How to Handle Credit Card Debt
There is nothing more crippling than debt, especially credit card debt. It takes a toll on your self-esteem. It takes a toll on your credit rating. If it truly gets out of control, it can cripple your future: jail time, trouble buying a house, etc. So let’s a grip on it before it gets that far, shall we?
What do I pay off first?
Normally when we talk about credit card debt, we’re talking about more than one credit card. So which one do you pay off first? Look at your debt: which ones are more urgent? Which ones are more likely to accrue some kind of tax delinquency or possibly a legal judgment? Those ones should get paid off first. After that, look at the ones who are already delinquent or have gone to collections.
After taking things into consideration take a look at these two differences. You can either:
- Pay off the card with the highest interest rate first, or
- Pay off the card with the lowest balance first
Both of these methods have their pros and cons. When you figure out which route you want to take, make sure to consider these concerns:
- The card with the highest interest rate is normally the card with the highest balance. This can make your debt seem never-ending. Paying off the lower balance first will boost your self-esteem (“Yes! One card down!”) and will leave more money to pay off the others.
- Paying off the highest interest rate card first will probably save you money in the long run.
How much do I pay?
Don’t just make minimum payments. Most of the time that money just pays for the interest and nothing else.
Look at how much you can afford to pay on your debt. Take a look at your monthly income. After you subtract your monthly expenses, see how much you have left over for your credit card debt.
Check out CNN Money’s credit card debt calculator if you need help figuring out the details: http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp
What about my income?
Need a little extra cash? Consider your expenses (what is necessary and what is luxury). Look into asking for a raise at work. Look at getting a couple extra hours at work. Make money from your hobbies: if you play an instrument offer to teach lessons, sell the crafts that you make.
Also, don’t be ashamed to ask for help. Your loved ones will be willing to help you out, especially when you show them just how much of an effort you are putting in to paying off your debt.
Image by Lotus Head (http://en.wikipedia.org/wiki/File:Credit-cards.jpg)