Learn How to Get Rid of Debt the Easy Way
Have you fallen into this trap? Repeatedly, reliable survey sources tell us that most of us do not realize how much we spend every month using our credit cards. Investigations reveal that when consumers thought their total credit card debt was about $20,000, in fact it was closer to $40,000. Scary difference – consumers are spending a lot more than they think! When we routinely pay for everything with the plastic card and don’t keep track of what we spend, these careless spending habits all too often lead to debt problems – problems which can easily be avoided.
To add to the problem, most of us have several credit cards, so if you use them to pay for everything, then you also transfer the balances from time to time to get a better interest rate, it’s easy to miscalculate how much you’re spending. With so many credit cards and with so many different payment options, it is easy to see how overspending can occur.
Six out of ten consumers don’t even know their account balances, so funds could be withdrawn in fraudulent transactions without them even realizing it! Now if you don’t keep track of your money, who else is going to? So what you need to do, if you haven’t done so already, is sit down and get an understanding of where you stand with your credit card debt. Double check what’s coming in and what’s going out, make sure everything balances at the end of the month, then continue to keep a tighter grip on your accounts.
Tighten Your Belt
Do you find yourself in this situation? Do you worry about reducing your debt? Life is certainly easier and more convenient if you have at least one credit card, but it needs to be used properly. Credit cards ideally should be used only when they are paid off each month or in the case of a true emergency. Credit card companies love it when we only pay the minimum payment every month, but if you only pay the minimum payment every month on a large balance and continue using your credit cards, you will never pay them off!
The banks and credit card companies are merely adding on more interest, and it will take longer for you to pay off the credit card bills. So what began as a small credit card bill could escalate into thousands of dollars, because they are raking it in while the interest rates are crippling us. . Say your credit card statement arrives and your balance is $2000 and the minimum payment is $40, which is 2% of your balance. If you continue paying only the minimum payment, most of your $40 is paying the interest and hardly any is going towards your balance.
If your debt is escalating out of control, it is time to tighten your belt and begin the process of becoming debt free. The best way to reduce your credit card debt is to stop using your credit cards, or better yet, cut them up (to avoid temptation). This will be painful at first, but it will save you a substantial amount of money in the long run.
Sit down and calculate how much more you can pay each month than the minimum payment. Once you have worked that out,stick to it even when you see on your statements that the minimum payment required is going down. Don’t be tempted to reduce your payment or you’ll be back to square one in no time. If you have more than one credit card, make the highest payment each month that you can to the card that has the highest interest rate. Keep paying the minimum payment on your other cards until the card with the highest interest rate is paid off, then add that payment to the minimum amount you are paying on the next highest card until it is paid off, and so on until all your cards are paid off.
Let’s Look at a Case Study
Let’s take a look at a case study of one creditor who had stopped using her credit card and was trying to pay it off, but who felt like she wasn’t getting anywhere. And, in fact, she wasn’t. Like many others who don’t fully understand financial matters, she believed that if she stopped using her credit card and paid the minimum monthly payment, she would soon be debt free.
But here is a simplified example of what really happens (the numbers, of course, would be different depending on the total amount owed, the interest rate, etc.). Let’s say her credit card statement showed a balance of $5810.00, at an interest rate of 18%, with a minimum payment of$120.00 per month. Based on the way her bank calculates the minimum required monthly payment, If she never uses this credit card again and continues to only make the minimum required monthly payment, while interest charges continue to accrue every month, it will take her 96 months (that is 8 years!) to pay off this balance. She will pay total interest of over $10,000.00!
If, however, she can pay more than the minimum payment each month, say $200.00, she could actually pay this debt off in about half the time. By paying $200.00 instead of $120.00 per month, she would then pay off this credit card in 42 months (3.5 years) rather than 96 months (8 years), paying only $7,362.00 in interest instead of $10,000.00, saving $3524.00 in interest charges. See what a difference this makes?
You Can Be Debt Free
Millions of Americans have tightened their belts and managed to pay off heavy credit card debt using just such methods. There is no reason you can’t be one of them. But in order to get rid of credit card debt, it isn’t enough to merely make the minimum monthly payment. You need to calculate a plan to pay as much more than the mimimum payment each month as you can, and you will not only get out of debt in a shorter time frame, but you will save hundreds or even thousands of dollars in interest charges. This is one of the simplest ways you can start right now to begin your program to become debt free.
About The Author
Jacque LaMantia has extensive business and administrative experience in multiple fields. She now works from home in Internet Marketing and likes to share information and resources with the public and other entrepreneurs. You can visit her websites at http://www.debtcreditrepairpro.com; http://www.affiliateincomesource.com; http://www.affiliateincomesource.com/blog, or you can email her at j-la@debtcreditrepairpro.com
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