In this age of instant gratification, credit cards often seem like a 'must have' item. As long as you can pay them off in full each month, then there isn't anything wrong with them, but for those of us without that self-disciplined approach to personal finances they really are a disaster waiting to happen!
If you have credit card debt that is costing you money on a monthly basis, then here's how to sort it out once and for all. Be warned - you WILL have to start being financially savvy and, depending on your past financial indiscretions, this could be a long term commitment!!
The first thing to do is to STOP SPENDING! Remove your credit cards from your wallet, cut them up or, if you can't stomach that, freeze them in a block of ice at the back of your deep freeze . . . anything to keep them out of reach!! If you 'need' one for internet purchases, hook yourself up with a Mastercard (or similar) debit card and use your own money!!
Work out exactly how much it is that you owe. If you have a mortgage you may be able to transfer this amount to your mortgage and pay it off at a lower interest rate. If you do this make sure you pay the same amount each month to your mortgage that you would otherwise be paying to your credit cards to get the balance out of the way as soon as possible! If this isn't an option for you, shop around and find who is offering the lowest fees on their credit cards. You may be able to organise to transfer your balance. If you do transfer your balance to another card or add it to your mortgage be sure to get rid of your original cards so you don't end up with more debt!!
If transferring your outstanding credit card balance is not an option, then work out which card charges the highest interest rate and start paying that off first. If you haven't set yourself a budget yet, now is the time to do it. Work out how much you have to pay to meet the minimum payment requirements for all your cards. If you have any extra cash available once you have covered all your other expenses then use it to pay some extra on the card with the highest interest rate. When that is paid off, apply this amount to the next card in line and so on until all your cards are paid.
Remember to ALWAYS pay your cards on time - credit card companies charge hefty late fees if you don't!
Once you are debt free and have all that spare money at your fingertips start a savings plan. Make sure that you include an amount for short term savings so that you have the cash for those impulse splurges!!
If you have any tips for paying off credit card debt or would like to share your getting out of debt story please leave a comment. We'd love to hear form you!!