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Guide to Pay Off Credit Card Debt

Credit card debt can be the pit of despair in the lives of many already struggling to make ends meet. Developing a plan to pay off the finance sucking balances can be a challenge, but it will open up a new world that has a foundation in freedom.

Many people find that they are in credit card debt because of bad habits. Others stumble into the situation because of tough times. No matter how a person gets into credit card debt, a few changes can be the answer for climbing out of the hole.

credit card debt
credit card debt

Keys to Pay Off Credit Card Debt

Debt Matters

For many people, credit cards are used because they are unable to meet their regular financial obligations solely using their regular income. Many people run up massive debts on credit cards before realizing this is a flawed strategy for dealing with personal finance and taking steps to rectify their financial situation.

Paying off a credit card can be difficult, however, there are ways to ensure it can be done effectively.

1. Stop using the credit cards

The first step into getting the hole is to stop digging. Many people think that they can break the debt hold but still grasp tight to those plastic charging machines. Put them away where they are impossible to access. Cut them up or put them in a container of water and freeze them. Get the temptation out of the pocket.

Having cut out the needless spending so you are now at the point you can live on your income, lose the credit cards. Simple.

2. Pay on time

Start the process of paying off credit card debt by making payments on time every time. Any late fees only add to the depth of the debt hole. Set up an auto draft if necessary, and schedule payments a few days before the actual due date just to avoid any unforeseeable issues.

3. Pay more than the minimum required payment

Many of the credit card companies have designed the minimum payment to get the most out of your wallet. Paying extra, and even paying additional payments each month, will do more to cut down on the credit card debt and move you along a path of getting back into smooth financial waters.

4. Call the company

It may be a long shot, but some companies may consider reducing interest rates for customers that have made consistent, on-time payments. A lower interest rate will allow more of each payment to go towards paying off the balance.

5. Cut spending in non-necessity areas of life

Skip the trip to get the nails done or carry lunch to work instead of eating out. You might even consider cutting the television until the credit card debt is paid off. Use all of the funds you find from cutting expenses to make additional payments to the smallest credit card balance.

6. Attack one card at a time

Line up all of the credit card debt. Pick one card to tackle first. Some choose the smallest balance because there is some satisfaction in getting that first card paid in full. Others choose the highest interest rate because that process will save the most in the long run.

Put all the extra funds into this one credit card. When that balance is paid in full then line them up and start again. Be sure to add in the payment to the old card into the new attack.

7. Evaluation

Take a look at your credit card debts and get a true appreciation of the task ahead. While this may be the thing you never want to do, understanding your level of debt will enable you to plan more effectively when looking at how to deal with it.

8. Know What You’re Spending

When it comes to financial discipline it can be difficult, not to mention extremely boring, to have to keep track of everything you buy and spend money on, from a new item of clothing down to a morning coffee and muffin. At the same time, it will give you a clear picture of where your money is going, and enable you to identify any unhealthy spending trends that you could do with reining in.

9. Pick Your Poison

Are you going to pay the card with the highest interest rate, highest balance, or lowest balance first? It is better to try and target one at a time rather than paying a little off many if you have more than one, as you will probably end up only servicing the interest.

10. Sacrifice Yourself

You know all of the luxuries you cut off earlier? Now go even deeper, so you leave enough of a surplus in your regular income to pay off a good amount of your debt each month.

11. Build Your Income

This is the quickest way to build up your income surplus even quicker and swiftly wave debts goodbye. Whether you start buying from second-hand shops and selling on eBay or get a part-time job working weekends, you will soon find yourself with even more money to pay off those awful debts.

12. Save

Try and do this while you are paying off your existing debts, but if not then make sure you start to do it soon afterward. By saving a regular sum you will be immediately safeguarding yourself from needing to use credit in the future. Unexpected costs can be dealt with by using your savings instead of a credit card!

13. Have a sale

Gather up all of the things in and around the house that you do not need, want or absolutely love. Find a prime location where lots of people pass by and set up a yard sale. Expect to sell the items for less than you spent.

Take most of that money and put it towards paying down one of the credit cards. Consider taking a percentage of putting that in an emergency savings account.

No matter how many different ways you find to pay off credit card debt, the problem will return unless spending habits change for good. Consider taking a finance class or getting involved in a financial support group to help avoid digging financial holes in the future.

How to Get Rid of Credit Card Debt after Retirement

So, you spent years (decades, even) planning for your retirement. And most likely, it’s not like you have an endless supply of retirement funds. In reality, retirement is generally a time in your life when you must conform to a budget, and when you don’t have a lot of wiggle room.

There’s no doubt that you want to get the most out of your retirement. After all, you did spend your whole life working on this! One of the best things you can do for yourself if to free yourself of the burden of credit card debt. But how do you pay down your debt on a fixed income? Follow these tips to get rid of credit card debt after retirement.

Home equity line of credit.

If you currently have a lot of equity in your home, then you may qualify to take out a loan on your home’s equity in the form of a home equity line of credit. If you have good credit, then the interest rates on this loan can be surprisingly low. What’s more, you don’t have to take all of the money out at once. You simply qualify for an amount, then draw against your home’s equity as you wish, up to the maximum amount of the loan. A low interest home equity line of credit can be a great way to pay those high interest rate credit cards off, and it will save you a lot of interest money in the long run.

Budget and spending habits.

Sit down and write out a budget. This should include both your income and an exhaustive list of your monthly expenses. Don’t leave anything out, because you need to be able to see, on paper, exactly where you are overspending and where you can cut some fat. For example, you may find that you’re doubling your cable bill with those premium channels, or that you have a few magazine subscriptions that you really don’t need.

Part-time work.

Yes, it is true that you are retired. But that doesn’t mean that you can’t (or don’t want to) do anything with all that spare time you have. Getting a part-time job is not only a great way to pay off that credit card debt, but it’s also a great way to broaden your retirement horizons, socialize, and hang on to the feeling of accomplishment associated with a job well done.

There are ways to pay of credit card debt after retirement. It may just require you approaching your retirement just a little differently, and trying some new things.

Tips For Making An Interest Free Credit Card Balance Transfer

Carrying credit card debt can be a heavy burden, particularly if you lose your job or have unexpected financial troubles. Paying on time is essential to keeping your credit score in the healthy range, so if you hit a hard time, lowering your minimum payment can be a helpful way to stay on track.

One way to do this is by transferring your current balance on one card to another card that has a zero interest balance transfer offer. This offers a short term solution to lowering what you pay each month, but here are some tips for what you need to keep in mind if you pursue a zero interest offer.

1. Know the difference between transfers and purchases

Some credit cards may offer a zero interest balance transfer policy, but that same policy won’t apply to new purchases. When that is the case, you will be charged interest for any new purchases you make on the card.

You will still be off the hook for interest on your transfer, but the amount of your balance attributed to new purchases will be charged monthly interest.

Pay special attention to which offer you are receiving – if you only have zero interest on balance transfers, don’t make a purchase on that card unless you absolutely have to. Read the fine print to see what the interest would be should you need to make a new purchase.

2. Ask about penalties and changes

If you pay late on your credit card, even once, you may have to start paying interest on your balance transfer. Not all card policies are the same, so it’s important to read the fine print on your application to find out if the zero interest will be revoked for any reason or look for the best balance transfer card available to you.

And, again, find out what the interest would be if the zero interest policy goes away. If you have reason to think you may be late sometimes, you may be better off leaving your balance where it is on another card.

3. Make a payment plan

Getting zero interest for 12 or 18 months might sound like a long period of time, but it will fly by before you know it. Whenever possible, pay more than the required minimum payment each month.

The best thing to do is calculate how much you need to pay each month to eliminate the balance all together within your zero interest period. Since you won’t have any interest accruing, you will know exactly how much your balance will be reduced with each payment.

If you don’t pay it all off before you zero interest time frame expires, you may be hit with a surprisingly high new minimum payment.

Reducing the interest you pay on debt naturally decreases the amount of money you have to pay towards the debt each month. Zero interest cards offer a reprieve from interest for a certain number of months, but may not be right for everyone, namely people who won’t be able to pay on time or resist adding new charges to the card’s total.

Knowing Your Limits for Credit Card Use

Owning a credit card is a huge responsibility and requires proper management. If you are a responsible credit card holder, you save yourself from the trouble of getting into huge a debt and get to enjoy the full benefits of having a credit card. Before you apply for a card, remember that there are limits you best not cross if you want to stay worry-free:

1.     Buy only what you can afford.

The main purpose of owning a credit card is to have something to use in case of emergencies such as accidents, sudden illness, house repairs, and other unexpected expenses. Restrain yourself from using your credit card to pay for items that you really can’t afford, given your means.

2.     Don’t pay only the minimum.

Every month when you pay for your credit card bill, make sure that you pay more than just the minimum amount required. This way, you can clear off your debt much earlier.

3.     Stay below your credit limit.

It is not a good idea to max out your card or charge to the limit. If you are striving for a good credit score, try to stay below 30% of your credit limit. Every new debt you take on affects your credit score, which determines whether or not you can get a higher credit limit on your next card, or get approved for a bigger amount of loan should you ever need to get one.

4.      Find the card with a low interest.

It is important to note the annual fee and interest rate charged by your credit card issuer. Look for a card that charges no to very low annual fees, and the lowest interest rates. Understand all the terms and conditions that come with your credit card thoroughly.

Contact the company’s customer service for other inquiries you may have. There are lots of different credit card options available and it is up to you to do your research and find the best card for your needs.

5.     Pay in cash/debit.

As much as possible, try to use cash or your debit card instead of relying on your credit cards when making purchases. Use your line of credit only on important purchases like house repairs and emergencies.

6.     Check your billing statements.

Always check your billing statements and verify all items against your credit card receipts (which you should make sure to always keep). Should you come across any doubtful and unauthorized use, report immediately to your provider within a few days upon receipt of the statement.

7.     Don’t use your card on unsecured sites.

Another tip for wise credit card use is to avoid transacting with sites that are not secure. One way to verify a site is to go through the check-out page and see if the site’s URL starts with “https://,” which signifies that the site you are trying to access is secure and safe to use.

8.     Don’t give out credit card info.

You also need to be careful in keeping your credit card details safe at all times. Do not reply to any e-mails, phone calls, etc.  asking you for sensitive information regarding your credit card.

Owning a credit card demands that you be disciplined about money and in control of your spending habits. You also need to be vigilant and not fall for credit card scams and identity theft, which could lead to serious financial trouble.

Take note of the reminders above and share with friends and family who also have credit cards.

Avoiding the Dangers of Your Credit Card

We’ve all done it before – whipped out our trusty best plastic friend and made an extravagant purchase that we couldn’t actually afford, only to later on realize the regret we feel when we open our bill and realize we probably shouldn’t have splurged and bought the item.

It’s not an uncommon feeling, but it is a major problem because that’s how millions of people wind up going up to their eyeballs in debt each year. It’s financially important to understand when it’s OK to use a credit card and when it’s not, and how to avoid the dangers of easily slipping into debt you can’t pull yourself out of.

So here are some tips for safely using your credit card or cards so that you can reap the benefits of a good credit card agreement but avoid the dangers of racking up debt that you can’t pay your way out of.

Use Your Credit Card for Necessity Purchases

Using your credit cards for everyday purchases is a perfectly acceptable practice, assuming one major thing, of course: that you have enough money in your monthly budget to pay off the balance in full at the end of every month.

When purchasing monthly necessities such as groceries or gas for your car, don’t be afraid to use your credit card. A lot of credit companies offer great rewards incentives for using your cards on purchases such as these, so it might even end up being a better value for you in the long run to use your card.

Just make sure that at the end of each month, you sit down with your finances and pay off however much you put on your credit card with purchases such as these. That way, your balance will stay low, but your rewards balance will continue to grow.

Use Your Credit Card Only for Emergencies

Another smart way to avoid the dangers of having and using a credit card is to use it only in the case of an emergency. A credit card can be a comforting thing to have should anything major occur for which you need a large sum of money that you don’t currently possess in your bank account.

For example, say you are in a car accident and have to be taken to the hospital in an ambulance for some testing. The ambulance ride alone, even if you have insurance, can cost you upwards of $1,000, plus hospital bills, plus whatever other medical bills that may arise as a result of your accident.

And this obviously isn’t something that you would have budgeted money for – so having a credit card can make all of the difference.

Just make sure that this card, in particular, is reserved only for emergencies – so the balance should always be kept at $0 to allot for anything that may come up like this. And if you have to charge a large emergency purchase to your card, just make sure you’re diligent about paying it off in as large chunks as you can possibly manage each month to avoid holding a large outstanding balance.

Choose the Right Credit Card

Most people know the major reliable credit card companies, but did you know that each company offers several different options as far as credit cards go? Choosing the right one based on your financial needs can be somewhat of a challenge for many.

Look at what each card has to offer, and assess it based on what you need from a credit card. If you know you’re going to make a large purchase with it right away, choose a card that offers a low fixed interest rate. If you enjoy traveling, choose a card that offers airline mileage as a rewards incentive on purchases. High cash-back incentives are also good options.

Choosing a good card can only be based on your buying, spending and paying off habits as a consumer. No one can choose a card for you, so make sure you open your own account based on your own needs that give you the incentives that you want.

Do you Often Make these 6 Credit Card Mistakes?

There is nothing wrong with buying the things you want. However, you could get in serious financial trouble if you spend excessively on things you don’t actually need—especially if all you do is charge your purchases to a credit card. The following are seven of the most common credit card mistakes to avoid if you want to maintain good financial health:

Using Credit Cards to Tolerate Impulse

The Research Journal of Management Sciences suggests that emotions and feelings play a decisive role in purchasing. Impulse is triggered when a person sees a particularly desirable product or is exposed to a well-crafted promotional message.

Impulse disrupts the normal decision-making process of a consumer and affects the ability to think through consequences. Often, unplanned purchase decisions, regardless of value, only lead to financial disappointments later on.

With a credit card, it becomes so easy to buy things. While impulses are difficult to control, you can manage better by creating a budget and deciding to stick to it, no matter what. Never make unplanned purchases unless there is an absolute emergency.

Paying for Small Purchases Using Credit Cards

You might think that using a credit card to pay for minor purchases saves you money, but this is just another huge mistake. Charging small amounts to your card is not financially sound and can actually result in exorbitant credit bills.

Merchants incur a fee for every charge made by a customer, even small ones. This is also the reason why there are some merchants that require a minimum purchase for credit cards. There are so-called “swipe” fees, which have been increasing over the past decade. It is better to pay for small purchases with cash.

Credit cards are useful for buying items you can’t afford in one payment, such as appliances and tech gadgets. Just remember to pay the total balance on or before your due date to maintain good credit standing. This way, you can continue to enjoy the full benefit of having a credit card.

Taking Advantage of Minimum Payments

Many credit card holders tend to only make minimum payments when settling credit card balances—and why not? Most credit card companies allow it. If you look at the bigger picture, making minimum payments only can double, even triple, the original amount you borrowed.

As the standard minimum payment, credit card companies permit their customers to pay at least 4% of their monthly bill.  Though it is acceptable, paying the least amount is not recommended because it will take several years to pay off your debt. The solution is to settle your credit card balance with the highest amount you can pay back.

Late and Overdue Payments

Your monthly payments increase with additional charges whenever you disregard paying your bills on or before the deadline. Overdue bills can also affect your credit score. Pay your debt as early as possible to avoid additional fees that will only cause you more financial trouble.

Online banking is the best and easiest way to settle your debts on time. Aside from offering a hassle-free way to pay, you can avoid late payment charges through the automatic payment scheduling feature available to most online banking facilities.

Reaching Credit Card Limit

Another common mistake is always reaching, or even exceeding, your credit limit. Up to 45 points will be deducted from your credit score if you breach the credit limit. You will have a hard time availing of other financial services, as a result.

Additional charges and balances such as over-the-limit fees and penalty interest rates are given to the credit holders who max out their credit card, so it’s better if you avoid overspending.

Multiple Credit Cards

Your credit score lowers when you apply for more than one credit card within a short period of time. Do not apply for a credit card just because you like the rebates and rewards, which are often offered by companies wanting to lure customers into getting a new card.

Managing too many credit cards is a financial headache. Sticking to one card only will provide you a good credit score, and helps you to pay your credit card debt more easily.

Unconcerned Credit Card Owner

In case you lost your credit card, report it immediately to your credit card provider. Do not postpone. Your bank can instantly restrict access to your lost card and you will not be held liable to any fraudulent charges made by the person who found it.

Always remember that the piece of plastic card you own is not free cash. Every swipe is a debt you have to pay—with interest. Be a responsible cardholder and stop committing the abovementioned credit card mistakes starting today.

Read also: What Is Credit Card Relief Program and How Does It Work?

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