There are a number of consequences to carrying around a significant amount of credit card debt. The more credit card debt you have in ratio to your total available credit, the worse it’ll be when you’re trying to secure a loan in the future. Therefore, the solution is in preparing and following an effective debt management plan to help relieve the burden.
Step One: Stop Charging
The quickest way to get out of debt is to stop creating it. Buy only those things you can afford to pay for up front. Not only will this help you pay off your debt more quickly, but you will learn habits that can improve your financial stability forever.
Step Two: Create a Budget
You can’t successfully get control of your finances until you know what you’re working with. Start a budget. Figure out what your expenses are, and divide them into necessities and discretionary spending. From your discretionary column, choose some things you can cut back. You can use this money to put toward paying down your credit cards.
Step Three: Start Saving
No one should be without two or three months’ worth of savings. Even if you are being crushed under debt, it’s essential to make saving money a priority. One emergency and you could be forced to charge up your cards again without a nest egg. Everyone faces the occasional crisis, so don’t be caught flat-footed when it happens.
Step Four: Make a Plan
You’ve stopped using your credit cards, you’ve made a budget, and you’ve decided to start saving. Now it’s time to start paying off your debt. There are two excellent ways to go about it. The first you can do on your own. Take the credit card with the highest interest rates, and pay that company more than the minimum amount each month. The more you pay, the faster you’ll pay off the balance and in turn lower your credit card debt. Meanwhile, continue making the minimum payments on your other accounts. Then you can proceed to tackle the debt with the second highest interest rates, and so on.
The second way is to enroll in a non-profit credit card consolidation program with someone like Creditguard of America. They will roll all of your credit card accounts into a single bill. You pay a certain amount every month to reduce this bill while saving on interest rates, penalties, and inconvenience. These programs usually come with credit counseling as well, so you can learn valuable techniques to avoid financial trouble in the years to come.