Just about everyone who possesses a credit card is looking for a way to tone down that debt, and for good reason. The average credit card debt at the end of 2016 was just under $6,000 per household, with some being more or less depending on a variety of factors.
Why Credit Card Debt Is High
One of the reasons for the rise in credit card debt is that, since 2003, the rise in income has been overcome by the cost of living on an ongoing basis. While income levels have risen since that time, the cost of living, especially medical costs and food costs, has more than doubled that in many areas.
It is also not to say that credit cards cannot be very useful financial tools. Indeed, they can offer rewards for spending certain amounts or by shopping at specific locations and they can even help you build credit if you have none. However, the key to credit card use is moderation and responsibility. Without those, you can find yourself drowning in credit card debt quickly.
Steps to Credit Card Debt Reduction
Pay More Than Minimum If You Can
Beware “minimum payment due” amounts on your credit card statement. While it is enticing to pay only the least amount due, it is never the wisest decision, especially if you are able to do more. In many cases, it is quite likely that your interest rate will cause to pay almost double what you owe by choosing the minimum amount due.
This is especially the case if you were forced into a card with a high interest rate due to some emergency, lack of credit, or poor credit. It can be very beneficial to negotiate a lower rate, if possible. Lowering your rate even by just a couple of points can equate to hundreds of dollars saved over the course of paying off that debt. You can save far more by setting your own minimum monthly payment of more than what is reflected on your statements.
Highest Rates First
If you have more than one credit card, concentrate on paying off the card with the highest interest rate first. Even if you have to make only the minimum payment due on your other cards, putting as much money towards the payoff of the one with the highest interest rate will ultimately free up a lot more money in the end. With that extra money, you then focus on the card with the next highest interest rate and before you know it, you will have them all paid off.
You could also choose to focus on paying off the card with the least balance first, but this is not the most effective way to reduce your debt. It will, however, rid you of one entire card payment and possibly give you enough peace of mind to really focus on paying off the rest.
Transferring to Lower Rate Cards
Transferring a balance from a high interest card to a lower interest card can save hundreds of dollars per year. While this is a good financial move to make overall, there are pros and cons to the attempt. When you transfer a balance, you usually have a time period, usually 12 to 18 months, during which your interest rate will be lower than normal. However, if you do not commit to paying off that debt within that allotted time, those rates could potentially skyrocket and set you back even further than before. Also, be aware those low interest rates sometimes only apply to a transferred balance and not to new purchases. The wisest choice is to refrain from new purchases on that card and focus only on debt elimination. Also keep an eye out for fees that may be incurred when transferring balances to make sure they are reasonable.
Chapter 7 Bankruptcy
Filing a Chapter 7 bankruptcy can eliminate all of your credit card debt without any repayment. If you are behind on payments and don’t see a way to catch up with your debt, contact Bankruptcy Law Professionals to find out more information on Chapter 7 bankruptcy for free at (855) 257-7671.