Feeling buried under credit card debt is pretty common, but getting out of it might not seem possible. Sure, you could sell everything you own, live with hardly anything, and move to a distant monastery, but let’s be honest, your family and work commitments might not allow that. Luckily, there are some practical steps you can take to reduce your debt without such drastic measures:
1. Use Technology: Missing a payment hurts your credit score and adds fees to your debt. There are many free online tools and apps that can help you avoid this. Set up automatic payments from your bank account, track your payments online, or set reminders in your digital calendar. The goal is to ensure you make payments on time consistently.
2. Avoid Retail Credit Cards: The 15% discount on a purchase might seem tempting, but store credit cards often have high interest rates and fees, which can hurt your finances. Pay off these debts, cancel the cards, and focus on other methods. To tackle all your credit card debt, make minimum payments on cards with low interest rates and put more money towards those with high interest rates. This method will help you eliminate debt more efficiently.
3. Negotiate for Lower Rates: Reducing your interest rates might be as simple as asking. Contact your credit card issuer or bank and ask if they can lower your rates. Effective communication and a good reason might get you a reduction, making it easier to pay down your debt.
4. Be Wary of Reward Cards: Rewards like cash back, gift cards, or frequent flyer miles can tempt you into spending more. Stick to just a couple of credit cards and avoid getting new ones for the rewards. When you need to use a card, choose the one with the lowest interest rate, not the best rewards. If you’re seriously considering a second mortgage because of debt, then a trip to Disneyland should probably wait.
5. Freeze Your Cards: If cutting up your credit cards seems too dramatic, consider a less drastic alternative: literally freeze them. Put your cards in a block of ice. This makes you wait for them to thaw before using them, giving you time to reconsider if you really need to make that purchase. This pause can help you avoid unnecessary spending on items like that discounted inflatable castle you saw online.
Ultimately, the key to reducing debt is simple: spend less and pay more towards your debt. While it might be tempting to think about abandoning Western comforts for a peaceful life on a mountain, these straightforward tips can help you get your finances in order without such extreme changes.
Ben DeMeter offers advice on credit cards and personal finance at CreditCardAssist.com, with his expertise also featured on Business Insider and other finance websites.