If your biggest problem is credit card debt, there are some proven ways to reduce it. While none of these will eliminate your debt overnight, you could use one of them to lower your credit card debts and get out of debt faster
First, you need to get organized. Make a list of all your debts with the amount you owe on each, the minimum payment required, the interest rate and the day of the month that the payment is due. This is the basic information you will need for any debt reduction plan
The “snowball” strategy
Nobody knows for sure how this strategy got its name but it can help you with what’s called “revolving credit” such as credit card debts. The way this works is that you first pay off the credit card that has the lowest balance. This will free up money that you can then use to pay off the credit card that has the next highest balance and so on until you have paid off all your credit cards. Of course, while you’re paying that one credit card, you will need to continue to make minimum payments on your other cards.
The highest APR strategy
A second strategy is to pay off the credit card with the highest interest rate or APR first. Many experts believe this strategy makes the most sense financially. To utilize it, you bump up the amounts you pay on your credit card that has the highest annual percentage rate (APR) while you make the minimum payments on your other cards. When you have paid off the balance on the credit card with the highest interest rate, you start making increased payments on the card that has the second highest interest rate and so forth.
For either to work
For either of these strategies work, you’ll need to stay with the program even as you see your balances and minimum payments get lower and lower. Keep in mind that your goal is to get all of your balances to zero.
Transfer all your debts to a single card
Several of the credit card companies now offer what are called zero balance transfer cards. No, you don’t end up with a zero balance. However, when you transfer all of your debts to one of these cards, you’ll get a ”time out” from interest payments for 6 to 20 months (depending on the card you choose). If you can find a card with a lower interest rate than your current cards, this will also help you save money. Suppose, for example, that you have five credit cards with interest rates of 18% to 21% and transfer all this debt to a credit card with a 15% interest rate. You could easily save several hundred dollars a month, which you could then use to pay down your balance on the new card and get out of debt much faster.
Stop charging on all your cards
It’s absolutely critical that no matter which of the strategies you choose that you stop charging on any of your credit cards. There is just no way to get ahead and reduce your debt if you continue to use your cards. In fact, the simplest strategy of all might be to just cut them all up while you continue to make your minimum payments.