Thanks to the explosion of credit card use in the western world, there is one
question which more and more people find themselves asking: how can I pay off my
credit card debt?
Answer - You can pay off your credit card debt using
either one or more of the following methods:
Pay more than the minimum -
Paying the minimum, usually 2% to 3% of the outstanding balance, is exactly what
the banks want you to do. The longer you take to repay the balance, the more
interest they make, and the less cash you have in your pocket. Instead, attempt
to pay as much as you can each month e.g. if your minimum payment is $50, pay
off $100 or more. Tighten your belt - don't eat out during your lunch break and
instead carry a packed lunch. Make a few sacrifices, and you will find the extra
money needed to reduce your debt .These increased payments will save you
hundreds, if not thousands of dollars, in interest. In addition, you will get
out of debt quicker. Is it fun? No - but it beats having ever increasing bills
each month.
Switch to a card with a lower annualized interest rate - Look
at all your cards. Have you reached the maximum limit on the one with the lowest
interest rate? If not, transfer amounts from higher rate cards. If your total
balance is too large to put on one card, pay the minimum amounts due on all
cards except one. Funnel most of your debt repayments onto that one card and pay
it off as quickly as possible. When that balance reaches zero, repeat the
process with other cards. As your debt reduces, the amount of money you have at
your disposal to repay the loan increases until all your debt is paid
off.
Take advantage of promotional offers - Another way to transfer
higher-interest debt to a low-interest card is to take advantage of the
promotional offers many banks use to entice you to their line of credit. You
have seen offers such as "Transfer all your credit card balance to us, and pay
just 5.9% for the next 12 months." It could be worth it as moving from 18% to 5%
interest could mean substantial savings to you. The money saved in interest
could then be applied toward the principal each month, reducing your outstanding
debt balance even further. Word of caution; read the fine print before you move
the debt. Examine the offer closely. Look for any pitfalls. Many banks stipulate
that if you transfer balances from the new card within a 12-month period, the
normal interest rate will be applied to all outstanding balances retroactively.
That provision could be a bitter pill to swallow for someone short on cash, and
it certainly doesn't help the debt repayment schedule. Always read the small
print.
That's all well and good I hear you say, but what if I am having
financial difficulties, what can I do then?
Answer - Renegotiate terms
with your creditors
The sheer number of persons with credit card debt has
made creditors realise that if they don't want people backing down from their
obligations ( i.e. they won't get any money back), they have to make deals. Let
your creditors know your financial situation.
Take the following two
scenarios:
Scenario One: You tell the company's collection department
that you're having financial difficulties and need to have your interest rate
lowered; simple as that. They say, "What can you manage?" You tell them.
(Personal note: I recently got one account to lower my rate to 10 percent and
cut off future finance charges.)
Scenario Two: A credit card company has
offered to pay off all your old credit card debt at nine percent if you switch.
Call your old companies and tell them the deal you've been offered; ask if they
can do better, and go with whichever is lowest.
So there you are, follow
these tips and enjoy a debt free future!
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