How to Reduce Credit Card Debt With a Calculator

Create a plan of action to get rid of credit card debt.

According to MSN Money, approximately one in 20 American households owe more than $8,000 on credit cards. For some families, credit card balances can be overwhelming. Creating a plan to reduce credit card debt can make the goal attainable. Consumers need to focus on reducing monthly expenses, reallocating the funds to credit cards and creating a time frame goal to payoff debt.

Instructions

1. Tally up total credit card debt. It might be scary, but tallying up total credit card balances is the beginning to reducing total debt. Write down each credit card’s total balance, monthly payment and interest rate.

2. Calculate how much to pay each month. Write down how much income is earned each month. Then, write down how much is spent each month. Subtract expenses from income. Money left over should be allocated toward credit card debt. Consumers who don’t have money left over should look at ways to slash monthly expenses. For example, switching cable companies, packing a lunch for work and carpooling to work will reduce monthly expenses.

3. Create a target date to pay off credit cards. For example, a person may decide she wants to be debt free in 36 months. Make the goal realistic to ensure it can be achieved.

4. Calculate monthly payments. CNN Money offers a debt calculator that allows consumers to figure out how to reduce card debt. Enter credit card debt information, such as monthly payments, number of months to pay the debt off and the calculator will determine if the goal is attainable. If the consumer can’t pay off the debt within the parameters set, the calculator can assist in making the necessary changes such as taking longer to payoff the debt or increasing monthly payments.

Tips & Warnings

• Request a lower interest rate. High interest rates make having credit card debt expensive. Ask the lender to reduce the interest rate. If the company won’t do it, shop around for a new lender. Balance transfer offers provide an opportunity to pay off debt quicker with a lower interest rate.

• Pay off high interest credit cards first. Once the highest interest credit card is paid, move onto the next highest card. Continue this pattern until all credit cards are paid off.

• Avoid paying the minimum payment only. Making these small payments will drive up total costs and make it take longer to pay off credit card debt.

References

• CNN Money: When Will You Be Debt Free?
• MSN Money: The Truth about Credit Card Debt
• Federal Trade Commission: Knee Deep in Debt