When you last looked at your credit card statements did it make you feel a little queasy? Or maybe it caused your heart to skip a few beats. This may not make you feel much better but if you’re carrying a load of credit card debt you’re in good company. American households now owe an average of more than $15,000 in credit card debt.
Double your payments
There’s one thing for certain and it’s that your credit card debts won’t go away if you just ignore them. You need to make a plan for paying them off. You could actually pay off your credit card debt in three years and it’s not that difficult. All you need to do is double your monthly payments. For example, suppose you have a credit card where your payment is normally $150 a month. Double that payment to $300 and it’s a mathematical certainty that you’ll have it paid off in three years assuming you make that $300 payment every month and that you don’t charge anything else on the card.
Buy yourself some time
If you feel you need some time to get your credit card debts organized, you can buy some by transferring all your credit card balances to a new card that has a lower interest rate or better yet, to one of those 0% interest balance transfer cards. Do choose that new card carefully as many of them come with substantial transfer fees. In fact, according to CreditCards.com 77 of the 89 cards that offer a balance transfer charge a fee that averages 3% of the amount being transferred. And be sure to do something about the balance on the new credit card before your interest-free period expires because when it does your interest rate will likely jump to 17% or higher.
Make a battle plan
There is not a General worth his salt that would go into battle without a plan and the same thing goes for paying off credit card debts. The first step in your plan should be to organize your debts into a spreadsheet. If you don’t have a spreadsheet program you could use the free program Google Sheets;
The information you will need to input into the spreadsheet should include the name of the credit card issuer, your balance, the minimum payment required, its interest rate and the date your payment is due. You may not like what you see on that spreadsheet but it’s absolutely necessary if you want to get started paying off those debts.
Negotiate with your credit card issuers
Your next step should be to contact each of your credit card companies to see if you can negotiate a lower interest rate. Again, according to CreditCards.com 78% of the people who requested a lower interest rate were granted one. If you have a bunch of late fees you could also negotiate to have them waived.
Choose a method for repaying your credit card debt
There are two very popular plans for paying off credit card debts. They are the Avalanche method and the Snowball method. Both have their pros and cons so it’s important to understand what they are before choosing one.
The basis of the Avalanche method is to order your debts (hence the spreadsheet program) from the one with the highest interest rate down to the one with the lowest. You then concentrate all your efforts on paying off the card that has the highest interest rate. The thinking behind the Avalanche method is that it will save you the maximum amount of money. But it will also take the most time.
The Snowball method to pay off credit card debt is where you order your credit cards from the one that has the lowest balance down to the one with the biggest. You then do everything you can to pay off the debt with the lowest balance, which should go fairly quickly. Once you have it paid off, you’ll have more money available to begin paying off the debt with the second lowest balance and so on. The financial expert, Dave Ramsey, created this method for paying off credit card debts and believes it’s the best solution because as you get one debt paid off you’ll have more money available to pay them off the next one and so forth
Note: Whichever of these methods you choose make sure you continue to make at least the minimum payments on your other credit cards.
If you’re really stuck
If this is the case you should contact the National Foundation for Credit Counseling (800-388-2227), which will then connect you with the nearest local office of this trustworthy organization. If you do this, you will have a credit counselor that will review your finances and help you make a plan for repaying those credit card debts.