Many Americans are facing high-cost credit card debt. Families are finding the need to pay off debt in order to secure the future of themselves and their loved ones. Paying off credit cards can be difficult but when the correct steps are taken the process of debt payoff is obtainable.
The first thing we all need to note is if we only pay the minimum payment we are required to pay each month it is going to take us many long years to get out of credit card debt. Paying the minimum payment will satisfy your requirement monthly to your creditor but will leave you paying a lot in interest over the many years it will take you to pay off your credit cards. Minimum payments cover mostly interest for the month and do very little to cover your principal balance. This being stated we can see why making the minimum payment monthly may not be in our best interest as consumers.
Next, we need to know exactly what we can afford to pay our creditors so we can lower the amount of years we are going to pay on a credit card and the amount of interest we are going to pay back. In order to know what we can really afford to pay creditors we need to take an in depth look at our finances. We can do this by building a budget plan or by forming a financial plan. This step is simple we need to know what money we have coming in from all sources and then how much of our money is going back out and to what sources. During this step we may need to cut out some less important frivolous items in order to be able to pay more toward our debt. Some things we might consider cutting out are daily trips to the coffee shop, smoking, or even cable.
Now we have our budget worked out we are ready to start paying more on some debt! People have different ways they choose to pay down debt and experts have different opinions on which is the best option. Choosing the option best for you can depend on how fast you need to see short term results. The two popular choices for paying off credit card debt are the snowball theory or the paying highest interest theory.
The snowball theory states you should begin paying more monthly toward your lowest debt while continuing to pay the minimum balance on all your other debt. You need to pay as much extra on this lowest debt as you can each month but even a small amount extra will help. You should note the more extra monthly you are willing to pay the faster you will eliminate a debt. You pay more toward this debt monthly until it is paid in full. Once your smallest debt is clear you take the amount you have been paying on this debt and apply it to the next account you have with the lowest balance. You continue this pattern until all your debts have been paid in full. If you need to see short term faster results to stay motivated with your debt payment plan this may be the correct choice for you.
The same general rules apply to the interest rate theory as to the snowball theory except instead of paying more on your lowest balance you will choose to pay more on your account with the highest interest rate. People who choose to use the interest rate theory do not see results toward eliminating debt as soon as those who choose the snowball theory but may in fact save more in interest charges. The biggest concern for many using this theory is the ability to stay motivated to see their efforts through to fruition because they do not see the short term rewards of their debt being eliminated. People who choose this theory can look at statements from their creditor to see how paying extra each month is lowering their principal and interest balances despite the fact the debt has not yet been eliminated. This may help to keep some degree of motivation.
These are two of the common practices many people use to pay off credit card debt sooner than they are scheduled. Some other helpful tips are do not accept more credit than you need. You should not have more than two credit cards at any given time. Accept offers with credit limits between three hundred and five hundred dollars. These tips will ensure you have credit if you need it while also ensuring you will not get into terrible financial trouble. Credit cards with grace periods are also in the consumers best interest.