If you’re feeling overwhelmed or stressed out over credit card debt, you’re not alone. In the US, the average household debt runs at about $15,762. If you’re desire is to lower or even eliminate your credit card debt, you must do two things.
1) Create a Plan
2) Stick to The Plan
In order to create a plan you need to know what you’re dealing with. Start by making a list of the individual details of each credit card you own. It’s important to know the interest rates of each card you hold as well as the total amount owed and minimum payment required. In addition, it’s a good idea to know how long it would take to pay off your credit cards if you simply made the monthly minimum payment.
Before we get into creating a plan, I want to go over some important statistics on credit card debt that you need to know.
The Dangers of The Minimum Payment
Every credit card comes with a minimum payment plan. Typically it’s a small payment and one that is far too tempting. However, before you create a plan for lowering your credit card debt, you must understand the real nature of how your current credit card interest rates and monthly payment plan add to the interest paid out over time.
One of the worst ways to pay off your credit cards is by simply making the monthly minimum payment. Doing this could not only take 5 to 10 years or more to pay off the credit card, but also could easily double (or more) the amount you borrowed in the first place. Let’s just consider one small debt of $3,000 with an interest rate of 26%. Making the monthly minimum payment of just $75.00 per month means this debt would take 7.8 years to pay off. But the interest it would accrue would be $4049! And that is how the credit companies make their money.
If the above information is a bit of a shock, take heart in knowing that by adding just $25.00 a month to that minimum payment you could decrease the time spent in paying off that debt by almost 4 years as well as lower the interest added to the debt by $2,152. Another way to pay off your credit card debt faster is by lowering the interest rates. Lowering your interest rate by just 5% on the above calculation would shave off another $959 in interest.
As you can see, knowing how the interest and minimum payment plans are set up do not work in the creditors favor. They are taking advantage of people by offering irresistible minimum payments that in many cases, over time, double the amount borrowed. For the borrower, coming to this realization should be an eye-opener. With this in mind, let’s move on to the next step in lowering this type of debt.
Creating a Budget
Now that you know how important it is to make more than the minimum monthly payments, it’s time to see where you can make adjustments so you can add to those monthly payments and pay off your credit cards faster. And, as a reminder, you’ll be able to save hundreds if not thousands of dollars on the interest paid to your creditors.
With this in mind it’s time to create a budget. The first thing to do is to write down everything you spend money on each month. There are two types of lists to create. One list should include life’s essentials such as your mortgage or rent, utilities, insurance, food, gas and any other types of monthly bills that cannot be neglected. This list should include your minimum monthly credit card payments and or the monthly payment amounts you are currently paying.
The second list is made up of things we can do without. They are not essential to our daily needs. This includes things such as Cable or Satellite TV as well as any monthly subscriptions to membership programs that can be cancelled and or adjusted.
Once you understand where your money is being spent each month, you may be surprised at how much you can save by making a few adjustments. This will not be easy. You may be required to temporarily give up something you really enjoy. But the rewards that come from doing so are well worth it.
Surprisingly Easy Adjustments To Save Hundreds Each Month
It is amazing how much money you can save each month without making a single change in your lifestyle. The following is a list of monthly subscriptions plans you can make adjustments to that will lower your monthly payments.
You might be wondering why we are even talking about this. The reason is because the easiest way to pay off credit card debt is by saving money in other areas and using that money to put towards credit card payments!
Cable and Satellite TV
TV subscriptions can run as much as $100 to $200 a month. It’s actually very easy to save money on your TV subscription. Your current cable or satellite TV provider wants to keep you happy. To lower your bill all you have to do is call them up and tell them you’re thinking of changing your subscription over to another TV provider. In most cases you can lower your bill by $10 to $20 per month without even making any changes in your subscription. In addition, many times they will offer 3 to 6 months of HBO, Showtime or some other type of premium subscription just to keep you as a customer.
To save even more on your bill you can change your monthly service plan. Some of the service plans are no longer publicly offered so you must ask if they have any other type of plan that will help you lower your bill. This includes up to 6 months of stopping your services altogether without any penalties of canceling your contract. Typically this costs about $5.00 a month. But be aware, putting your plan on hold only extends the life of your contract. You will still have to pay that. But if the amount saved was applied to a high interest credit card debt the savings over time would be well worth it.
Cell Phones Subscriptions
The first thing to do is repeat the above task. Simply call up your current provider and ask how much they would be willing to cut off your bill to keep you as a customer. The next thing to do is ask how you can lower your bill by making a few adjustments in your subscription.
Many times you can lower your monthly subscription by adjusting your data plan and save anywhere from $10 to $50 a month.
Have you heard of Roku TV? If not, check it out. Many people are now using Roku as their sole TV subscription provider. Could you survive with Netflix and Hulu for a year? Possibly saving you $50 to $100 monthly? If so, making this simple adjustment could save you thousands of dollars a year in interest paid on credit card debt.
Other Monthly Subscription Plans
No matter what type of subscription plan you have it’s easy to find out if you can save money by calling up your provider and asking what they can do to help you lower your bill. If you can eliminate the subscription, do it. Remember, every dollar you add to your monthly credit card payments can save you hundreds of dollars per year on the interest accrued.
Adjusting Your Interest Rates
Believe it or not in order to lower your interest rates on your current credit cards all you have to do is call up and ask. However, before you do so, you can do a little research that could help your provider offer you an even lower interest rate for a longer period of time. Competition is always a good thing when it comes to interest rates. Simply do a little research to find out what other creditors are offering online before you make that call. Be sure to mention the bank that you’re considering moving your money over too and why.
Before You Begin
Remember, these tips will only help you pay off your credit cards faster with lower interest accrued if you stop using your credit cards. Place every credit card you own into an envelop and store them in a safe place. Every dollar you spend using your credit cards goes against your goal of getting out of debt.
If you want to succeed, you must first know what you’re dealing with. And last but not least, remember that the perfect plan is pointless if you don’t take action and stick to it!