How to Reduce Credit Card Balances
Pay off Unsecured Debts with Simple Money Saving Techniques
Nov 16, 2008
According to a Comscore Report in 2008, 55 percent of credit card users keep a balance on their credit card, up 2 percent from 2007. When it is considered that credit card debt attracts an APR of upwards of 15% it isn't hard to see why people struggle.
Reduce Credit Card Balances by Making More than the Minimum Payment
The only way to pay off debt is by creating enough spare cash each month to slowly pay off more than the minimum payment. Paying just 2% has virtually no impact on the amount owed. Only the extra money paid will reduce the credit card balance.
For example, making the minimum 2% repayment on a £5000 credit card debt at 15% would take the borrower 36 years and 4 months to pay off. The interest paid is a colossal £6,838 which is nearly 137% higher than the original balance.
Prepare a Budget
The above figures show how important it is to find a way to be able to repay more than the minimum. The best way to pay off a credit card balance is by compiling a breakdown of all income and expenditures. How much does this leave at the end of the month? If nothing, it is necessary to identify ways to reduce spending.
Identify where it is Possible to Save Money and Pay off Debts
It isn't possible to cut corners on essential bills, but social spending can be reduced. Take a bit of time to analyse where money is going. If too much is going on things like smoking, try giving this up as saving money here will assist people to reduce credit card balances.
Sell Items that Aren't Needed on eBay or at a Car Boot Sale
Most people acquire things that aren't needed over the years. The time has come to start selling these items at a car boot sale, in the local paper or on eBay. It isn't unknown to uncover collectibles and other high value items when sorting through things.
As soon as payment arrives make a debit card payment and reduce the credit card balance before the money is used on something else. In order to avoid temptation, ask the customer service advisor to reduce the credit limit on the card. Keep doing this until the debt is eliminated.
Alternative Debt Solutions When Credit Card Debt Becomes too Much to handle
For those who have multiple credit cards with no reasonable prospect of paying them off there are several alternative debt solutions that may be more appropriate. Once a financial analysis has been completed and it has been decided that no other option exists, consider whether a Debt Management Plan or IVA may be more suitable.
Credit card debt problems are very worrying due to the rate of APR charged on the balance. Debt problems don't just go away so it is important to identify that financial difficulties exist at an early stage. It is also imperative that someone with credit card debts talks to a free debt advisor before proceeding.
