If you have high credit card debts, you are not alone. In fact, a lot of Americans are deeply in debt thanks to their credit card spending. According to reports, the national average for credit card debt is currently at $4,293. But if you think that is high enough, wait until you calculate how much the high-interest rate will make the average consumer pay in total. With the finance charges and minimum payment requirement, some consumers might end up paying more than $3,800 on interest alone. That means if you stick to the minimum payments, you will pay almost double of what you actually borrowed.
Do you really want to waste all that money on your high credit card debts?
If your answer is no, then you have a lot of work to do. Fortunately for you, there are ways for you to solve your huge credit card balance. You just have to make sure that you take financial control back from your credit card debts. This effort includes finding a debt solution that you can use to get out of debt successfully. While there are many options for you to choose from, all it really takes is 4 simple steps.
4 simple steps to get rid of high credit card debts
To be honest, it can be challenging to solve your high credit card debts. It will require self-control, discipline, and dedication. All types of debt relief will take time. When you make a choice, you need to ensure that your decision is based on a careful analysis of your debt and financial situation. Do not focus on where you can save the most. While that is a great goal, it may not be what you really need to get out of debt.
Whatever you decide on should be done with your full commitment. Not only that, you need to make sure that you go through these 4 simple steps to get out of your high credit card debts.
Stop using your credit cards immediately
First of all, stop adding to your debts. That means you should stop using your credit cards. This can be hard to do especially if you are relying on this card for basic needs. According to one survey, 1 out of 5 respondents admitted that they use their credit cards for their basic necessities. The truth is if you find yourself relying on your cards for your basic needs because you ran out of cash, that only means there is something wrong with how you manage your finances. This has to change if you want to stop accumulating debt.
But no matter what the reason is, you have to make an effort to stop borrowing money. This is only temporary. Once you have paid off your high credit card debts, you can think about using credit once more. But this time, you need to be smarter with how you use it.
Revise your budget to lower your spending
Once you have stopped borrowing, you need to take a look at your current budget. If you do not have a budget plan, that probably explains why you have a lot of debts. But if you do, then your debt is an indication that there is something wrong with your budget. You need to check if your income can still cover your expenses. If not, then you need to change your spending categories. Not only that, you need to make sure that your debt payments are secure. It should be one of your priorities – or at least after your basic necessities. If it is not needed for your survival, then you probably should skip paying for it.
After you have revised your budget plan, make sure that you stick to it. Be cautious of everything that you are spending on. You cannot afford to waste money since you have a lot of high-interest credit card debts.
Transfer your balance into a low-interest card
Once you have revised your budget, you should have an idea of how much you can afford to pay your debts. Get a balance transfer credit card that offers a 0% rate for at least 12 months. Some are offered by up to 18 months. If you can get something longer, that would be better. It means you will enjoy a longer period wherein all your payments will only go to the principal debt. None of it will be wasted on the interest rate. This will help you get out of debt a lot faster. In most cases, you get the best terms if you pay a balance transfer fee. But make sure to calculate the real costs to ensure that you are really saving money.
Make bigger monthly payments
After setting up the balance transfer, you need to make bigger payments. The more you can pay, the faster you can achieve debt freedom. And since balance transfer gives you 0% interest, all of your payments will eliminate a bigger part of your debt. It could even make your journey towards debt freedom a lot faster. As soon as you get rid of your high credit card debts, you can be free to start working on other financial goals. This includes building your personal net worth and making your financial future secure.
Tips to avoid high credit card debts
Once you have gotten rid of your high credit card debts, you need to exert a different kind of effort now. Even if you just resolved your credit card debts, that does not mean it cannot happen again. If you are not careful with how you manage your finances after debt freedom, it is not unlikely that you will land in another difficult debt situation.
Here are some tips that you can use to avoid landing in another huge debt situation.
Stick to your budget
To start with, you need to look at your budget and see if you can revise it. Sometimes, people stick to the frugal budget that they use while they were trying to get out of debt. This is actually a good idea because it will give you a lot of extra money. If you got used to the new and frugal lifestyle anyway, there is nothing wrong with continuing with what you started. It will help you be more mindful of how you spend your money.
But if you want to change your budget and give yourself more freedom to spend on what you want, then that is also okay. Just make sure to keep your expenses lower than your income. And once you have set the budget, you need to make a commitment to stick to it.
Pay your balance in full each month
When you get rid of your high credit card debts, that does not mean you will no longer use your cards. It is still a convenient and secure way to pay for your expenses. However, if you will use it, you have to make sure that you pay the balance in full each month. According to reports, 4 out of 10 Americans earn enough income to afford paying their balance in full. If they can do it, then so can you. It is just a matter of proper planning and careful spending.
Have an emergency fund
Finally, you should always make sure that you have enough emergency fund. This is one of the best ways for you to avoid high credit card debts in the future. There are times when people land in debt because of an emergency situation that they were unprepared for. This forces them to borrow money to pay for an unexpected expense. If you have an emergency fund, you will not be put in this situation. You can confidently face any emergency event because you know you are financially prepared for it. Not only will it keep you from debt, but it will also leave you with a calm state of mind. It will allow you to make smart decisions because you know you have the resources to take full control of the situation.