Credit card debt can be a terrible burden, one that follows you for years and prevents you from being able to buy a house, car, or take out a loan. Your debt may seem like an impossible mountain to get out from under, but that doesn’t have to be the case. It is possible to pay back your credit card debt and repair your credit score. Here’s where you need to know:
Analyze your lifestyle – The first thing to do is to look at how you got into debt in the first place. Perhaps you’re paying off student loans or your mortgage, or you’re trying to get out from under debts of something you bought. Take stock of your lifestyle and see if your expenses are close to or exceeding your income. Find ways to cut expenses and live more frugally so you can put more money toward your credit card debt. Eliminate all “frills” until you’ve got the debt under control.
Negotiate a lower interest rate – Most lenders are willing to discuss your interest rate, especially if you’re polite about it. You can go to your bank or creditor and explain that you’re having a hard time paying off the debt. They may be willing to drop your interest rate in order to get their money sooner. Even a small decrease in your interest rate can lead to THOUSANDS of dollars in savings for you—and a quicker debt repayment for them.
Find out the exact debt – It’s vital that you know EXACTLY how much you owe creditors. Go to your bank and find out the exact debt. The more details you know about your debts, the easier it will be to figure out how to repay them.
Create a frugal budget – The budget should be tailored around two things: 1) keeping up with all the mandatory expenses, such as your rent, mortgage, car payments, etc.; and 2) paying back the debt. Everything else—all the extra perks and benefits—will have to go for a while. Create a frugal budget and stick with it for at least a year. By the end of that year, you’ll have made good progress on your debts and you can consider including a few frills as your income permits.
Pay off the highest-interest card first – Sink as much money as possible into the credit card that has the highest interest rate. Pay off the minimums on the other cards, but focus on repaying the highest-interest debts. This will repair your credit score faster than paying off the lowest-interest card first.
Carry cash – If you have a tendency to over-spend with your credit cards, get used to carrying cash. You’re far less likely to overspend the money you can see and feel.
Credit card debt doesn’t have to bury you for years. Create a plan on how to pay it off, and stick with it. Those small payments made each month will go a long way toward getting you out from under a mountain of debt.