A realistic way to pay off credit cards.
We all hear of the many ways that credit card debt can be paid. Yet, Americans continue to increase their credit card debt.
There are numerous reasons that the nation’s credit card debt continues growing. This is not about how it is increasing, but how you can decrease your personal credit card debt in some very simple ways.
To eliminate credit card debt as rapidly as possible at the lowest possible cost to you, follow these steps:
While you are listing out the cards make sure you include the minimum payment percentage and the minimum payment according to the latest statement because this information will be used a bit later.
You can find the minimum payment percentage in the small print on the credit card statement or in your cardholder agreement (it is usually between 2 and 2 .5% of your balance).
Rearrange the list putting the credit card with the highest interest rate at the top followed by decreasing interest rates until the card with the lowest interest rate is at the bottom.
Get a total of the required minimum payments for all the cards.
Based off of your budget, decide how much money you can afford each month for credit card debt. This is in addition to the total minimum payments on all your credit cards (step 3).
Each month, pay the minimum balance on each card except the one at the top of the list. The card at the top of the list with the highest interest rate is paid the minimum balance plus the additional amount you identified at step 4. This action will reduce your credit card debt each month.
Continue to do this until the credit card with the highest interest rate is paid off entirely. Then take the amount you were paying monthly toward that credit card and apply it to the balance on the second credit card. This amount includes the minimum balance paid on both credit cards as well as the additional amount identified at step 4.
Balances with higher interest rates accumulate interest costs more quickly; the end result is you pay more to the credit card company in interest and less toward the principal amount. Some people feel removing the card with the least amount of debt is wise, but in actuality it is not the best financial decision.
Some other ways to eliminate credit card debt faster would be to contact all your credit card companies and request a lower interest rate. Most are willing to work with you on this as they lose if you cannot make payments. The lower interest rate will decrease your overall debt faster.
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