Several people don’t realize the consequences of an over-extravagant lifestyle until it shows up as a considerate debt burden on them. The ease of use and convenience of plastic cards along with several competitive offers has just spurred on the popularity of the credit card as a method of payment.
If you are one of the several people who couldn’t make any purchases without a credit card, think again, whether you are accumulating a lot of debt on that card and how long it will take you to pay it back.
Steps to Pay Off Credit Card Debts
Mentioned below are a few things to be kept in mind before you go all out with that credit card and end up with a sizeable sum in debts that takes years to repay.
- Avoid Getting into Debt: The best way to avoid debt is to live within one’s means. It is not at all bad to own a credit card as long as one chooses to spend cautiously and with discretion and has sufficient savings to repay the amount outstanding on time.
- Credit Card Debt Closure has to be Planned: For people owning several cards, on each card, the outstanding balance must be computed. Each of these accounts then needs to be settled in a proper manner. Make an attempt to repay the smallest accounts first. Then move on to the larger ones. Or you might close the highest interest account first on the basis of your debt situation.
- One thing has to be borne in mind. For the purpose of diminishing your credit card debt, apart from changing your habits and lifestyle to a more modest one, you would need to pay off more than the minimum due on each account every month. Simultaneously, you ought to also take care of all other monthly expenses. Hence, a list of monthly expenses has to be prepared, the essentials have to be paid off first and of the remaining debt reducing budget, either pay off the small accounts or choose to begin by allocating maximum funds to the account that charge the highest rates of interest.
- Balance Transfer: If you can, even make an attempt and transfer some of the debt onto the other card if that carries a lower rate of interest. Or you can combine your credit card debt by transferring balance from all your credit cards onto a single card. The zero APR and other such offers might be provisional to you of some relief, but do read the fine print carefully.
- Home Equity Loan: Another option could be a home equity loan for paying off credit card debt. Even though you would be putting your home at stake, the rate of interest on home equity loan would be much lower, beyond the rate of interest on your cards.
- Get Professional Help: All said and done, if your credit score is hit badly and you are contemplating insolvency filing, it may be worth the effort to consult companies that offer help in the erasure of debt. But, here too, you may be in the acquisition of exercising some caution. It is better to still put aside money to meet all your disbursements rather than putting faith on a debt management company to bargain your credit card debt bill. No guarantee is there that the company might be able to persuade your card provider for accepting a lower partial debt payment.
- The debt management company may even charge you a hefty fee for arranging to lower your debt and may even inquire for a percentage from the money saved by you. In such a case, the initial thing you ought to do is to contact your credit card company and negotiate your debt with them. Try and arrive at a settlement. If you do decide on a company, do consider other people’s experiences with the company, particularly complaints. Do not go in for any company that makes loud claims such as guaranteeing you a debt free life, freedom from debt collection calls and lawsuits and the like.
- Also, you may get in touch with non-profit credit counseling agencies. You will find ways of contacting one in the course of a toll free number provisional on your statement by the credit card provider, as is now requisite by the law. Several such agencies are around that proffer help and timely advice on how to pay off credit card debt. They hold various seminars and conferences, workshops and disseminate free information.
- Be Careful in Future: One ought to even add a small proportion of one’s income into savings every month so as to meet unforeseen contingencies. This money, after a while will come in handy. Once you have paid off the credit card debt, you can carry on to deposit the amount equal to your credit card payment into his savings account and make it a principle to have at least 6 months’ living expenses at one’s disposal.
Negative Effects of Credit Card Debt
- Potentially Losing a Job Promotion: This just affects people that are in line for a promotion to a position where they have to handle money, credit checks, or make financial decisions. If you believe you may receive a job promotion in the future, you must assure to settle any debt you have due to the fact that it could keep you from getting promoted.
- Filing for Insolvency: If you are really in over your head, your best option might be insolvency, as insolvency stops wage garnishment immediately for a credit card debt, but, filing for bankruptcy affects many aspects of your life and ought not to be taken lightly. In many cases, you ought not file solely to stop a garnishment.
- Debt Collectors: One of the things that major credit card companies do is that they may often sell your delinquent credit card debt to debt collectors. Debt collectors buy the debt for a fraction of what you actually owe, then they make an attempt to assort the debt by getting you to make voluntary disbursements over the phone, internet or through the mail. The debt collector can even sue you in court just like how a credit card company does. If a judgment is awarded to the debt collector, it too can garnish your wages.