Beating Credit Card Debt For Good – Part Two of Two
Worthwhile credit card debt recovery strategies
In part one of this series on getting rid of credit card debt, we discussed both drastic and practical ways of approaching financial recovery. Now that you have considered those first steps, it is time to figure out what to do next in order to embrace debt-free living. The following suggestions are certainly not easy, but those who are now in full debt recovery will tell you that they are certainly worthwhile.
Get on the phone and discuss your credit card debt
Now that you’ve created a snapshot of your debt, go down your list and call each credit card company. If you are late on a payment to them, explain why and give them a date by which you can send a payment. Even if it is a small payment, be honest about when you can send it in and then do exactly that.
If you do not have frequent late payments or are not behind in your bill, and if your FICO score is decent, call each credit card company and try to negotiate a better interest rate than the one that you currently have. One way of doing this is to single out one of your cards with a more affordable rate and call the companies with higher rates to inform them that you are considering sticking primarily with the one with the lower rate. Or, another way of approaching this is to research companies offering better rates and tell the credit card companies with higher rates that you are considering changing to one of those cards because of the rate difference. If a lower rate is not immediately offered, don’t be afraid to ask them to lower it. The worst thing that can happen is that they can say no and, compared to the high interest rates that you’re paying, that shouldn’t be nearly as frightening.
If the credit card company refuses to lower your interest rate, consider moving your debt to a card with a more comfortable rate and, after doing so, you may consider canceling the high rate card.
The road to debt recovery begins with a single month
After cutting your credit cards and/or negotiating a lower interest rate, look at your monthly personal budget and very carefully calculate the largest possible payment you can make on all of your balances each month. Next, add ten dollars to the minimum payment requirement offered by each credit card company. Now, add up all of the minimum payments, plus the ten dollars that you added in the previous step. If the minimum amount that the credit card company allows you to pay is lower than the maximum amount that you can afford to pay each month, go ahead and subtract the lower amount from the higher. The remaining sum is what you should consider applying to the card that is charging the highest interest rate.
After the high interest rate card is paid off, you may consider canceling that card, but don’t stop there. Now it is time to go back to the beginning and repeat the entire repayment process all over again by focusing on the card with the next highest interest rate. Do not lower the amount that your calculations permitted you to pay before the first highest card was paid off, however. Instead, continue to designate this exact same amount out of your personal budget for paying off credit card debt until it is all gone. Continue to repeat this entire process of paying your credit card debt off by assassinating the highest interest rate cards first and working your way down until you are left with cards that have affordable rates and you are debt free.
Carefully consider emergency cash options
Once you are debt free, if you ever find yourself in need of a cash advance, before turning to a credit card, carefully weigh that option against that of a loan till payday or an installment loan from a personal loan company. Always know your options, study them closely and select the one with the lowest repayment terms for your personal budget.