Eliminate Credit Card Debt

Eliminating credit card debt is probably the single best “investment” the average person will ever make. What makes this such a great investment? The fact that you get an immediate, constant return on your investment. Let’s say you have a credit card with a balance of $10,000 and an interest rate of 15%. Making higher payments until you eliminate that credit card debt is the equivalent of putting around $125 per month in your pocket. This is money that would otherwise go to the greedy banker. Ask any seasoned investor, “How many investments they have made with a consistent 15% return year after year?” If they are honest, they will say, “None.”

To eliminate credit card debt, your first step is to find some extra cash to pay down more than the minimum due each month. If you only pay down the minimum required by your credit card issuer, it will take years - maybe decades - to pay those cards down. And, that assumes you don’t add more debt on that card that will cost you even more in interest. Taking this long to pay down the debt means paying an obscene amount of your hard earned cash as interest payments.

On the other hand, if you stop adding to the amount you owe on your credit cards, and pay down a little each month, your balance will, of course, gradually get smaller. That means that each month you pay a little less in interest. The money saved can then be added to your next month’s payment. By staying consistent with this strategy, you will see that the debt is eliminated at an increasing rate. It accelerates a little more each month.

Don’t think you can’t find many ways to come up with that cash. Some are easy; some are not. It depends on your situation and how serious you are about no longer being a slave to the banks. You can think of plenty of ways to reduce your monthly budget. You can also find money saving tips on this website and elsewhere.

Operate On Cash

Here’s a really simple tip to get started with eliminating credit card debt. To start down the road to eliminating credit card debt start - immediately - switch to a cash-only budget. For one thing, it is quite an eye opener to look at all of the $20, $50, even $100 bills that go flying out of your purse or wallet each week just to put food on the table and purchase other incidentals. It is one thing to just swipe a credit card – it tends to make your purchase “just” a number. It is quite another to start out on Monday with a healthy stack of greenbacks, and be sweating it out by the end of the week wondering if you will have enough cash even for a gallon of milk or to put gas in the car.

Even better is the effect on a family. Just keep showing the spouse and kids how much is left each day. They will appreciate the amount of money required to run a household. As a result, they will usually be much more open to helping trim down the budget.

Raise Some Cash to Get Started Today

There are so many ways to reduce your budget. The top marketers of every corporation work overtime to find ways to extract more money from you. However, after you work through your monthly budget and reduce those expenses, it is time to raise a little cash around the house.

Go through the attic and garage. These days, there is really no reason to have a cluttered garage. Sell things on e-bay. If you really don’t want to take the time for that, there are now businesses that will take quality stuff and sell if for you for a commission.

Take the money you accumulate with your garage-clearing to get you off to the best possible start on eliminating your credit card debt.

Credit card debt can be eliminated for all but the most dire situations. I can make this claim based on the knowledge that credit card companies will simply stop issuing credit to those whose finances are beginning to spin out of control. They will discover this by observing the creditor’s falling credit rating. Of course, high debt coupled with job loss or unexpectedly large medical expenses can change a manageable situation to one that is out of control. Then, bankruptcy may be the only way out. But for the vast majority of creditors, this is not the case.

For most cases, the best method for eliminating credit card debt is the old fashion way - roll up your sleeves, trim your expenses, and get started paying down those credit card debts. Then, dig in you heels when the temptation to go over your budget comes up (which will happen something like 27 times a week!). But, by relentlessly making this commitment, the amount you can pay down your debt each month will grow ever larger. Your payments get larger since your balance is gradually reduced which results in lower interest charges each month. This means that what would have gone to the greedy banks can now be applied to pay down your debt.

One way to put yourself in further financial danger, however, is to put up your home or other essential property as collateral for a secured loan. Once you take out a home equity loan, you may get a more favorable interest rate – nothing wrong with that. But, it also puts your house at risk. Meaning…if you were to suddenly loose your job and cannot make those mortgage payments for an extended period, it is the financial institution’s right to seize the collateral on that loan. In this case the collateral is your home.

Unsecured as well as secured debt consolidation loans are generally available from lending institutions. These are intended to help you manage your credit card payments by combining all credit card debt into a single payment. Unsecured consolidation loans are generally available for those that are not too far in debt. To qualify for the unsecured loan, the borrower’s financial situation would have to suggest that the lender is not at high risk. So, if you are carrying a particularly high level of debt relative to your income, you will probably not qualify. In this case, you would have to look at a secured debt consolidation loan. In this case, you will put up something – such as your home – as collateral for the loan. Unfortunately, similar to the home equity loan, your will risk loosing your home if you cannot continue to make the loan payments.

Although the unsecured consolidation loan seems to be the way to go, if you have a very negative credit standing, your chances at obtaining such as loan are practically non-existent. Also, given the financial situation that is global in nature, do not expect any reputable lender to make such a loan.

One other situation to avoid…the “payday” loan. These are loans that allow you to access cash by putting up you next paycheck. Chances are you will not be able to pay back this loan on time. That’s when the added paid starts. These loans come with all sorts of interest rate clauses. Before you know it, you are paying back unbelievable amounts in interest. These make the greedy bank’s 29% credit card interest rates look attractive. Don’t use payday loans. Ever.

Hopefully, this has opened your eyes to a few pitfalls to avoid when getting your credit card debt under control. There is no magic. But if you are committed and diligent, you can eliminate that debt. See our other articles on this website to get ideas on how to eliminate credit card debt the right way.