Paying off Credit Card Debt

There are many easy ways to avoid credit card debt and there are several articles that prove that, but if you are like me, and started the credit card debt cycle in college when you were doing nothing more than finding ways to cut class and working at a fast-food burger joint, these solutions amount to little more than closing the barn door after the horses are already out.  What you’re looking for is not how to avoid the debt in the first place, but how to get rid of the debt you already have and how to avoid it going forward.  I can help you with that.  What qualifications do I possess that will allow me to do this? I used to work for a credit card company for almost ten years.  I did telemarketing, customer service, and even collections.  I knew ways to keep people saddled with their credit card debt for years, but I also learned how to help people pay that debt off. 

There have been changes in the credit card industry that will help.  For example in the past your entire payment was applied to the lowest interest rates first.  This meant that if you had used your credit card for purchases and cash advances, but also for a balance transfer at a promotional rate you’d be paying that promotional rate of while the interest was piling up on the remaining balance.  Now anything above your minimum payment is applied to the higher interest rate which will allow credit card customers to pay off their balances quicker.

The key though is to know how to make monthly payments that will allow you to actually make some headway with your debt.  The most frustrating thing about paying your credit card bills is that it never seems like you’re making any progress.  Barring winning the lottery or getting an inheritance most of us can not pay our revolving credit card debt in one month so we will need to look into making appropriate monthly payments.  The key to determining the right payments for you is to set a goal.  Decide when you feel you could realistically have the debts paid off and stick to it.  To determine the appropriate minimum payments you can either use an amortization calculator, these can be found simply by searching online, or you can take your total balances and divide by the number of months you set as your goal.  An amortization calculator allows you to simply plug in the balance and interest rate and determine monthly payments either by typing in a payment amount and having the calculator determine the number of months until payoff or vice versa.  The manual calculation method will give you the amount of progress needed to be made each month which is then added to the required minimum payment amount.  For example, if you had a $1500 balance with $30 monthly payments which you wanted to pay off over the course one year what would you need to pay? $1500 divided by 12 months is $125 per month. Add to the the minimum monthly payment as determined by the credit card company to cover the monthly interest and you have a total payment of $155 per month.

Most of us don’t just have one credit card balance that needs paying.  Some of you may be wondering if this method works on multiple cards.  The answer is yes.  There are a couple of different ways to adjust this method to account for multiple credit card balances.  First is that you can do the above calculations for each credit card balance, but most people would not be able to afford the amount of these payments or they probably wouldn’t have the credit card dilemma in the first place.  The other option is to prioritize which account should be paid first.  For some this would be the one with the highest interest.  For others it would be the one with the highest balance.  No matter which you choose set your goal as above and focus on paying this first card off.  Be sure to continue with monthly payments on the others in order to avoid increasing those balances.  When you have paid off the first bill take the entire amount that you were paying to that card and add it to the amount you’ve been paying on the next and watch that bill disappear.  Continue this until all of your debt has been paid.

Once you have paid the bills off it is important to make sure that you keep a couple of cards for emergencies, but cut up the rest.  Too many people think that once they’ve paid their debt they are free, but the temptation is usually too great.  If you do intend to use cards for monthly expenses that’s fine, just don’t use more than you can payoff on a month to month basis.  Credit cards are not always the enemy.  Sometimes they can be a good ally you just need to have a game-plan.  I hope this was helpful.