If you’re like most folks, you’ve got more debt than you’d like to have, and a lot of it is probably in the form of credit cards. Some of those credit cards might have relatively low interest rates, but some of them might have quite a bit higher interest than the others. This is especially true if you have take out cash advances on those cards, or if you have had several late payments on the card. If you’re smart, you’ll implement a credit card reduction plan.
There are a number of different ways you can reduce your debt. You can go to credit counseling where a third party will negotiate your debt. The problem here is that you’ll likely face some negative impact on your credit report if you do this. Either the credit card company will write off a portion of the debt showing it “settled,” or they will continue to show you as paying late.
The best credit card debt reduction plan, however, doesn’t involve a third party and it doesn’t involve paying late. Instead, it involves some basic steps:
- Make your credit card payments, every month. This isn’t always as simple as it sounds, but it’s where you have to start. If you don’t make enough money to pay your credit card payments, you need to consider other ways to make money. That might mean a second job, or it might mean cutting back on other expenses.
- Find a way to pay a little extra. Even if you’re only talking about $20 extra, you need to put some additional funds toward your credit card debt reduction. Here again, cutting expenses or increasing income may be necessary.
- Put the extra toward your lowest balance credit card bill. Now, here’s where we start to see real progress. Even $20 extra a month will quickly pay off that low balance card.
- Once one card is paid off, put the money from that payment toward the next highest balance card. Now we’re talking. If the first card had a minimum payment of $15, and the second card has a minimum payment of $15, and you were paying $20 extra per month, now you’re going to be paying a total of $50 per month on that next credit card.
- Repeat this process until everything but your mortgage is paid off. You’ll be surprised how fast you can get out of your credit card debt, as well as other debt like car loans or student loans.
