debt recovery

3 Ways To Reduce Credit Card Debt

Too much debt is a major problem in today's society, and credit cards are one of the worst types of debt you can have. They're convenient to use and let a person buy things they wouldn't be able to afford otherwise, but these advantages quickly turn to disadvantages when the debt becomes unmanageable. The following are three of the best ways to reduce credit card debt.

reduce credit card debt

Debt Consolidation

Debt consolidation loans let you combine all your outstanding debt into a single loan, with a single monthly payment and most likely a lower interest rate.

This is especially helpful when dealing with credit card debt. If you are simply making the minimum monthly payments on your cards, you are hardly reducing the balance at all. Almost all of what you are paying is interest. If you continued to do that until the card was paid off it could take as long as twenty years!

By consolidating the debt into a single loan with a lower interest rate, your payments will go further towards paying off the outstanding balance and the money you save on interest will go straight towards paying off the loan faster. This can shave 10-15 years off the time it will take to be debt-free.

Negotiate Better Terms

The credit card industry is extremely competitive and your credit card company doesn't want to lose you to a competitor. For this reason, you may be able to negotiate better terms such as interest or monthly payments.

The best way to handle this is to do some research into other credit cards and what kind of terms they offer. You can then use this information by negotiating with your current credit card company to see if they will match the best deal you find.

If you can convince them to lower your interest rate, you can either lower your monthly payment or (the better choice) continue making the same payments, but more of the payment will be applied to the balance.

Debt Snowball

The "snowball" method involves the following steps:

  1. List all the outstanding balances on your credit cards
  2. Determine how much extra money you have after all the minimum payments are met and pay that extra amount towards the smallest debt each month
  3. When the smallest debt is paid off, add the payment that was going towards it to the next smallest debt and continue to do so until it is paid off
  4. Continue the process to pay off credit cards until they are all paid.

The alternative way to do this is to start with the highest interest rate instead of the smallest debt. Starting with the smallest debt has the advantage that you will see results (cards being paid off) sooner, which can be a moral booster.

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