paying off the card is set as a top priority, it will be easier to pay the card off quickly. The faster a card is paid off, the less interest is accrued. This is true with all interest related debts such as mortgages and car payments as well. Once the card is paid off, a person can still use the card responsibly on occasion. In fact, some credit card companies will charge a fee if the card is not used unless the account is closed. The best way to continue to use the card without going further into debt is to make sure that any items bought with the card are in the budget and the statement balance is paid in full. Any rewards that are offered for use of the card can be taken advantage of this way without falling back into debt. The card may also be used in emergencies provided the debt is paid off quickly.
The last thing to remember about credit card debt is to make payments on time and never exceed the limit. Falling behind or exceeding the limit on a card will normally trigger huge increases in the APR. The default rate may be as high as 29.9%. To make matters worse, there are often fees for both and it is easy to keep maxing out the card if one keeps spending after each payment.
If you’ve already tried pushing yourself to do the things mentioned above and are still struggling with your debt, it may be a good idea for your to speak with a debt relief professional about your options. If you’re interested in how Pacific Debt can help you, please review the details on our debt reduction program.