Reducing the amount you owe on your credit cards is one of the most important things you can do to quickly get out of debt. It doesn’t matter if you’re simply looking for a few ways to lower your monthly payment or if you’re overwhelmed with debt you can’t afford to pay anymore. This article contains a listing of the many ways you can begin implementing a plan for credit card debt reduction.
There are basically three categories of ways to reduce your credit card debt. They are:
- Change your current habits
- Do it yourself: consolidation and negotiation
- Getting Assistance: consolidation, negotiation, and settlement
The first category is for when you’re not really in any serious financial trouble yet, but you can sense it coming if you don’t do something now. If that’s the case, then congratulations. You’re acting in a proactive way by getting in front of your credit card problems before they catch up with you. By taking action now, you’ll avoid the destructive effects that come with putting this off until you can’t ignore it anymore.
The second category is for when you may have missed some payments, and things are beginning to get out of hand. You may not be in serious trouble yet, but you know you’ve already or soon will get some negative marks on your credit report unless you act now.
Finally, the third category is for when you’re behind on payments regularly. You’ve probably suffered many late fees and other penalties in addition to having your interest rates increased to the highest amount the law will allow. If that’s the case, then don’t worry. You can still do something about it. It’s going to take some time, but you won’t have to declare bankruptcy.
Read on to learn more about each category below.
Changing Your Current Habits
If you haven’t yet suffered major financial set backs but things are getting tight, then it’s good you’ve chosen to take the initiative now. Much of your discomfort can be solved by simply changing your habits. It may sound obvious, but it still should be said; stop spending so much on credit cards. Get in the habit of paying cash, so you are forced to think about the amount you’re spending and whether or not the item you’re buying is really necessary.
Another useful habit is to begin making a budget which includes extra payments if necessary. Stick to the budget, and learn to control unnecessary spending. If you’re still credit worthy, then move all of your credit card payments to a new card with a lower interest rate. Often, a new credit card will allow you to transfer amounts from other cards. You might check with any of your current cards to see if they’ll allow you to do this. Many times they will if you’re still in good standing.
Do it yourself: consolidation and negotiation
If you’ve missed some payments and sense you can’t keep going the way you’re going, then you’ll want to try some do-it-yourself techniques. This may be as simple as transferring a balance to a lower interest credit card. Other options may be a Home Equity Line of Credit (HELOC) which you can use to pay off all your credit cards and make a monthly payment at a lower interest rate. With the lower rate, you’ll be able to pay the debt off much faster. You should also consider calling up your credit card company and explaining your situation. Many times, a manager or supervisor can approve waiving late fees. If you let them know the fees might put you in serious financial trouble, they may be willing to give you a second chance so as not to send you spiraling into a situation where they won’t get any payments at all. So, it never hurts to ask.
Getting Assistance: consolidation, negotiation, and settlement
If you’re to the point where you’re receiving aggressive phone calls and can’t figure out a way to keep up with your credit card debt, then it’s time to get some help. It’s good to check with the Better Business Bureau for a list of companies who handle debt consolidation, negotiation, and settlement. Make sure they’ve been in business more than six months and have no unresolved complaints against them. You can also consider getting the help of an attorney.
At this point, you’ll want to lower the amount you need to pay to something you can reasonably afford. Many times, junk fees can be waived. Other times, the company may need to negotiate for better interest rates. By eliminating the fees and lowering the interest rates, you might be able to bring the monthly payment down to an acceptable level.
However, it’s very often necessary that you’ll need the company to negotiate a consolidation and settlement on your behalf. That’s where the credit card companies accept getting paid less than what they are owed. If bankruptcy is your only alternative, then many times they’ll agree in order to avoid losing the debt entirely. You’ll have a monthly payment you can afford. Plus, most often, the company handling your situation will make it so you only need to make one payment every month. You’ll also end the annoying phone calls because the company will have power of attorney which means the credit card companies must deal with them instead.
