Paying
down credit debt doesn’t always mean having to make huge monthly
payments or sacrifices. It just takes some basic planning and a simple
effective strategy to make it work.
Ask a friend what resolutions they made for the new year and your bound
to hear them reply “Pay off my credit cards.” Ask them how they planned
on reaching that goal and many of them will not have a clear cut
answer.
The obvious first step to paying off credit card debt or paying down
credit debt load is to cut back or eliminate the use of your credit
cards. For some people this first step can often be the most difficult.
If you’re used to spending freely with plastic and worrying about the
consequences later, it’s difficult to break free from this “buy now,
pay later” attitude.
To gain control of their careless credit card spending habits, some
people cut up their credit cards therefore making it impossible to use
them. Others lock up their credit cards or hide them in a safe place
and vow to use them only in an emergency.
The second step to paying down credit debt is to pay more than the
minimum balance due. Most credit card companies require a minimum
monthly payment of 2.5% of the outstanding balance. For example, if you
have an outstanding balance of $1100.00 on a credit card charging an
Annual Percentage Rate (APR) of 18.9% your minimum monthly payment
would be $27.50. It will take you 66 months or 5.5 years to pay off
your balance of $1100.00 making the minimum payments. The credit card
company will make $676.94 in interest from your use of their credit
card.
Monthly payments are purposely kept low by the credit card companies so
that they can earn as much as possible from the interest rate charged
to you the consumer. Paying just the minimum payment will keep you
tangled in credit’s web for years and years to come.
If you’ve been paying only the minimum due month after month, ask
yourself this question, “Do I have an extra $10.00 I could apply to
this month’s payment?” I’m sure that most of us could find some way to
come up with an extra $10.00 for the month. Try cutting out a few cups
of coffee or lunches at your nearby fast food outlets and in no time
flat you’ll have saved up the extra money that you need.
Now, it’s time to unveil “The Simple $10.00 Debt Elimination Solution.”
Take that extra $10.00 and add it to the minimum monthly payment above,
therefore making a payment of $37.50. By adding just that $10.00 a
month to your minimum payment, you’ll trim 23 months or nearly two
years off of that credit debt! On top of that you’ll save $277.00 in
interest alone! That’s money you can put toward savings or paying off
other debts. Imagine how much you’d be able to save if you applied this
same simple strategy to each of your other credit card debts!
Paying down credit debt doesn’t always mean having to make huge monthly
payments or sacrifices. It just takes some basic planning and a simple
effective strategy to make it work.
