Beat Credit-Card Debt for Good | Part I of II
You can get rid of credit-card debt
It takes some sacrifice and a lot of discipline, but you really can get rid of credit-card debt for good. Relax. Breathe. Others have done it and you can too. Paying off credit-card debt can seem overwhelming when you look at your statements each month and realize that you’re not even putting a dent in it. You may have tried getting personal loans, requesting extra cash till payday, or even working a second job, but you still feel like you’re drowning in debt.
It isn’t easy to break the credit-card spending cycle but it is, in fact, completely possible. You first have to believe that financial recovery can be achieved and then you have to make the commitment to work hard at it.
Simple (but not-so-easy) steps to financial freedom
Cut up your cards. If you’re ever going to get your credit-card debt under control, you must stop adding to it. There’s no room for negotiation on this one: Cut up your credit cards. This can feel like a drastic action, but if you’re serious about getting out of debt, you cannot use credit cards.
Consider other emergency-cash options. If the thought of not having any credit cards is too much for you to handle at first, choose one card to keep for emergency use only. Store that card in a safe place or give it to someone you trust, but don’t carry it in your purse or wallet. If the card has a high credit-limit, consider asking the credit-card company to lower it. Remember, when you’re in need of emergency cash, a credit card is not your only way out. You can get a short-term loan or an installment loan online even if you have bad credit, without the risk of over-spending.
Don’t be too quick to close accounts. Don’t be too quick to close your credit cards before you’ve paid them off. Many people have made the mistake of closing their accounts when they cut up their cards, without understanding the negative effects this action would have on their credit ratings. For one thing, closing an account stops the clock on that part of your credit history. If you’ve had credit cards for a long time and have made the payments as required, that history can have a positive impact on your credit rating. Closing an account can also negatively affect your debt-to-credit ratio, which can have a direct affect on your credit score. So cut up your cards, but do some research and ask around before you cancel any accounts.
Be honest with yourself. Take an honest look at your credit-card statements and tally up what you owe. This is scary for people who purposely avoid looking at the bottom line because of the stress it causes. Ironically, however, not knowing what you actually owe can be the most stressful part of all. Make a list of your account balances and make a note of the interest rate on each. List the balances in descending order of interest rates, so that the account with the highest interest rate is at the top of the list. Next to each entry, write down the minimum required monthly payment. Finally, note the name and phone number of each credit card company.
Make a realistic personal budget. Once you’ve decided to get serious about credit-card debt recovery, have cut up your cards and taken an honest look at what you owe, take some time to make a realistic personal budget setting forth your monthly income and expenses. Look at what’s left after deducting the essentials – rent or mortgage, car payment, utilities, food, etc., — and decide how much of your disposable monthly income you can devote to paying off your credit-card debt.
Read part two of this series for suggestions about what to do next. There, you’ll find advice about negotiating with credit card companies and getting rid of account balances with high interest rates. If you exercise some willpower and resolve and take these suggestions seriously, you really can find your way to a debt-free life, once and for all.