The In and Out of Credit Card Management
When the economy or personal problems result in a maxing out of credit card debt, we often find our debt spread over three or more cards. So you may have a Visa, several MasterCards, a Discover card and a Amex card and maybe many more each carrying several thousands of dollars of debt. The result is an mile high pile of bills from each company each needing a minimum payment that pays the interest and takes just a small amount off your debt.
If it seems that the debt mountain never seems to go down, that’s not an illusion. The situation is not designed to help you get that debt down. It’s a cruel mixed message the credit industry sends us because if you have high credit card debt, your credit rating goes down. But even if you have too much debt, the credit card companies just keep raising your credit ceiling and sending more and more credit card offers to lure you into more debt.
The instinct is to keep taking out more accounts and transferring money to those attractive zero percent interest offers that expire in a matter of months and leave you with yet another bill to pay that only makes managing that debt even more impossible. If you do get a little ahead, the instinct is also to pay more down on the debts that have the highest interest rates to try to slow the erosion of your finances due to high interest rates.
But there is another approach to handling this debt that goes completely opposite to your instincts and gives more control to you to begin seeing headway against those debts. But to use this approach, you will have to think with your head, not your emotions and not panic but think about how to get as much principal paid down as possible. This approach to paying down your credit cards is simple and gives you a road map to freedom from debt.
First of all, stop opening new credit cars accounts. That only gives another credit card company access to your money. They will offer you membership with annual recurring fees and probably offer you credit insurance. If you have three or more credit cards already, that is way more than plenty of plastic debt.
Second, use short term offers wisely. If one of your existing cards offers you a zero percent deal for a few months, take it but transfer a small amount to that account. Then you can focus on paying off that transferred amount and see 100% of your payment go against principal which is the fastest way out of debt.
Third, pick a card and pay it off completely. It might be the card with the lowest balance. But if you pay that card off, that is one less bill coming in each month and it gives you a great feeling to know you are slowly killing off the monster of credit card debt one card at time.
That brings us to the cornerstone of the this method. Instead of paying on the card with the highest interest rate, pay them the minimum payment and put your excess funds against the cards with the lowest rate. In this way you are getting the most bang for your buck with the small amount of extra funds you may have to pay on the debt. That debt will go down more quickly and then you can attack the bigger interest accounts. By using a smart approach to your credit card debts , you take control of the problem and put you on a path to zero debt. And that will be the greatest feeling of them all.
