Learning how to reduce credit card debt is usually a one of the best steps you can take to reduce debt and find financial freedom. It is common for most credit card companies to make grand offers such as low introductory rates, or other exciting promotions like discounts to make you sign up for a new card on the spot..
What most people may not understand is just how hard it is to pay down credit card debt once you have accumulated a running balance. Unless you are disciplined, you could soon be way in over your head in debt. Often, introductory rates are only temporary and it is possible the rate could jump to triple what it started out as, sometimes even as high as nearly 30% APR. That high interest rate makes it nearly impossible to reduce credit card debt if you are only making minimum payments.
Consider this as a valuable first step in finding new financial freedom: by reducing your credit card debt, you will free up your finances for more important things like savings, vacations, retirement, college, and other savings venues.
How to Reduce Credit Card Debt – Getting Started
First, you will want to make a plan and lay out a budget. Follow these helpful tips to learn how to reduce credit card debt starting right now:
- Make a List of All of Your Credit Card Debts
- Write Down the Balances and Minimum Payment for Each of Your Credit Cards
- Stop Using Credit Cards and Loans
- Pay More than the Minimum Payment when Possible
- Use any Extra Income to Pay off Debt
- When One Card is Paid Off, Use that To Pay Down the Next One
- Liquidate Low-Interest Savings in Order to Pay Off Debt
- Keep a Budget and Chart Your Progress
Let’s review this in more detail.
Start off with a plan and prepare an overview of your finances. Make a list of all of your credit cards. Start with the lowest balance at the top of your list and keep writing them in order with the biggest balance at the bottom. And, record the minimum payments for each card as well. Keep in mind that minimum payments will be reduced as the overall balance decreases so if you keep paying only the minimum, you will be paying for a very long time.
Stop using your credit cards and loans. If you cannot use cash to make a purchase, then think about whether you really need it. If you have to resort to debt and using credit cards to pay for everything, you are asking for trouble. You’ll never reduce and pay off your credit card debt at that rate. Really try to be disciplined and stop using your credit cards.
Pay at least the minimum payment on your account, and preferably pay more each month.As your credit card balance decreases and the payments also go down, keep making the same higher monthly payment and you will be paying your card off faster..
Use bonuses and other unexpected income to increase the amount you pay on your credit card payment. If you should find yourself with extra money such as a bonus, gift, or raise, just add that new income onto your debt payments and use it to pay down your lowest credit card balance. This will allow you to pay things off faster and decrease your debt and you won’t even notice the money is gone..
Once you pay off one card, take that money and roll it onto the next one. As you pay off each card on your list, take the money you would have been using for that payment and just double it up on the next card. Because you are already used to spending that on bills, you won’t notice any shortfall but your debt will decrease faster.
Consider using some forms of savings to pay down credit card debt. While this doesn’t make sense for accounts like a retirement plan, if you have some savings free, consider using it to pay off your credit card debt. Obviously, you would not want to liquidate all of your savings, because you want to keep a buffer set aside for emergencies.
Track your progress where you can see it. As a form of motivation and inspiration, make a visual chart someplace you can easily see it. As you watch your progress towards your goal, it will keep you motivated to keep going and reducing your credit card debt each month.