Get In Control Of Your Credit Card Debt

Vicious Circle of Debt

The main value of credit cards is also the main problem when it comes to uncontrolled debt. Credit cards let you purchase goods even when you do not have the cash to do so. If you have a discipline you can use this feature on your advantage by enjoying something you buy today and save to pay for it in a longer period of time. However, lack of discipline will lead you to be tempted to purchase goods without consideration and exceeding your repayment capacity.

Thus, debt accumulates in your balance. If, when payment is due, you can not cancel the balance in full, you'll probably pay a smaller amount and finance the rest. This will implying interests that will add up to your balance. If you do not stop buying goods, you will not be able to pay the balance in full and debt will keep accumulating. Time will come when you will not be able to pay the minimum amount on your credit card and you'll incur in penal fees and higher interest rates will be charged on the unpaid balance.

Although exaggerated as it may seem, this scenario is very common and it often leads to default or even bankruptcy. The consequences of such events are devastating to your credit score. Your ability to get finance will shrink till it disappears completely. Recovering from such situation takes many years.

There are however many things you can do to avoid these situations and start reducing your debt till you become debt free. If you achieve some discipline and follow this advice, you will not ever need to worry about your credit again.

Avoid Minimum Payments

Most of a minimum payment is interests, so if you pay only the minimum payments you will not be reducing your debt significantly. The key to success in reducing credit card debt is to pay as much as possible but always over the minimum. By doing so, though it may not show right away, you'll end up saving thousands of dollars in interests on the long run.

If you have multiple credit cards, check which of them has the highest interest rate and if you can not transfer the balance, pay as much money as possible in that card and only the minimum on the others. Once the balance is fully paid, return the credit card and continue with the next higher interest credit card. This way, you'll be saving a lot of money on interests too.

Cut on Non-Essential Expenses

At least till you reduce your debt substantially, you need to lower the amount of money you spend on non-essential expenses. Buy only what you specifically need. It's important that you make some sacrifices, in the future you'll be able to retake those expenses and you will have avoided worse problems than pilling up bills and debt like default or bankruptcy.

Consolidating your Debt

If all this does not work, you can request a consolidation loan to pay off your debit and cancel your credit cards or contact a debt consolidation agency to negotiate with your creditors new repayments plans with lower and affordable installments. However, this should only be done as a last resort since it may affect your credit score negatively.

Source by Kate Ross

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