A Five Step Plan to Bring Down Those Credit Card Balances

In the current financial climate a lot of people are taking stock of their finances and realizing that they, like most governments, have spent more than they should have spent and are now staring at a large debt that needs to be paid off. For most families and individuals that debt will come in the form of credit cards and store cards and once they add them all together, the final figure will invariably be far worse than they had imagined. But don’t worry, with a little bit of organization it is easy to bring those cards right back down and get rid of those excess balances. Just follow these five steps and you’ll soon be debt free:

(1) Begin By Organizing All of Your Debts: Think of this bit as where you bottom out with your debt. It’s time to take stock and add up your total combined debts. So clear a space on a table, sit yourself down and organize all of your store and credit cards and statements into individual piles. Add together the total owing on all cards and pour yourself a stiff drink! 

(2) Now Calculate A Repayment Schedule: The next step is to calculate the precise amount that you will need to pay off monthly. Start with the total combined minimum payment for all the cards. This is the amount you absolutely must pay if you are to stay above the water. If you don’t pay this amount you will see your debts going up rather than going down, and you will be hit with punitive charges and interest. If you calculate that you can’t clear the minimum amount then your best course of action is to call up the credit card companies and negotiate a schedule of repayment that you both can live with. This is much smarter than just ignoring a bill and missing payments. If you are able to clear the minimum amount, and better still if you can clear more than the minimum, then you will see your debts go down quicker. 

(3) Do Your Research and Take Advantage of Credit Card Offers: There are hundreds of offers out there in magazines and online, many of them offering you excellent deals on balance transfers. Some balance transfers even offer 0% interest so if you see any of these, make sure you grab them quickly. Get the lowest interest rates you can and move the card with the highest interest rates over to that new card. Always read the small print and check how long the balance transfer rate is in place. It will normally be around 6 months. 

(4) Make Sure You Clear the Credit Cards with the Highest Interest Rates First: If you do have a bit of cash to pay over the minimum amount every month, then ensure that you pay it into the card with the highest interest charges. Keep doing this until you have cleared it. Then repeat with the card with the next highest rate. 

(5) Destroy All of Your Cards Until You Are Debt Free: Don’t lose your focus half-way through (or even once they are all clear) and start spending again. Avoid this by tearing them all up and keeping just one card, with a low limit, for emergencies. 

Esther is a freelance copywriter. She likes to write about music and travel but these days seems to be mostly writing about finance, loans and payday loans. 

For additional information on credit cards or related topics please visit our library of credit card articles.