Credit Card: Ending the Debt Cycle

Don’t let it cost you.

If you charged 15,863 on an 18% interest credit card, your minimum balance due would be 396.58 per month. If you only paid the minimum balance due of 396.58 per month, it would 388 payments to pay off the credit card debt. In other words, it would take you 32 years to pay off your debt and in the end you will have paid a total of 23,215.69 worth of interest alone. Ready for the grand total? Drum roll 38,898.69! Still think using credit cards are worth the convenience?

Get control.

Remove the credit cards from your wallet and don’t use them until your credit card debt is paid in full. If you can get up the strength, remove your debit card also. A debit card can be a dangerous replacement for a credit card because it’s harder to stay aware of what you are spending. Adopt a cash only policy.

Take Inventory.

Make a list of all your credit cards on a spreadsheet or a piece of paper. Next to each credit card record the balance due and interest rate. Then add up all of your credit card balances and record the total due at the bottom. This can be scary, but being aware of the damages is an important step toward becoming debt free.

Consolidate your credit cards.

Consolidate all of your credit cards to one low-interest rate credit card. Preferably a credit card with a 0% transfer fee. If consolidation is not an option, then focus on paying down the credit card with the highest interest rate first, while maintaining the minimum payments on the remaining credit cards. Once the credit card with the highest interest rate is paid off, work on paying off the next credit card with the highest interest rate.

Don’t be cheap.

Always pay more than the minimum balance due. If fact, if you can double the minimum balance due, you will pay off your debt in half the time. If you can’t pay double, always strive to pay as much as you can toward the outstanding balance.

Don’t be late.

Make your payments on time to avoid late charges and potential interest increases. Continue to make payments until all of your credit card debt is paid in full. Depending on your circumstances this step could take many years. Don’t give up and penny pinch as much as you possibly can to get out of this stage?

Say goodbye.

Choose the best two credit cards for emergencies by comparing interest rates, annual fees and benefits. Cancel all remaining credit cards by calling the credit card issuers and make sure you request cancellation letters. The two remaining credit cards are to be used for real emergencies only.

Be prepared.

Create an emergency fund you can depend on by diverting the funds once used to pay down your credit card debt to a savings account that is FDIC insured. Most financial experts feel you need at least 6 months worth of emergency savings, but considering the damage caused by the Great Recession, you should strive for 12 months. The average job takes over one year to replace and having a substantial emergency fund is critical for your financial survival. No one knows what the next recession will be like, but history has proven that there will be another.

Keep control.

Set your own personal credit card limit to keep control of your credit card balances. Even though the credit card issuers may give you credit line in the thousands, it’s good idea to set a limit for yourself. Keep the limit small enough that you are able to pay the balance off in full every month. This prevents the credit card balance from getting out of control.

Source: http://blogs.rediff.com/blogcreditcard/2016/02/23/credit-card-ending-the-debt-cycle/