It has never been easy to overcome a massive credit debt. During harsh economic times, it can be a real challenge to pay off your credit card debt. But it doesn't mean that you cannot manage and pay down your debts. Read our helpful tips on how to manage and pay off your credit card debt with a step-by-step debt management plan.
Just a few years ago, consumers could afford carrying big balances over time and lenders really liked those card holders, as they paid a lot in interest. But in today's challenging economic environment, banks and companies are trying to offset their losses by slashing spending limits and increasing interest rates on multiple accounts. Even if you pay your bills on time, you're not protected against interest rate hikes that are quite common today. Higher interest rates can easily result in massive balances. So, how to deal with big balances?
The first thing you should do is examine your credit card statements and calculate how much you actually owe. Better yet, you can begin by listing your all your debts. It can be a painful step, as the vast majority of consumers have no idea how bad their situation is.
Once you know how much you owe, you should make a debt reduction plan. There are many companies specializing in credit debt consolidation, but you can make this plan by yourself. Start with contacting your issuers. There's no harm in asking to lower your interest rate. If the company's reps refuse to lower your rate, ask to speak with the manager. You may ask to lower your rates for a specified period of time, let's say six months.
It can be a win-win situation for you and for the company, as lenders are suffering great losses because of high credit delinquency rates. All the more so, the major companies and banks offer debt management programs designed specifically for those consumers who find it difficult to manage their debts.
The next step is arranging your bills from those with the highest interest rates to the bills with the lowest rates. There are two strategies of debt elimination: you can start paying down your debt either from the lowest rate balance or from the highest rate one. The choice of the right strategy depends on your current financial situation. Try to figure out the most money you can put towards your bills. Continue to make the minimum payments on your cards and put the rest of your money towards the highest or the lowest rate debt. Once you have paid that debt, start paying down the other debt and repeat the same steps with the remaining cards.
One of the secrets of the successful debt reduction plan is to find extra cash for your payments. There're plenty of creative ways to earn cash. Whether it's a car advertisement or a rebate cheque from the grocery store, every little bit counts. If you have a rewards credit card, you may be allowed to exchange your rewards into a credit statement. This will also help you ease the debt burden and eliminate your debts faster.