Are you one who has overloaded the dinghy with credit card debt, but really don't remember what you purchased? You are not alone. Most of us have been in the same boat, but managed to grab a life raft before going under. The debt mounts up quickly and the sooner you get relief, the easier it will be to plant your feet on solid ground.
Many small business owners and individuals try to get help in reducing their obligation by using debt consolidation companies. Some can be helpful to you, while others you are better off without. Here are some solutions you can do on your own, before you seek outside help.
1. Recognize the problem by putting together all your credit card info together on a spreadsheet. Use the bank or account name, date account opened, credit limit, current balance, payment due date, minimum monthly payment and interest rate. In order to reduce the burden, you need to know what you owe. There is a psychological advantage when you have all the credit card debt statistics in front of you, particularly if you add up all the interest paid on those accounts.
2. Do not use your highest interest rate cards at all, pay those down first. The average balance varies by demographic, but the average interest rate for credit cards is upwards of 13%. Determine your average for all the accounts on the spreadsheet. For example, if the average is 12.5% than anything above that rate is a priority and should be paid off first.
3. Start with the lowest interest rate credit card and call their customer service and tell them politely that you've been a customer for x number of years and you want to be able to reduce your interest rate. Ask if there is anything available at a better rate. You'll be surprised at how they respond to your request. The reason you start with the lowest rate first is to become familiar with the process before you go to the highest. Negotiating credit card debt is painless. The issuing companies would rather work with you than run into problems later on down the road.
4. There is an easy way to consolidate credit card debt by using your lowest interest rate card. If your available credit is not enough to consolidate every account then ask the customer service agent to increase your limit. The next step is to do a balance transfer from the high to the low card.
5. A good solution to paying off the high interest balance is to apply for a new credit card with a low introductory rate. The offers usually come in the mail but some are advertised online. The low rate or sometimes 0% interest rate, is usually good for at least six months. Transfer that high interest rate balance to the new card. But remember, only do this once. Too many new accounts will reduce your FICO SCORE.
6. The better way to reduce the balances is to get a debt consolidation loan from your bank. Just make sure that the interest rate is lower than the average on your credit cards.
7. The best way to eliminate credit card debt is using a home equity line of credit and pay off all your charges at once. The interest rate is generally much lower, usually a point or two above your mortgage. There are also tax benefits involved for the homeowner. By using this method the monthly payments will be less, but if you keep the payments the same as before, the principle will be retired in a shorter time frame. You will be out of credit card debt by your next billing cycle.
The most important thing to do when you begin to eliminate credit card debt altogether is not to go back to the same habits of charging everything on your credit cards - no matter how good the rewards seem.
The permanent solution to is to use a debit card from your bank and only spend the money that you actually have in your account. Save your credit for the day that you'll really need it.
Ken writes articles on on more than 20 subjects from art to yachts. There is additional consumer information available at http://www.BestCreditCardChoice.com The subject matter in other articles is varied and presented in a useful manner. His current project includes information on business planning, personal credit and starting a new business venture. Other articles and free E-books can be found at http://www.ProBusinessHelp.Com