What’s the best advice I’ve ever received about credit card debt? It’s don’t get into it to begin with. How can you do this? The simple answer is to simply pay off your balance or balances every month. If you have been unable to do this for a number of months, you’re probably struggling with credit card debt and wondering if you’re ever going to become debt free. The good news is that it’s possible. The bad news is that it will take some sacrifices on your part. An ugly fact of debt is that there is no way to get rid of it without paying it off.
But before that
Before I get into this, here are some things to watch out for that make it more difficult to get out of credit card debt. For example, your mail may be full of credit card offers. Why do you get them? It’s simple. The industry makes a lot of money on credit cards. The credit card merchants such as Visa and MasterCard earn their money by creating big merchant networks that will assume payments using their cards.
How the banks make money
The big issuing banks such as Bank of America and Citigroup earn their money various ways. They get a large slice out of every credit card transaction through what are called interchange fees, which are divided between the network, the issuer and the bank where your charges are authorized. They get these fees whether or not you carry forward a balance. However, these companies really make out like bandits on the interest you pay when you carry a balance.
You earn a little, pay a lot
If you haven’t noticed this, the interest rates you get on your savings are like 1% or less. On the other hand, the interest you pay on your credit card can be 18% or higher, which is an absolute gold mine for the credit card networks.
#1: Pay more than your minimum monthly payment
A dirty little secret of credit cards is that if you pay only your minimum monthly payment, you’ll never get out of debt. So, if you want to become debt free, you need to quit paying those minimum amounts and use all of your extra cash towards paying down your balances as fast as possible.
Step #2: Pay down your high-interest cards first
Check your statements to see how much interest you’re paying on which card. Then put your efforts on paying down the card with the highest interest rate. This will help you reduce the total of your interest charges the fastest.
Step #3: Stop using your credit cards
This may be painful but try to stop using your credit cards when working to eliminate your debt. A bad thing about carrying forward a balance is that you aren’t given a grace period when you make new purchases as are people who pay their balances every month. If you do have a card where you can pay the balance every month, use it so that you can enjoy a grace period.
Step #4: Keep up your head of steam
Once you pay off a couple of your cards, it might be very tempting to take a break. But a better idea is to take the money that you were using to make payments on the cards you’ve paid off and use it to pay down your other balances. This will help you get your debt paid off the fastest.