The key to maintaining good credit is to reduce or eliminate credit card debt before it transforms from the ever-ready assistant to the overbearing spouse (hey, don’t a lot of marriages go that way?). It’s that simple, right?
Riiiight. If it really was that simple we wouldn’t have credit clinics, credit rebuilders, and the millions of people that are literally swimming in debt. Unfortunately, that just isn’t the case- instead, credit card debt creeps up on you like a bad dream, catching you when you’re least expecting it to. That new TV you bought six months ago? Yea, you’ll be shocked to see that in six months you’ve paid $200 interest on it alone, nevermind any of the other purchases that you’ve made using your trusty plastic companion. Without getting into the math, if you have a credit card at 19.25% (pretty standard interest rate for most), it would take you years to pay off a $5,000 balance using minimum payments.
- Step One: Prevent it From Becoming Unmanagable – Curb your credit card spending and reassess your lifestyle. If your debt is already hanging over your head, I’d recommend cutting the cards up completely. Stop using the cards, stop accumulating additional capital by which the credit card company will so gleefully charge you interest on. This step is really quite simple: buck up and do it.
Use cash instead of your credit card. This will force you to live within your means, and while you may find that it takes longer to make big-ticket purchases, you’ll also find a certain amount of relief that exists when you know that you won’t have to pay interest on it or ever see a bill again to pay for it.
- Step Two: Focus! – Dedicate the next six months of your life to doing nothing but eating, sleeping, and paying down your debts. Believe me when I say that it’s going to suck, and not having all of the luxuries that you would normally have (dinners out, movies, games, etc.) will be hard, but if you sit down and think about it you are probably spending hundreds of dollars per month on them that could and should be going to your credit cards.
The reason why I say six months if because after six months you’ll probably have had enough and will want to treat yourself to something nice. By all means, do it. During that six months you probably will have paid off an easy $2,500 or more on your credit cards so long as you actually used the money that you weren’t spending on luxuries. That leaves you in a lot better shape and it will reduce your interest requirements.
- Step Three: Pay More than Minimum
Another thing you can do is transfer the balance of one card to another when you first get serious about paying down your credit card debts. Many cards offer a 0% APR for 6 months or so when you first get them. That’s a great way to eliminate interest for six months and really gives you a shot to widdle away at the princiapl amounts.
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