How to Lower Your Credit Card Debt
Credit card debt puts a serious strain on your household budget because you have to make payments each month for goods you purchased months, or even years, ago. You also have to pay interest on credit cards, usually at a higher rate than on other types of consumer credit, such as mortgages, auto loans and student loans. Lowering your credit card debt not only reduces your monthly payments and your interest expense, but it improves your credit score and helps you get better interest rates when you borrow in the future.
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Instructions
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Stop using your credit cards for new purchases. You should take them out of your wallet or pocket and delete saved credit card numbers on your favorite websites to reduce temptation. If you really want to make it difficult to use a card, freeze it in a large block of ice so you have to wait while it thaws, which reduces impulsive buys.
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Make a household budget that includes your current credit card payment as a monthly bill. Also include your other monthly bills, including purchases that you used to put on your credit cards. You will be paying for everything out of your checking account now. If your expenditures exceed your income, either get another job to increase your income or cut your expenditures by giving up luxuries, such as entertainment, eating out and purchases of clothing and electronics.
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Call each credit card company and ask for a lower interest rate. You will not always get it, but if you do, it increases the proportion of each payment that will go toward actually reducing your debt instead of paying off interest.
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Make an extra payment each month toward the credit card balance with the highest interest rate. Extra payments further reduce the principal balance on the card so you not only lower your debt but also reduce the amount of your interest charge in future months. Doing so on the card with the highest interest rate has the greatest impact.
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Tips & Warnings
Find a friend or family member to act as personal support during this time. This person can ask you how much of an extra payment you are making each month to keep you accountable. If the person also has credit card debt, you could even compete to see who can get out of debt faster.
If you get offers for new credit cards with balance transfers with an introductory interest rate of 0 percent, you can use these to lower your debt. Although the balance transfer charges a fee, if you are disciplined and work to pay down your balance after the transfer, you will quickly make it up through the interest savings. Plus, you make faster progress at lowering your debt because you are not paying any interest.
Keep up with payments on all of your credit cards. Missing a payment can trigger a penalty interest rate, usually of about 30 percent, which significantly increases the cost of your debt and slows your progress at getting out of debt.
