Has it happened to you? You buy a few things on your credit card, and don’t get around to paying them off. Before you know it, the bills are so big you dread opening the mail! If it hasn’t happened yet, a financial emergency in your life may bring this problem to your doorstep before you realize it. Here are 5 easy tips on how to get credit card debt relief.
Stop spending on your cards
Your first reaction to this is likely that you are OK and only buy the odd thing. NO! Do not spend anything on your credit cards until they are paid off. If you must, keep one card with you for emergencies and keep it completely paid off each month. If you keep spending, you will be taking 1 step forward when you pay off cards and 2 steps back when you spend on them again. At that rate it will take you forever to find that credit card debt relief.
Find out where you stand
It’s hard to believe the number of people who don’t know how much they owe on their credit cards. If you don’t know what you owe, you will be stressed out about this big shadowy nasty thing that you imagine being gigantic. The best way to rid yourself of that nightmare is to sit down for 10 minutes with your credit card bills and see what you owe. While you are at it, go back a few months to see if you can find a trend in your spending and paying off. If you can find some bank statements to figure out how much money you have available each month. The last part of this tip is to cement in your mind the minimum payments for each card so that you don’t forget to pay at least that much!
Set debt relief goals
If you set goals for yourself, you will be more likely to actually follow through on your plans. Add up all your debt. Now see how much free money you have each month. If you divide your debt by that amount you will know how long it will take to pay it off right? Not quite. Let’s not forget about that dreaded interest monster! With credit cards interest can be 20 or even 30% per year! Compare this to current mortgage rates that are about 4-5%. With high interest rates if you just make minimum payments you will never pay off your debts. It’s a bit more math to figure out how long to pay off your debts with interest, but you will be getting an idea if you are still following these tips. Pick your credit card with the smallest debt owing. See how much free money you have after making all the minimum payments on your other credit cards. Take your best guess at how long it will take you pay this one card off. Mark that date on the calendar. Track your progress. Better still – find some extra money to throw at it. Before you know it, you will reach your goal and be ready to tackle the next one!
Consolidation loans, are they for you?
A consolidation loan allows you to move all your credit card debt off the cards and into one place that charges a lower rate of interest. The benefits of this method include lower interest costs you less each month, there is only one bill each month instead of many bills, the money you save will help you pay off your debt faster. A benefit that most people forget is that this is a loan, and you can’t put purchases on a loan. So if you clear your cards and cut them up, you don’t have to worry about slipping and putting purchases on the cards again. If you pay off your debt slowly without a loan, you may have a weak moment and end up paying for it for months to come. Consolidation loans come in a number of forms. Some are real loans, just like a car loan. Others are a line of credit (best to avoid these in this situation due to the temptation). And many people include this debt on their mortgage when they refinance. Your mortgage is a very low interest rate loan because your house is the collateral. That means if you don’t pay, the bank can sell your house to pay off your debt. Still other people transfer one credit card debt to another credit card. This only makes sense if the new card has lower interest than the original one – its not the best answer, but it’s a start. No matter what form of consolidation you are considering, think it over carefully, or better yet talk to a financial professional.
When to talk to a financial professional about credit card debt relief
If you think you need to, then you should talk to a professional. If you look at your bills, and you can’t figure them out – go to a professional. If you don’t do your own taxes, go to a professional. That said, you can go to more than one financial professional if you want different points of view. This is a good idea because often each bank or company has one view on things based on how they can best help people. If you shop around, you will find the best fit for you. Your first visit should be free, so don’t worry about that.
If you follow these 5 tips, you will be well on your road to seeing credit card debt relief in no time! But remember, if you are in doubt talk to a financial planner or other professional.