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Small Steps to Credit Card Debt Relief
Don’t let credit card debt ruin your mood, relationships, or life. You can reduce your credit card debt by following a few simple steps. The process will not be easy, but it can be simple. To completely free yourself from credit card debt takes a lot of determination and willpower. It’s very easy to fall back into old habits and start charging everything. Just remember what got you into financial trouble to begin with! The ability to learn from past mistakes is very important to your financial future.
Two Simple Steps to Credit Card Debt Relief
Step One: Stop taking on new debt. Stop using your credit cards for unnecessary items and cancel all recurring payments. These automatic fees can range from a monthly gym membership to automatic bill payment or even online gaming accounts. If any of the companies you deal with require a credit card to be registered for automatic payment, consider using a checking account debit card instead. Your debit card doesn’t pay interest.
Step Two: Contact your creditors and try to negotiate lower payments and interest rates. In some cases they may even waive late charges. Many companies are willing to work with you because they would rather get some of the money owed rather than none of it. After negotiating with your creditors you may find it beneficial to consolidate all your credit card debts into one credit card. This can be accomplished by transferring all balances to the card with the lowest APR.
Another option for consolidation is to apply for a low-interest, unsecured personal loan that will allow you to pay off your credit cards in full. In some cases you may also be able to borrow against investments like stocks, your mortgage, health insurance or even your 401K. If you find it impossible to consolidate all your balances onto one card or if you can’t get a loan, your best course of action is to pay more than the minimum payment each month. The industry standard for a minimum payment is 2 to 3% of your balance. If you continue to make only the minimum payments, you will be paying off a small debt for many years to come. Don’t fall victim to paying hundreds of dollars for a $15 purchase.
Before you start paying more than the minimum, it’s a good idea to create a savings account. This will allow you to have an emergency fund and you won’t have to use your credit cards if unexpected expenses come up. Once you have established an emergency fund, you should collect all of your monthly bills and figure out how much can be paid for your credit card debt each month. At this point, you have two options for a refund:
Option One: Pay the minimum amount due on all cards except the card with the highest interest rate. For the high interest card, you must not only pay the minimum balance, but also put the rest of your monthly allowance towards this card. Paying off the card with the highest interest rate will keep you from paying back hundreds of dollars in interest in the long run.
Option Two: Put extra funds on the card with the lowest amount of debt. Paying off the card with the lowest amount of debt will ultimately free up more funds from your monthly budget. That money can then be applied to the cards with the highest interest rates or used to pay off another card with a relatively low balance.
The option you choose should be based on the total amount of money you will end up repaying. You should also consider how quickly your credit card debt can be eliminated with each method. Every situation is different. Each individual must choose the debt repayment method that best benefits their lifestyle.
Once the first card is paid off, do not change your monthly credit card debt payment. Just keep putting any extra money toward your other credit cards. When your credit card balances are paid in full, keep your cards locked up, but don’t cancel them. This can have a negative impact on your credit score. Simply putting them away in case of an emergency or learning to use them responsibly can increase your credit rating and save you from bankruptcy.
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