So, what do you do if you find yourself in the situation of having too much debt?
Following the steps below will get you right on track to managing your credit card debt.
Step 1: Stop using your credit cards
This may sound very obvious and too silly to mention, but you will be amazed at how many people have too much debt for them to handle and are at the same time, still using their credit cards! The best way to get a handle on your spending is to only spend the cash that you do have. That is, after you have paid your bills.
Step 2: Rank your credit cards by interest rate
Most people who have credit cards, usually have more than one. All credit cards carry different interest rates, so it is best for you to pay down the debt which has the highest interest rate. You may even consider consolidating your debt into one card – the one with the lowest interest rate of course! You will be amazed at how much money this will save you.
Step 3: Start making payments more than the minimum amount
To start making a dent in your debt, you need to start making payments which are more than the minimum amount. This means that you are paying off the interest as well as some of the principal amount. Therefore, by discontinuing the use of the credit card and reducing the principal amount, you will finally start seeing the amount of debt you owe decrease.
If the steps above are not achievable, then you can consider some other options.
You may be able to negotiate your interest rate with your credit company. They usually only do this for customers with a good track record, i.e. customers who have always made payments on time and always met the minimum payment. If you are honest about your situation with them, you may be surprised as to what they can arrange for you. No matter what you arrange with your credit card company, get them to put it in some form of writing.
If you are in trouble with your debts, perhaps it is worth considering credit counseling services. They can help you get back on track while paying off your debts in a timely fashion, and everyone is happy in the end – you and the credit card companies. However, be wary of credit counseling organizations that:
- charge high up-front or monthly fees for enrolling.
- pressure you to make “voluntary contributions,” – another name for fees.
- won’t send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances.
- try to enroll you in a Debt Management Plan (DMP) without spending time reviewing your financial situation.
- offer to enroll you in a DMP without teaching you budgeting and money management skills.
- demand that you make payments into a DMP before your creditors have accepted you into the program.