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Getting Rid Of Potentially Crippling Credit Card Debt

Posted on April 21, 2008 - Filed Under Finance

Many people don’t realize that their credit card debts present serious financial problems until the debt has reached endemic proportions. Financial experts think that there are solid ways that you can eliminate credit card debt. When solving any problem, the point to begin is to determine the actual position; and the same goes with credit cards.

The first step would be to sort your credit cards using such criteria as; the minimum balance, the interest rate, the minimum payment percentage and so on. Then arrange them in a manner that the one with the highest interest rate sits at the top while the one with the lowest is at the bottom. Combine all minimum payment for all the cards.

Now you have an idea of how much is due per month, but this is only the minimum payment and you won’t go far by paying this amount. So find out how much money is available per month for paying your credit card bills. If you can only afford paying the minimum payment monthly, then make you should consider making some budget cuts. Everybody in the household should be informed that there will be some tightening of the belt.

The next step is to pay your credit card bills in the order of priority. You may pay the minimum amount for the low interest cards, but as for the high interest card, pay the minimum amount plus any other additional disposable money that you may have. This should continue until the card with the highest interest rate is paid in full. After that, take the minimum amount set aside or the fully paid card, plus the minimum amount for the second highest interest card plus any additional disposable amount you have and direct all these into paying off the second card until it is fully paid. The process should be repeated until all the cards are fully paid.

If this option is open to you, you may use a home equity loan to pay off credit card debt. The interest rates charges on these loans are typically lower than the ones charged by credit card issuers, and are also tax deductible. This can be a cheaper way to pay credit card debt if carried out with discipline. Loans are always susceptible to abuse, just like credit cards. But this time remember that home equity loan are secured on your house and you may end up losing your home if you default.

You can also make a life little less hard for you through a concept called credit card surfing or balance transfer which is simply to transfer your balances to low rate accounts. But this method may not cover freshly acquitted debts which also are not given priority over the old debt. This might mean more accumulated interest on the new debts.

You may also try your luck and call your credit card issuer and request that the interest rate to be reduced. Many of them would consider your request, though positive outcome is not guaranteed.
Follow each of these steps with discipline in order to reduce and eliminate your personal debt.

Monty Loree is the founder of http://www.canadian-money-advisor.ca which helps Canadians better understand their money, credit and the financial industry in Canada. In our financial podcasts, we are interviewing industry experts who give our visitors the truth about the financial industry. Canadian Money Advisor is an important source for Canadians to learn more about their money.

Secured credit card information:
http://www.canadian-money-advisor.ca/secure-credit-card-info.html

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