7 Ways to Reduce Credit Card Debt

Are you knee deep in credit card debt? You are not alone. A majority of the American population is struggling with huge amounts of credit card debt. As of April 2011, there is 779.9 billion in revolving debt according to Federal Reserve. Credit card debt is a good example of revolving debt where by a lending institution gives the lender permission to continually borrow and repay the money within the given guidelines including a credit limit and payment terms. Don’t be discouraged for there are some ways that you can implement right away to start reducing your credit card debt.

1. Stop the vicious cycle: This can be done by avoiding the use of credit cards all together. The bold step is to cut the cards thus eliminating all access to the credit cards.

2. Create a budget and track your costs: I know, we always hear about having a written budget. This is because it is an effective way of keeping track of your money. A budget is as effective as the person following it.
A budget will help you figure out how you spend your money and highlight the areas you have to eliminate or reduce so that the need to use credit cards is avoided.

3. Rainy-Day fund: As we live our lives, emergencies happen sometimes. Having an emergency fund will transform most emergencies into inconveniences. If your air conditioner stops working, instead of reaching for the credit cards, the emergency funds will come in handy at this time. The rule of thumb is at least $1000.00 if you are not out of debt. A fully funded emergency fund is worth 6months of your household living expenses.

4. Action Plan: Have a plan for all your predictable expenses before you make a purchase. By having a plan, it reduces all the guess work of which purchases are priority and also the urgency for the unexpected. Thereby reducing the need to use credit.

5. Negotiate the Interest Rate: Much as the credit card companies would like to get paid in full, most are willing to review your account for a lower interest rate. You will have to contact the credit card company and make a request stating any financial hardship that you may be going through (unemployment, illness etc).

6. Accountability: Stay on track by following your budget. Review and revise your budget every week to ensure you are on track. Remember a budget is a moving target. As your life changes and needs change, so does your budget. In most cases, credit cards are used because there’s a lack of finances thus “buy now and pay later” mentality. But when you are within your budget, monies are already allocated to the expenses ahead of time.

7. Get out of Debt Strategy: As you reduce your debt, you need to have a plan of how to eliminate the credit card debt. The snow-ball method endorsed by Dave Ramsey is the best way to go. Organize all your debt from smallest to largest amounts. Paying only minimum payment on all the credit card debts and any extra monies, are to pay-off the smallest debt first. The process is repeated until the debt is paid off.

Getting out of debt and staying debt free is a life style choice. Whatever method you choose to use, avoid behaviors that will make you accumulate debt again. Remember to cut up all those cards, I mean literally!!. And continue on with your debt free journey.

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About The Author

Keroy King

Keroy King is a Financial Educator, Podcast Host and founder of www.lifethenfinance.com community where she coaches entrepreneurs, network marketers, direct sales professionals and business owners to overcome personal and financial obstacles that are holding them back so they can quickly and effectively live a full-filled and purpose driven life. Even when they think the odds are stacked against them.

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