Simple Steps to Eliminate Credit Card Debt

Credit card debt is a growing problem for many Americans. According to some sources, the Average American family currently carries over $5,000 in high-interest credit card debt (other sources put the average closer to $8,000). While credit cards can be useful tools, especially in case of emergency, their over or improper use is threatening the financial futures of many individuals and families. It is important to realize that, just because you are able to meet the monthly obligations on these debts, it does not mean that you have the debt under control.

Assess Your Credit Card Debt Problem

To determine whether you are in too deep with credit card debt, you should first assess the situation. The general rule is that if more than 20% of your after-tax income goes toward the financing of non-mortgage debt, you may be over-extended. Of course, if you’re having trouble meeting the monthly minimums on your credit card debt, this is also a bad sign. If a problem is indicated, you should consider taking the following steps.

Stop Using Credit Cards

The first step toward resolving the problem is in not making it any worse. Consider cutting up your credit cards and using cash for your purchases. For many people, the simple act of no longer using plastic reminds them that they are spending real money on their purchases.

Discuss the Problem with the Credit Card Company

If you are having serious issues in meeting your obligations, perhaps even falling behind on payments, the credit card company might be willing to suspend interest charges for a period of time and may even be work with you to discount the total amount you to formulate a plan for satisfying the debt, possibly even discounting the balance owed (please note, though, that this settlement would be indicated on your credit report).

Look to Consolidate Your Balances

Debt consolidation is the act of combining your balances into a single loan that offers you the lowest possible interest rate. Most consumers will see an immediate savings benefit in eliminating high-interest debt. At the same time, the consolidation will stop any harassing phone calls they’re getting from their creditors.

Set and Follow a Budget

To stay on the right track financially, it will be important to develop a long-term budget and savings plan. After all, success in personal finance is mostly about behavior. It can be helpful to look at your income and expenses on a monthly basis and make your financial plans with the goal of saving at least 10% of your income for an emergency fund and investments.

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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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