Credit card debt is a major issue that has been a concern for many consumers like you and me, especially in the recession and post-recession era. Reducing large volumes of debt, is a major worry for several people, as debt brought on by the use of credit cards has a multiplying nature. Such a debt can be very risky, due to the fact that the APR (annual percentage rate), annual fees, fines and membership fees, keep on accumulating at a certain rate. Another big problem with such fees is that they are imposed with a certain fixed rate, irrespective of the extent to which the credit card is used. Reducing debt legally, is both essential and also easy. Why? That's because, if you don't reduce or completely pay off the debt right now, you will have a debt that keeps on increasing monstrously. However, if you set your mind to it and apply simple measures, you can pay off the debt in almost no time.
How to Reduce Credit Card Debt
A simple approach towards the mountain of debt, will help you to clear it off, rather quickly. All you need to do is plan and execute, both with efficiency. The trick is to be aware and be disciplined. Here are few pointers.
Research and Analyze
The best way to reduce debt is to research and asses. To carry out an appropriate assessment and research, you will first get two types of statements, namely, the bank statements, where you have accounts, and secondly, the statements showing how much you owe, to the credit card companies. Next, compare all these statements with your monthly income. Divided a large chunk of income into portions, in which you need to pay off the credit card companies. Now, it's your personal judgment, with which you need to proceed and make the division in such a manner, that it's in your proportion, with your monthly income. Checking the statements will make you realize how much you actually owe. Also keep a watchful eye for any mistakes in the statements.
Block Credit Cards
Your next immediate step is to approach all your credit card companies and stop/block all your credit card accounts, so that the excess fees and fines would stop. You can then work off the debt. It must be noted that some companies charge an APR, or interest rate on the debt, to repay the entire amount. Debt settlement or negotiation is often recommended by many, however I would recommend otherwise, as it is not that effective due to three reasons; one, costs a lot, two, it does not make a substantial difference on the volume of debt that you owe to the credit card company, and three, it brings down your credit score. Coming back to the point, blocking credit cards is an excellent money-saving option. Apart from that, you can also retain some selected credit cards which have low or a fixed APR.
Next off, you can make provisions with a bank, such as, a fixed deposit or a recurring account. You can use the yield amount (i.e.: saved amount + interest), to pay off the debt. The advantage of such a provision is that you get the extra benefit of interest rate that gets accumulated on the provision. Apart from that, another advantage is that you have the money employed in a productive channel, till the bill for the credit card arrives. Another great way to raise money quite quickly is to take up a sale, for example, a garage sale to raise money as quickly as possible. Shares, stocks, bonds, foreign currency, gold and silver are some of the other items that you can easily sell. Basically, use your assets, that can provide short term liquidity, to pay off your debt.
It is a known fact that reducing credit card debt in a very short time is almost impossible, especially if it is owed to multiple credit card companies. The only way to erase off your debt, instantly, is to take debt consolidation loan. You will then have to repay the loan over a period of several years, with a relatively low rate of interest. The loan that is used for consolidating the debt is an effective option, as it saves you a lot of money, that may pile up in the form of APR, fees and fines. Apart from that, the interest rate charged on the loan is quite less and the loan is repaid over a term of several years. Lastly, it must be noted that it is a secured loan and hence you need a collateral or security to get the loan, along with an average (600) or above average credit score. Plan, calculate and think before taking up this liability.
Use Cash and Debit Cards
Credit cards basically cost you. APR that is well over 5%, and a certain annual or monthly membership fee is charged on the credit card, which is an expenditure. Thus, using direct cash and use of debit cards will save you lots of money. So drop the habit of swiping your credit card, shop only when you have balance on your debit card, to splurge! Cutting unnecessary purchases is absolutely essential. Remember the old adage, 'a penny saved is a penny earned'!
Plan Your Expenses
The moment you receive your paycheck, divide all your expenditures, in accordance with the volume of debt, that you owe to each company and pay off a part of the debt immediately. Planning should also be aided by execution and instant payoffs. In this manner, if you plan for about 6 months or so, you would be able to successfully clear off the debt, that has been incurred. Besides that, it goes without saying that you must work harder to earn more, which will make the debt clearance easier!
Reducing debt is a process that requires time, patience, efficient planning and precise execution, hence you need to work out your way out of debt. You will be facing some lean and tough months ahead, but you need to grit your teeth and charge up to the mountain top with all courage you have. If you meticulously follow the aforementioned steps, then you will be successful in not just reducing debt, but you will also be able to clear off the entire sum.