Reduce Credit Card Debt

When it comes to managing finances, the number one priority that many people need to think about is how to reduce credit card debt. Many people carry a large outstanding balance on their credit cards.  If you find yourself in that situation, there is no need to feel embarrassed.  But you should make it a priority to try to reduce your credit card debt.  Large balances wind up hurting your credit score which makes future loans more expensive as people with better credit scores are offered loans at better interest rates.  Also, a better credit score means it is easier to get a home or auto loan.  So it is important to reduce your credit card debt, if possible.  Here are a few tips to help you reduce your credit card debt.

Many financial advisors suggest that you stop your discretionary spending while you are working on lowering your outstanding balances.  This is a good idea, but if your balance is very large, it is not practical to expect that you will not buy new clothes or a DVD until your debt is paid off.  Instead, you should limit your discretionary spending.  If you normally buy a new pair of shoes every month, you should try to limit that to every other month or less.   These small changes are easy to make and not all that painful.

Also it is very important to always pay your bills on time.  If you miss a payment, your credit card company will increase the annual percentage rate (APR) they charge you.  Your APR is the amount of interest you pay on your outstanding balances.  And each month that you carry a balance means that you are paying interest on the interest you were charged in the previous months.  This quickly becomes very expensive.  If you find yourself in a situation where you are unable to pay your bills on time, you should contact your credit card company immediately.  They will work with you to arrange a payment schedule without impacting your APR.

If you are able, you should always try to pay more than your minimum balance due.  If you simply pay the minimum balance you will not make any inroads into reducing your credit card balances.  Set a goal to pay as little as $10 per month more than your minimum on all your cards.   This will go a long way to reducing your outstanding balances, simply by reducing the interest you pay on that money each month.

Finally, you should contact your credit card company and see if they might be willing to reduce your APR.  If they say no, you can look into switching your balance to a card that offers a lower APR, but make sure to do your due diligence.  Often banks offer a low introductory rate for a few months to attract new business, but then raise that rate substantially.  So if the bank rate is much higher than what you are paying after a few months, it doesn’t make sense to switch.  It is important to always make sure you read the fine print on any offer.

By following the steps above you can get on your way to better financial health, you should be able to successfully reduce credit card debt.

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