Reducing Your Credit Card Debt

Hi All,

In spite of everything, a lot of people still manage to find themselves in a situation where they have credit card debt. So, if you’re in that position, here are some things that might help:

1) Stop Borrowing: This is obvious, but its important. Instead of relying on your credit cards, consider switching your method of payment. The way to do this is to destroy your cards – cut them up or throw them out. Then move over to a debit card, or switch to an all cash or cash/check system. The main idea here is to get yourself outside of the cycle of relying on your credit card.

2) Score A Better Interest Rate: The current trainwreck that is the US economy has made it much more difficult to transfer your balances to a lower rate card. However, if your credit is good you might be able to pull this off. If not, there are plenty of other alternatives for getting a better rate. You could consider a bank loan, home equity line of credit, peer to peer lending funding, or a personal loan from friends or family.

3) Dump High Interest Debt: If you have multiple cards, pay off the highest interest rate first. The reason is that as you eliminate your high interest credit card debt, your cash flow situation improves.

It works like this. If you owe $100 dollars and the interest rate is 29%, then you’d have to pay 29 dollars to carry to the debt. If you owed $100 at 6%, you’d just have to pay just 6 bucks to carry it. The higher interest rates require higher payments. Eliminate this.

4) Raise Extra Money: If you’re like most Americans, you probably have a ton of stuff in your house. Try selling some this by having a garage sale or unloading it on ebay. Then, use the money to give your debt payoff a boost.

5) Remember Credit Card Companies are NOT Your Friend: We’ve been watching the behavior of card companies for a couple of years now. Its a safe bet to say they have their own profit in mind, not your best interests. So remember this, credit cards are not conveniences, you’re essentially taking out a 12 to 29% loan when you use them.

Just as a final note here, there is no shame owing money on credit cards. Over the past 30 years, real wages have been stagnant while the price of housing, food and health has been increasing at a steady clip. One reason why you – and so many others have credit card debt is because the economy is out of balance. Living frugal and doing what you can to build your wealth is the best thing you can do for yourself. So, don’t get too wrapped up in feeling ashamed about your debt – a lot of the country is in the same boat.

Best,

James