Credit card debt can become a rope around your neck, especially in times of economic uncertainty, tighter lending standards and higher interest rates. Drastic action to reduce the debt may be needed to survive.

When the noose is tightening

You have just received your credit card statement and there is no doubt about it, the noose is tightening and you are in debt. How do you go about reducing your card debt before it strangles you? You must make a firm commitment to get out of debt come what may, even if it means cutting up each and every credit card you own!

Making the commitment to get out of debt is the first step toward financial freedom. You will need both long and short-term strategies to do so.

    • Take stock of your situation. Write down what you owe on each card and remember to add the interest you are charged.
    • Set up a monthly budget, check where your money is going and why. Calculate how much you can pay each month.
    • Make an appointment with your creditors and explain your situation to them. Ask them if it is possible to lower your interest rate and if they can help you with both a short and long-term plan to pay off your debt.
    • Pay your credit balance on time, every time.
    • Make at least the minimum payment each month.
    • Try to pay a little more than the minimum payment that is due each month, preferably on the card with the highest interest rate. By doing this, more of your payment goes towards the principal balance and not just to interest.
    • Thereafter, pay the same amount of money every month, disregarding the declining minimum amount as stated on the monthly statement until that debt is fully paid up.
    • As one debt has been paid off, add the amount you used to pay on this debt to the payment of the next debt. This way you will pay the same total amount towards your debt until all your debts are paid.

 

Sources

Csiszar, J. How to negotiate your credit card debt yourself without lump sum payment. Retrieved  from: http://budgeting.thenest.com/negotiate-credit-card-debt-yourself-lump-sum-payment-21124.html
Gibbons, V. How to eliminate credit card debt. Retrieved from: http://www.realsimple.com/work-life/money/eliminate-credit-card-debt
Peterson, E. Eight steps to reducing credit card debt. Retrieved from:
http://www.creditcards.com/credit-card-news/help/8-steps-cut-credit-card-debt-6000.php

 

Revised by M van Os